L T Foods Ltd Auditors Report.
To the Members of LT Foods Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of LT Foods Limited (the Company), which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.
2. 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 (Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Indian Accounting Standards (Ind AS) specified under section 133 of the Act, of the state of affairs (financial position) of the Company as at March 31, 2019, and its profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. 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 (ICAI) together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act 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
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
5. We have determined the matters described below to be the key audit matters to be communicated in our report.
|Key audit matter||How our audit addressed the key audit matter|
|Revenue recognition Sale of products Refer Note 1(i) in the Summary of significant accounting policies and other explanatory information||Our audit procedures included, but were not limited to the following:|
|The Company recognised an amount of 219,255.55 lakhs as revenue for the year ended March 31, 2019, as disclosed in Note 29 to the financial statements.|| Obtained an understanding of the process of revenue stream of sale of rice and other food products.|
|Revenue of the Company majorly comprises revenue from sale of rice and other food products.|| Evaluated the design, implementation and tested the operating effectiveness of key controls over revenue recognition including around quantity sold, pricing and accounting of revenue transactions;|
|In accordance with Standards on Auditing, there is a presumed fraud risk relating to revenue recognition. Further, there is continuous pressure on the management to achieve planned results. Accordingly, occurrence and existence of revenue is a key focus area on account of the multiple channels for sales, various categories of customers and significant variations in sales quantities during certain periods of the year. Further, there are sporadic high value transactions requiring special audit attention and evaluation as they involve varying terms of contracts with such customers.|| Performed substantive analytical procedures on revenue which included ratio analysis, product mix analysis, region wise analysis, etc;|
| Evaluated the terms and conditions of the contracts, including incoterms, with customers to ensure that the revenue recognition criteria are assessed by the management in accordance with the accounting standards;|
| On a sample basis, tested revenue transactions recorded during the year, and revenue transactions recorded in the period before and after year-end, with supporting documents such as invoices, agreements with customers, proof of deliveries, and subsequent collection of payments;|
|Due to the above factors, we have identified testing of revenue recognition as a key audit matter.|| Performed other substantive audit procedures including obtaining debtor confirmations on a sample basis and reconciling revenue recorded during the year with statutory returns;|
| Tested manual journal entries impacting revenue including credit notes, claims etc., which were material or irregular in nature with supporting documents and evaluated business rationale thereof.|
| Evaluated disclosures made in the financial statement for revenue recognition from sale of goods for appropriateness in accordance with the accounting standards.|
|Inventory existence and valuation||Our audit procedures included, but were not limited to the following:|
|Refer Note 1(a) in the Summary of significant accounting policies and other explanatory information||Existence:|
|The Company held inventories amounting to 89,940.79 lakhs as at March 31, 2019. The inventory primarily comprises of paddy and finished rice. Inventory holding is generally significant at the end of the financial year considering seasonality of the agricultural produce of paddy. Such inventory is stored in plants, warehouses, silos, yards and storage bags. High quantity of inventory at the year-end makes inventory physical verification an extensive procedure for the management.|| Obtained understanding of management process of inventory management and inventory physical verification performed at year end;|
| Evaluated the design effectiveness of controls over inventory management process/inventory physical verification and tested key controls for their operating effectiveness;|
| Observed physical count carried out by the management at locations selected based on materiality and risk factors;|
| During the above said observation, we noted whether the instructions given by senior management to stock count teams were followed, including ensuring proper segregation of stock, use of calibration scales/charts, separate identification of goods received after year end, identification of damaged inventory, if any, etc.|
|The production process of rice involves mixing of different varieties of purchased rice and rice manufactured from paddy, and also leads to generation of by-products such as bran, husk and broken rice. Production process also involves ageing the paddy/ rice to achieve desired quality of end produce. The valuation of finished rice is a complex exercise and is carried out manually through excel spreadsheets. The valuation process involves estimation around determination of |
| Recounted inventory on sample basis to match with inventory records and results of management conducted count; and|
| Reviewed reconciliation of differences, if any, between management physical count and inventory records, and tested the necessary adjustment made in the inventory records by the management.|
| Overhead absorption rates|
| Determination of yield,|
| Determination of net realisable value of by-products, and||Valuation:|
| Calculation of holding period and determination of weighted average borrowing cost.|| Obtained an understanding of management process of inventory valuation;|
|Accordingly, existence and valuation of year-end inventory balance, which is significant with respect to the total assets held by the Company, is considered to be one of the areas which required significant auditor attention owing to the complexity and judgements involved in the process of physical count and valuation.|
| Evaluated design effectiveness of controls over inventory valuation process and tested key controls for their operating effectiveness;|
| Tested inputs into the valuation process from source documents/ general ledger accounts;|
| Tested reconciliation of opening inventory, purchase/ production, sales and year-end inventory to validate of yield during the year and to identify any abnormal production loss,|
| Compared key estimates, including those involved in computation of overhead absorption and borrowing cost, to prior years and enquired reasons for any significant variations,|
| Checked net realisable value of by-products from actual sales proceeds near/ subsequent to the year-end, and|
| Tested arithmetical accuracy of valuation calculations. Evaluated appropriateness of disclosure of inventory year-end balance in the financial statements.|
Information other than the Financial Statements and Auditors Report thereon
6. The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the financial statements and our auditors report thereon. The Annual Report is expected to be made available to us after the date of this auditors report.
