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Zenotech Laboratories Ltd.

BSE: 532039 Sector: Health care
NSE: N.A. ISIN Code: INE486F01012
BSE 00:00 | 13 Apr 38.20 -0.45
(-1.16%)
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NSE 05:30 | 01 Jan Zenotech Laboratories Ltd
OPEN 37.00
PREVIOUS CLOSE 38.65
VOLUME 7523
52-Week high 47.90
52-Week low 17.95
P/E
Mkt Cap.(Rs cr) 233
Buy Price 0.00
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Sell Price 0.00
Sell Qty 0.00
OPEN 37.00
CLOSE 38.65
VOLUME 7523
52-Week high 47.90
52-Week low 17.95
P/E
Mkt Cap.(Rs cr) 233
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Zenotech Laboratories Ltd. (ZENOTECHLAB) - Auditors Report

Company auditors report

To

the Members of

Zenotech Laboratories Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the standalone financial statements of Zenotech Laboratories Limited("the Company") which comprise the balance sheet as at 31 March 2019 and thestatement of Profit and Loss statement of changes in equity and statement of cash flowsfor the year then ended and notes to the financial statements including a summary ofsignificant 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 Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31 March 2019 and loss changes in equity and its cash flows for the year ended onthat date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theStandalone Financial Statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the ethical requirements that are relevant toour audit of the standalone financial statements under the provisions of the CompaniesAct 2013 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 sufficient and appropriate to provide a basisfor our opinion.

Emphasis of Matter

We draw attention to Note 28 in the standalone financial statements which describe thereconstruction of financial records and various legal proceedings as follows: -

(a) Based on the information provided to us by the Management the books of accountsfor the financial years ended 31st March 2011 & 31st March 2012were reconstructed by the Management post 12th November 2011.

(b) The matters relating to several financial and non-financial irregularitiespertaining to period prior to 12th November 2011 are currently sub-judice andthe impact of the various legal proceedings would be made in the standalone financialstatements of the Company as and when the outcome of the above uncertainties becomes knownand the consequential adjustments / disclosures are identifiable / determinable. TheCompany has represented to us that based on the steps taken by the Management and evidenceavailable so far any financial impact on the standalone financial statements of theCompany is likely to be significantly low.

Our report is not modified in respect of these matters.

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.

We have determined the matters described below to be the key audit matters to becommunicated in our report.

Key audit matters Auditor's Response
Going concern assumption
The Company has losses from last many years and continuing in loss for the current audit period also. Hence we were required to assess whether the going concern assumption is appropriate. Our Audit Procedures included:
• Review of management's budgets to gain an understanding of the inputs and process underpinning the cash flow model prepared for the going concern assessment.
• Discussion with the management on the cash flow position and the plans for meeting the requirements of cash deficits if any in the business plans.
• Evaluation of the plans of the Company for becoming cash positive from operations and becoming profitable over a period.
• We have also evaluated the disclosures provided in the standalone financial statements to ensure that this aspect has been appropriately disclosed.
Impairment of Fixed Assets
Non-recognition of impairment provision on fixed assets. Our Audit procedures included:
• Checks to identify if the plant is performing below the rated capacity.
• Review of all Long pending capital advances as at date of the financials.
• Review the assessment made by the management and evaluating whether those are mitigating the risk of not considering the provision for impairment as at date of the financials.
• Review that there is no significant movement in the land price as per registration value prescribed by State Government which calls for the impairment if any.

Information Other than the Financial Statements and Auditors' Report Thereon

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Board's Report and ManagementDiscussion & Analysis Report but does not include the standalone financial statementsand our auditors' report thereon.

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.

Responsibilities of the Management and Those Charged with Governance for StandaloneFinancial Statements

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 financialposition financial performance changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theIndian accounting Standards specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the 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 wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the company's financialreporting process.

Auditors' 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 auditors' 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 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 standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company 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 auditors' report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditors' report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent 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.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the "Annexure A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.

2. 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 Balance Sheet the Statement of Profit and Loss the Statement of Changes inEquity and the Cash Flow Statement dealt with by this Report are in agreement with thebooks of account.

(d) In our opinion the aforesaid standalone financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014.

(e) On the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 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 over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".

(g) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements - Refer Note 29 to the financialstatements;

ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.

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

3. As required by Section 197(16) of the Act we report that the remuneration paid bythe company to its directors is in accordance with the prescribed provisions and theremuneration paid to every director is within the limit specified under Section 197.

For PKF Sridhar & Santhanam LLP

Chartered Accountants

Firm's Registration No.003990S/S200018

S. Prasana Kumar

Partner

Membership No. 212354

Place of Signature: Mangalore

Date: 18th May 2019.

Annexure A

Referred to in paragraph 1 on ‘Report on Other Legal and Regulatory Requirements'of our report of even date to the members of Zenotech Laboratories Limited ("theCompany") on the standalone financial statements as of and for the year ended 31March 2019.

(i) In respect of the Company's fixed assets:

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

(b) The Company has a regular programme of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of three years. Inour opinion this periodicity of physical verification is reasonable having regard to thesize of the Company and the nature of its assets. Pursuant to the programme certain fixedassets were physically verified by the management during the year. In our opinion andaccording to the information and explanations given to us no material discrepancies werenoticed on such verification.

(c) According to the information and explanations given to us the records examined byus and based on the examination of the conveyance deeds provided to us we report thatthe title deeds comprising all the immovable properties of the land and buildings whichare freehold are held in the name of the Company as at Balance Sheet date.

(ii) The inventory has been physically verified by the management at reasonableintervals during the year. In our opinion the frequency of such verification isreasonable. The discrepancies noticed on verification between the physical stocks and thebook records were not material and have been dealt with in the books of account.

