TO THE MEMBERS OF GUJARAT NARMADA VALLEY FERTILIZERS & CHEMICALS LIMITED
Report on the Audit of the Consolidated Ind AS Financial Statements Opinion
We have audited the accompanying consolidated Ind AS financial statements of GujaratNarmada Valley Fertilizers & Chemicals Limited (hereinafter referred to as "theHolding Company") its subsidiary (the Holding Company and its subsidiary togetherreferred to as "the Group") and its associate comprising of the consolidatedBalance sheet as at March 31 2019 the consolidated Statement of Profit and Lossincluding other comprehensive income the consolidated Cash Flow Statement and theconsolidated Statement of Changes in Equity for the year then ended and notes to theconsolidated Ind AS financial statements including a summary of significant accountingpolicies and other explanatory information (hereinafter referred to as "theconsolidated Ind AS financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us and based on the consideration of reports of other auditors on separatefinancial statements and on the other financial information of the subsidiary and anassociate the aforesaid consolidated Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the consolidated state of affairs of the Group itsassociate as at March 31 2019 their consolidated profit including other comprehensiveincome their consolidated cash flows and the consolidated statement of changes in equityfor the year ended on that date.
Basis for Opinion
We conducted our audit of the consolidated Ind AS financial statements in accordancewith the Standards on Auditing (SAs)as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Consolidated Ind AS Financial Statements' section ofour report. We are independent of the Group in accordance with the 'Code of Ethics' issuedby the Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the consolidated Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the consolidated Ind AS financial statements for thefinancial year ended March 31 2019. These matters were addressed in the context of ouraudit of the consolidated Ind AS financial statements as a whole and in forming ouropinion thereon and we do not provide a separate opinion on these matters. For eachmatter below our description of how our audit addressed the matter is provided in thatcontext. We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the consolidated Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the consolidated Ind AS financial statements. The results ofaudit procedures performed by us and by other auditors of components not audited by us asreportedby them in their audit reports furnished to us by the management including thoseprocedures performed to address the matters below provide the basis for our audit opinionon the accompanying consolidated Ind AS financial statements.
|Key audit matters ||How our audit addressed the key audit matter |
|Recognition and measurement of Urea Subsidy Income (as described in Note 2.3 of the Consolidated Ind AS financial statement) |
|Subsidy income on Urea is recognized and measured with reference to notification/ circular/ policies issued by the Department of Fertilizers Government of India. During the current year the Holding Company has recognized Urea subsidy Income of aggregating to Rs 1126.33 crores and de-recognized/write-off subsidy balance of Rs. 127.38 crores recognized in earlier years and outstanding as at March 31 2018. The measurement of Urea subsidy income involves interpretation of relevant regulatory pronouncements understanding of energy norms and management estimates / judgements including in respect of escalation / de-escalation costs at each reporting date. Accuracy of revenues may deviate significantly because of revision/ changes in such interpretation estimates and judgements. || Our audit procedures included considering the appropriateness of the Company's income/ subsidy recognition accounting policies and assessing compliance with the policies in terms of the applicable accounting standards. |
| || We performed test of controls assisted by our IT specialists over revenue recognition with specific focus on whether Urea subsidy income is recognised as per applicable regulatory pronouncements and consistency of judgement & estimation norms defined thereon. |
| || We have reviewed the relevant regulatory pronouncement in respect of Urea subsidy income and verified the claims filed by the Company along-with underlying evidences in respect of such income. |
|Accordingly recognition and measurement of subsidy income was determined to be a key matter in our audit of consolidated Ind AS financial statements. || The Subsidy income recognised and remained outstanding over significant period are discussed / enquired with management based on follow-up with Department of Fertilizers Government of India including basis of management judgement and realisation certainty thereof. |
| || We also verified the collections made during the year as well as subsequent period against such subsidy income recognized by the Company. |
Judgement and Estimation of income tax provision and adjustments thereof (as describedin Note 3 of the consolidated Ind AS financial statement)
|During the year the Holding Company has provided tax provision of Rs.244.32 crore and has also has adjusted/credited excess tax provision of Rs. 133.86 crores on reconciliation of current tax provision of earlier years as per the books compared to tax liability acknowledged in respective year's income tax return / assessed tax liabilities as at date. || Our audit procedures included review of income provision made in the books incl. review of income tax return filed by the Company for the previous year including tax liabilities acknowledged therein and tax provisions recorded/ carried in the books of account for the respective financial year. |
