Hindustan Organic Chemicals Ltd Directors Report.

To the Members of Hindustan Organic Chemicals Limited

Report on the Audit of the Revised standalone financial statements

Opinion

We have audited the revised standalone financial statements of Hindustan Organic Chemicals Limited ("the Company"), which comprise the balance sheet as at 31st March 2019, and the statement of profit and loss (including Other Comprehensive Income), statement of changes in equity and statement of cash flows for the year then a summary of significant accounting policies and other explanatory information (hereinafter referred to as ‘the revised standalone financial statements).

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid revised standalone financial statements give the information required by the Companies Act, 2013 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, 2019, and its profit and total comprehensive income, 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) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the 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 together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, 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 Auditors Response
1 Evaluation of uncertain tax positions Principal Audit Procedures
The Company has material uncertain tax positions including matters under dispute which judgment to involves significant determine the possible outcome of these disputes. Refer Notes no. vii(c) of Annexure A to this Auditors Report Obtained details of completed tax assessments and demands for the year ended March 31, 2019 from management. We involved an external expert to challenge the managements underlying assumptions in estimating the tax provision and the possible outcome of the disputes. The external expert also considered legal precedence and other rulings in evaluating managements position on these uncertain tax positions. Additionally, we considered the effect of new information in respect of uncertain tax positions as at April 1, 2018 to evaluate whether any change was required to managements position on these uncertainties.
2 Recoverability of Trade Receivables Principal Audit Procedure
As at March 31, 2019, current asset in respect of Trade Receivables in respect of Rasayani Unit includes recoverable amounting to Rs. 2,007.68 lakhs which are pending legal dispute. We have reviewed the nature of the amounts recoverable, the sustainability and the likelihood of recoverability upon final resolution.
The above amount refers to the major portion of Trade Receivable.
Refer Note no. 8 to the Revised standalone financial statements
3 Reversal of penal interest on Government of India (GoI) Loan Principal Audit Procedure
The Company has reversed the provision for penal interest in respect of GoI Loan amounting to Rs. 2004.30 lakhs in respect of previous years. We have reviewed the letter received by the Company from the Ministry of Petrochemicals, Government of India which clarified that the Penal interest and Interest on interest is payable only when the sanctioning authority uses its right to demand, apart from the same all interest is due and payable. We have obtained the said documentation from the management.
Re-instatement of interest on Government of India Loan of Rs. 758.97 lakhs written in the books of accounts in the earlier years(.Refer Note no. 13b(ii)and 25(i)of the revised standalone financial statements.

Other Information

The Companys Board of Directors is responsible for the other information.

The other information comprises the information included in the Management Discussion and Analysis Report including Annexures to Boards Report, Corporate Governance and Shareholders information and the chairmans statement but does not include the financial statements and our auditors report thereon, which we obtained prior to the date of this auditors report. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditors report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Revised standalone financial statements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these revised standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with 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 of 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors 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 the Board of Directors 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 Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 users taken on the basis of these 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 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 control relevant to the audit in order to design 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 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 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 doubt on the Companys ability to continue as a going maycastsignificant concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the 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 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the 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 financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing ofthe significantaudit findings,and deficiencies in internal control that we identify during including anysignificant 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 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.

Other Matter

We did not audit the financial statements/ information of Kochi unit included in the revised standalone financial statements of the Company whose financial statements/financial information reflect total assets of Rs. 24,016.42 lakhs (excluding inter branch balance) as at 31st March 2019 and total revenue of Rs. 47,199.01 lakhs and total comprehensive profit of Rs. 4,326.20 lakhs for the year ended on that date, as considered in the revised standalone financial statements. The financial statements/information of Kochi unit have been audited by the branch auditor whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of branch, is based solely on the report of such branch auditor.

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 of the Companies Act, 2013, we give in the ‘Annexure A a statement on the matters specifiedin paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by the directions and sub-directions issued by the office of the Comptroller & Auditor General of India under section 143(5) of the Act, we give in the ‘Annexure B, a statement on the matters referred to in those directions.

