Bafna Pharmaceuticals Ltd Directors Report.

To The Members of Bafna Pharmaceuticals Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalonefinancialstatements of Bafna Pharmaceuticals Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2020, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and a summary policies and other explanatory information (herein after referred to as "the Standalone Financial ofsignificant Statements").

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone

Financial Statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("IndAS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2020, its Loss, total comprehensive income, changes in equity and its cash flows for the year ended on that date, except in respect of matters stated as per 1(d) under "Report on Other Legal and Regulatory Requirements" herein below.

Basis for Opinion

We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditors Responsibility for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules made there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our modified audit opinion on the Standalone Financial Statements.

Emphasis of Matter

As specificallyexplained vide Clause no B (9) of Notes to Standalone Financial statements, We have considered the basis of management judgment in determining impact on the financial statements of any subsequent events related to the COVID-19 pandemic, taking into consideration the date of the financial statements, the facts and circumstances pertaining to the entity, and the conditions that existed at, or arose after, that date. As the impacts of the COVID-19 outbreak continue to evolve, including regulatory restrictions/ conditions, capturing events that relate specifically to conditions that existed at the date of the financial statements, or after the date of the financial statements, we have considered all subsequent events and transactions to substantiate our conclusions on the appropriateness of managements assessment of the Covid19 impact.

Our opinion is not modified in respect of the above.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our Standalone Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone Financial Statements as a whole, and in forming our opinion there on, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

 

Key Audit Matter Description

Since major proportion of the turnover were from such contracts, we have identified revenue recognition as the key audit matter.

Revenue Recognition: We have observed that the agreements with customers are for a fixed period of time, however, renewable every year, and that it creates enforceable rights and obligations for both the parties.

The Company has entered into contracts of similar characteristics (in terms of performance obligations) with major customers, however with certain minimum variations and hence, the effects on the financial statements of applying standard IND AS 115 to the portfolio of contracts does not differ materially from applying the same to individual contracts.

• Revenue from contracts entered into for manufacturing of pharmaceuticals on behalf of customers is recognized as and when every manufactured batch is dispatched to the customer, and invoiced, since the agreement specifies so.

We observed that these contracts have commercial substance which would impact the entitys future cash flows as well, since the contract periods are long term in nature. These contracts reviewed by us are within the validity period, and both the company and its customers have present enforceable rights and obligations.

• According to the information and explanations obtained, the company estimates that the customers covered under the contracts have the ability to pay the consideration in exchange for the promised goods. The management asserts that that they have been cautious in entering into manufacturing agreements with entities of repute and good credit report.

• In a scenario where an advance has been received from the customers, the company recognizes that portion of the advance as liability against the obligation is to transfer the goods in the near future.

We have observed that in a scenario where there have been a modification in the contract, there has been no distinct additional obligation to deliver goods nor was there any instance of amendment to the pricing structure, and neither did it result in any change in the nature or type of goods that were part of the original / main contract.

Hence, it did not necessitate accounting the modification as a separate contract nor did it necessitate termination of the existing contract and creation of a new one. It did not have any impact on the transaction price either. The amendment was in respect of advance amount being paid by the customer post signing of the main contract, which did not result in change or variation in the basic terms of the contract. Thus the principles of the standard were being followed or complied with.

• We have observed that the transfer of Control of the transferred goods is almost complete in test cases taken up for audit, since it enabled customer to direct the use of, and obtain substantially all of the remaining benefits from, the end product, once they were legally transferred to them in compliance with agreed-upon specifications. The transfer of goods also prevented other entities from directing the use of, and obtaining the benefits from, an asset. Test checks indicated that there was no scope for repurchase agreements, consignment arrangements or bill-and- hold arrangements.

• In the test cases taken up, We have evaluated other information that supported the estimates of the progress towards satisfying the performance obligation, and also we have also evaluated the appropriateness of and consistency in the application of managements policies and methodologies to estimate progress towards satisfying the performance obligation.

