Sharda Cropchem Ltd Auditors Report.

To the Members of

Sharda Cropchem Limited

Report on the Audit of Standalone Financial Statements

Opinion

We have audited the standalone financial statements of Sharda Cropchem Limited (‘the Company), which comprise the standalone balance sheet as at 31st March, 2019, and the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (‘the Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2019, and profit and other 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 Act. Our responsibilities under those SAs 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 standalone 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

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 year. 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.

Description of Key Audit Matters:

Key Audit Matters How the matter was addressed in our audit
Revenue recognition
Our audit procedures included following:
Revenue is measured based on transaction price, which is the consideration, adjusted for rebates, discounts, incentives (scheme allowances) and estimated sales returns. As disclosed in Note 2 (e) to the standalone financial statements, revenue is recognised upon transfer of control of promised goods to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods. - Understanding the process followed by the management for the purpose of identifying and determining the amount of provision of sales returns and accrual for rebates and schemes;
- Checking of completeness and accuracy of the data used by the management for the purpose of calculation of the provision for sales returns and checking of its arithmetical accuracy;
Sales return estimation
As disclosed in Note 2 (e) to the standalone financial statements, revenue is recognised net of sales returns. - Comparison between the estimate of the provision for sales returns created in the past with subsequent actual sales returns and analysis of the nature of any deviations to corroborate the effectiveness of the management estimation process;
Estimation of sales returns involves significant judgement and estimates due to its dependency on various internal and external factors. - Considering the appropriateness of the Company accounting policies regarding revenue recognition as they relate to accounting for rebates, discounts and scheme allowances;
Estimation of sales return amount together with the level of judgement involved makes its accounting treatment a significant matter for our audit. - Testing the Companys process and controls over the calculation of rebates, discounts and scheme allowance;
Accrual for rebates and schemes
Revenue is recognised net of rebates, discounts, incentives (scheme allowances) and estimated sales returns owed to the customers based on the arrangement with customers. - Selecting a samples of revenue transactions and scheme circular to re-check that rebates, discounts and scheme allowance were calculated in accordance with the eligibility criteria mentioned in the scheme;
The recognition and measurement of rebates, discounts and schemes allowances, including establishing an appropriate accrual at year end, involves significant judgement and estimates, particularly the expected level of claims of each of the customers. - Selecting a sample of claims submitted by customers along with claim form and verifying it with the accrual made in the books of account; and
The value of rebates, discounts and schemes allowances together with the level of judgement involved make its accounting treatment a significant matter for our audit. - Considering the assumptions and judgements used by the Company in calculating rebates, discounts and schemes allowances, including the level of expected claims, by reviewing historical trends of claims.

 

Key Audit Matters How the matter was addressed in our audit
Impairment testing of Other intangible assets and intangible assets under development Our audit procedures included following:
The Companys intangible assets comprised product registrations and licenses. - Inquired with management about its intention and probability to obtain product registrations in the respective geographies;
The carrying amount of the intangible assets and intangible assets under development represents 28.31% of the Companys total assets. - Compared managements assessment with the past trend product registrations awarded; and
The Company applies for product registrations in different countries to sell its products and capitalises costs incurred to apply for product registrations. - Testing the mathematical accuracy of the discounted cash flow model and evaluation of the assumptions and methodologies used by the Company.
The value of intangible assets and intangible assets under development was identified as a key audit matter as the Companys annual impairment assessment contains significant judgments involving forecasting and discounting future cash flows. It also involves likelihood of obtaining product registration.
The impairment assessment is based on each product registrations value in use.
This impairment test is significant to our audit because the assessment process is complex and judgement is based on assumptions, such as expected growth rate, expected profitability and future market or economic conditions.
Due to significance and magnitude of the costs capitalised this was considered a key audit matter.

Other Information

The Companys management and Board of Directors are responsible for the other information. The other information comprises the information included in the Companys annual report, but does not include the 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 the other information is materially inconsistent with the standalone 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.

Managements Responsibility for the Standalone Financial Statements

The Companys management and Board of Directors are 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, profit /(loss) and other comprehensive income, changes in equity and cash flows 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. 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 standalone financial Ind AS 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 and Board of Directors are 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.

The Board of Directors is 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 professional judgment and maintain professional skepticism throughout the audit. We also:

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

• Obtain an understanding of internal 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 standalone 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 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 Matters

The Standalone financial statements of the Company for the year ended 31st March, 2018 were audited by the predecessor auditor who expressed an unmodified opinion on those financial statements on 09 May 2018. 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 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, to the extent applicable.

(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 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 standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows 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 Ind AS specified under Section 133 of the Act;

e) On the basis of the written representations received from the directors as on 31st March, 2019 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2019 from being appointed as a director in terms of Section 164(2) of the Act; and

f) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in ‘Annexure B.

