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Stovec Industries Ltd.

BSE: 504959 Sector: Industrials
NSE: N.A. ISIN Code: INE755D01015
BSE 14:03 | 30 Jul 2862.00 69.10
(2.47%)
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2870.05

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2889.95

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NSE 05:30 | 01 Jan Stovec Industries Ltd
OPEN 2870.05
PREVIOUS CLOSE 2792.90
VOLUME 896
52-Week high 2949.00
52-Week low 1680.00
P/E 30.56
Mkt Cap.(Rs cr) 598
Buy Price 2865.00
Buy Qty 1.00
Sell Price 2894.90
Sell Qty 1.00
OPEN 2870.05
CLOSE 2792.90
VOLUME 896
52-Week high 2949.00
52-Week low 1680.00
P/E 30.56
Mkt Cap.(Rs cr) 598
Buy Price 2865.00
Buy Qty 1.00
Sell Price 2894.90
Sell Qty 1.00

Stovec Industries Ltd. (STOVECINDS) - Auditors Report

Company auditors report

To the Members of Stovec Industries Limited

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion

We have audited the accompanying financial statements of

Stovec Industries Limited ("the Company") which comprise the

Balance Sheet as at December 31 2020 the Statement of Profit and Loss including thestatement of Other Comprehensive Income the Cash Flow Statement and the Statement of

Changes in Equity for the year then ended and notes to the financial statementsincluding a summary of significant accounting policies and other explanatory information(herein referred to as ‘financial statements'). year ended

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies

Act 2013 as amended ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at December 31 2020 its profit othercomprehensive income its cash flows and the changes in equity for the year ended on thatdate.

Basis for Opinion

We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) as specified under section 143(10) of the Act. Our responsibilities underthose Standards are further described in the ‘Auditor's Responsibilities for theAudit of the Financial Statements' section of our report. We are independent of theCompany in accordance with the ‘Code of Ethics' issued by the

Institute of Chartered Accountants of India together with the ethical requirements thatare relevant to our audit of the financial statements under the provisions the Rulesthereunder and we have fulfilled responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained issufficientand appropriate to provide a basis for our auditopiniononthefinancial statements

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements for the financial 31 2020. Thesematters were addressed in the context of our audit of the financial statements as a wholeand in forming our opinion thereon and we do not provide a separate opinion on thesematters. For each matter below our description of how our audit addressed the matter isprovided in that context.

We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the financial statements section of ourreport including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the financial statements. The results of our audit procedures includingthe procedures performed to address the matters below provide the basis for our auditopinion on the accompanying financial statements.

