To the Members of Pioneer Distilleries Limited
Report on the audit of the Ind AS financial statements
1. We have audited the accompanying Ind AS financial statements of Pioneer DistilleriesLimited ("the Company") which comprise the Balance Sheet as at March 31 2019and the Statement of Profit and Loss (including Other Comprehensive Income) Statement ofChanges in Equity and Statement of Cash Flows for the year then ended and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory information. 2. In our opinion and to the best of our information andaccording to the explanations given to us the aforesaid financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019and total comprehensive income (comprising of loss and other comprehensive income)changes in equity and its cash flows for the year then ended.
Basis for opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Key audit matters
4. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
|Key audit matters Assessment of recoverability of Deferred Tax Asset in respect of unabsorbed tax losses and MAT credit ||How our audit addressed the key audit matters Our audit procedures included the following: |
|(Refer Note 32 to the financial statements) The Company has recognised a deferred tax asset aggregating to INR 5862 lakhs in respect of unabsorbed tax losses including unabsorbed depreciation and INR 1168 lakhs in respect of MAT ||Understanding and evaluating the design and testing the operating effectiveness of controls over recognition and review of deferred tax assets; Comparing the Company's profit forecasts prepared in the previous year with its actual performance during the year; Checking the arithmetical accuracy of the forecasts; |
|credit entitlement which is included under total deferred tax assets (net) of INR 6022 lakhs. The deferred tax asset is recognised to the extent it is considered recoverable based on the Company's projected taxable profits in the forthcoming years. Under Indian Accounting Standard 12 Income Taxes' the carrying amount of a deferred tax asset is required to be reviewed at the end of each reporting period. We considered this as a key audit matter because the amount of deferred tax asset referred to above is significant to the financial statements and is based on the forecast of the taxable profits of the Company that involve significant judgement and uncertainty of outcome. The assumptions underlying the forecast include sales growth rate which is based on projected sales volume and available capacity while cost of materials (the key component of overall cost) which is based on inflation the Company's bargaining position with sellers of raw materials and other productivity improvement measures planned by the management of the Company. These projections have been reviewed and approved by the Board of Directors. Assessment of litigations and related disclosure of contingent liabilities (Refer Note 27 Contingent liabilities" of the Financial Statements) There are legal and regulatory matters for which there are ongoing litigations which are included in the aforesaid note. There is a high level of management judgement required in estimating the likelihood of outcome in such cases and the amount of ultimate liability if any. We considered this a key audit matter as the eventual outcome of these matters is uncertain and the position taken by the management is based on the exercise of significant judgement supported by external legal advice where applicable. ||Review of key assumptions underlying the forecasts such as sales growth rate and estimated increase in the cost of materials to arrive at the projected profit in each year of the forecasts. Checking whether the tax losses and MAT credit can be utilised within the forecasted recoupment period. Evaluating the progress made by the Company in recent periods vis-a- vis the approved budgets. Based on the above procedures performed our testing did not identify any exceptions with respect to the reasonableness of the assumptions and estimates used by the management in assessing the recoverability of Deferred Tax Asset in respect of unabsorbed tax losses and MAT credit. Our audit procedures included the following: Understanding and evaluating the design and testing the operating effectiveness of controls surrounding litigations and related disclosure of contingent liabilities; Performing tests of details on the underlying calculations supporting the contingencies disclosed; Reading external legal opinions obtained by management where applicable; Discussing the matters subjected to litigation with the Company's in-house legal counsel; Assessing management's conclusions through our understanding of the judicial precedents set in similar cases; Obtaining on a sample basis independent confirmations from external legal counsel; and Evaluating the objectivity competence and capabilities of external legal counsels. Based on the above procedures we considered the assessment of litigations made by the management and the adequacy of the contingent liabilities disclosure to be reasonable. |
5. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the report of the Board of DirectorsCorporate Governance Report and Management Discussion and Analysis but does not includethe financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact.