(B) 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 as at 31st March, 2019 on its financial position in its standalone financial statements - Refer Note 32 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; iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company; and

iv. The disclosures in the standalone financial statements regarding holdings as well as dealings in specified bank notes during the period from 8 November 2016 to 30 December 2016 have not been made in these financial statements since they do not pertain to the financial year ended 31st March, 2019.

(C) With respect to the matter to be included in the Auditors Report under Section 197(16) of the Act, in our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) which are required to be commented upon by us.

For B S R & Associates LLP
Chartered Accountants
Firms Registration No. 116231W/W-100024
Shabbir Readymadewala
Mumbai Partner
May 14, 2019 Membership No: 100060

Annexure A to the Independent Auditors report 31st March, 2019 (Referred to in our report of even date)

i. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. (b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verification.

(c) According to the information and explanations given to us, there are no immovable properties included in fixed assets of the company. Accordingly, paragraph 3(i)(c) of the Order is not applicable to the Company.

ii. The inventory, except for goods-in-transit and stocks lying with third parties, has been physically verified by the management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable. For stocks lying with third parties at the year-end, written confirmations have been obtained by management and in respect of goods-intransit, subsequent goods receipts have been verified. The discrepancies noticed on verification between the physical stocks and the book records were not material.

iii. (a) The Company had in the past, granted a loan to one subsidiary company covered in the register maintained under section 189 of the Companies Act, 2013. In our opinion and according to the information and explanations given to us, the terms and conditions of the grant of such loans were not prejudicial to the companys interest. However, the Company has written off loan given to that subsidiary of र 140 Lakhs (31st March, 2018: र 510 Lakhs) during the year.

(b) The principal and interest for the above referred loan are payable on demand and these have been paid during the year as and when demanded by the Company, and thus there is no default on part of the party to whom the money has been lent.

(c) In respect of the loans referred to in para (iii)(a) above, and the interest thereon, there are no amounts which are overdue for more than ninety days.

iv. In our opinion and according to the information and explanations given to us, the Company has not granted any loans or provided any guarantees or security in respect of any party covered under the section 185 of the Act and hence not commented upon. In respect of loans granted to, and investments made by the Company in companies/bodies corporate Company, the provisions of section 186 of the Act have been complied with. According to the information and explanations given to us, the Company has not given guarantees or provided security in connection with loans to any person / bodies corporate, and hence are not commented upon.

v. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public during the year in terms of the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under. Accordingly, paragraph 3(v) of the Order is not applicable to the Company.

vi. We have broadly reviewed the books of account maintained by the Company as specified under Section 148(1) of the Act, for maintenance of cost records in respect of products manufactured by the Company, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

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, Goods and Service Tax, Duty of Customs, Cess and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities.

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

(b) According to the information and explanations given to us and on the basis of our examination of the records of the Company, details of dues of Income-tax, and Service tax, which have not been deposited as at 31st March, 2019 on account of disputes are given below:

Name of the Statute Dues Forum where Nature of the dispute is pending Period to which amount relates (Assessment Year) ( In Lakhs
Finance Act, 1994 Service Tax, Commissioner CESTAT Deputy 2007-08 to 2012-13 785.14
Income Tax Act, 1961 Income Tax, Commissioner of Income Tax Deputy 2015-16 565.94
Income Tax, and Interest Commissioner of Income Tax 2016-17 1,994.65

*net of amounts paid under protest viii. In our opinion and according to the information and explanations given by the management, the Company has not defaulted in repayment of the borrowing to a bank. The Company did not have any outstanding loans or borrowing dues in respect of a financial institution or to government or dues to debenture holders during the year.

ix. According to the information and explanations given to us, the Company did not raise money by way of initial public offer or further public offer (including debt instruments) or term loan during the year. Accordingly, paragraph 3(ix) of the Order is not applicable to the Company.

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

xi. According to the information and explanations give to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

xii. In our opinion and according to the information and explanations given to us, the Company is not a Nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable to the Company.

xiii. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards.

xiv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, paragraph 3(xiv) of the Order is not applicable to the Company.

xv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with them. Accordingly, paragraph 3(xv) of the Order is not applicable to the Company.

xvi. According to the information and explanations given to us, the Company is not required to be registered under Section 45 - IA of the Reserve Bank of India Act, 1934. Accordingly, paragraph 3(xvi) of the Order is not applicable to the Company.

For B S R & Associates LLP
Chartered Accountants
Firms Registration No. 116231W/W-100024
Shabbir Readymadewala
Mumbai Partner
May 14, 2019 Membership No: 100060