Our opinion on the financial statements does not cover the other information and we 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 when it becomes available 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.
When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
7. 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 state of affairs (financial position), profit or loss (financial performance including other comprehensive income), changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Ind AS specified under section 133 of the Act. 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.
8. In preparing the 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.
9. Those Board of Directors are also responsible for overseeing the Companys financial reporting process.
Auditors Responsibilities for the Audit of the Financial Statements
10. 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 Standards on Auditing 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.
11. As part of an audit in accordance with Standards on Auditing, 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.
Under section 143(3)(i) of the Act, we are also responsible for explaining 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 may cast significant doubt on the Companys ability to continue as a going 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.
12. 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.
13. 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.
14. 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.
Report on Other Legal and Regulatory Requirements
15. As required by section 197(16) of the Act, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditors Report) Order, 2016 (the Order) issued by the Central Government of India in terms of section 143(11) of the Act, we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order.
17. Further to our comments in Annexure A, 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 purpose 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 standalone financial statements dealt with by this report are in agreement with the books of account;
d) in our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) on the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2019 from being appointed as a director in terms of section 164(2) of the Act;
f) we have also audited the internal financial controls over financial reporting (IFCoFR) of the Company as on March 31, 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated May 16, 2019 as per Annexure B expressed an unmodified opinion; and
g) 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, as detailed in note 41 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at March 31, 2019;
ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at March 31, 2019;
iii. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended March 31, 2019; and
iv. the disclosure requirements relating to holdings as well as dealings in specified bank notes were applicable for the period from November 8, 2016 to December 30, 2016, which are not relevant to these standalone financial statements. Hence, reporting under this clause is not applicable.
For Walker Chandiok & Co LLP
Firms Registration No.: 001076N/N500013
Membership No.: 99514
Date: May 16, 2019
Annexure A to the Independent Auditors Report of even date to the members of LT Foods Limited, on the standalone financial statements for the year ended March 31, 2019
Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, and to the best of our knowledge and belief, we report that:
(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assets under which fixed assets are verified in a phased manner over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this program, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification.
(c) The title deeds of all the immovable properties (which are included under the head Property, plant and equipment) are held in the name of the Company.
(ii) In our opinion, the management has conducted physical verification of inventory at reasonable intervals during the year, except for goods-in-transit and stocks lying with third parties. For stocks lying with third parties at the year-end, written confirmations have been obtained by the management. No material discrepancies were noticed on the aforesaid verification.
(iii) The Company has granted unsecured loan to one company, Genoa Rice Mills Private Limited, a joint venture with Future Consumer Limited covered in the register maintained under Section 189 of the Act; and with respect to the same:
(a) in our opinion the terms and conditions of grant of such loans are not, prima facie, prejudicial to the Companys interest; and
(b) the schedule of repayment of principal and payment of interest has been stipulated and the repayment/receipts of the principal amount and the interest are regular; and
(c) there is no overdue amount in respect of loans granted to such company.
(iv) In our opinion, the Company has complied with the provisions of Section 186 in respect of investments, loans and guarantees. Further, in our opinion, the Company has not entered into any transaction covered under Section 185, and Section 186 of the Act in respect of security.
(v) In our opinion, the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.
(vi) The Central Government has not specified maintenance of cost records under sub-section (1) of Section 148 of the Act, in respect of Companys products. Accordingly, the provisions of clause 3(vi) of the Order are not applicable.