Key audit matters How our audit addressed the key audit matter
Recognition of revenue from contracts with customers for sale of textile machinery (refer note 3.06 and 18 of the financial statements)
Revenue from sale of textile machinery of Rs 1159.84 million is recognized in accordance with Ind AS 115 Revenue from Contracts with Customers based on transfer of controls i.e. the dispatch/delivery of machines on completion of manufacturing (at a point in time). A certain portion of revenue is also deferred and recognised when the installation is completed to the satisfaction of the customers. Our audit procedures included but were not limited to:
Obtained understanding and tested design and operating effectiveness of internal controls over revenue recognition.
Assessed revenue recognition accounting policy to be compliance with Ind AS 115.
We consider revenue recognition from such contracts to be a Key Audit Matter because management's assessments and terms of contracts significantly impact the determination of the performance obligations related to the individual contracts which critically affects the revenue recognised for the year. Performed tests of details on a sample basis verified the underlying customer contracts and relevant supporting documents to analyse the dispatch/delivery conditions i.e. point in time and distinct performance obligations under contract.
Evaluated management assumption for the allocation of transaction price between various performance obligation including variable consideration.
These assessments include in particular the scope of deliveries and services required to fulfil contractually defined obligations. Obtained and verified documents of the machines. Obtained and read installation report and other relevant documents maintained by the Company for installation of machines. Assessed the relevant disclosures made by the company in accordance with Ind AS 115.
Key audit matters How our audit addressed the key audit matter
Valuation of inventories and allowance for receivables (refer note 44 of the financial statements)
Due to outbreak of the COVID-19 Textile industry has been affected. Accordingly there has been slow moving and non-moving of certain inventories and delay in recovery of receivables. Our audit procedures included but were not limited to:
As at December 31 2020 the carrying amount of inventories was Rs 310.83 million net of write downs. Obtained an understanding evaluated the design and tested the operating effectiveness of controls that the Company has in relation to written down of inventories valuation and allowance of receivable.
Further the carrying amount of receivable amounting to Rs 245.49 million net allowance for receivable of Rs 9.66 million as at December 31 2020. Tested the aging report of inventories and receivable and on sample basis tested the calculation of the inventory provision and receivable as per the policy of the Company.
The Company writes down inventories based on policy due to various reasons viz: slow-moving non- moving etc. as well as makes provision for overdue trade receivables based on policy past experience current trend and future expectations. Obtained an understanding of management's estimate on business impact of COVID 19 pandemic on valuation of inventories and receivables.
For specific provisions made on a sample basis assessed the basis assumption used by the management obtained and read management approvals.
Accordingly the assessment of valuation of inventories and allowance for receivables especially due Covid-19 period requires significant judgment and hence same is considered as Key Audit Matter. Assessed the Company's disclosures in Note 44 on impact of Covid-19 on the financial statement of the company.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Directors report but does notinclude the financial statements and our Our opinion on the financial statements does notcover other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements responsibility is to read theother information and in doing so consider whether the other information is materiallyinconsistent with the financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated. If based on the work we have performed weconclude that there is a material misstatement of this other information we are requiredto report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF MANAGEMENT FOR THE FINANCIAL STATEMENTS

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation and presentation of these financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; reportthereon. selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; andthe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

The Board of Directors are also responsible for overseeing the Company's financialreporting process.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an auditconductedinaccordancewithSAswillalways deficiencies in internal control that we detect amaterial misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if individually or in the aggregate they could reasonably beexpected to influence the economic decisions of users taken on the basis of thesefinancial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also: Identify and assess therisks of material misstatement of the financial statements whether due to fraud or errordesign and perform audit procedures responsive to those risks and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resultingfrom error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control. Obtain an understanding ofinternal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances. Under section 143(3) (i) of the Act we are alsoresponsible for expressing our opinion on whether the Company has adequate internalfinancial controls with reference to financial statements in place and the operatingeffectiveness of such controls. Evaluate the appropriateness of accounting policies usedand the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that ability may cast significant to continue as agoing concern. If we conclude that a material uncertainty exists we are required to drawattention in our auditor's report to the related disclosures in the financial statementsor if such disclosures are inadequate to modify our opinion. Our conclusions are basedon the audit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a going concern.

Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings any significantduring our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements for thefinancial year ended December 31 2020 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

OTHER MATTER

The financial statements of the Company for the year ended December 31 2019 includedin these financial statements have been audited by the predecessor auditor who expressedan unmodified opinion on those financial statements on February 25 2020.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditor's report) Order 2016 (" the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.

2. As required by section 143 (3) of the Act we report that: (a) We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purpose of our audit;

(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books; (c) The Balance Sheetthe Statement of Profit and Loss including the Statement of Other Comprehensive Incomethe Cash Flow Statement and Statement of Changes in Equity dealt with by this Report arein agreement with the books of account;

