To
the Members of
Meghmani Organochem Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of
Meghmani Organochem Limited ("the Company"), which comprise the Balance sheet as
at March 31 2021, the Statement of Profit and Loss, including the statement of Other
Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for
the year then ended, and notes to the standalone financial statements, including a summary
of significant accounting policies and other explanatory information (hereinafter referred
to as the Standalone financial 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, as amended ("the Act") in the
manner so required and give a true and fair view in conformity with the accounting
principles generally accepted in India, of the state of affairs of the Company as at March
31,2021, its profit including other comprehensive income, its cash flows and the changes
in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in
accordance with the Standards on Auditing (SAs), as 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 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 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 audit opinion on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment,
were of most significance in our audit of the standalone financial statements for the
financial year ended March 31, 2021. 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. For each matter below,
our description of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit
matters to be communicated in our report. We have fulfilled the responsibilities described
in the Auditors responsibilities for the audit of the standalone financial statements
section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks
of material misstatement of the standalone financial statements. The results of our audit
procedures, including the procedures performed to address the matters below, provide the
basis for our audit opinion on the accompanying standalone financial statements.
| Key audit matters |
How our audit addressed the key audit matter |
| Revenue recognition (as described in Note 2 of the
standalone financial statements) |
|
| The Company majorly operates in two segments viz: Agro
Chemicals and Pigment. The Company recognises revenue from sales of goods in accordance
with the requirements of Ind AS 115, Revenue from Contracts with Customers, measured at
fair value of the consideration received or receivable in the ordinary course of its
activities. Revenue from sale of goods is recognised net of discounts, rebates and taxes. |
Our audit procedures included the following: |
| Certain terms in sales arrangements relating to timing for
transfer of control to the customer and delivery specifications including incoterms,
involves significant judgment in determining whether the revenue is recognised in the
correct period. |
• Read and evaluated the Companys policy for
revenue recognition and assessed its compliance with Ind AS 115 Revenue from contracts
with customers. |
|
• Assessed the design and tested the operating
effectiveness of internal controls related to revenue. |
|
• Performed sample test of sales transactions and
inspected the underlying sales orders, invoice copies, terms of delivery, lorry receipts,
bill of lading and collection as per the terms of the contract with customers. |
|
• Performed sample test of transactions near year end
date as well as credit notes issued after the year end date. |
|
• Assessed the relevant disclosures in the standalone
financial statements for compliance with disclosure requirements. |
Business combination - Demerger of Agro and Pigment division from
Meghmani Organics Limited (MOL) and merged into the Company (as described in Note 48 of
the financial statements)
| Key audit matters |
How our audit addressed the key audit matter |
| As per the Scheme of Arrangement, Agro Chemicals and Pigment
division has demerged from Meghmani Organics Limited (MOL) and merged into the Company
(the Scheme). The Scheme was approved by National Company Law Tribunal
(NCLT) vide order dated May 3, 2021. The Company has given effect of the
Scheme in the standalone financial statements considering business combination under
common control as per the requirements of Ind AS 103. |
Our audit procedure included the following: |
| The Scheme has a significant impact on the standalone
financial statements of the Company including revenue, profit, tax, reserve and
comparative figures basis which the same is considered as a key audit matter for the year. |
• Obtained and read the Scheme, and compared the assets
and liabilities pertaining to Agro Chemicals and Pigment division considered for
accounting as per the Scheme. |
|
• Assessed the accounting as per applicable accounting
standards including, for cancellation of shareholding of MOL and issuing of equity shares
to shareholders of MOL as per the share swap ratio approved in the Scheme. |
|
• Obtained and read the approval of National Company Law
Tribunal (NCLT) giving effect to the Scheme. |
|
• Assessed accounting in accordance with Scheme. |
|
• Tested underlying workings used in accounting
calculations, including for previous year (March 31, 2020) restated financial information
of the Company. |
|
• Read and assessed the disclosures in the standalone
financial statements for compliance with disclosure requirements. |
Information other than the Standalone financial statements and
Auditors report thereon:
The Companys Board of Directors is responsible for the other
information. The other information comprises the information included in the Directors
report, but does not include the standalone financial statements and our auditors report
thereon.
