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Varun Beverages Ltd.

BSE: 540180 Sector: Agri and agri inputs
NSE: VBL ISIN Code: INE200M01013
BSE 00:00 | 24 Feb 808.55 -10.70
(-1.31%)
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809.75

HIGH

820.00

LOW

805.10

NSE 00:00 | 24 Feb 808.85 -10.20
(-1.25%)
OPEN

814.80

HIGH

820.00

LOW

805.00

OPEN 809.75
PREVIOUS CLOSE 819.25
VOLUME 1109595
52-Week high 869.95
52-Week low 512.04
P/E 52.03
Mkt Cap.(Rs cr) 23,342
Buy Price 806.00
Buy Qty 1.00
Sell Price 818.00
Sell Qty 1.00
OPEN 809.75
CLOSE 819.25
VOLUME 1109595
52-Week high 869.95
52-Week low 512.04
P/E 52.03
Mkt Cap.(Rs cr) 23,342
Buy Price 806.00
Buy Qty 1.00
Sell Price 818.00
Sell Qty 1.00

Varun Beverages Ltd. (VBL) - Auditors Report

Company auditors report

To the Members of

Varun Beverages Limited

Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of Varun BeveragesLimited (‘the Company') which comprise the Balance Sheet as at 31 December 2018 theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofthe significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

2. The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 (‘the Act') with respect to the preparation ofthese standalone financial statements that give a true and fair view of the state ofaffairs (financial position) profit or loss (financial performance including OtherComprehensive Income) cash flows and changes in equity 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 the assets of the Company and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

4. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

5. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthese standalone financial statements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial controls relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.

7. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on these standalone financial statements.

Opinion

8. 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 Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India including Ind AS specified under Section133 of the Act of the state of affairs (financial position) of the Company as at 31December 2018 and its profit (financial performance including other comprehensiveincome) its cash flows and the changes in equity for the year ended on that date.

Other Matter

9. The standalone financial statements of the Company for the year ended 31 December2017 were jointly audited by the predecessor joint auditor Walker

Chandiok & Associates Chartered Accountants and current joint auditor APAS &Co. Chartered Accountants who have expressed an unmodified opinion on those financialstatements vide their audit report dated 16 February 2018.

Report on Other Legal and Regulatory Requirements

10. As required by section 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under section 197 read with Schedule V to the Act.

11. As required by the Companies (Auditor's Report) Order 2016 (‘the Order')issued by the Central Government of India in terms of Section 143(11) of the Act we givein the Annexure 1 a statement on the matters specified in paragraphs 3 and 4 of the Order.

12. Further to our comments in Annexure 1 as required by Section 143(3) of the Act wereport that:

a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;

b) in our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

c) the standalone financial statements dealt with by this report are in agreement withthe books of account;

d) in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under Section 133 of the Act;

e) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 December2018 from being appointed as a director in terms of Section 164(2) of the Act;

f) we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 December 2018 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 20 February 2019 as per Annexure 2 expressed an unqualified opinion; and

g) 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 as detailed in Note 42 to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position;

ii. the Company as detailed in Note 26 to the standalone financial statements hasmade provision as required under the applicable law or Ind AS for material foreseeablelosses if any on long-term contracts including derivative contracts;

iii. there were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company; and

iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.

For Walker Chandiok & Co LLP For APAS & Co.
Chartered Accountants Chartered Accountants
Firm's Registration No.: Firm's Registration No.:
001076N/N500013 000340C
Anupam Kumar Sumit Kathuria
Partner Partner
Membership No.: 501531 Membership No: 520078
Place: Gurugram Place: Gurugram
Date: 20 February 2019 Date: 20 February 2019
L-41 8/14
Connaught Place Basement Kalkaji Extension
New Delhi 110 001 New Delhi 110 019

Annexure 1

Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The fixed assets other than refrigerators (visi coolers) and containers lying withthird parties have been physically verified by the management during the year and nomaterial discrepancies were noticed on such verification. The Company has a regularprogram of physical verification of refrigerators (visi coolers) under which such fixedassets are verified in a phased manner over a period of three years and no materialdiscrepancies were noticed on such verification. According to the information andexplanations given to us the existence of containers lying with active third parties isconsidered on the basis of the confirmations obtained from such third parties. In ouropinion the frequency of verification of the fixed assets is reasonable having regard tothe size of the Company and the nature of its assets.

