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Sudarshan Chemical Industries Ltd.

BSE: 506655 Sector: Industrials
NSE: SUDARSCHEM ISIN Code: INE659A01023
BSE 10:09 | 29 May 392.60 -2.65
(-0.67%)
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395.00

HIGH

395.00

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388.00

NSE 10:04 | 29 May 392.50 -3.10
(-0.78%)
OPEN

391.00

HIGH

393.90

LOW

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OPEN 395.00
PREVIOUS CLOSE 395.25
VOLUME 3165
52-Week high 505.95
52-Week low 286.25
P/E 22.65
Mkt Cap.(Rs cr) 2,719
Buy Price 391.45
Buy Qty 27.00
Sell Price 392.50
Sell Qty 15.00
OPEN 395.00
CLOSE 395.25
VOLUME 3165
52-Week high 505.95
52-Week low 286.25
P/E 22.65
Mkt Cap.(Rs cr) 2,719
Buy Price 391.45
Buy Qty 27.00
Sell Price 392.50
Sell Qty 15.00

Sudarshan Chemical Industries Ltd. (SUDARSCHEM) - Auditors Report

Company auditors report

to the Members of Sudarshan Chemical Industries Limited

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

Opinion

We have audited the standalone financial statements of SudarshanChemical Industries Limited ("the Company") which comprise the standalonebalance sheet as at 31st March 2019 the standalone statement of profitand loss (including other comprehensive income) standalone statement of changes in equityand standalone statement of cash flows for the year then ended and notes to thestandalone financial statements including a summary of the significant accountingpolicies and other explanatory information.

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31stMarch 2019 and profit and other comprehensive income changes in equity and its cashflows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing(SAs) specified under section 143(10) of the Act. Our responsibilities under those SAs arefurther described in the Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Act and the Rules thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.

Description of Key Audit Matter

The key audit matter How the matter was addressed in our audit
Revenue recognition Our audit procedures included:
The Company's revenue is primarily derived from the sale of pigment products. The Company recognises revenue when the control is transferred to the customer in accordance with Ind AS 115 "Revenue from contracts with customers". l evaluated the design implementation and operating effectiveness of internal controls over the existence accuracy and timing of revenue recognition; performed substantive test of details over revenue
The terms set out in the Company's sales contracts are varied. Accordingly the timing of the transfer of control of the goods will be different for each sales contract depending upon the terms and conditions and when its performance obligations are met. l recognised during the period by selecting a sample of transactions to ensure that the samples selected meet the revenue recognition criteria and are appropriately recorded; tested sample transactions around the period end to ensure
We identified the recognition of revenue as a key audit matter because revenue is one of the key performance indicators of the Company and is therefore subject to an inherent risk of misstatement and because errors in the recognition of revenue could have a material impact on the Company's financial statements. l they were recorded in the correct accounting period; and
l tested journal entries posted to revenue accounts focusing on unusual or irregular items if any.
(Refer note 20 to the standalone financial statements)
Valuation of derivative financial instruments (held for hedging purposes) Our audit procedures included:
In line with its risk management policy the Company enters into forward contract arrangements on highly probable forecast transactions to hedge its foreign currency exposure. Estimating l evaluated the design implementation operating and effectiveness of internal controls over the completeness existence and accuracy of derivative instruments and management's documentation of the hedge effectiveness;
The key audit matter How the matter was addressed in our audit
future cash flows is a significant factor in determining the accounting of such forward contracts and in the determination of its fair value. Judgement is applied in making these estimates . l obtained valuation of the instruments from the management and their effectiveness testing; performed substantive test of details by selecting sample of
The Company adopted hedge accounting during the current year. We have identified the valuation of derivative financial instruments (held for hedging purposes) as a key audit matter considering the fact that judgement is applied is estimating l transactions to ensure that the aforesaid instruments meet the recognition criteria for cash flow hedge accounting and consequently gains / losses are recognised in equity; engaged independent specialist
future cash flows and effectiveness testing. Errors in the valuation of derivative financial instruments (held for hedging purposes) could have a material impact on the Company's financial statements. l to assist in verifying the valuation and effectiveness testing of the derivative financial instruments held for hedging purposes;
(Refer note 43 to the standalone financial statements) l assessed the appropriateness of the disclosure relating to derivatives and hedging activities.