We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the financialstatements
6. The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Accounting Standards specified under section 133of the Act. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
7. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Auditor's responsibilities for the audit of the financial statements
8. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
9. As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also: Identify and assess therisks of material misstatement of the financial statements whether due to fraud or errordesign and perform audit procedures responsive to those risks and obtain audit evidencethat is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resultingfrom error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control. Obtain an understanding ofinternal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances. Under Section 143(3)(i) of the Act we are alsoresponsible for expressing our opinion on whether the company has adequate internalfinancial controls with reference to financial statements in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management. Conclude on theappropriateness of management's use of the going concern basis of accounting and based onthe audit evidence obtained whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Company's ability to continue as a goingconcern. If we conclude that a material uncertainty exists we are required to drawattention in our auditor's report to the related disclosures in the financial statementsor if such disclosures are inadequate to modify our opinion. Our conclusions are basedon the audit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a going concern.Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
10. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
11. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
12. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
13. As required by the Companies (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure B a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
14. 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 bestof our knowledge and belief were necessary for the purposes of our audit. (b) In ouropinion proper books of account as required by law have been kept by the Company so faras it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Statement of Changes in Equity and Cash Flow Statement dealt with by thisReport are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act. (e) On the basis of thewritten representations received from the directors as on March 31 2019 taken on recordby the Board of Directors none of the directors is disqualified as on March 31 2019 frombeing appointed as a director in terms of Section 164 (2) of the Act. (f) With respect tothe adequacy of the internal financial controls over financial reporting of the Companyand the operating effectiveness of such controls refer to our separate Report in"Annexure A". (h) With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules2014 in our opinion and to the best of our information and according to the explanationsgiven to us: i. The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements Refer Note 27 to the financial statements;ii. The Company has long-term contracts as at March 31 2019 for which there are nomaterial foreseeable losses. The Company does not have any derivative contracts as atMarch 31 2019. iii. There were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Company during the year ended March 312019.
For Price Waterhouse & Co Chartered Accountants LLP
Firm Registration Number: 304026E/E-300009
May 13 2019 Membership Number: 042393
Annexure A to Independent Auditors' Report
Referred to in paragraph 14(f) of the Independent Auditors' Report of even date to themembers of Pioneer Distilleries Limited on the financial statements for the year endedMarch 31 2019
Report on the Internal Financial Controls with reference to financial (i) of the Act
1. We have audited the internal controls with reference to financial statementsof Pioneer Distilleries Limited ("the Company") as of March 31 2019 inconjunction with our audit of the financial statements of the Company for the year endedon that date.
Management's Responsibility for Internal Financial Controls
2. The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India(ICAI). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.
3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing deemed to be prescribedunder section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls both applicable to an audit of internal financial controls and bothissued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemwith reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
6. A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.
Inherent Limitations of Internal Financial Controls with reference to financialstatements
7. Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
8. In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as atMarch 31 2019 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note issued by ICAI.
For Price Waterhouse & Co Chartered Accountants LLP
Firm Registration Number: 304026E/E-300009
May 13 2019 Membership Number: 042393
Annexure B to Independent Auditors' Report
Referred to in paragraph 13 of the Independent Auditors' Report of even date to themembers of Pioneer Distilleries Limited on the Ind AS financial statements as of and forthe year i. (a) The Company is maintaining proper records showing full particularsincluding quantitative details and situation of fixed assets.
(b) The fixed assets of the Company have been physically verified by the Managementduring the year and no material discrepancies have been noticed on such verification. Inour opinion the frequency of verification is reasonable.