(c) The title deeds of all the immovable properties (which are included under the head‘Property plant and equipment') are held in the name of the Company except for thefollowing property which according to the information and explanation given to us by themanagement land at Pathankot will be registered in the name of the Company on expiry of 3years from the date of commencement of commercial production on such property and land atSonapur and Sangli will be registered on full and final payment.

Nature of property Total Number of Cases Whether leasehold / freehold

Gross block as on 31 December 2018

Net block as on 31 December 2018

Land (at Pathankot) 1 Leasehold Rs 197.10 million Rs 192.23 million
Land (at Sonapur 1 Leasehold Rs 1.50 million Rs 1.49 million
Kolkata)
Land (at Sangli 1 Leasehold Rs 1.55 million Rs 1.55 million
Maharashtra)

(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year except for goods-intransit and stocks lying withthird parties. For stocks lying with third parties at the year-end written confirmationshave been obtained by the management. No material discrepancies were noticed on theaforesaid verification.

(iii) The Company has not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships (LLPs) or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly the provisions of clauses 3(iii)(a) 3(iii)(b)and 3(iii)(c) of the Order are not applicable.

(iv) In our opinion the Company has not entered into any transaction covered underSections 185 of the Act. The Company has complied with the provisions of Section 186 ofthe Act in respect of loans investments guarantees and security as applicable.

(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.

(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax goods and service tax sales-tax service tax duty of customsduty of excise value added tax cess and other material statutory dues as applicablehave generally been regularly deposited to the appropriate authorities though there hasbeen a slight delay in a few cases. Further no undisputed amounts payable in respectthereof were outstanding at the year-end for a period of more than six months from thedate they became payable.

(b) The dues outstanding in respect of income-tax sales-tax service-tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:

