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Ugar Sugar Works Ltd.

BSE: 530363 Sector: Agri and agri inputs
NSE: UGARSUGAR ISIN Code: INE071E01023
BSE 15:09 | 05 Jun 13.88 0.81
(6.20%)
OPEN

13.70

HIGH

15.15

LOW

13.50

NSE 15:04 | 05 Jun 14.10 0.95
(7.22%)
OPEN

13.50

HIGH

15.30

LOW

13.40

OPEN 13.70
PREVIOUS CLOSE 13.07
VOLUME 87736
52-Week high 16.65
52-Week low 7.23
P/E 9.38
Mkt Cap.(Rs cr) 156
Buy Price 13.88
Buy Qty 633.00
Sell Price 13.97
Sell Qty 400.00
OPEN 13.70
CLOSE 13.07
VOLUME 87736
52-Week high 16.65
52-Week low 7.23
P/E 9.38
Mkt Cap.(Rs cr) 156
Buy Price 13.88
Buy Qty 633.00
Sell Price 13.97
Sell Qty 400.00

Ugar Sugar Works Ltd. (UGARSUGAR) - Auditors Report

Company auditors report

To

The Members of

The Ugar Sugar Works Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the accompanying financial statements of The Ugar Sugar Works Limited("the Company") which comprise the Balance Sheet as at March 31 2019 theStatement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date and asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "the financial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the Indian Accounting Standards prescribed under section 133of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 the profit and total comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under section 143(10) of the Act (SAs). Our responsibilities underthose Standards are further described in the Auditor's Responsibilities for the Audit ofthe Financial 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 (ICAI) together with the independence requirements that are relevant to our audit ofthe financial statements under the provisions of the Act and the Rules made thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the ICAI's Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our audit opinion on thefinancial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.

Sr. No. Key Audit Matter Auditor's Response
1. Accuracy of Cost of Goods Sold We assessed the Company's process to verify the Cost of Goods Sold incurred during the year.
We identified Cost of Goods Sold area as a key audit matter for the Company because it is the most significant cost of the company which comprise cost of sugarcane and other direct materials & Our audit approach consisted of testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
direct costs of production and the same has significant impact on the profitability of the Company. • Overall evaluation and testing of controls related to corresponding business processes viz. ‘Procurement of Sugarcane Production of Sugar Molasses Industrial Alcohol Potable Alcohol Generation of Eelectricity Purchase of Petroleum Products.
• Reconciliation of reports pertaining to Cane Purchases Cane Purchases Advance Harvesting and Transportation Advance Cane Crushing Report as per Cane Management System (CMS) with SAP (ERP).
• Review of overall operations and production / conversion process of materials into finished products.
• Review of Internal Audit reports and internal management reports relating to COGS.
• Review of captively consumed Steam Molasses and Bagasse costs.
• Review of cost estimates and current net realizable values for Valuation of Steam Sugar Spirits IML and Electricity.
• Review of Physical Inventory verification reports with reference to book inventory for accuracy and controls including review of internal period-end inventory procedures and reconciliations.
• Reviewing completeness and overall accuracy of system generated material consumption and reconciling with General Ledger including manual accounting entries relating to material consumption.
• Review of inventory valuation material consumption in accordance with applicable Indian Accounting Standards.
2. Accuracy of Revenue We assessed the Company's process to verify the sales revenues process during the year.
Revenue has been considered as a key audit matter in view of its peculiar nature of business and segment wise variation in criteria for revenue recognition. The subject area is significant & has a direct impact on the profitability of the Our audit approach consisted of testing of the design and operating effectiveness of the internal controls and substantive testing relating to revenue cycle viz. ‘Order To Collection' as follows:
Company. • Review of sales of Sugar Indian Made Liquor Spirit Co-Generation and Petroleum Sale process flow of documents/information and their respective controls effectiveness.
• Substantive Tests on random sampling for all the major sale transactions across all segments and end to end verification of all documents involved in the sample sale transactions verified.
• Scrutiny of relevant general ledger accounts to assess if the sales have been correctly accounted for to respective accounts.
• Review of payment terms associated with the segment wise sale arrangements identification of significant financing components and terms of rebate.
• Review of any changes to sales contracts and the underlying accounting impacts.
• Review of underlying commercial terms associated with the contract in order to assess point of transfer of ownership of goods.
• In case of revenue from sale of sugar ensuring the recovery as per Minimum Support Price (MSP) fixed by the Government.
• Review of terms of agreement with electricity supply companies pertaining to supply of electricity and agreements and purchase orders with Petroleum companies regarding sale of ethanol.
• Review of compliance done with respect to State GST Act for segmental sales and State Excise Act particularly for sale of Indian made liquor.
• Review of revenue recognition in compliance with IndAS - 115 ‘Revenue from Contracts with customers' and the requisite disclosures as mandated by the Accounting Standard.