3. 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 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 and proper returns adequate for the purposes of our audit have been received from the branches not visited by us.

(c) The reports on the accounts of the branch offices of the Company audited under Section 143(8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report. (d) The Balance Sheet, the Statement of Profit Comprehensive Income, the Statement of Changes in Equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from the branches not visited by us.

(e) In our opinion, the aforesaid revised standalone financial statements comply with the IndASspecified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(f) As per the notification no. G.S.R. 463(E) dated June 05, 2015, the Government companies are exempted from provisions of section 164(2) of the Act. Accordingly, we are not required to report whether any director(s) are disqualified in terms of provisions contained in said section.

(g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in ‘Annexure C.

(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, 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 financial statements Refer Note no. 36 to the financial statements;

ii. The Company has entered into long term transmission contract with the Gas Authority of India Limited (GAIL) for transmission of Liquified Natural Gas in 2011 for a period of 15 years ending in 2026. Material foreseeable losses cannot be identified in the current scenario. The Company did not have any other derivative contract.

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

4. Based on the observations of the Comptroller and Auditor General of India, additions/revisions have been carried out. We give in Annexure D, the statements of the said additions/revisions which has been carried out.

 

For M. B. Agrawal & Co.
Chartered Accountants
(Firm’s Registration No. 100137W)
sd/-
Harshal Agrawal
Partner
Place : Mumbai (Membership No. 109438)
Date : 29-July-2019 UDIN : 19109438AAAACG4370

 

ANNEXURE ‘A TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements section of our report to the Members of Hindustan Organic Chemicals Limited of even date)

i. In respect of 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 in a phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the program, certain fixed assets were physically verified by the management during the year. 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 and based on the examination of the conveyance deeds / registered sale deed provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings which are freehold, are held in the name of the Company as at the balance sheet date.

ii. In respect of inventories:

a. The inventory has been physically verified by the management at reasonable intervals during the year.

b. The Company has maintained proper records of inventory. As explained to us, the discrepancies between the physical inventory and the book records were not material.

iii. According to the information and explanations given to us, the Company has granted secured and unsecured loans to one body corporate, covered in the register maintained under section 189 of the Companies Act, 2013, in respect of which:

a. The secured loan to one body corporate is interest free to the extent of Rs. 2744.06 lakhs under BIFR agreement and has varying interest rates on amount of Rs. 453.01 lakhs.

b. Both principal and interest on the above mentioned loan has not been received by the Company during the year as per stipulation.

c. In the above case, except follow up, the company has not taken any other steps for its recovery.

iv. The Company has not entered into any transaction regarding the provisions of section 185 and 186 of the Companies Act, 2013 except for guarantee given by the Holding Company of Rs. 603 lakhs for the loans taken by its subsidiary Hindustan Fluorocarbons Limited, from bank. Based on the information and explanation given to us, the terms and condition of this guarantee are not prejudicial to the interest of the Holding Company.

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 books of accounts maintained by the company in pursuance to the rules made by the Central Government for maintenance of cost records under sub-section (1) of section 148 of the Act, for the certain products of the company and are of the opinion that prima facie and prescribed accounts and records have been maintained. We have not, however, made a detailed examination of the 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 Provident Fund, Employees State Insurance, Income Tax, Goods and Service Tax, Customs Duty, Cess and other material statutory dues applicable to it with the appropriate authorities.

b. There were no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income Tax, Goods and Service Tax, Customs Duty, Cess and other material statutory dues in arrears as at March 31, 2019 for a period of more than six months from the date they became payable.

c. Details of dues of Income Tax, Sales Tax, Service Tax, Excise Duty and Value Added Tax which have not been deposited as at March 31, 2019 on account of dispute are given below:

Rasayani Unit:

Sr. No. Name of Statue Nature of Dues Period to which the amount relates (F.Y.) Amount of dispute (Rs. In lakhs) Forum where the dispute is pending
1 Central Excise Act, 1944 Exemption not allowed 2006-07, 2007-08 104.63 Customs, Excise & Service Tax Appellate Tribunal
2 Finance Act, 1994 Credit disallowed 2006-07 9.34 CESTAT
3 Finance Act, 1994 Wrong classification 1999-2000 7.62 CESTAT
4 Finance Act, 1994 Service tax on canteen services 2006-07 to 2010-11 66.96 Commissioner of Service tax
5 Income Tax Act, 1961 Penalty dues 2001-02 Yet to be determined High Court
6 Income Tax Act, 1961 Disallowances of expenses 2010-11 404.71 Commissioner of Income Tax (Appeals), Mumbai
7 Income Tax Act, 1961 Disallowances of expenses 2011-12 81.03 Commissioner of Income Tax (Appeals), Mumbai
Kochi Unit
Sr. No. Name of Statue Nature of Dues Period to which the amount relates (F.Y.) Amount of dispute (Rs. In lakhs) Forum where the dispute is pending
1 Finance Act, 1994 Disallowance of service tax input credit on inter unit goods transfer 2003 to 2006 43.46 CESTAT, Bangalore
2 Finance Act, 1994 Disallowance of service tax input credit on Tyreretrading charges 2011-12 3.17 CESTAT, Bangalore
3 Finance Act, 1994 Disallowance of service tax input credit on employee transportation charges 2011-12 1.10 Commissioner (Appeals), Ernakulam
4 Finance Act, 1994 Disallowance of service tax input credit on tyre re- trading charges 2012-13 10.96 Commissioner (Appeals), Ernakulam
5 Finance Act, 1994 Disallowance of Cenvat credit 2006 to 2013 83.32 CESTAT, Bangalore
6 ESI Act Demand of ESI 2004 2.17 ESI Court, Ernakulam
7 Central Sales Tax Act, 1956 Disallowance of Input Tax credit 2012-13 73.36 Deputy Commissioner (Appeals), Ernakulam
8 KVAT Act, 2003 Demand on assessment 2011-12 714.58 Deputy Commissioner (Appeals), Ernakulam
9 Central Sales Tax Act, 1956 Trade discount through Credit note disallowed 2005-06 53.71 Deputy Commissioner (Appeals), Ernakulam
10 Central Sales Tax Act, 1956 Trade discount through Credit note disallowed 2006-07 79.67 Deputy Commissioner (Appeals), Ernakulam
11 Central Sales Tax Act, 1956 Levy of interest 2006-07 11.87 Deputy Commissioner (Appeals), Ernakulam
12 Central Sales Tax Act, 1956 Trade discount through Credit note disallowed 2007-08 6.70 Deputy Commissioner (Appeals), Ernakulam
13 KVAT Act, 2003 Demand due to non submission of C Form 2011-12 102.76 Deputy Commissioner (Appeals), Ernakulam

viii. In our opinion and according to the information and explanations given to us, in absence of adequacy of funds the company has made default in repayment of dues to Government loan as per stipulation. Details of default made by the company are as follows :

(Rs. In lakhs)
Sr. no. Amount of default as at March 31, 2019 Period of default
1 61.60 2002-03
2 152.60 2003-04
3 212.60 2004-05
4 268.50 2005-06
5 328.50 2006-07
6 388.50 2007-08
7 448.50 2008-09
8 804.50 2009-10
9 749.10 2010-11
10 749.10 2011-12
11 687.50 2012-13
12 828.50 2013-14
13 768.50 2014-15
14 412.00 2015-16
15 844.20 2016-17
16 1336.40 2017-18
17 8679.49 2018-19
Total 17,660.09

ix. The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) or term loans and hence reporting under clause 3 (ix) of the Order is not applicable to the Company.

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 Company by its officers or 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 section 197 read with Schedule V to the Act.