Other Matters

Further to the continuous spreading of COVID -19 across India, the Indian Government announced a strict 21-day lockdown on March 24, 2020, which was further extended till June 30, 2020 across India to contain the spread of the virus. This has resulted in restriction on physical visit to the client locations and the need for carrying out alternative audit procedures as per the Standards on Auditing prescribed by the Institute of Chartered Accountants of India (ICAI).

As a result of the above, part of the audit was carried out based on remote access of the data as provided the management.

This has been carried out based on the advisory on "Specific Considerations while conducting Distance Audit/ Remote Audit/ Online Audit under current Covid-19 situation" issued by the Auditing and Assurance Standards Board of ICAI. We have been represented by the management that the data provided for our audit purposes is correct, complete, and reliable and are directly generated by the accounting system of the Company without any further manual modifications. We bring to the attention of the users that the audit of the financial conditions.

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

Managements Responsibility for the Standalone Financial Statements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the IndAS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Financial Statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Companys financial reporting process.

Auditors Responsibility for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of taken on the basis of these Standalone Financial Statements.

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

• Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion ,forgery, intentional omissions, misrepresentations or the override of internal control.

• Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

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

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may doubt on the Companys ability to continue as a going concern. If we conclude that a material castsignificant uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the Standalone Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained upto the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone Financial Statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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 best of 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 the Company so far as it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the relevant books of account.

d) In our opinion, the aforesaid Standalone Financial Statements comply with the Ind AS specified under Section 133 of the Act, except in respect of:

(i) Quantification and valuation of Work in progress (WIP) is computed on estimated basis by the Management, and not on as per methodologies prescribed as per IND AS 2. Inventory costing system in the production units have to be streamlined.

(ii) The Company has not followed or complied with the Impairment principles prescribed as per IND AS 109 in respect of write off and write back of financial assets.

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

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectivenessof such controls, refer to our separate Report in "Annexure A". Our report expresses a modified opinion on the adequacy and operating effectiveness of the Companys internal financialcontrols over financial reporting.

g) With respect to the other matters to be included in the Auditors Report in accordance with the requirements of section 197(16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

h) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and 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 financial position in its Standalone Financial Statements We draw reference to the Clause no. 21 of the Notes to Standalone financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

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

2. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

For R.SATHYANARAYANAN&CO
Chartered Accountants
Firm Registration Number: 003656S
Sd/-
(R. SATHYANARAYAN)
Partner Place: Chennai
Membership number: 028377 Date: 25.06.2020

ANNEXURE "A" to the Independent Auditors Report on the IND AS Financial Statements of BAFNA PHARMACEUTICALS LIMITED

Referred to in paragraph (f) under ‘Report on Other Legal and Regulatory Requirements section of our report of even date) Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub- section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Bafna Pharmaceuticals Limited ("the Company") as of March 31, 2020 in conjunction with our audit of the Standalone Financial Statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Board of Directors of the Company are responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that effectivelyfor ensuring the orderly and efficient conduct of its were operating business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10)of the CompaniesAct,2013,to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectivelyin all material respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained, is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A companys internal financial financialreporting is a process designed to provide reasonable assurance controlover regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles .A companys internal financial control over financial reporting includes those policies and procedures that dispositions of the assets of the company;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

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

Opinion

In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31,2020, except for the following areas: a. Certain Balances of Debtors, Creditors and current assets are subject to confirmation. b. Balances pertaining to Advances given to suppliers for supply of materials and others remain unconfirmed.

The above modified opinion has appeared in our report pertaining to the previous year as well. However, the company has an established set of internal control over financial consideration the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.