(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under section 133 of the Act read with Companies (Indian AccountingStandards) Rules 2015 as amended; (e) On the basis of written representations receivedfrom the directors as on December 31 2020 and taken on record by the Board of Directorsnone of the directors is disqualified as on December 31 2020 from being appointed as adirector in terms of section 164(2) of the Act; (f) With respect to the adequacy of theinternal financial controls over financial reporting with reference to these financialoperating effectiveness of such controls refer to our separate Report in "Annexure2" to this report; (g) In our opinion the managerial remuneration for the year endedDecember 31 2020 has been paid / provided by the Company to its directors in accordancewith the provisions of section 197 read with Schedule V to the Act; and (h) With respectto the other matters to be included in the Auditor's Report in accordance with Rule 11 ofthe Companies (Audit and Auditors) Rules 2014 as amended in our opinion and to the bestof our information and according to the explanations given to us: i. The Company hasdisclosed the impact of pending litigations on its financial position in its financialstatements Refer note 30 to the financial statement s; of the Company ii. TheCompany did not have any long-term statements andthe contracts including derivativecontracts for which there were any material foreseeable losses; and iii. There has been nodelay in transferring amounts required to be transferred to the

Investor Education and Protection Fund by the Company.

For S R B C & CO LLP
Chartered Accountants
ICAI Firm Registration Number: 324982E/E300003
per Sukrut Mehta
Partner
Place of Signature: Ahmedabad Membership Number: 101974
Date: February 26 2021 UDIN: 21101974AAAABF4112

ANNEXURE 1 REFERRED TO IN PARAGRAPH 1 OF REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS OF OUR REPORT OF EVEN DATE OF STOVEC INDUSTRIES LIMITED FOR THE YEAR ENDEDDECEMBER 31 2020;

(i) a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment; b) Property plantand equipment have been physically verified by the management during the year and nomaterial discrepancies were identified on such

c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename of the company. (ii) The inventory has been physically verified by management duringthe year. In our opinion the frequency discrepancies of verification were noticed on suchphysical verification. Inventories lying with third parties have been confirmed by them asat year end and no material discrepancies were noticed in respect of such confirmations.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theAct. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of the Order are notapplicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to usthere are no loans guarantees and securities given in respect of which provisions ofsection 185 and 186 of the Act are applicable and hence not commented upon. In our opinionand according to the information and explanations given to us provisions of section 186of the Act in respect of investments made have been complied with by the company.

(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records undersection 148(1) of the Act related to manufacture and supply of textile machineriesspares and related services sugar screen organic and inorganic chemicals and are of theopinion that prima facie the specified accounts and records have been made andmaintained. We have not however made a detailed examination of the same.

(vii) a) According to the information explanation given to us and on the basis of ourexamination of records of the Company amounts deducted / accrued in books of account inrespect of undisputed statutory dues including provident fund employees' state insuranceincome-tax duty of custom goods and service tax cess and other material statutory duesare generally regularly deposited with government authorities. b) According to theinformation and explanations given to us no undisputed amounts payable in respect ofprovident fund employee's state insurance income-tax goods and services tax duty ofcustom cess and other material statutory dues were outstanding at the year end for aperiod of more than six months from the date they became payable.

c) According to the information and explanation and records of the Company the dues ofincome-tax value added tax duty of customs service tax and goods and services tax notdeposited on account of any dispute are as follows:

Name of the statute Nature of the dues Amount (Rs in million) Period to which the amount relates Forum where the dispute is pending
The Income Tax Act 1961 Income Tax 5.41 AY 2007-08 to AY 2011-12 and AY 2017-18 Commissioner of Income Tax (Appeals)
The Finance Act 1994 Service Tax 0.45 FY 2012-13 Commissioner of Central Excise (Appeals)
FY 2013-14
FY 2014-15
Gujarat Value Gujarat Value 1.60 FY 2015-16 Commissioner of Gujarat Value Added Tax
Added Tax Act Added Tax FY 2016-17

Apart from above the Company has deposited Rs 1.53 million with various taxauthorities although the same have been disputed with the respective authorities.

(viii) The Company did not have any outstanding loans or borrowing dues to a financialinstitution or bank or government or dues to debenture holders during the year and hencereporting under clause 3(viii) of the order is not applicable to the Company and hence notcommented upon.

