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Zodiac Energy Ltd.

BSE: 535032 Sector: Engineering
NSE: ZODIAC ISIN Code: INE761Y01019
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Zodiac Energy Ltd. (ZODIAC) - Auditors Report

Company auditors report

TO THE MEMBERS OF ZODIAC ENERGY LIMITED

Report on the Audit of the Financial Statements

Opinion

We have audited the accompanying financial statements of ZODIAC ENERGY LIMITED("the Company") which comprise the Balance Sheet as at March 31 2020 theStatement of Profit and Loss and the Statement of Cash Flows for the year ended on thatdate and notes to the financial statements including a summary of the significantaccounting 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 (hereinafter referred to as "the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Rule 7 of the Companies (Accounts)Rules2014 as amended and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2020 the profit and its cash flows forthe 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 (hereinafter referred to as"SAs"). Our responsibilities under those Standards are further described in theAuditor's Responsibilities for the Audit of the Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (hereinafter referred to as"ICAI") together with the ethical 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 and 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 How our audit addressed the key audit matter
1 Recoverability Assessment of Trade Receivable: We tested the design and operating effectiveness of key controls focusing on the following:
As at the balance sheet date the value of Trade Receivable amounted to Rs 2533.66 lakhs representing 58% of the total Assets Trade receivables of the Company comprises mainly receivables in relation to the
I. Service Provided to Power Distribution Companies - Identification of loss events including early warning and default warning indicator.
II. Subsidy Receivable from Power Distribution Companies. - Assessment and approval of individual loss provisions;
III. Service provided to other customers We have performed the following procedures in relation to the recoverability of trade receivables:
The increasing challenges over the economy and operating environment during the year have increased the risks of default on receivables from the Company's customers.
In particular in the event of insolvency of customers the Company is exposed to potential risk of financial loss when the customers fail to meet their contractual obligations in accordance with the requirements of the agreements. Tested the accuracy of ageing of trade receivables at year end on a sample basis;
Obtained a list of outstanding receivables and identified any debtors with financial difficulty through discussion with management;
The recoverable amount was estimated by management based on their specific recoverability assessment on individual customer with reference to the ageing profile historical payment pattern and the past record of default of the customer. Assessed the recoverability of the unsettled receivables on a sample basis through our evaluation of management's assessment with reference to the credit profile of the customers historical payment pattern of customers publicly available information and latest correspondence with customers and to consider if any additional provision should be made; and
Management make provision based on the established model as well as specific provision against individual balances with reference to its recoverable amount. For the purpose of establishing provisioning model to make provision for expected credit loss significant judgments and assumptions including the credit risks of customers the timing and amount of realization of these receivables are required to be made. Tested subsequent settlement of trade receivables after the balance sheet date on a Sample basis if any
We have reviewed that the appropriateness is in accordance with presentation of disclosures against relevant accounting standards.
2. Inventory:
As at the balance sheet date the value of inventory amount to Rs 1120.31 lakhs representing 25% of the total Assets Inventory verification was carried out by the management subsequent to the year end. We have tested the controls of the management over inventory existence during the year of the Company. We have consequently performed alternate audit procedures to audit the existence of inventory
Due to COVID 19 restrictions and lock down the Company was unable to carry out physical verification of inventory as on the year end.

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 Board'sReport including Annexures to Board's Report and Shareholder's Information but does notinclude the financial statements and our auditor's report thereon. The other informationis expected to be made available to us after the date of this auditor's report.

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 workwe 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.

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 of the Company inaccordance with the accounting principles generally accepted in India. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding 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 financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

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.

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

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 the financial statements. As part of an audit in accordance with SAs we exerciseprofessional judgment and maintain 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. Wecommunicate with those charged with governance regarding among other matters the plannedscope and timing of the audit and significant audit findings including any significantdeficiencies in internal control that we identify during our audit. We also provide thosecharged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence and whereapplicable 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 for thefinancial year ended on March 312020 and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act based on our audit 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 and the Statement of Cash Flowdealt with by this Report are in agreement with the relevant books of account.

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

e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.

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 we report thatin our opinion and to the best of our information and according to the explanation givento us the remuneration paid or provided by the company to its directors during the yearis in accordance with the provisions of the 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 does not have any pending litigations which would impact its financialposition.

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 the by the Company.

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 the paragraphs 3 and 4 of the order.

For Manubhai& Shah LLP
Chartered Accountants
Firm Reg. No. 106041W/W100136
(K.M. Patel)
Place: Ahmedabad Partner
Date: June 27 2020 Membership Number: 045740
UDIN: 20045740AAAABA2154

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 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 internalfinancial controls over financial reporting of Zodiac Energy Limited ("theCompany") as of March 31 2020 in conjunction with our audit of the financialstatements of the Company for the period ended on that date.

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'). 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 company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditor's 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 applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects. Our auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion on the Company's internal financial controls system over financialreporting.

