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Sutlej Textiles and Industries Ltd.

BSE: 532782 Sector: Industrials
NSE: SUTLEJTEX ISIN Code: INE645H01027
BSE 00:00 | 27 Oct 68.95 4.70
(7.32%)
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64.50

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69.90

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64.45

NSE 00:00 | 27 Oct 68.95 4.60
(7.15%)
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65.30

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69.90

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OPEN 64.50
PREVIOUS CLOSE 64.25
VOLUME 43879
52-Week high 81.05
52-Week low 26.25
P/E 16.61
Mkt Cap.(Rs cr) 1,129
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 64.50
CLOSE 64.25
VOLUME 43879
52-Week high 81.05
52-Week low 26.25
P/E 16.61
Mkt Cap.(Rs cr) 1,129
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sutlej Textiles and Industries Ltd. (SUTLEJTEX) - Auditors Report

Company auditors report

To the Members of

Sutlej Textiles and Industries Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the standalone financial statements of Sutlej Textilesand Industries Limited ("the Company") which comprise the standalone balancesheet as at 31 March 2021 and the standalone statement of profit and loss (includingother comprehensive income) standalone statement of changes in equity and standalonestatement of cash flows for the year then ended and notes to the standalone financialstatements including a summary of the significant accounting policies and otherexplanatory 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 a_airs of the Company as at 31 March 2021and profit and other comprehensive income changes in equity and its cash flows for theyear 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 are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is su_cient and appropriate to provide a basisfor our opinion on the Standalone financial statements.

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 the Key Audit Matters

The Key Audit Matter How the matter was addressed in our audit
Impairment of Damanganga - a cash generating unit (‘CGU')
See notes 2.8 and 51 to the standalone financial statements In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
The Damanganga cash generating unit (which includes property plant and equipment with a carrying value of Rs 136.66 Crore as on 31 March 2021) is incurring losses due to increased input costs competitive pressure and unfavorable market conditions. – Assessed the appropriateness of accounting policy for impairment as per relevant accounting standard;
There is a risk that the carrying value of CGU is higher than the recoverable value thereby triggering impairment. – Evaluated the design and implementation of key internal financial controls with respect to the assessment of impairment of Damanganga CGU including determination of recoverable value and tested the operating effectiveness of such controls;
The assessment process of impairment is complex as it involves significant judgement in estimating the recoverable value. The recoverable amount has been determined based on fair value less costs to sell model using work of independent valuer basis reassessment of previous year fair valuation after considering changes in key assumptions wherever applicable. This valuation model involves use of several unobservable inputs such as prevailing market rate and replacement cost. Given the significant level of judgement involved in making the above estimates and the quantitative significance of the CGU we have determined this to be a key audit matter. – Evaluated the objectivity independence and competence of the valuation specialist engagement by the Company;
– We discussed changes in key assumptions as compared to previous year with the management in order to evaluate whether the inputs and assumptions used in the valuation models by management's valuer are reasonable including considerations due to current economic and market conditions;
– Performed sensitivity analysis of the key assumptions used to determine the changes to such key assumptions both individually and in aggregate which would change the outcome of impairment assessment;
– Assessed the adequacy of the disclosures relating to impairment of CGU.
Assessment of impairment of unquoted investment in wholly owned subsidiary (including step-down subsidiary)
See notes 2.18(C) and 5 to the standalone financial statements. In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
The Company has investment in wholly owned subsidiaries (including step-down subsidiary) which represent significant portion (1.84%) of the Company's total assets as at 31 March 2021. – Assessed the appropriateness of accounting policy for impairment of investment in wholly owned subsidiary (including step-down subsidiary) as per relevant accounting standard.
In case there is an any indicator of impairment the company adjusts the carrying value of the investment for the consequential impairment loss if any. – Evaluated the Company's assessment for identification of indicators of impairment.
The recoverable amount has been derived from discounted forecast cash flow model. This model uses several key assumptions including future sales volumes prices operating margin growth rates and the discount rate. We have identified the assessment of impairment in respect of investment in the wholly owned subsidiaries (including step down subsidiary) as a key audit matter since it involves significant judgement in making the above estimates and is dependent on external factors such as future market conditions and the economic environment. – Evaluated the design and implementation of key internal financial controls with respect to impairment including determination of recoverable value and tested the operating effectiveness of such controls.
– We assessed the business plan by comparing the growth rates to the market and assessed that the overall growth rates appear to be reasonable.
– We discussed changes in key assumptions as compared to previous year with the management in order to evaluate whether the inputs and assumptions used in the valuation models by management's valuer are reasonable including considerations due to current economic and market conditions;
– Performed sensitivity analysis of the key assumptions used to determine which changes to assumptions would change the outcome of impairment assessment;
– Assessed the adequacy of the disclosures relating to impairment of investment.