(ix) According to the information and explanations given by the management and auditprocedures performed by us the Company has not raised any money way of initial publicoffer / further public offer / debt instruments and term loans and hence reporting underclause 3(ix) of the order is not applicable to the Company and hence not commented upon.

(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the company or no material fraud onthe company by the officers or employees of the Company has been noticed or reportedduring the year. (xi) According to the information and explanations given by themanagement and audit procedures performed by us the managerial remuneration has been paid/ provided in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Companies Act 2013.

(xii) In our opinion the Company is not a nidhi company and hence reporting underclause 3(xii) of the order is not applicable to the Company and hence not commented upon.

(xiii) According to the information and explanations given by the management and auditprocedures performed by us transactions with the related parties are in compliance withsection 177 and 188 of Act where applicable and the details have been disclosed in thenotes to the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) of the order are notapplicable to the company and not commented upon. (xv) According to the information andexplanations given by the management and audit procedures performed by us the Company hasnot entered into any non-cash transactions with directors or persons connected with him asreferred to in section 192 of Companies Act 2013. (xvi) According to the information andexplanations given to us the provisions of section 45-IA of the Reserve Bank of IndiaAct 1934 are not applicable to the Company.

For S R B C & CO LLP
Chartered Accountants
ICAI Firm Registration Number: 324982E/E300003
per Sukrut Mehta
Partner
Place of Signature: Ahmedabad Membership Number: 101974
Date: February 26 2021 UDIN: 21101974AAAABF4112

ANNEXURE 2 OF THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTSOF STOVEC INDUSTRIES LIMITED

REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER CLAUSE (I) OF SUB-SECTION 3 OF SECTION143 OF THE COMPANIES ACT 2013 ("THE ACT")

We have audited the internal financial controls over financial reporting of StovecIndustries Limited ("the Company") of December 31 2020 in conjunction with ouraudit of financial statements of the Company for the year ended that date.

MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Company's Management is responsible for establishing and maintaining internalfinancial controls based on internal control over financial reporting criteria establishedby the Company considering the essential components internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that operating effectively for ensuring the orderly and efficientconduct of its business including adherence to the Company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as

AUDITOR'S RESPONSIBILITY

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting reference to these financial statements based on ouraudit. conducted our audit in accordance with the Guidance Note and the StandardsonAuditingasspecifiedunder section 143(10) of the Act to the extent applicable to anaudit of internal financial controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting with reference tothese financial statements established and maintained and if such controls operatedeffectively in all material respects. statements may Our audit involves performingprocedures to obtain audit evidence about the adequacy of the internal financial controlsover financial reporting with reference to these financial statements and their operatingeffectiveness. Our audit internal financial controls over financial reporting includedobtaining an understanding of internal financial controls financial reporting withreference to these financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness internal controlbased on the assessed risk. The procedures selected depend on the auditor's judgementincluding assessment of the risks of material misstatement of financial statementswhether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls over financialreporting with reference to these financial statements.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING WITH REFERENCE TO THESEFINANCIAL STATEMENTS

A company's internal financial control over financial with reference to these financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial control over financialreporting with reference to these financial statementsincludes those policies and procedures that (1) pertain to the maintenance of recordsthat in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised undertheAct. acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL

CONTROLS OVER FINANCIAL REPORTING WITH REFERENCE TO THESE FINANCIAL STATEMENTS

Because of the inherent limitations of internal financial controls over financialreporting with reference to these financial statements including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of theinternal financial controls over financial reporting with reference to these financialstatements to future periods are subject to the risk that the internal financial controlover financial reporting with reference tothese inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.

OPINION

In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these financial statements and suchinternal financial controls over financial reporting with reference to these financialstatements were operating effectively as at December 31 2020 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note.

For S R B C & CO LLP
Chartered Accountants
ICAI Firm Registration Number: 324982E/E300003
per Sukrut Mehta
Partner
Place of Signature: Ahmedabad Membership Number: 101974
Date: February 26 2021 UDIN: 21101974AAAABF4112

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