Other Information

The Company's management and Board of Directors are responsiblefor the other information. The other information comprises the information included in theCompany's annual report but does not include the financial statements and ourauditors' report thereon.

Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.

Management's Responsibility for the Standalone FinancialStatements

The Company's management and Board of Directors are responsiblefor the matters stated in section 134(5) of the Act with respect to the preparation ofthese standalone financial statements that give a true and fair view of the state ofaffairs profit/loss and other comprehensive income changes in equity and cash flows ofthe Company in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) specified under section 133 of the Act.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the standalone financial statements management and Boardof Directors are responsible for assessing the Company's ability to continue as agoing concern disclosing as applicable matters related to going concern and using thegoing concern basis of accounting unless management either intends to liquidate theCompany or to cease operations or has no realistic alternative but to do so.

Board of Directors is also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements

Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3) (i) of the Act we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls with reference to financialstatements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the standalone financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation. We communicate with those charged with governance regardingamong other matters the planned scope and timing of the audit and significant auditfindings including any significant deficiencies in internal control that we identifyduring our audit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditors' report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors' Report) Order 2016("the Order") issued by the Central Government in terms of section 143 (11) ofthe Act we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

(A) As required by Section 143(3) of the Act we report that: a) Wehave sought and obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit. b) In our opinionproper books of account as required by law have been kept by the Company so far as itappears from our examination of those books. c) The standalone balance sheet thestandalone statement of profit and loss (including other comprehensive income) thestandalone statement of changes in equity and the standalone statement of cash flows dealtwith by this Report are in agreement with the books of account. d) In our opinion theaforesaid standalone financial statements comply with the Ind AS specified under section133 of the Act. e) On the basis of the written representations received from the directorsas on 31st March 2019 taken on record by the Board of Directors none of thedirectors is disqualified as on 31st March 2019 from being appointed as adirector in terms of Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls withreference to financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure B".

(B) With respect to the other matters to be included in theAuditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according to theexplanations given to us: i. The Company has disclosed the impact of pending litigationsas at 31st March 2019 on its financial position in its standalone financialstatements

- Refer Note 41 (b) to the standalone financial statements; ii. TheCompany did not have any long-term contracts including derivative contracts for whichthere were any material foreseeable losses. iii. There has been no delay in transferringamounts required to be transferred to the Investor Education and Protection Fund by theCompany; and iv. The disclosures in the standalone financial statements regarding holdingsas well as dealings in specified bank notes during the period from 8thNovember 2016 to 30th December 2016 have not been made in these financialstatements since they do not pertain to the financial year ended 31stMarch 2019.

(C) With respect to the matter to be included in the Auditors'Report under section 197(16): In our opinion and according to the information andexplanations given to us the remuneration paid by the Company to its directors during thecurrent year is in accordance with the provisions of Section 197 of the Act. Theremuneration paid to any director is not in excess of the limit laid down under Section197 of the Act. The Ministry of Corporate Affairs has not prescribed other details underSection 197(16) which are required to be commented upon by us.

For B S R & Associates LLP
Chartered Accountants
Firm's Registration No. 116231W/W-100024
Shiraz Vastani
Date: 24th May 2019 Partner
Place: Pune Membership No. 103334

Annexure "A" to Independent Auditor's Report

REFERRED TO IN PARAGRAPH (1) UNDER ‘REPORT ON OTHER LEGAL ANDREGULATORY REQUIREMENTS' SECTION OF OUR REPORT OF EVEN DATE

(i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.