Name of the statute Nature of dues Amount Amount paid under Protest Period to which the amount relates Forum where dispute is pending
(Rs million) (Rs million)
Central Excise Central 395.39 - 2005-06 February 2009-June 2017 CESTAT New Delhi
Act 1944 Excise
Central Excise Act 1944 Central Excise 11.89 0.89 April 2012 to December 2015 CESTAT New Delhi
Central Excise Act 1944 Central Excise 1.77 0.05 April 2012 to June 2017 Additional Commissioner Bhiwadi
Central Excise Act 1944 Central Excise 4.51 0.40 March 2012 to December 2016 Commissioner (Appeal) Bhiwadi
Central Excise Act 1944 Central Excise 1.27 0.13 2014-15 CESTAT Allahabad
Central Excise Act 1944 Central Excise 0.20 0.01 September 2014 to June 2015 Commissioner (Appeal) Meerut
Central Excise Act 1944 Central Excise 9.88 0.48 August 2015 to March 2016 CESTAT New Delhi
Central Excise Act 1944 Central Excise 1.39 - April 2016 to June 2017 Commissioner (Appeal) Ludhiana
Central Excise Act 1944 Central Excise 0.78 - April 2013 to Feb 2016 Commissioner (Appeal) Kolkata
Central Excise Act 1944 Central Excise 3.51 - July 2014 to August 2014 Commissioner (Appeal) Kolkata
Central Excise Act 1944 Central Excise 0.16 - March 2015 to October 2016 Deputy Commissioner Panipat
Central Excise Act 1944 Central Excise 0.58 - March 2015 to January 2016 Office of the Commissioner of Central Excise Sonepat
Central Excise Act 1944 Central Excise 13.69 0.51 April 2014 to February 2015 Office of the Commissioner of Central Excise Panchkula
Central Excise Act 1944 Central Excise 0.12 - February 2016 to March 2017 Office of the Commissioner of Central Excise Sonepat
The Uttar Pradesh Goods and Services Act 2017 GST 1.28 1.28 June 2018 to October 2018 Additional Commissioner Ghaziabad
The Custom Act 1962 Custom Duty 45.37 - January 2017 to December 2018 Principal Commissioner/ Commissioner of Custom Maharashtra
The Uttar Pradesh Value Added Tax Act 2008 Value Added Tax 1.61 0.11 2001-2002 to 2003-2005 Additional Commissioner (Appeals) Ghaziabad and Dy. Commissioner Noida
The Uttar Pradesh Value Added 0.71 0.65 2015-16 Additional
Value Added Tax Act 2008 Tax 2016-17 2017-18 Commissioner Ghaziabad and Joint Commissioner Ghaziabad
The Uttar Pradesh Value Added Tax Act 2008 Value Added Tax 1.95 0.68 2009-2010 Commercial Tax Tribunal Uttar Pradesh
The Uttar Pradesh Value Added Tax Act 2008 Value Added Tax 10.36 2.72 January 2008 to March 2010 and 2011-12 Joint Commissioner Ghaziabad
The Uttar Pradesh Value Added Tax Act 2008 Value Added Tax 18.29 7.66 2010-2012 Joint Commissioner Ghaziabad and Add. Commissioner Ghaziabad
The Uttar Pradesh Value Added Tax Act 2008 Value Added Tax 0.10 0.10 2010-2011 Joint Commissioner Kanpur
The Uttar Pradesh Value Added Tax Act 2008 Value Added Tax 0.38 0.38 2009-10 May 2015 and June 2016 Dy. Commissioner (Appeal) Jaipur
Haryana Value Added Tax Act 2003 Value Added Tax 95.68 0.40 April 2015 to March 2016 Excise and Taxation officer cum Assessing Authority Mewat
Punjab Value Added Tax Act 2005 Value Added Tax 0.18 - 2015-16 Assessing officer Mohali
Punjab Value Added Tax Act 2005 Value Added Tax 0.33 0.08 2015-16 Value added tax tribunal Punjab and Chandigarh
Punjab Value Added Tax Act 2005 Value Added Tax 0.19 0.14 2016-17 The Deputy Excise and Taxation Commissioner (Appeals) cum Joint Director (Investigation) Bathinda
Punjab Value Added Tax Act 2005 Value Added Tax 0.13 0.03 2016-17 The Deputy Excise and Taxation Commissioner (Appeals) cum Joint Director (Enforcement) Jallandhar
Rajasthan Value Added Tax Act 2003 Value Added Tax 582.46 16.75 2010-2015 Honorable High Court Rajasthan
West Bengal Value Added Tax Act 2003 Value Added Tax 1.21 0.51 July 2012 and September 2013 January 2015 and September 2015 West Bengal Tribunal
West Bengal Value Added Tax Act 2003 Value Added Tax 0.96 0.47 April 2016- September 2016 West Bengal Tribunal
The Goa Value Added Tax Act 2005 Value Added Tax 2.43 - 2013-14 Assistant Commissioner Margoa
The Maharashtra Value Added Tax Act 2002 Value Added Tax 0.12 - April 2013 to March 2014 Dy. Commissioner of Sales tax Dept. (Appeals) Kolhapur
The Uttarakhand Value Added Tax Act 2005 Value Added Tax 0.14 0.14 April 2012 Uttarakhand Sale Tax Department
Punjab Tax on Entry of goods into Local Areas Act 2000 Entry Tax 28.77 - 2016-17 Honorable High Court Chandigarh
Rajasthan Tax of Entry of Goods into Local Areas Act 1999 Entry Tax 3.37 - 2014-16 Honorable High Court Jaipur
Uttar Pradesh Tax on Entry of Goods into Local Areas Act 2007 Entry Tax 14.64 2.90 2009-10 and 2010-11 Joint Comm. Office (Circle-1) Ghaziabad
Goa Non- Biodegradable Garbage (Control) Act 1996 (Act 5 of 1997) Cess 42.78 - April 2014 to December 2018 Honorable High court of Bombay Panji
Income-Tax Act 1961 Income Tax 0.34 - A.Y 2006-07 AY 2007-08 Income Tax Appelate Tribunal New Delhi
Income Tax 39.00 - AY 2012-13 Income Tax Appelate Tribunal New Delhi
Income-Tax Act 1961 Income Tax 2.79 - AY 2014-15 2015- 16 Commissioner Income Tax (Appeals) New Delhi