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 and Board of Directors' Responsibility for theStandalone Financial Statements

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 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 the Management andBoard of Directors are responsible for assessing the Company's ability to continue asa going concern disclosing as applicable matters related to going concern and using thegoing concern basis of accounting unless the Board of Directors either intends toliquidate the Company or to cease operations or has no realistic alternative but to doso.

The 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 the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3) (i) of the Act we are also responsible for expressing our opinion on whether thecompany has adequate internal financial controls with reference to financial statements inplace and the operating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures in the standalone financialstatements made by the Management and Board of Directors.

Conclude on the appropriateness of the Management and Board ofDirectors use of the going concern basis of accounting and based on the audit evidenceobtained whether a material uncertainty exists related to events or conditions that maycast significant doubt on the Company's ability to continue as a going concern. If weconclude that a material uncertainty exists we are required to draw attention in ourauditor's report to the related disclosures in the standalone 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. Howeverfuture events or conditions 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 regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

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.

2. (A) As required by Section 143(3) of the Act we report that:

a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.

b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books

c) The standalone balance sheet the standalone statement of profit andloss (including other comprehensive income) the standalone statement of changes in equityand the standalone statement of cash flows dealt with by this Report are in agreement withthe books of account

d) In our opinion the aforesaid standalone financial statements complywith the Ind AS specified under section 133 of the Act.

e) On the basis of the written representations received from thedirectors as on 1 April 2021 taken on record by the Board of Directors none of thedirectors is disqualified as on 31 March 2021 from being appointed as a director in termsof 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 litigations as at 31March 2021 on its financial position in its standalone financial statements

- Refer Note 40 to the standalone financial statements;

ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses.

iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.

iv. The disclosures in the standalone financial statements regardingholdings as well as dealings in specified bank notes during the period from 8 November2016 to 30 December 2016 have not been made in these financial statements since they donot pertain to the financial year ended 31 March 2021.

( 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 and explanations givento us the remuneration paid by the company to its directors during the current year is inaccordance with the provisions of Section 197 of the Act. The remuneration paid todirectors is in excess of the limit laid down under Section 197 of the Act. Accordinglythe Company has obtained shareholder's approval by way of special resolution for suchpayments. The Ministry of Corporate Affairs has not prescribed other details under Section197(16) which are required to be commented upon by us.

Annexure A referred to in our Independent Auditor's Report to theMembers of Sutlej Textiles and Industries Limited on the standalone financial statementsfor the year ended 31 March 2021

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

(b) The Company has a regular programme of physical verification of itsfixed assets by which all fixed assets are verified in a phased manner over a period ofthree years. In accordance with this program certain fixed assets were verified duringthe year. In our opinion the periodicity of physical verification is reasonable havingregard to the size of the Company and the nature of its assets and no materialdiscrepancies were noticed on such verification.

(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of theimmovable properties are held in the name of the Company except for the below assets forwhich registration is pending and are currently held in the name of respective units :-

(Rs. in crore)

Particulars Gross block as at 31 March 2021 Net block as at 31 March 2021
Leasehold land at Kathua 2.92 2.48
Freehold land at Baddi (Himachal Pradesh) 0.08 0.08

In respect of the immovable properties taken on lease and disclosed asright-of-use-assets in the standalone financial statements the lease agreements are inthe name of the Company. Further based on the confirmation received from bank by themanagement where such deeds are kept as security against loan title deed of immovableproperties are held in the name of the Company as on balance sheet date.

(ii) The inventories except goods-in-transit has been physicallyverified by the management. For goods-in transit all materials were substantiallyreceived/ delivered till the date of issuance of the report. In our opinion the frequencyof verification is reasonable. The discrepancies noticed on verification between thephysical inventory and the book records were not material.

(iii) According to the information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms limitedliability partnerships or other parties covered in the register maintained under Section189 of the Companies Act 2013 ("the Act"). Accordingly paragraph 3(iii) of theOrder is not applicable to the Company.

(iv) In our opinion and according to the information and explanationsgiven to us the Company has complied with provisions of section 186 of the Companies Act2013 in respect of investments made. According to information and explanations given bythe management there are no loans guarantee and securities given in respect of whichprovisions of section 185 and 186 of the Companies Act 2013 are applicable and hence notcommented upon.

(v) According to the information and explanations given to us theCompany has not accepted any deposits as mentioned in the directives issued by the ReserveBank of India and the provisions of Section 73 to 76 or any other relevant provisions ofthe Act and the rules framed there under.