(c) The title deeds of immovable properties as disclosed in Note 2 on property plantand equipment to the financial statements are held in the name of the Company. ii. Thephysical verification of inventory have been conducted at reasonable intervals by theManagement during the year. As stated in Note 19 to the financial statementsdiscrepancies amounting to INR 288 lakhs noticed on physical verification of inventory byManagement as compared to book records were material and have been appropriately dealtwith in the books of accounts. iii. The Company has not granted any loans secured orunsecured to companies firms Limited Liability Partnerships or other parties covered inthe register maintained under Section 189 of the Act. Therefore the provisions of Clause3(iii) (iii)(a) (iii)(b) and (iii)(c) of the Order are not applicable to the Company.iv. The Company has not granted any loans or made any investments or provided anyguarantees or security to the parties covered under Section 185 and 186. Therefore theprovisions of Clause 3(iv) of the Order are not applicable to the Company. v. The Companyhas not accepted any deposits from the public within the meaning of Sections 73 74 75and 76 of the Act and the Rules framed there under to the extent notified. vi. The CentralGovernment of India has not specified the maintenance of cost records under Section 148(1)of the Act for any of the products of the Company. vii. (a) According to the informationand explanations given to us including management's assessment in respect of providentfund as referred to in Note 40 to the Financial Statements and the records of the Companyexamined by us in our opinion the Company is regular in depositing the undisputedstatutory dues including provident fund employees' state insurance income tax salestax service tax duty of customs duty of excise value added tax cess goods andservices tax and other material statutory dues as applicable with the appropriateauthorities.
(b) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of service-tax duty of customs duty of exciseand goods and services tax which have not been deposited on account of any dispute. Theparticulars of dues of income tax sales tax and value added tax as at March 31 2019which have not been deposited on account of a dispute are as follows:
|Name of the statute ||Nature of dues ||Disputed amount (INR lakhs) ||Amount paid (Under protest) (INR lakhs) ||Period to which the amount relates ||Forum where the dispute is pending |
|Central Sales Tax 1958 & Maharashtra Value ||Sales Tax/ Value Added ||841 ||149 ||2012-13 ||Maharashtra Sales Tax Tribunal |
|Added Tax 2002 ||Tax || || || || |
|Income Tax Act 1961 ||Income Tax ||76 ||- ||2009-10 ||Income Tax Appellate Tribunal |
viii. According to the records of the Company examined by us and the information andexplanation given to us the Company has not defaulted in repayment of loans or borrowingsto any financial institution or bank or Government or dues to debenture holders as at thebalance sheet date. ix. The Company has not raised any moneys by way of initial publicoffer further public offer (including debt instruments) and term loans. Accordingly theprovisions of Clause 3(ix) of the Order are not applicable to the Company. x. During thecourse of our examination of the books and records of the Company carried out inaccordance with the generally accepted auditing practices in India and according to theinformation and explanations given to us we have neither come across any instance ofmaterial fraud by the Company or on the Company by its officers or employees noticed orreported during the year nor have we been informed of any such case by the Management.xi. Read with Note 36 to the financial statements the Company has paid/ provided formanagerial remuneration in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act. xii. As the Company is not aNidhi Company and the Nidhi Rules 2014 are not applicable to it the provisions of Clause3(xii) of the Order are not applicable to the Company. xiii. The Company has entered intotransactions with related parties in compliance with the provisions of Sections 177 and188 of the Act. The details of such related party transactions have been disclosed in thefinancial statements as required under Indian Accounting Standard (Ind AS) 24 RelatedParty Disclosures specified under Section 133 of the Act. xiv. The Company has not madeany preferential allotment or private placement of shares or fully or partly convertibledebentures during the year under review. Accordingly the provisions of Clause 3(xiv) ofthe Order are not applicable to the Company. xv. The Company has not entered into anynon-cash transactions with its directors or persons connected with him. Accordingly theprovisions of Clause 3(xv) of the Order are not applicable to the Company. xvi. TheCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934. Accordingly the provisions of Clause 3(xvi) of the Order are not applicable tothe Company.
For Price Waterhouse & Co Chartered Accountants LLP
Firm Registration Number: 304026E/E-300009
May 13 2019 Membership Number: 042393