(b) The Company has a physical verification programme whereby items offixed assets are physically verified according to a phased programme designed to cover allthe items over a period of three years. In our opinion the frequency of such physicalverification programme is reasonable having regard to the size of the Company and thenature of its assets. Pursuant to the programme a portion of the fixed assets has beenphysically verified by the Management during the year and no material discrepancies havebeen noticed on such verification.

(c) Immovable properties of land and buildings whose title deeds havebeen pledged as security for facilities taken from banks are held in the name of theCompany based on the confirmations directly received by us from banks. In respect ofimmovable properties of land that have been taken on lease and disclosed as fixed asset inthe financial statements and the buildings constructed on such leasehold land whose leasedeeds have been pledged as security for facilities taken from banks the lease agreementsare in the name of the Company where the Company is the lessee in the agreement based onthe confirmations directly received by us from banks.

(ii) The physical verification of inventory has been conducted atreasonable intervals during the year. In our opinion the frequency of such physicalverification is reasonable. Based on the information and explanations given to us nomaterial discrepancies were noticed on such physical verification.

(iii) The Company had granted unsecured loans to one subsidiary companycovered in the register maintained under Section 189 of the Act.

(a) In respect of the aforesaid loans the terms and conditions underwhich such loans were granted are not prima facie prejudicial to the Company'sinterest.

(b) In respect of the aforesaid loans the schedule of repayment ofprincipal and payment of interest has been stipulated and the parties are repaying theprincipal amounts as stipulated and are also regular in payment of interest asapplicable.

(c) In respect of the aforesaid loans there is no amount which isoverdue for more than ninety days.

(iv) According to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013with respect to loans guarantees investments and security as applicable.

(v) According to the information and explanations given to us theCompany has complied with the provisions of Sections 73 to 76 or any other relevantprovisions of the Act and the Rules framed thereunder to the extent notified with regardto the deposits accepted from the public.

(vi) Pursuant to the rules made by the Central Government of India theCompany is required to maintain cost records as specified under Section 148(1) of the Actin respect of some of its products. We have broadly reviewed the same and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. We have not however made a detailed examination of the records with a viewto determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us andthe records of the Company examined by us in our opinion the Company is generallyregular in depositing undisputed statutory dues in respect of professional tax goods andservice tax income-tax duty of customs cess and other material statutory dues with theappropriate authorities except that there have been slight delays in the deposit of duesin respect of provident fund employees' state insurance and tax deducted at source.

According to the information and explanations given to us noundisputed amounts payable in respect of provident fund employees' state insuranceincome-tax goods and service tax duty of customs cess and any other material statutorydues were in arrears as at 31st March 2019 for a period of more than six monthsfrom the date they became payable.

(b) According to information and explanation given to us and therecords of the Company examined by us there are no dues of income-tax goods and servicetax which have not been deposited on account of any dispute. The particulars of dues ofduty of customs duty of excise and value added tax which have not been deposited onaccount of any dispute are as follows:

Name of the Statute Nature of dues Amount (Rs.) Period to which amount relates Forum where dispute is pending
The Central Excise Act 1944 Excise Duty 3783098 2004-05 to 2010-11 and 2014-15 to 2016-17 Assistant Commissioner of Central Excise
The Central Excise Act 1944 Excise Duty 26803331 2008-09 to 2013-14 Custom Excise & Service Tax Appellate Tribunal
The Central Excise Act 1944 Excise Duty 109864 2014-15 2015-16 Commissioner Appeal Central Excise
Maharashtra VAT Act 2002 VAT 7844190 2006-07 2008-09 and 2010-11 to 2014-15 Joint Commissioner of Sales Tax (Appeal)
Tamil Nadu VAT Act 2006 VAT 623691 2003-04 Assistant Commissioner Commercial Tax Department Coimbatore
Andhra Pradesh VAT Act 2005 VAT 826015 2007-08 Assistant Commissioner Commercial Tax Department (LTU)
Karnataka VAT Act 2003 VAT 76959 2008-09 The Commercial Tax Inspector Commercial Tax Check Post
Customs Act 1962 Custom duty 33035612 2006-07 to 2008-09 2011-12 and 2012-13 Custom Excise & Service Tax Appellate Tribunal