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 Section 177 and 188 of the Companies Act, 2013 where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the revised 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 Companies Act, 2013 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 M. B. Agrawal & Co.
Chartered Accountants
(Firm’s Registration No. 100137W)
sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 29-July-2019 (Membership No. 109438)

ANNEXURE‘B TO THE INDEPENDENT AUDITORS REPORT

To the Members of Hindustan Organic Chemicals Limited for the year ended 31st March, 2019 (Referred to in paragraph 2 under Report on Other Legal and Regulatory Requirements)

As required by the directions and sub-directions issued by the Office of the Comptroller and Auditor General of India under Section 143(5) of the Act, we give below our comments on the matter referred therein

1. Whether the company has system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications,ifany, may be stated.

Yes, all the accounting transactions are processed through IT systems. However, there are two IT systems in place i.e., TallyERP in Rasayani Unit and SAP in Kochi unit. The company does not have process of integrating the two systems, causing delay in preparation of financial statements. Consolidation of the Rasayani and Kochi unit as a whole is prepared using MS Office.

2. Whether there is any restructuring of an existing loan or cases of waiver/ write off of debts / loans/interest etc made by a lender to the company due to the companys inability to repay the loan? If yes, the financial impact may be stated.

There are no loans which have been restructured during the year. A restructuring plan has been approved by the Government of India vide order dated May 22, 2017. As per restructuring plan, no waiver of interest or principal amount of loans has been granted. As per GoI letter no. P-51015/1/2019 Ch. III dated 27/03/2019, it has been clarified that no penal interest or interest on interest has been charged by GoI. If they were to be charged, then interest on interest would amount to Rs. 312.73 crores and Penal interest would amount to Rs. 30.71 crores.

3. Whether funds received/receivable for specific schemes from central / state agencies were properly accounted for / utilized as per its terms and conditions? List the cases of deviation.

No, the company has not received any fund for specific scheme from central / state agencies.

4. State areas of land under encroachment and briefly explain the steps taken by the Company to remove encroachments.

As informed and as per the information and explanation available to us, in Rasayani Unit, land admeasuring 66.024 acres is under encroachment as per the report of the survey conducted by M/s. The Geo Tekdated January 14, 2019. Also, there is public road constructed approximating 10.776 acres. In the financial statements, the land at Rasayani to extent of 66.024 acres have not been revalued.

For M. B. Agrawal & Co.
Chartered Accountants
(Firm’s Registration No. 100137W)
sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 29-July-2019 (Membership No. 109438)

 

ANNEXURE ‘C TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 3(f) under ‘Report on Other Legal and Regulatory Requirements section of our report to the Members of Hindustan Organic Chemicals Limited 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 Hindustan Organic Chemicals Limited ("the Company") as of March 31, 2019 in conjunction with our audit of the revised 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 is 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 were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to respective 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 CompaniesAct, 2013. underthe

Auditors Responsibility

Our responsibility is to express an opinion on the 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 Companies Act, 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 effectively in 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 judgement, 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 internal financial controls system over financialreporting Company . ofthe

Meaning of Internal Financial Controls Over Financial Reporting

A companys internal financial control over financial reporting is a process designed to provide reasonable assurance 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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and 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 authorisations 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.

Limitations of Internal Financial Controls Over Financial Reporting

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 controls over financial reporting to future periods 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, 2019, 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.