Our opinion on the standalone financial statements does not cover the
other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements,
our responsibility is to read the other information and, in doing so, consider whether
such 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, 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 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 and presentation of these
standalone financial statements that give a true and fair view of the financial position,
financial performance including other comprehensive income, cash flows and changes in
equity of the Company in accordance with the accounting principles generally accepted in
India, including the Indian Accounting Standards (Ind AS) specified under section 133 of
the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended.
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 the 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 Responsibilities 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 users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exercise
professionaljudgmentand 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 resultingfrom error, asfraud 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 Act, we are also responsible for expressing our opinion on
whether the Company has adequate internal financial controls with reference to financial
statements 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
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.
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 for the financial year ended March 31, 2021 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 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 Act, we give in the "Annexure 1" a statement on the
matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations
which to the 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 the
Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes
in Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone financial statements
comply with the Accounting Standards specified under Section 133 of the Act, read with
Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) On the basis of the written representations received from the
directors as on March 31, 2021 taken on record by the Board of Directors, none of the
directors is disqualified as on March 31,2021 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
with reference to these standalone financial statements and the operating effectiveness of
such controls, refer to our separate Report in "Annexure 2" to this report;
(g) In our opinion, the managerial remuneration for the year ended
March 31, 2021 has been paid / provided by the Company to its directors in accordance with
the provisions of section 197 read with Schedule V to the Act; and
(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 - Refer Note 41 to the
standalone financial statements;
ii. The Company did not have any long-term contracts including
derivative contracts for which there were any material foreseeable losses; and
iii. There has been no delay in transferring amounts, required to be
transferred, to the Investor Education and Protection Fund by the Company
Annexure 1 referred to in Paragraph 1 of Report on Other Legal and
Regulatory Requirements of our report of even date of Meghmani Organochem Limited for the
year ended March 31, 2021.
i. (a) The Company has maintained proper records showingfull
particulars, including quantitative details and situation of property, plant and
equipment.
(b) All property, plant and equipment have not been physically verified
by the management during the year. However, there is a regular programme of verification
once in three years which, in our opinion, is reasonable having regard to the size of the
Company and the nature of its assets. Discrepancies noticed on such verification have been
appropriately dealt with in the books of accounts.
(c) According to the information and explanations given by the
management, all the immovable properties included in property, plant and equipment (PPE)
were acquired pursuant to the process of demerger of Agrochemical and Pigment division of
Meghmani Organics Limited as per the scheme of arrangement. As explained to us, the
company is in the process of changing to the titles for all the applicable PPE acquired as
mentioned in note 3 in accordance with the requirement of the scheme. Consequently
disclosure under this clause is mentioned in note 3.
ii. The inventory (except goods in transit) has been physically
verified by the management during the year. In our opinion, the frequency of verification
is reasonable. No material discrepancies were noticed on such physical verification.
iii. According to the information and explanations given to us, the
Company has not granted any loans, secured or unsecured to companies, firms. Limited
Liability Partnerships or other parties covered in the register maintained under section
189 of the Companies Act, 2013. Accordingly, the provisions of clause 3(iii) (a), (b) and
(c) of the Order are not applicable to the Company and hence not commented upon.
iv. In our opinion and according to the information and explanations
given to us, provisions of section 186 of the Act in respect of investments made have been
complied with by the Company. Further, in our opinion and according to the information and
explanations given to us, there are no loans, guarantees, and securities given in respect
of which provisions of section 185 and 186 of the Act are applicable and hence not
commented upon.
v. 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 and
hence not commented upon.
vi. We have broadly reviewed the books of account maintained by the
Company pursuant to the rules made by the Central Government for the maintenance of cost
records under section 148(1) of the Companies Act, 2013, related to the manufacture of
agrochemicals and pigment products, and are of the opinion that prima facie, the specified
accounts and records have been made and maintained. We have not, however, made a detailed
examination of the same.
vii. (a) According to the information and explanations given to us and
on the basis of our examination of the records of the Company, amounts deducted/ accrued
in the books of account in respect of undisputed statutory dues including provident fund,
employees state insurance, income- tax, duty of custom, goods and services tax,
professional tax, cess and other statutory dues are generally regularly deposited with the
appropriate authorities though there has been a slight delay in a few cases of
professional tax and provident fund.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of provident fund, employees state insurance,
income- tax, duty of custom, goods and services tax, cess and other material statutory
dues were outstanding, at the year end, for a period of more than six months from the date
they became payable.
