to the Members of Sudarshan Chemical Industries Limited
REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
We have audited the standalone financial statements of Sudarshan Chemical IndustriesLimited ("the Company") which comprise the standalone balance sheet as at 31March 2020 the standalone statement of profit and loss (including other comprehensiveincome) standalone statement of changes in equity and standalone statement of cash flowsfor the year then ended and notes to the standalone financial statements including asummary of the significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2020 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion on the Standalone financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
Description of Key Audit Matter
|The key audit matter ||How our audit addressed the key audit matter |
|Capitalisation of product development costs ||Our audit procedures included: |
|Product development costs for new product development are recognised as intangible assets when technical feasibility is established the Company has committed technical and commercial resources and future economic benefits are assessed as probable'. ||Evaluated the design implementation and operating effectiveness of key internal controls around initiation of capitalisation of the product development costs including Company's controls over estimation of the future economic benefit of the projects; |
|Costs capitalised during the year represents the cost of technical know-how expenses including costs paid to external consultants up to the date the intangible asset is available for use. ||Evaluated the Company's assessment that the recorded costs meet the capitalisation criteria. One of the criteria relating to future economic benefits being assessed as probable' was evaluated by assessing that there is an active market available for selling the products under development; |
|The assessment of the capitalisation criteria as set out in Ind AS 38 Intangible Assets' is made at an early stage of product development. It involves: ||Tested sample transactions for costs incurred towards projects by using statistical sampling; |
|Company's judgement to establish technical feasibility of the product; ||Analysed and determined the costs which are capitalised are directly attributable' towards product development activities; |
|Company's estimation of availability of committed technical and commercial resources; ||Assessed Company's estimate of any possible effect from COVID-19 pandemic such as discontinuance or suspension. |
|Inherent challenges in predicting future economic benefits which must be assessed as probable' for capitalisation to commence. || |
|There is a risk of development cost getting capitalised where the relevant criteria have not been met. Accordingly we identified capitalisation of product development cost as a key audit matter. || |
|(Refer notes 2(C)(c)(ii) and 4 to the Standalone Financial Statements) || |
|Impairment assessment for investments in subsidiaries ||Our audit procedures included: |
|The Company has investments in subsidiaries. These investments are accounted for at cost less impairment. Where an indication of impairment exists the carrying amount of the investment is assessed and written down immediately to its value in use. Value in use of the above investments are estimated in order to determine the extent of the impairment loss. ||Evaluated the design implementation and operating effectiveness of key internal controls around identification of impairment indicators including Company's controls over estimation of the value in use of the investments in subsidiaries; |
|Identification of indicators for impairment of these investments and measurement of value in use involves significant estimates and judgements of the Company including those related to the possible effects of the COVID-19 pandemic. These investments are significant. This is identified as a key audit matter due to inherent uncertainties involved in projecting future cash flows and discount rate which are the basis of impairment assessment. ||Evaluated impairment risk to identify impairment indicators for any investment in a subsidiary based on consideration of external and internal factors affecting the value and performance of the investment; |
| ||Evaluated Company's assessment of value in use for investments where impairment risk is identified; |
| ||Evaluated key inputs used in and the arithmetical accuracy of the cash flow projections. We assessed underlying key assumptions used to determine discount rate sensitivity of the assumptions and cash flow projections against the historical performance. |
|(Refer notes 2(C)(d) and 5 to the Standalone Financial Statements) ||Assessed Company's estimate of the impact of COVID-19 pandemic on the impairment assessment. |
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Management's and Board of Directors' Responsibility for the Standalone FinancialStatements
The Company's Management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. 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; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring accuracy and completeness of the accounting records relevant tothe preparation and presentation of the standalone financial statements that give a trueand fair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements the Management and Board of Directorsare responsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Board of Directors either intends to liquidate the Companyor to cease operations or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements. As part of an audit inaccordance with SAs we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3) (i) ofthe Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures in the standalone financial statements madeby the Management and Board of Directors.