|Income tax provisioning for the year including write back adjustments involve interpretation of income tax laws and respective judgements pronounced by authorities. || We reviewed various orders/judgements awarded by different forums of income tax authorities against tax assessments/ appeals completed during the year that resulted in significant re-assessment of tax liabilities/ provisions in the books. |
|Amount of write back of income tax provision is a significant transaction that has occurred during the year. || We verified the income tax refund collected during the year and reviewed the tax refund orders received in this regard by the Company including the reasons of additional deductions allowed therein by the tax authorities. |
|Accordingly judgements and estimatesfor providing income tax provision and adjustments thereofwas determined to be a key matter in our audit of consolidated Ind AS financial statements. || We reviewed the relevant judicial pronouncement made by different judicial forums applicable tax laws and rules and prevailing tax propositions in respect of the matters that resulted into reduction of tax liabilities based on the representations made by the Company. |
| || Reviewed the reconciliation of tax balances as per the books as per the tax amount assessment and management judgement and estimation based on which tax provision was provided and excess provision was recorded in the financial results. |
Information Other than the Financial Statements and Auditor's Report Thereon
The Holding Company's Board of Directors is responsible for the other information. Theother information comprises the information included in the Annual report but does notinclude the consolidated Ind AS financial statements and our auditor's report thereon. Ouropinion on the consolidated Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated Ind AS financial statements ourresponsibility isto read the other information and in doing so consider whether suchother information is materially inconsistent with the consolidated financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.
Responsibilities of Management for Consolidated Ind AS Financial Statements
The Holding Company's Board of Directors is responsible for the preparation andpresentation of these consolidated Ind AS financial statements in terms of therequirements of the Act that give a true and fair view of the consolidated financialposition consolidated financial performance including other comprehensive incomeconsolidated cash flows and consolidatedstatement of changes in equity of the Groupincluding its associate in accordance with the accounting principles generally accepted inIndia including the Indian Accounting Standards (Ind AS) specified under section 133 ofthe Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended. Therespective Board of Directors of the companies included in the Group and of its associateare responsible for maintenance of adequate accounting records in accordance with theprovisions of the Act for safeguarding of the assets of the Group and of its associate andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and the design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the consolidatedInd AS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error which have been used for the purpose ofpreparation of the consolidated Ind AS financial statements by the Directors of theHolding Company as aforesaid.
In preparing the consolidated financial statements the respective Board of Directorsof the companies included in the Group and of its associate are responsible for assessingthe ability of the Group and of its associate to continue as a going concern disclosingas applicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operationsor has no realistic alternative but to do so.
Those respective Board of Directors of the companies included in the Group and of itsassociate arealso responsible for overseeing the financial reporting process of the Groupand of its associate.
Auditor's Responsibilities for the Audit of the Consolidated Ind AS FinancialStatements
Our objectives are to obtain reasonable assurance about whether the consolidated Ind ASfinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these consolidated Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated IndAS financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal control relevant to the audit in order todesign 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 HoldingCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the ability ofthe Group and its associate to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the consolidated Ind AS financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Group and its associateto cease to continue as a going concern.
Evaluate the overall presentation structure and content of the consolidated IndAS financial statements including the disclosures and whether the consolidated Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial informationof the entities or business activities within the Group and its associate of which we arethe independent auditors to express an opinion on the consolidated Ind AS financialstatements. We are responsible for the direction supervision and performance of the auditof the financial statements of such entities included in the consolidated financialstatements of which we are the independent auditors. For the other entities included inthe consolidated financial statements which have been audited by other auditors suchother auditors remain responsible for the direction supervision and performance of theaudits carried out by them. We remain solely responsible for our audit opinion.