(viii)The Company has not defaulted in repayment of loans or borrowings to anyfinancial institution or a bank or government or any dues to debenture-holders during theyear.

(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). In our opinion the term loans were applied for thepurposes for which the loans were obtained.

(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.

(xi) Managerial remuneration has been paid by the Company in accordance with therequisite approvals mandated by the provisions of Section 197 of the Act read withSchedule V to the Act.

(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.

(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.

(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.

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

For Walker Chandiok & Co LLP For APAS & Co.
Chartered Accountants Chartered Accountants
Firm's Registration No.: 001076N/N500013 Firm's Registration No: 000340C
Anupam Kumar Sumit Kathuria
Partner Partner
Membership No.: 501531 Membership No: 520078
Place: Gurugram Place: Gurugram
Date: 20 February 2019 Date: 20 February 2019
L-41 Connaught Place 8/14 Basement Kalkaji Extension
New Delhi 110 001 New Delhi 110 019

Annexure 2 to the Independent Auditor's Report of even date to the members of VarunBeverages Limited on the standalone financial statements for the year ended 31 December2018

Annexure 2

Independent Auditor's Report on the Internal Financial Controls under Clause (i) ofSubsection 3 of Section 143 of the Companies Act 2013 (‘the Act')

1. In conjunction with our audit of the standalone financial statements of VarunBeverages Limited (‘the Company') as at and for the year ended 31 December 2018 wehave audited the internal financial controls over financial reporting (‘IFCoFR') ofthe Company as at that date.

Management's Responsibility for Internal Financial Controls

2. The Company's Board of Directors 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 ("the Guidance Note") issued by the Institute of Chartered Accountantsof India ("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of the Company's business including adherenceto the Company's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditor's Responsibility

3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theICAI and deemed to be prescribed under Section 143(10) of the Act to the extentapplicable to an audit of IFCoFR and the Guidance Note issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate IFCoFR wereestablished and maintained and if such controls operated effectively in all materialrespects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR include 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.

Inherent Limitations of Internal Financial Controls over Financial Reporting

7. BecauseoftheinherentlimitationsofIFCoFRincluding the possibility of collusion orimproper management override of controls material misstatements due to error or fraud mayoccur and not be detected. Also projections of any evaluation of the IFCoFR to futureperiods are subject to the risk that the IFCoFR may become inadequate because of changesin conditions or that the degree of compliance with the policies or procedures maydeteriorate.

Opinion

8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such controls were operating effectivelyas at 31 December 2018 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal financialcontrols stated in the Guidance Note issued by the ICAI.

For Walker Chandiok & Co LLP For APAS & Co.
Chartered Accountants Chartered Accountants
Firm's Registration No.: 001076N/N500013 Firm's Registration No: 000340C
Anupam Kumar Sumit Kathuria
Partner Partner
Membership No.: 501531 Membership No: 520078
Place: Gurugram Place: Gurugram
Date: 20 February 2019 Date: 20 February 2019
L-41 Connaught Place 8/14 Basement Kalkaji Extension
New Delhi 110 001 New Delhi 110 019