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Zenotech Laboratories Ltd.

BSE: 532039 Sector: Health care
NSE: N.A. ISIN Code: INE486F01012
BSE 12:47 | 09 Dec 47.15 0.10
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NSE 05:30 | 01 Jan Zenotech Laboratories Ltd
OPEN 49.00
PREVIOUS CLOSE 47.05
VOLUME 6070
52-Week high 62.65
52-Week low 26.20
P/E 50.70
Mkt Cap.(Rs cr) 288
Buy Price 47.15
Buy Qty 2.00
Sell Price 47.50
Sell Qty 98.00
OPEN 49.00
CLOSE 47.05
VOLUME 6070
52-Week high 62.65
52-Week low 26.20
P/E 50.70
Mkt Cap.(Rs cr) 288
Buy Price 47.15
Buy Qty 2.00
Sell Price 47.50
Sell Qty 98.00

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 standalone balance sheet as at 31 March2021 and the standalone statement of Profit and Loss (including other comprehensiveincome) standalone statement of changes in equity and standalone statement of cash flowsfor the year then ended and notes to the standalone financial statements including asummary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ('the Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2021 and loss and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India (ICAI) togetherwith the ethical requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion.

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
The Company has losses from last many years. Hence we were required to assess whether the going concern assumption is appropriate. Our Audit Procedures included:
• Review of management's budgets (including consideration of adjustment for COVID19 impact on business if any) 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.
• Evaluation of the disclosures provided in the standalone financial statements to ensure that this aspect has been appropriately disclosed.
Impairment of Property Plant and Equipment
Non-recognition of impairment provision on Property Plant and Equipment. Our audit procedures included:
• Checks to identify if the plant is performing below the rated capacity.
• Review of all Long pending capital advances if any as at the reporting 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 the reporting date of the financials.
• Review to ensure there is no significant decline in the land price as per registration value prescribed by State Government which calls for impairment if any.

Emphasis of Matter

We draw attention to Note 28 in the standalone financial statements which describes thevarious legal proceedings as follows:

The matters relating to several financial and non-financial irregularities pertainingto period prior to 12th November 2011 are currently sub-judice and the impact of thevarious legal proceedings would be made in the standalone financial statements of theCompany as and when the outcome of the above uncertainties becomes known and theconsequential adjustments / disclosures are identifiable / determinable. The Company hasrepresented to us that based on the steps taken by the Management and evidence availableso far any financial impact on the standalone financial statements of the Company islikely to be significantly low.

Our opinion is not modified in respect of the above matter.

Information Other than the Standalone Financial Statements and Auditors' Report Thereon

The Company's management and Board of Directors are responsible for the preparation ofthe other information. The other information comprises the information included in theBoard of Directors' report and Management Discussion & Analysis Report but does notinclude the standalone financial statements and 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 during the audit or otherwise appears to be materially misstated. If based onthe work we have performed we conclude that there is a material misstatement of thisother information 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 management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian accountingStandards (Ind AS) prescribed 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.

In preparing the standalone financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so..

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 financial 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 the standalonefinancial statements in place and the operating effectiveness 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; and

• 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.

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

(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.

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

(c) The standalone Balance Sheet the standalone Statement of Profit and Loss(including other comprehensive income) the standalone Statement of Changes in Equity andthe standalone statement of cash flows dealt with by this Report are in agreement with thebooks of account.

(d) In our opinion the aforesaid standalone financial statements comply with theIndian Accounting Standards (Ind AS) prescribed under Section 133 of the Act.

(e) On the basis of the written representations received from the directors as on 31March 2021 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2021 from being appointed as a director in terms of Section164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls with reference tothe standalone financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate 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 as at 31 March 2021 onits financial position in its standalone financial statements - Refer Note 29 to thestandalone financial statements.

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 during the year ended 31 March 2021.

3. With respect to the matter to be included in the Auditors' Report under section197(16):

In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.

For PKF Sridhar & Santhanam LLP

Chartered Accountants

Firm's Registration No.003990S/S200018

S. Prasana Kumar

Partner

Membership No. 212354

UDIN : 21212354AAAAAY3705

Place of Signature: Hyderabad

Date: 01-May-2021

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 2021.

(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 and no materialdiscrepancies were noticed 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 (Refer Note-30to the Standalone Financial Statements).

(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 2021 for a period ofmore than six months from the date they became payable.

According to the information and explanations given to us and based on our examinationof the records of the Company there are no dues of Income-tax Sales Tax Service taxGoods and Services Tax(GST) Duty of customs Excise duty and Value added tax as at 31March 2021 which have not been deposited with the appropriate authorities on account ofany 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
A.P Vat Act 2005 VAT 1685 FY 2009-10 to 2012-13 Deputy Commissioner Commercial Taxes (Appeal)
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.

** Pertaining to Sales Tax for which no records/ details are available with the Companyand hence Interest not ascertained.

(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 ‘000s)*
Technology Development Board FY 2011-18 27645

*amount of accrued interest only. (Refer Note-30 to the Standalone FinancialStatements).

(ix) According to the information and explanations given to us the Company has notraised any money by way of initial public offer / further public offer / debt instruments.

(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 / provided in accordance with the requisite approvals mandatedby the provisions 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 Ind AS24 Related Party Disclosures.

(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 or fully or partly paid convertible debentures during the year under review.Accordingly the 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. Accordingly the provisions of clause (xv) of the Order arenot applicable.

(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. Accordingly the provisions of clause (xvi) of the Order are notapplicable.

For PKF Sridhar & Santhanam LLP

Chartered Accountants

Firm's Registration No.003990S/S200018

S. Prasana Kumar

Partner

Membership No. 212354

UDIN : 21212354AAAAAY3705

Place of Signature: Hyderabad

Date: 01-May-2021

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 with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013

We have audited the internal financial controls with reference to standalone financialstatements of Zenotech Laboratories Limited ("the Company") as of 31 March 2021in conjunction with our audit of the standalone financial statements of the Company forthe year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the "Guidance Note"). These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013 (hereinafter referred to as "the Act").

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and if such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of internal financial controls assessingthe risk that a material weakness exists and testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.

Meaning of Internal Financial Controls with reference to standalone financialstatements

A Company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial control withreference to financial statements includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the Company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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 with reference to standalonefinancial statements

Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

Opinion

In our opinion the Company has maintained in all material respects adequate internalfinancial controls with reference to financial statements and such internal financialcontrols were operating effectively as at 31 March 2021 based on the internal financialcontrols with reference to financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note.

For PKF Sridhar & Santhanam LLP

Chartered Accountants

Firm's Registration No.003990S/S200018

S. Prasana Kumar

Partner

Membership No. 212354

UDIN: 21212354AAAAAY3705

Place of Signature: Hyderabad

Date: 01-May-2021

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