 

For M. B. Agrawal & Co.
Chartered Accountants
(Firm’s Registration No. 100137W)
sd/-
Harshal Agrawal
Place: Mumbai Partner
Date: 29-July-2019 (Membership No. 109438)

ANNEXURE ‘D TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 4 under ‘Report on Other Legal and Regulatory Requirements section of our report to the Members of Hindustan Organic Chemicals Limited of even date)

Based on the observations of the Comptroller and Auditor General of India, following additions/revisions have been carried out : Additions/Revisions in the Accounts:

Sr. No. Note No. Subject
a. 21 Other Income
Current Year Rs. 11792.50 lakhs is revised as Rs. 11571.30 lakhs.
Previous Year Rs. 6638.77 lakhs is revised as Rs. 6859.97 lakhs.
Net effect is Rs. 221.20 lakhs on account of Excess provision written back previously booked in FY 2018-19, now considered as prior period income and booked in FY 2017-18.
b. 4(A) Investments
Investments in Previous Year Rs. 889.80 lakhs is revised as Rs. 1,111.00 lakhs on account of above effect.
c. 12(b) Retained Earnings
Retained Earnings Rs. (1,18,330.06) lakhs in previous year is revised as Rs. (1,18,108.86) lakhs. Net effect is Rs. 221.20 lakhs in previous year.
d. 16 Deferred Tax Liabilities
Decrease in deferred tax liability in current year by Rs. 65 lakh on account of above revision. (Sr. No. a)
e. Cash Flow Statements
The cash flow from operating activities is determined by adjusting profit or loss for the period as against previously done by adjusting Total Comprehensive income for the year. Cash Flow statement changed on account of non-cash flow items previously not eliminated.
The components of Cash and Cash Equivalents are added as separate head below revised Cash Flow Statement.
f. 36 Contingent Liabilities and Commitments
Assessment demands raised by KVAT Authorities and adjusted against refunds due to the company amounting to Rs. 288.30 lakhs shown as Contingent Liability is removed from Contingent Liability and disclosed under Other Current Assets (Note no. 6b)
Assessment demands made and not adjusted against refund due to the company amounting to Rs. 73.36 lakh has been disclosed under Contingent Liability.
Current Year Contingent Liability is revised to Rs. 44,798.31 lakhs from Rs. 45,013.25 lakhs earlier.

 

For M. B. Agrawal & Co.
Chartered Accountants
(Firms Registration No. 100137W)
sd/-
Harshal Agrawal
Place : Mumbai Partner
Date : 29-July-2019 (Membership No. 109438)

REPORT OF THE C&AG SUPPLEMENTARY AUDIT - STANDALONE FY 2018-19

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THE COMPANIES ACT, 2013 ON THE FINANCIAL STATEMENTS OF HINDUSTAN ORGANIC CHEMICALS LIMITED, FOR THE YEAR ENDED 31 MARCH 2019

The preparation of Financial Statements of Hindustan Organic Chemicals

Limited for the year ended 31 March 2019 in accordance with the financial reporting framework prescribed under the Companies Act, 2013 (the Act) is the responsibility of the management of the Company. The Statutory Auditor appointed by the Comptroller and Auditor General of India under Section 139(5) of the Act is responsible for expressing opinion on the Financial Statements under Section 143 of the Act based on independent audit in accordance with the standards on auditing prescribed under Section 143(10) of the Act. This is stated to have been done by them vide their Revised Audit Report dated 29 July 2019 which supersedes their earlier Audit Report dated 28 May 2019.

I, on behalf of the Comptroller and Auditor General of India, have conducted a Supplementary Audit of the Financial Statements of Hindustan Organic Chemicals Limited for the year ended 31 March 2019 under Section 143(6)(a) of the Act. This Supplementary Audit has been carried out independently without access to the working papers of the Statutory Auditors and is limited primarily to inquiries of the Statutory Auditors and Company personnel and a selective examination of some of the accounting records.

In view of the revisions made in the Financial Statements by the management, as indicated in Note No. 37B of the Financial Statements, to give effect to some of my audit observations raised during Supplementary Audit, I have no further comments to offer upon or supplement to the Statutory Auditors Report under Section 143(6)(b) of the Act.

For and on behalf of the

Comptroller and Auditor General of India

Sd/-

(Roop Rashi)

Director General of Commercial Audit and

Ex-officio Member, Audit Board-I, Mumbai.

Place: Mumbai

Date: 21 August 2019