(viii) Based on the records examined by us and according to theinformation and explanations given to us the Company has not defaulted in repayment ofloans or borrowings to any financial institution or bank as at the Balance Sheet date.Further the Company did not have loans or borrowings from the government and has notissued any debentures as at the Balance Sheet date. (ix) The Company has not raised anymoneys by way of initial public offer or further public offer (including debtinstruments). Further based on the records examined by us and according to theinformation and explanations given to us the moneys raised by way of term loans wereapplied for the purpose for which they were obtained. (x) According to the information andexplanations given to us no material fraud by the Company and on the Company by itsofficers or employees have been noticed or reported during the year.

(xi) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has paid / providedfor managerial remuneration for the year ended 31st March 2019 inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V of the Act.

(xii) As the Company is not a Nidhi Company the provisions of Clause3(xii) of the Order are not applicable to the Company.

(xiii) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has entered intotransactions with related parties in compliance with the provisions of Sections 177 and188 of the Act. The details of such related party transactions have been disclosed in thestandalone Ind AS financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year under review. Accordingly the provisions of Clause 3(xiv) ofthe Order are not applicable to the Company.

(xv) According to the information and explanations given to us theCompany has not entered into any non-cash transactions with directors or persons connectedwith them during the year. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.

(xvi) The Company is not required to be registered under Section 45-IAof the Reserve Bank of India Act 1934.

For B S R & Associates LLP
Chartered Accountants
Firm's Registration No. 116231W/W-100024
Shiraz Vastani
Date: 24th May 2019 Partner
Place: Pune Membership No. 103334

Annexure B to the Independent Auditors' Report

REFERRED TO IN PARAGRAPH (1)(A)(F) IN REPORT ON OTHER LEGAL ANDREGULATORY REQUIREMENTS OF THE INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OFSUDARSHAN CHEMICAL INDUSTRIES LIMITED ON THE IND AS FINANCIAL STATEMENTS FOR THE YEARENDED 31ST MARCH 2019.

Opinion

We have audited the internal financial controls with reference tofinancial statements of Sudarshan Chemical Industries Limited ("the Company") asof 31st March 2019 in conjunction with our audit of the standalone financialstatements of the Company for the year ended on that date.

In our opinion the Company has in all material respects adequateinternal financial controls with reference to financial statements and such internalfinancial controls were operating effectively as at 31st March 2019 based onthe internal financial controls with reference to financial statements criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (the "Guidance Note").

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors areresponsible for establishing and maintaining internal financial controls based on theinternal financial controls with reference to financial statements criteria established bythe Company considering the essential components of internal control stated in theGuidance Note. These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013(hereinafter referred to as "the Act").

Auditors' Responsibility

Our responsibility is to express an opinion on the Company'sinternal financial controls with reference to financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to financial statements. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols with reference to financial statements were established and maintained andwhether such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls with reference to financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of such internal financialcontrols assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment ofthe risks of material misstatement of the standalone financial statements whether due tofraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls with reference to financial statements.

Meaning of Internal Financial controls with Reference to FinancialStatements

A company's internal financial controls with reference tofinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. Acompany's internal financial controls with reference to financial statements includethose policies and procedures that (1) pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could havea material effect on the financial statements.

Inherent Limitations of Internal Financial controls with Reference toFinancial Statements

Because of the inherent limitations of internal financial controls withreference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

For B S R & Associates LLP
Chartered Accountants
Firm's Registration No. 116231W/W-100024
Shiraz Vastani
Date: 24th May 2019 Partner
Place: Pune Membership No. 103334