ANNEXURE ‘B TO the Independent Auditors Reporton the IND AS Financial Statements of BAFNA PHARMACEUTICALS LIMITED

(Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements section of our report of even date)

(i) In respect of the Companys fixed assets:

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

(b) The Company has a program of verification to cover all the items of fixed assets at reasonable intervals which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us, the records examined by us, we report that, the title deeds, comprising all the immovable properties of land and buildings are held in the name of the Company as at the balance sheet date.

(ii) (a) As explained to us, the inventories were physically verified during the year by the management at reasonable intervals. There was no material discrepancies noticed on physical verification during the year .

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. The Company is generally maintaining proper records of its inventories. No material discrepancy was noticed on physical verification of stocks by the management as compared to book records. However, as stated in clause1 (d) (1) of main report, quantification and valuation of work in progress is done on an estimated basis, and not as per IND AS 2. Costing methodologies of inventories at production units needs to be streamlined.

(iii) According to the information and explanations given to us, the Company has not granted any loans, or advances to any person listed in the register maintained under section 189 of the Companies Act, 2013 during the year.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

(v) The Company has not accepted deposits during the year and does not have any unclaimed deposits as at March 31, 2019 and therefore, the provisions of the clause 3 (v) of the Order are not applicable to the Company.

(vi) We have broadly reviewed the cost records maintained by the Company pursuant to the Rules prescribed by the Central Government under Section 148(1) of the Companies Act, 2013 and are of the opinion that though, prima facie, certain prescribed cost records have been made, the system requires more streamlining in respect of inventory costing methodologies as commented vide clause (ii) (b) here in above. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has generally been regular in depositing undisputed statutory dues, including Employees State Insurance, Income Tax, Sales Tax, Service Tax, Goods and Services Tax, Value Added Tax, Customs Duty,

Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities, however, defaulted in remittance of Provident fund and ESIC dues as depicted below:

Name of the Statue Nature of Dues Amount Payment to which the amount Relates
( Rs. In Lakhs)
EPF & MP Act 1952 PF Contribution 38.60 Nov 2019 to March 2020
ESI Act 1948 ESI Contribution 17.76 Dec 2018 to March 2020
Income tax Act 1961 TDS 10.85 Jan 2020 to March 2020
Income tax Act 1961 Income tax 10.00 Assessment year 2015-16

(b) There were no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Value Added Tax, Goods and Services Tax, Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at March 31, 2020 for a period of more than six months from the date they became payable, except for statutory dues.

(c) According to information and explanations provided to us, during the year, the Company has implemented the resolution plan as approved by NCLT, Chennai, whereby the past arrears in respect of statutory dues (as depicted in the table above) were settled except for past dues of income tax (pending for confirmation from the department).

(viii) According to the information and explanations given to us, the Company, as part of implementation of the resolution plan approved by the NCLT, Chennai, has settled its dues to the Financial creditors, and satisfaction of charge has been filed with the Registrar of Companies by the respective lenders. The Company has not availed any loans or borrowings from Government or any bank or financial institution during the year. The Company has not issued any debentures.

(ix) The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) or term loans during the year, hence reporting under clause 3(ix) of the Order is not applicable to the company. As part of the approved resolution plan by NCLT, Chennai, the Company garnered equity investment from an investor and is holding the same as Share application money as on 31st March 2020.

(x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company or no material fraud on the Companybyitsofficersor employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us, the Company has paid/ provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section197readwithScheduleVtotheAct.

(xii) The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of the Order is not applicable to the Company.

(xiii) In our opinion and according to the information and explanations given to us, the Company is in compliance with Section177 and 188 of the Act, where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the Standalone Financial Statements as required by the applicable accounting standards.

(xiv) During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly paid convertible debentures and hence, reporting under clause 3 (xiv) of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its Directors or persons connected to its directors and hence provisions of section 192 of the Act, are not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act,1934.

For R.SATHYANARAYANAN&CO
Chartered Accountants
Firm Registration Number: 003656S
Sd/-
(R. SATHYANARAYAN)
Partner Place: Chennai
Membership number: 028377 Date: 25.06.2020