Information Other than the Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report CorporateGovernance and Shareholder's Information but does not include the financial statementsand our auditor's report thereon.

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

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance total comprehensiveincome changes in equity and cash flows of the Company in accordance with the Ind AS andother accounting principles generally accepted in India. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.

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

The Board of Directors are responsible for overseeing the Company's financial reportingprocess.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the 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 financial controls 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 system in place and the operatingeffectiveness of such controls.

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

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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 (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure B" a statement on the mattersspecified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act based on our audit we report to theextent applicable 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 Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Cash Flow and Statement of Changes in Equity dealt with by thisReport are in agreement with the relevant books of account.

d. In our opinion the aforesaid Ind AS financial statements comply with the IndianAccounting Standards prescribed under section 133 of the Act read with rule 7 of theCompanies (Accounts) Rules 2014.

e. On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 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 over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internal financialcontrols over financial reporting.

g. With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended:

In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by Company to its directors during the year is inaccordance with the provision of section 197 of the Act.

h. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:

I. The Company has disclosed the impact of pending litigations on its financialposition in its Ind AS financial statements - Reference for the same is given in Ind ASnotes to financial statements.

II. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;

III. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For Kirtane & Pandit LLP
Chartered Accountants
Firm Reg. No. 105215W / W100057
Parag Pansare
Place : Pune Partner
Date : 22-05-2019 Membership No: 117309

Annexure "A" to the Independent Auditor's Report

(Referred to in paragraph 1(f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of THE UGAR SUGAR WORKS LIMITED ofeven date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of THE UGARSUGAR WORKS LIMITED ("the Company") as of March 31 2019 in conjunction withour audit of the financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India. 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 respective company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing 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 financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the internal financial controls system over financialreporting of the Company.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the company has in all material aspects an adequate financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2019 except that there is scope forimprovement in certain areas which require strengthening of controls 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. We have considered these weaknessesidentified in determining the nature timing and extent of audit tests applied in ouraudit of the March 31 2019 standalone financial statements of the Company and theseweaknesses do not affect our opinion on the financial statements of the company.

For Kirtane & Pandit LLP
Chartered Accountants
Firm Reg. No. 105215W / W100057
Parag Pansare
Place : Pune Partner
Date : 22-05-2019 Membership No: 117309

"Annexure - B" to the Independant Auditors' Report

(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 property plant and equipment.

(b) The Company has a program of verification of property plant and equipment to coverall the items in a phased manner over a period of three years which in our opinion isreasonable having regard to the size of the Company and the nature of its assets. Pursuantto the program certain property plant and equipment were physically verified by themanagement during the year. According to the information and explanations given to us nomaterial discrepancies were 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 the title deeds of immovable properties areheld in the name of the Company.

(ii) The inventory has been physically verified at reasonable intervals by theManagement and no material discrepancies were noticed on such verification. In ouropinion the frequency of verification is reasonable and adequate considering the size ofthe Company and the nature of its business.

(iii) The Company has not granted any loans secured or unsecured to Companies FirmsLimited Liability Partnerships or other parties covered in the register maintained underSection 189 of the Companies Act. Accordingly paragraph 3(iii) of the Order is notapplicable.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act in respect ofloans investments guarantees and security.

(v) According to information and explanation given to us the Company has not acceptedany deposits from public. Accordingly the reporting under Clause 3(v) of the Companies(Auditor's Report) Order 2016 is not applicable.