(vi) We have broadly reviewed the books of account maintained by theCompany as specified under section 148(1) of the Act for maintenance of cost records inrespect of products manufactured by the Company and are of the opinion that prima faciethe prescribed accounts and records have been made and maintained. However we have notmade a detailed examination of cost records with a view to determine whether they areaccurate or complete.

(vii) (a) According to the information and explanations given to us andon the basis of our examination of the records of the Company amounts deducted/ accruedin the books of account in respect of undisputed statutory dues including Provident FundEmployees' State Insurance Income-tax Goods and Services Tax Duty of Customs Cessand any other material statutory dues to the extent applicable have generally beenregularly deposited with the appropriate authorities.

According to the information and explanations given to us noundisputed amounts payable in respect of Provident Fund Employees' State InsuranceIncome-Tax Sales Tax Goods and Services Tax Duty of Customs Cess and other materialstatutory dues to the extent applicable were in arrears as at 31 March 2021 for a periodof more than six months from the date they became payable.

(b) According to the information and explanations given to us and onthe basis of the records of the Company examined by us there are no dues outstanding ofIncome Tax Sales Tax Service Tax Duty of Customs Duty of Excise Value Added Tax andGoods and Services Tax which has not been deposited as on 31 March 2021 on account ofdisputes except as mentioned below:-

Name of the Statute Nature of dues Amount (net of paid) Rs. in crore Forum where dispute is pending Period to which amount relates
Himachal Pradesh Tax on entry of goods in local area act 2010 Entry Tax 5.43 High Court Himachal Pradesh 2011-2017
The Central Excise Act 1944 Excise Duty 0.53 Central Excise & Service Tax Appellate Tribunal New Delhi 2010-2011
0.07 Central Excise & Service Tax Appellate Tribunal Ahmedabad 2009-11
0.07 High Court Jammu 2004-05
Income Tax Act 1961 Income Tax 0.19 CIT (Appeal) 2016-17
0.02 CIT (Appeal) 2017-18

(viii) According to the information and explanations given to us theCompany has not defaulted in repayment of loans or borrowings to any banks and financialinstitutions. The Company did not have any outstanding loans or borrowings from governmentand there are no dues to debenture holders during the year.

(ix) According to the information and explanations given to us theCompany did not raise any money by way of initial public o_er or further public o_er(including debt instrument) during the year. Further the term loans taken by the Companyhave been applied for the purpose for which term loans were raised.

(x) According to the information and explanations given to us no fraudby the Company or on the Company by its o_cers or employees has been noticed or reportedduring the year.

(xi) According to the information and explanations given to us andbased on our examination of the records of the Company the managerial remuneration hasbeen paid or provided by the Company in accordance with provisions of Section 197 readwith Schedule V of the Companies Act 2013.

(xii) According to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable.

(xiii) According to the information and explanations given to us and onthe basis of our examination of the records of the Company all transactions with therelated parties are in compliance with section 177 and 188 of the Act where applicableand the details have been disclosed in the standalone financial statements as required bythe applicable accounting standards.

(xiv) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the Company has not made anypreferential allotment or private placement of its shares or fully or partly convertibledebentures during the year. Accordingly paragraph 3(xiv) of the Order is not applicable.

(xv) According to the information and explanations given to us theCompany has not entered into any non-cash transactions with directors or persons connectedwith him. Accordingly paragraph 3(xv) of the Order is not applicable.

(xvi) According to the information and explanations given to us theCompany is not required to be registered under section 45-IA of the Reserve Bank of IndiaAct 1934. Accordingly paragraph 3(xvi) of the Order is not applicable.

Annexure B to the Independent Auditors' report on the standalonefinancial statements of Sutlej Textiles and Industries Limited for the period ended 31March 2021.

Report on the internal financial controls with reference to theaforesaid standalone financial statements under Clause (i) of Sub-section 3 of Section 143of the Companies Act 2013

(Referred to in paragraph 2(A)(f) under ‘Report on Other Legal andRegulatory Requirements' section of our report of even date)

Opinion

We have audited the internal financial controls with reference tofinancial statements of Sutlej Textiles and Industries Limited ("the Company")as of 31 March 2021 in conjunction with our audit of the standalone financial statementsof 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 31 March 2021 based on the internalfinancial controls with reference to financial statements criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute 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 su_cient 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 in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;

(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 timelydetection of unauthorised acquisition use or disposition of the company's assetsthat could have a 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 & Co. LLP
Chartered Accountants
ICAI Firm registration number: 101248W/W-100022
Rajiv Goyal
Place: Gurugram Partner
Date: 07 May 2021 Membership No. 094549
ICAI UDIN: 21094549AAAACF3386

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