We communicate with those charged with governance of the Holding Company and such otherentities included in the consolidated Ind AS financial statements of which we are theindependent auditors regarding among other matters the planned scope and timing of theaudit and significant audit findings including any significant deficiencies in internalcontrol that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the consolidated Ind AS financialstatements for the financial year ended March 31 2019 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
(a) We did not audit the financial statements and other financial information inrespect of the subsidiary whose Ind AS financial statements include total assets of Rs0.01 crores and net assets of Rs. (0.03) crores as at March 31 2019 and total revenuesof Rs Nil and net cash inflows of Rs Nil for the year ended on that date. These Ind ASfinancial statement and other financial information have been audited by other auditorswhich financial statements other financial information and auditor's reports have beenfurnished to us by the management. Our opinion on the consolidated Ind AS financialstatements in so far as it relates to the amounts and disclosures included in respect ofthe subsidiary and our report in terms of sub-sections (3) of Section 143 of the Act inso far as it relates to the aforesaid subsidiary is based solely on the report of suchother auditors.
(b) The consolidated Ind AS financial statements include the Group's share of netprofit of Rs.8.58 crores for the year ended March 31 2019 as considered in theconsolidated Ind AS financial statements in respect of an associate whose financialstatements other financial information have not been audited and whose unauditedfinancial statements other unaudited financial information have been furnished to us bythe Management. Our opinion in so far as it relates amounts and disclosures included inrespect of such associate and our report in terms of sub-sections (3) of Section 143 ofthe Act in so far as it relates to the aforesaid associate is based solely on suchunaudited financial statement and other unaudited financial information.
In our opinion and according to the information and explanations given to us by theManagement these financial statements and other financial information are not material tothe Group.
Our opinion above on the consolidated Ind AS financial statements and our report onOther Legal and Regulatory Requirements below is not modified in respect of the abovematters with respect to our reliance on the work done and the reports of the otherauditors and the financial statements and other financial information certified by theManagement.
Report on Other Legal and Regulatory Requirements
|(a) We/the other auditors whose report we have relied upon 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 of the aforesaid consolidated Ind AS financial statements; |
|(b) In our opinion proper books of account as required by law relating to preparation of the aforesaid consolidation of the financial statements have been kept so far as it appears from our examination of those books and reports of the other auditors; |
|(c) The Consolidated Balance Sheet the Consolidated Statement of Profit and Loss including the Statement of Other Comprehensive Income the Consolidated Cash Flow Statement and Consolidated Statement of Changes in Equity dealt with by this Report are in agreement with the books of account maintained for the purpose of preparation of the consolidated Ind AS financial statements; |
|(d) In our opinion the aforesaid consolidated Ind AS 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 of the Holding Company as on March 31 2019 taken on record by the Board of Directorsof the Holding Company and the reports of the statutory auditors who are appointed under Section 139 of the Act of its subsidiary company associate company none of the directors of the Group's companies its associate incorporated in India is disqualified as on March 31 2019 from being appointed as a director in terms of Section 164 (2) of the Act; |
|(f) With respect to the adequacy and the operating effectiveness of the internal financial controls over financial reporting with reference to these consolidated Ind AS financial statements of the Holding Company and its subsidiary company associate company incorporated in India refer to our separate Report in "Annexure 1" to this report; |
|(g) The provisions of section 197 read with Schedule V of the Act are not applicable to the Holding Company its subsidiary associate incorporated in India for the year ended March 31 2019; |
|(h) With respect to the other matters to be included in the Auditor's 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 and based on the consideration of the report of the other auditors on separate financial statements as also the other financial information of the subsidiary as noted in the 'Other matters' paragraph": |
|i. The consolidated Ind AS financial statements disclose the impact of pending litigations on its consolidated financial position of the Group its associate in its consolidated Ind AS financial statements - Refer Note 36 to the consolidated Ind AS financial statements; |
|ii. The Group and its associate did not have any material foreseeable losses in long-term contracts including derivative contracts during the year ended 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 Holding Company its subsidiary associate incorporated in India during the year ended March 31 2019. |
| ||For S R B C & CO LLP |
| ||Chartered Accountants |
| ||ICAI Firm Registration Number: 324982E/E300003 |
| ||per Ravi Bansal |
|Place of Signature: Mumbai ||Partner |
|Date: May 29 2019 ||Membership Number: 49365 |