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 in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For Manubhai& Shah LLP
Chartered Accountants
Firm Reg. No. 106041W/W100136
(K.M. Patel)
Place: Ahmedabad Partner
Date: June 27 2020 Membership Number: 045740
UDIN: 20045740AAAABA2154

ANNEXURE - B TO THE INDEPENDENT AUDITOR'S REPORT

(Annexure Referred to in paragraph 2 under ‘Report on Other Legal and RegulatoryRequirements' section of our report on financial statements for the year ended March 312020 to the members of Zodiac Energy Limited)

Report on Companies (Auditor's Report) Order 2016 (‘the Order') issued by theCentral Government in terms of Section 143(11) of the Companies Act 2013 ('the Act') ofZodiac Energy Limited (‘the Company')

1. In respect of fixed assets:

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

b) The fixed assets have been physically verified by the management once in a yearwhich we consider reasonable having regard to the size of the Company and the nature ofits assets. According to the information and explanations given to us no materialdiscrepancies were noticed on such verification.

c) The company does not have immovable properties. Hence reporting requirement underthis clause is not applicable to the company and hence not reported upon.

2. In respect of Inventories:

The inventory has been physically verified by the management at reasonable intervals.The discrepancies noticed on verification between physical stock and book records were notmaterial and have been dealt with in books of accounts.

3. In respect of loans granted to parties covered in the register maintained u/s189 of the Act:

The Company has not granted any loans secured or unsecured to companies firms andlimited liabilities partnerships or other parties covered in the register maintained underSection 189 of the Act. Therefore the provisions of Clause 3 (iii) [(a) to (c)] of theOrder are not applicable to the Company.

4. In respect of compliance of section 185 and 186 of the Act:

In our opinion and according to the information and explanations given to us thecompany has not made loans or investments or provided guarantees and securities in respectof which provisions of sections 185 and 186 of the Act are applicable.

5. In respect of deposits:

The Company has not accepted deposits within the meaning of Sections 73 to 76 or anyother relevant provisions of the act and the rules framed thereunder.

6. In respect of maintenance of cost records:

To the best of knowledge and according to information and explanation given to us themaintenance of cost records has not been specified by Central Government under section148(1) of the Act for the business activity carried out by the company. Thus reportingrequirement under clause 3(vi) of the order is not applicable to the Company.

7. In respect of statutory dues:

a) According to the information and explanations given to us and the records of theCompany examined by us in our opinion the Company is generally regular in depositing theundisputed statutory dues including provident fund employees' state insurance incometax goods and service tax custom duty cess and other material statutory dues asapplicable with appropriate authorities.

b) According to the information and explanations given to us and the records of theCompany examined by us in our opinion no undisputed amounts payable in respect ofstatutory dues as applicable were in arrears as at March 31 2020 for a period of morethan six months from the date they became payable.

c) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of Income Tax Wealth Tax Service Tax andValue Added Tax which have not been deposited on account of any dispute.

8. In respect of dues to financial institutions / banks / debentures:

To the best of our knowledge and according to the information and explanation given tous the company has not defaulted in the repayment of loan to the bank. The Company hasneither taken any loan from Government/financial institution nor issued debentures.

9. In respect of money raised by way of public offer and application of termloan:

The Company did not raise any money by way of initial public offer or further publicoffer (including debt instruments) during the year. Further the company has not raised anyterm loans during the year. Accordingly reporting requirement under paragraph 3 (ix) ofthe Order is not applicable.

10. In respect of fraud:

According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.

11. In respect of managerial remuneration in accordance with Section 197 of the Act:

According to the information and explanations given to us managerial remuneration hasbeen paid or provided in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act.

12. In respect of Nidhi company:

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.

13. In respect of transactions with related parties in compliance of section 177 and188 of the Act and its disclosures:

According to the information and explanations given to us and based on our examinationof the records of the Company transactions with the related parties are in compliancewith sections 177 and 188 of the Act where applicable and details of such transactionshave been disclosed in the financial statements as required by the applicable accountingstandards.

14. In respect of preferential allotment or private placement of shares or debentures:

According to the information and explanations give to us and based on our examinationof the records of the Company the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the year.

15. In respect of non-cash transactions with directors or persons:

According to the information and explanations given to us and based on our examinationof the records of the Company the Company has not entered into non-cash transactions withdirectors or persons connected with him. Accordingly reporting requirement underparagraph 3(xv) of the Order is not applicable.

16. In respect of company is required to be registered under section 45-IA of theReserve Bank of India Act 1934:

The Company is not required to be registered under section 45-IA of the Reserve Bank ofIndia Act 1934.

For Manubhai & Shah LLP
Chartered Accountants
Firm Reg. No. 106041W/W100136
Place: Ahmedabad (K.M. Patel)
Date: June 27 2020 Partner
Membership Number: 045740
UDIN: 20045740AAAABA2154

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