Conclude on the appropriateness of the Management and Board of Directors 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's report tothe related disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during 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 standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
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) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.
2. (A) As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes 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 standalone balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account.
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under section 133 of the Act.
e) On the basis of the written representations received from the directors as on 31March 2020 and taken on record by the Board of Directors none of the directors aredisqualified as on 31 March 2020 from being appointed as a director in terms of Section164(2) of the Act.
f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B" (B) With respect to the othermatters to be included in the Auditors' Report in accordance with Rule 11 of the Companies(Audit and Auditors) Rules 2014 in our opinion and to the best of our information andaccording to the explanations given to us:
i. The Company has disclosed the impact of pending litigations as at 31 March 2020 onits financial position in its standalone financial statements - Refer Note 41 to thestandalone financial statements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts - Refer Note 17(c) to the standalone financial statements;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company; and iv. The disclosures in thestandalone financial statements regarding holdings as well as dealings in specified banknotes during the period from 8 November 2016 to 30 December 2016 have not been made inthese financial statements since they do not pertain to the financial year ended 31 March2020.
(C) With respect to the matter to be included in the Auditors' Report under section197(16): In our opinion and according to the information and explanations given to us theremuneration paid by the company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.
Annexure A to Independent Auditors' Report on the financial statements of SudarshanChemical Industries Limited for the year ended 31 March 2020
REFERRED TO IN PARAGRAPH (1) UNDER REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS' SECTION OF OUR REPORT OF EVEN DATE
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assets bywhich all fixed assets are 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) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company and where applicable confirmation from thecustodian title deeds of immovable properties are held in the name of the Company.
(ii) The inventory except goods in transit have been physically verified by themanagement. In our opinion the frequency of such physical verification is reasonable.Based on the information and explanations given to us no material discrepancies werenoticed on such physical verification and roll back procedures. In respect ofgoods-in-transit subsequent goods receipts have been verified.
(iii) The Company has granted unsecured loans to two subsidiary companies covered inthe register maintained under Section 189 of the Act.
(a) In respect of the aforesaid loans the terms and conditions under which such loansare granted are not prima facie prejudicial to the Company's interest.
(b) In respect of one of the aforesaid loans the schedule of repayment of principaland payment of interest has been stipulated and the subsidiary has repaid the amounts due.In respect of the other loan the terms of arrangement do not stipulate any repaymentschedule and the loans are repayable on demand. The subsidiary was not required to makepayment of principal and interest in respect of the other loan as those were not demandedduring the current year.
(c) In respect of the aforesaid loans there is no amount which is overdue for morethan ninety days.
(iv) According to the information and explanations given to us the Company hascomplied with the provisions of Section 185 and 186 of the Companies Act 2013 withrespect to loans guarantees investments and security as applicable.
(v) According to information and explanations given to us the Company has compliedwith the provisions of section 73 to 76 or any other relevant provisions of the Act andthe Rules framed thereunder to the extent notified with regard to the deposits acceptedfrom the public.
(vi) We have broadly reviewed the books of accounts maintained by the Company pursuantto the rules made by Central Government for the maintenance of cost records under Section148(1) of the Act in respect of its products and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have not however madea detailed examination of the records with a view to determine whether they are accurateor complete.
(vii) (a) According to the information and explanations given to us and the records ofthe Company examined by us amounts deducted / accrued in the books of account in respectof undisputed statutory dues including provident fund employees' state insurance incometax goods and service tax duty of customs cess and other material statutory dues havebeen generally regularly deposited by the Company with the appropriate authorities exceptthat there have been slight delays in the deposit of dues in respect of goods and servicetax tax deducted at source labour welfare fund and provident fund.
According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax goods andservice tax duty of customs cess and any other material statutory dues were in arrearsas at March 31 2020 for a period of more than six months from the date they becamepayable.