(vi) The Central Government has specified maintenance of cost records under Sub-Section(1) of Section 148 of the Act and we are of the opinion that prima facie such accounts andrecords are made and maintained. We have not however made a detailed examination of therecords with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us in respect ofstatutory dues:

(a) The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Income Tax Sales Tax Value Added Tax Duty of Customs Duty ofExcise Service Tax Goods & Service Tax Cess and other material statutory duesapplicable to it with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund Income TaxSales Tax Value Added Tax Duty of Customs Duty of Excise Service Tax Goods &Service Tax Cess and other material statutory dues were in arrears as at 31stMarch 2019 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax Excise Duty and Value Added Tax which have not beendeposited as on 31st March 2019 on account of disputes are given below

Name of the Statute Nature of the Dues Amount Under Dispute Period(s) to which the amount relate Forum where such dispute is pending
Central Excise Act 1944 Cenvat Credit demand issues 14.61 2006-07 CESTAT Bangalore
Central Excise Act 1944 Cenvat Credit demand issues 45.84 2007-08 CESTAT Bangalore
Central Excise Act 1944 Cenvat Credit demand issues 15.36 2008-09 CESTAT Bangalore
Central Excise Act 1944 Cenvat Credit demand issues 3.03 2010-11 CESTAT Bangalore
Central Excise Act 1944 Reversal on Rectified Spirit Sold or transferred to IML 151.34 2008-13 CESTAT Bangalore
Central Excise Act 1944 Cenvat Credit demand issues 43.18 2015-16 CESTAT Bangalore
Central Excise Act 1944 Cenvat Credit demand issues 26.65 2012-13 Assistant Commissioner of Central Excise Belagavi
Central Excise Act 1944 Cenvat Credit demand issues 4.92 2010-12 Commissioner of Central Excise (Appeals) Mysore
Central Excise Act 1944 Cenvat Credit demand issues 16.38 2014 Commissioner of Central Excise (Appeals) Mysore
Central Excise Act 1944 Cenvat Credit demand issues 19.14 2014-15 Commissioner of Central Excise (Appeals) Mysore
Central Excise Act 1944 Cenvat Credit demand issues 0.96 2015 Commissioner of Central Excise (Appeals) Mysore
Central Excise Act 1944 Cenvat Credit demand issues 1.30 2015 Commissioner of Central Excise (Appeals) Mysore
Central Excise Act 1944 Cenvat Credit demand issues 14.08 2016-17 Commissioner of Central Excise (Appeals) Mysore
Income Tax Act 1961 Dispute of tax u/s 115JB 189.53 AY 2012-13 Income Tax Appellate Authority Pune
Income Tax Act 1961 Dispute of tax u/s 115JB 9.27 AY 2014-15 Income Tax Appellate Authority Pune
Income Tax Act 1961 Dispute of tax u/s 115JB 0.79 AY 2013-14 Income Tax Appellate Authority Pune
Karnataka Tax on Entry of Goods Act 1979 Entry tax issues Commercial Taxes 20.14 FY 2011-12 Commissioner of (Appeals) Belagavi

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to financialinstitutions banks and government and dues to the debenture holders.

(ix) In our opinion and according to the information and explanations given to us theterm loans taken by the Company have been applied for the purpose for which they wereraised. The Company has not raised money by way of further public offer (including debtinstruments) during the year.

(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during theyear.

(xi) In our opinion and according to the information and explanations given to us theCompany has paid/ provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.

(xii) In our opinion and 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) In our opinion and according to the information and explanations given to usthe Company is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the Ind AS financial statements as required by theapplicable accounting standards.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underparagraph 3(xiv) of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or persons connected with him. Accordingly paragraph 3(xv) of the Order is notapplicable.

(xvi) In our opinion the Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934 and accordingly the provisions of clause 3(xvi) ofthe Order are not applicable to the Company and hence not commented upon.

For Kirtane & Pandit LLP
Chartered Accountants
Firm Reg. No. 105215W / W100057
Parag Pansare
Place : Pune Partner
Date : 22-05-2019 Membership No: 117309