(iii) Based on our audit procedures & according to the information and explanationgiven to us the Company has not granted any loans secured or unsecured to partiescovered in the register maintained under section 189 of the Act and hence 3(iii) of theOrder is not applicable to the Company.

(iv) Based on our audit procedures & according to the information and explanationgiven to us the Company has neither given any loan guarantees or security nor made anyinvestment during the year covered under section 185 and 186 of the Act. Therefore clause3(iv) of the Order is not applicable to the Company.

(v) Based on our audit procedures & according to the information and explanationgiven to us the Company has not accepted any deposits from the public within the meaningof the Act and the rules made there under and hence clause 3(v) of the Order is notapplicable.

(vi) The Company is not required to maintain cost records specified by the CentralGovernment under sub section (1) of section 148 of the Act.

(vii) (a) According to the information and explanations given to us and the records ofthe Company examined by us the Company has generally been regular in depositingundisputed statutory dues including provident fund employees' state insuranceincome-tax duty of customs duty of excise Goods and Services Tax(GST) cess and anyother statutory dues as applicable with the appropriate authorities.

According to the information and explanation given to us and the records of the Companyexamined by us no undisputed amounts payable in respect of provident fund employees'state insurance income-tax duty of customs duty of excise Goods and Services Tax(GST)cess and any other statutory dues were in arrears as at 31 March 2019 for a period ofmore than six months from the date they became payable.

(b) According to the information and explanations given to us and based on ourexamination of the records of the Company there are no dues of Income-tax Sales TaxService tax Goods and Services Tax(GST) Duty of customs Excise duty and Value added taxas at 31 March 2019 which have not been deposited with the appropriate authorities onaccount of any dispute except as stated below:

Name of statute Nature of dues Amount Rs. in ‘000* Period to which amounts relates Forum where dispute is pending
The Finance Act 1994 Service Tax NIL# FY 2007-08 Commissioner of Central Excise and Service Tax Hyderabad IV
The Finance Act 1994 Service Tax NIL# FY 2007-08 to 2009-10 Commissioner of Central Excise and Service Tax Hyderabad IV
The Finance Act 1994 Service Tax 10124 FY 2006-07 and 2007-08 Commissioner of Central Excise and Service Tax Hyderabad IV
A.P Vat Act 2005 VAT 1685 FY 2009-10 to 2012-13 Deputy Commissioner Commercial Taxes (Appeal)
The Finance Act 1994 Service Tax 3405** Prior to Financial year 2011-12 (Service Tax) N/A
A.P Vat Act 2005 Sales Tax 39 ** Prior to Financial year 2011-12 (Sales Tax) Commercial Tax Officer Srinagar Colony Circle
The Customs Act 1962 Customs Duty 5160 Prior to Financial year 2011-12 (Customs Act) Principal Commissioner of Customs Hyderabad

* excluding penalty & Interest.

** Provision for Service Tax on Forex outgo Wealth Tax and Sales Tax for which norecords/ details are available with the Company and hence Interest not ascertained.

# Principal portion fully settled in this year.

(viii) In our opinion and according to the information and explanations given to usthe Company has defaulted in repayment of loans or borrowings to government agencies whichare as follows:

Name of the Lender Period Amount (Rs. in ‘000)*
Technology Development Board FY 2011-18 27645

* amount of accrued interest only.

(ix) According to the information and explanations given to us the Company hasutilized the money raised by way of Rights issue of Equity shares during the previous yearfor the purposes for which they were raised.

(x) To the best of our knowledge and belief and according to the information andexplanations given to us we report that no fraud by the Company or on the Company by itsofficers or employees has been noticed or reported during the year nor have we beeninformed of such case by the management.

(xi) According to the information and explanations given to us the managerialremuneration has been paid in accordance with the requisite approvals mandated by theprovisions of section 197 read with Schedule V to the Act.

(xii) The Company is not a Nidhi company in accordance with Nidhi Rules 2014.Accordingly the provisions of clause (xii) of the Order are not applicable.

(xiii) Based on our audit procedures and according to the information and explanationsgiven to us all the transactions entered into with the related parties during the yearare in compliance with Section 177 and Section 188 of the Act where applicable and thedetails have been disclosed in the standalone financial statements as required by theapplicable Indian accounting standards.

(xiv) Based on our audit procedures and according to the information and explanationsgiven to us the Company has not made any preferential allotment or private placement ofshares / fully or partly convertible debentures during the year under review. Accordinglythe provisions of clause (xiv) of the Order are not applicable.

(xv) Based on our audit procedures and according to the information and explanationsgiven to us the Company has not entered into any non-cash transactions with directors orpersons connected with them.

(xvi) Based on our audit procedures and according to the information and explanationsgiven to us the Company is not required to be registered under Section 45-IA of ReserveBank of India Act 1934.

For PKF Sridhar & Santhanam LLP

Chartered Accountants

Firm's Registration No.003990S/S200018

S. Prasana Kumar

Partner

Membership No. 212354

Place of Signature: Mangalore

Date: 18th May 2019

Annexure B

Referred to in paragraph 2(f) on ‘Report on Other Legal and RegulatoryRequirements' of our report of even date

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of ZenotechLaboratories Limited ("the Company") as of 31 March 2019 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both 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 internalfinancial controls over financial reporting were 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.

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 systemover financial reporting.

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 authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized 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

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 maintained in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31 March 2019 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.

For PKF Sridhar & Santhanam LLP

Chartered Accountants

Firm's Registration No.003990S/S200018

S. Prasana Kumar

Partner

Membership No. 212354

Place of Signature: Mangalore

Date: 18th May 2019.

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