(b) According to information and explanation given to us and the records of the Companyexamined by us there are no dues of income tax duty of customs duty of excise servicetax value added tax and goods and service tax which have not been deposited on account ofany dispute except as noted below :
|Name of the Statute ||Nature of dues ||Amount involved (Rs. in lakhs) ||Amount paid under protest* (Rs. in lakhs) ||Period to which amount relates ||Forum where dispute is pending |
|The Central Excise Act 1944 ||Excise Duty ||37.8 ||10.9 ||2004-05 to 2010- 11 and 2014-15 to 2016-17 ||Assistant Commissioner of Central Excise |
|The Central Excise Act 1944 ||Excise Duty ||287.7 ||19.7 ||2008-09 to 2013-14 ||Custom Excise & Service Tax Appellate Tribunal |
|The Central Excise Act 1944 ||Excise Duty ||1.1 ||- ||2014-15 to 2015-16 ||Commissioner Appeal Central Excise |
|Maharashtra VAT Act 2002 ||VAT ||38.2 ||38.2 ||2007-08 2013-14 and 2014-15 ||Joint Commissioner of Sales Tax (Appeal) |
|Tamil Nadu VAT Act 2006 ||VAT ||6.2 ||6.2 ||2003-04 ||Assistant Commissioner Commercial Tax Department Coimbatore |
|Andhra Pradesh VAT Act 2005 ||VAT ||8.3 ||8.3 ||2007-08 ||Assistant Commissioner (CT) Tax Department (LTU) |
|Karnataka VAT Act 2003 ||VAT ||0.8 ||0.8 ||2008-09 ||The Commercial Tax Inspector Commercial Tax Check Post |
|Customs Act 1962 ||Custom duty ||330.4 ||- ||2006-07 to 2008-09 2011-12 to 2012-13 ||Custom Excise & Service Tax Appellate Tribunal |
* includes refunds adjusted by the authorities.
(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of loans or borrowings to any financialinstitution or bank as at the Balance Sheet date. Further the Company did not have loansor borrowings from the government and has not issued any debentures as at the BalanceSheet date.
(ix) The Company has not raised any moneys by way of initial public offer or furtherpublic offer (including debt instruments) during the year. Further based on the recordsexamined by us and according to the information and explanations given to us the moneysraised by way of term loans were applied for the purpose for which they were obtained. (x)According to the information and explanations given to us no fraud by the Company or anymaterial fraud on the Company by its officers or employees has been noticed or reportedduring the year.
(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid / provided for managerialremuneration for the year ended March 31 2020 in accordance with the requisite approvalsmandated by the provisions of Section 197 read with Schedule V of the Act.
(xii) As the Company is not a Nidhi Company the provisions of Clause 3(xii) of theOrder are not applicable to the Company.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has entered into transactions withrelated parties in compliance with the provisions of Sections 177 and 188 of the Act. Thedetails of such related party transactions have been disclosed in the standalone Ind ASfinancial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly the provisions of Clause 3(xiv) of the Order are not applicable tothe Company.
(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with themduring the year. Accordingly the provisions of Clause 3(xv) of the Order are notapplicable to the Company.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
Annexure B to the Independent Auditors' report on the standalone financial statementsof Sudarshan Chemical Industries Limited for the year ended 31 March 2020
REPORT ON THE INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE AFORESAID STANDALONEFINANCIAL STATEMENTS UNDER CLAUSE (I) OF SUB-SECTION 3 OF SECTION 143 OF THE COMPANIESACT 2013 (REFERRED TO IN PARAGRAPH (2)(A)(F) UNDER REPORT ON OTHER LEGAL ANDREGULATORY REQUIREMENTS' SECTION OF OUR REPORT OF EVEN DATE)
We have audited the internal financial controls with reference to financial statementsof Sudarshan Chemical Industries Limited ("the Company") as of 31 March 2020 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at 31 March 2020 based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the "Guidance Note").
Management's Responsibility for Internal Financial Controls
The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013 (hereinafter referred to as"the Act").
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.
Meaning of Internal Financial controls with Reference to Financial Statements
A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial controls with Reference to FinancialStatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.