(vii) (a) Undisputed statutory dues including provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, have generally been regularly deposited to the appropriate authorities, except advance income tax where significant delays in deposit have occurred during the year. Further, no undisputed amounts payable in respect thereof were outstanding at the year-end for a period of more than six months from the date they became payable.
(b) The dues outstanding in respect of income-tax, sales-tax, service-tax, duty of customs, duty of excise and value added tax on account of any dispute, are as follows:
|Name of the statute||Nature of dues||Amount ( in lakhs)||Amount paid under Protest ( in lakhs )||Period to which the amount relates (Financial Year)||Forum where dispute is pending|
|Income-tax Act, 1961||Income tax demands||57.54||-||2002-03||Income tax Appellate Tribunal (ITAT)|
|Income-tax Act, 1961||Income tax demands||4.84||-||2006-07||ITAT|
|Income-tax Act, 1961||Income tax demands||327.62||850.00||2007-08||ITAT|
|Income-tax Act, 1961||Income tax demands||235.95||223.95||2008-09||ITAT|
|Income-tax Act, 1961||Income tax demands||346.01||103.38||2009-10||ITAT|
|Income-tax Act, 1961||Income tax demands||142.68||19.50||2011-12||ITAT|
|Income-tax Act, 1961||Income tax demands||175.61||108.16||2012-13||ITAT|
|Income-tax Act, 1961||Income tax demands||769.75||200.00||2013-14||Commissioner of Income Tax (Appeals) (CIT(A))|
|Income-tax Act, 1961||Penalty||36.27||36.27||1998-99||CIT(A)|
|Income-tax Act, 1961||Penalty||177.42||10.00||2009-10||CIT(A)|
|Income-tax Act, 1961||Income tax demands||19.36||-||2015-16||CIT(A)|
(viii) The Company has not defaulted in repayment of loans or borrowings to any bank during the year. The Company did not have any outstanding debentures or loans or borrowing payable to any financial institution or government during the year.
(ix) The Company did not raise moneys by way of initial public offer or further public offer (including debt instruments) and did not have any term loans outstanding during the year. Accordingly, the provisions of clause 3(ix) of the Order are not applicable.
(x) No fraud by the Company or on the Company by its officers or employees has been noticed or reported during the period covered by our audit.
(xi) Managerial remuneration has been paid and provided by the Company in accordance with the requisite approvals mandated by the provisions of Section 197 of the Act read with Schedule V to the Act.
(xii) In our opinion, the Company is not a Nidhi Company. Accordingly, provisions of clause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are in compliance with Sections 177 and 188 of Act, where applicable, and the requisite details have been disclosed in the financial statements etc., as required by the applicable Ind AS.
(xiv) During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures.
(xv) In our opinion, the Company has not entered into any non-cash transactions with the directors or persons connected with them covered under Section 192 of the Act.
(xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.
For Walker Chandiok & Co LLP
Firms Registration No.: 001076N/N500013
Membership No.: 99514
Date: May 16, 2019
Annexure B to the Independent Auditors Report of even date to the members of LT Foods Limited on the standalone financial statements for the year ended March 31, 2019
Independent Auditors report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")
1. In conjunction with our audit of the standalone financial statements of LT Foods Limited ("the Company") as of and for the year ended March 31, 2019, we have audited the internal financial controls over financial reporting (IFCoFR) of the Company as of that date.
Managements Responsibility for Internal Financial Controls
2. The Companys Board of Directors 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 (the Guidance Note) issued by the Institute of Chartered Accountants of India (the ICAI). 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 the companys 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.
3. Our responsibility is to express an opinion on the Companys IFCoFR based on our audit. We conducted our audit in accordance with the Standards on Auditing, issued by the ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of IFCoFR and the Guidance Note issued by the ICAI. 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 IFCoFR were established and maintained and if such controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining an understanding of IFCoFR, 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.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A companys IFCoFR 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 IFCoFR 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.
Inherent Limitations of Internal Financial Controls over Financial Reporting
7. Because of the inherent limitations of IFCoFR, 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 IFCoFR to future periods are subject to the risk that IFCoFR may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
8. In our opinion, the Company has, in all material respects, adequate internal financial controls 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 issued by the ICAI.
For Walker Chandiok & Co LLP
Firms Registration No.: 001076N/N500013
Membership No.: 99514
Date: May 16, 2019