(c) According to the information and explanations given to us, there
are no dues of income tax, duty of excise, duty of customs, goods and service tax and
other material statutory dues which have not been deposited with the appropriate
authorities on account of any dispute, except for the following:
| Name of statue |
Nature of dues |
Amount involved (INR lakhs) |
Period |
Forum where the dispute is pending |
| Central Excise Act |
Excise duty demand |
1,721.87 |
2003-04 to 2008-09 and 2011-12 to 2016-17 |
Gujarat High court. Central Excise and Service Tax Appellate
Tribunal, Commissioner (Appeals) |
| Goods and Service Act, 201 7 |
Goods and service tax |
2,951.63 |
2017-18 and 2018-19 |
Gujarat High Court |
| Income tax Act, 1961 |
Income tax demands |
1,339.83 |
2002-03, 2008-09, 2012-13 to 2016-17 |
Gujarat High Court, Income tax Apellate Tribunal,
Commissioner Appeals, Income tax |
*Net of amount paid under protest amounting to INR 172.47 lakhs and
adjustment of the amount of Income tax refunds pertaining to other assessment years
amounting to INR 18.01 lakhs.
viii. In our opinion and according to the information and explanations
given by the management, the Company has not defaulted in repayment of loans or borrowings
from banks. The Company did not have any due payable to the financial institutions,
debenture holders and government during the year.
ix. According to the information and explanations given by the
management, the Company has utilized the monies raised by way of term loans for the
purposes for which they were raised, though idle funds which were not required for
immediate utilization have been invested in fixed deposits with bank. The maximum amount
of idlefunds invested during the year was Rs 10,000 lakhs, of which Rs Nil was outstanding
at the end of theyear. The Company has not raised money by way of initial public offer,
further public offer and debt instrument during the year.
x. Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and according to the
information and explanations given by the management, we report that no fraud by the
Company or no fraud on the Company by the officers and employees of the Company has been
noticed or reported during the year.
xi. According to the information and explanations given by the
management, the managerial remuneration has been paid / provided in accordance with the
requisite approvals mandated by the provisions of section 197 read with Schedule V to the
Companies Act, 2013.
xii. In our opinion, the Company is not a nidhi company. Therefore, the
provisions of clause 3(xii) of the order are not applicable to the Company and hence not
commented upon.
xiii. According to the information and explanations given by the
management on certain transactions entered with related parties being of specialized
nature, transactions with the related parties are in compliance with section 177 and 188
of Companies Act, 2013, where applicable, and the details have been disclosed in the notes
to the standalone financial statements, as required by the applicable accounting
standards.
xiv. According to the information and explanations given to us and on
an overall examination of the balance sheet, the Company has not made any preferential
allotment or private placement of shares or fully or partly convertible debentures during
the year under review and hence, reporting requirements under clause 3(xiv) are not
applicable to the Company and, not commented upon.
xv. According to the information and explanations given by the
management, the Company has not entered into any non-cash transactions with directors or
persons connected with him as referred to in section 192 of the Act.
xvi. According to the information and explanations given to us, the
provisions of section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to
the Company.
Annexure 2 to the Independent Auditors report of even date on the
Standalone financial statements of Meghmani Organochem Limited
Report on the Internal Financial Controls 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 Meghmani Organochem Limited ("the Company") as of March 31, 2021 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 Companys Management 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 the 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 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") and the Standards on Auditing as specified under
section 143(10) of the Act, to the extent applicable to an audit of internal financial
controls and, both issued by the Institute of Chartered Accountants of India. 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 system 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
over system financial reporting.
Meaning of Internal Financial Controls System Over Financial Reporting
with reference to these standalone financial statements
A Companys internal financial control over financial reporting with
reference to these standalone financial statements 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. Acompanys internal financial control over financial reporting with
reference to these standalone financial statements 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 with reference to these standalone financial statements
Because of the inherent limitations of internal financial controls over
financial reporting with reference to these standalone financial statements, 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 with reference
to these standalone financial statements 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, the Company has, in all material respects, an adequate
internal financial controls system over financial reporting with reference to these
standalone financial statements and such internal financial controls over financial
reporting were operating effectively as at March 31, 2021, 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 S R B C & CO LLP Chartered Accountants ICAI Firm Registration
Number: 324982E/E300003 |
| per Sukrut Mehta Partner |
| Membership Number: 101974 |
| UDIN : 21101974AAAACD1727 |
| Place of Signature: Ahmedabad |
| Date: May 20, 2021 |
+91-9892691696
