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Torrent Pharmaceuticals Ltd.

BSE: 500420 Sector: Health care
NSE: TORNTPHARM ISIN Code: INE685A01028
BSE 00:00 | 24 Apr 2020 Torrent Pharmaceuticals Ltd
NSE 05:30 | 01 Jan 1970 Torrent Pharmaceuticals Ltd

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OPEN 2460.00
PREVIOUS CLOSE 2421.10
VOLUME 19349
52-Week high 2679.45
52-Week low 1453.00
P/E 44.01
Mkt Cap.(Rs cr) 41,148
Buy Price 2431.60
Buy Qty 1000.00
Sell Price 2450.00
Sell Qty 3.00
OPEN 2460.00
CLOSE 2421.10
VOLUME 19349
52-Week high 2679.45
52-Week low 1453.00
P/E 44.01
Mkt Cap.(Rs cr) 41,148
Buy Price 2431.60
Buy Qty 1000.00
Sell Price 2450.00
Sell Qty 3.00

Torrent Pharmaceuticals Ltd. (TORNTPHARM) - Auditors Report


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Company auditors report

TO THE MEMBERS OF TORRENT PHARMACEUTICALS LIMITED Report on the Audit of the StandaloneFinancial Statements Opinion

We have audited the standalone financial statements of Torrent Pharmaceuticals Limited("the Company") which comprise the standalone balance sheet as at 31 March2019 and the standalone statement of profit and loss (including other comprehensiveincome) standalone statement of changes in equity and standalone statement of cash flowsfor the year then ended and notes to the standalone financial statements including asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "standalone financial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2019 and its profit and othercomprehensive income changes in equity and its cash flows for the year ended on thatdate.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.

Key audit Matters

Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.

1. Revenue Recognition

 

The Key Audit Matter How the matter was addressed in our audit
• The Company provides a right of return to its customers as a customary business practice. These arrangements result in deductions to gross amounts invoiced. The initial revenue recognition is reduced taking into consideration the anticipated sales returns. In view of the significance of the matter we applied following procedures :
• Refer note 4.12 of the financial statements for details on accounting policy on revenue recognition. • assessed the appropriateness of the Company's revenue recognition accounting policies by comparing with applicable accounting standards.
• Due to the Company's presence across different regions and the competitive business environment the estimation of anticipated sales returns is material and considered to be complex and judgemental. Management has determined an accrual of Rs149.50 crores to be necessary as at 31 March 2019 (31 March 2018: Rs140.47 crores). • assessed and tested the design implementation and operating effectiveness of management key controls over the Company's systems relating to the deductions made to gross sales for anticipated sales returns including those controls over accrual rates used for calculations of provision for sales returns.
• performed testing by selecting samples relating to sales returns recorded during the year and comparing the parameters used in the calculation with the relevant source documents.
• compared the assumptions to current trends of sales returns. We have also considered the historical accuracy of the Company's estimates as well as current trends of sales return.
• considered the adequacy of the disclosures in respect of revenue.

2. Assessment of recoverability of the carrying value of goodwill intangible assetsand investment in subsidiaries

The Key Audit Matter How the matter was addressed in our audit
As at 31 March 2019 the Company has 'Rs 4386.79 crores of acquired brands under intangible assets and related goodwill of 'Rs 209.34 crores. In addition the Company has Rs 132.78 crores of investment in subsidiaries. The carrying value of goodwill acquired brands and investment in subsidiaries will be recovered through future cash flows and there is inherent risk that these assets will be impaired if these cash flows do not meet the Company's expectations. Refer to note 4.8 7 and 8 in the Standalone Financial Statements for details of accounting policies on impairment of assets and related disclosures. In view of the significance of the matter we applied following procedures :
Valuation of goodwill acquired brands and investment in subsidiaries is a key audit matter due to: • tested operating effectiveness of controls over the review of the impairment analysis.
• The inherent complexity in auditing the forward looking assumptions applied to recoverable value given the significant judgements involved. The key assumptions in the cash flow models include the forecast revenue margins terminal growth and discount rates. • assessed the accuracy of prior period cash flow forecasts of the Company by reference to actual performance.
We focused on brands acquired through historical acquisitions and related goodwill as these are the most significant individually and in aggregate. • using our knowledge of the Company and industry challenged the significant assumptions and judgements incorporated in impairment analysis specifically in relation to forecast revenue margins terminal growth and discount rates with the assistance of our valuations specialist;
• performed sensitivity analysis of the key assumptions
including future revenue growth rates future gross margins and the discount rate applied in the recoverable value and considering the resulting impact on the impairment testing and whether selection of these key assumptions is appropriate;
 

 

• evaluated the adequacy of disclosures including disclosures of key assumptions judgements and sensitivities.

3. Minimum alternate Tax (Mat) credit Entitlement - Deferred tax assets:

The Key Audit Matter How the matter was addressed in our audit
The Company pays minimum alternate tax (MAT) under section 115JB of the Income Tax Act 1961. The MAT paid would be available as an offset over a period of 15 years. The MAT credit is recognized as a deferred tax asset to be available for offset when the Company pays taxes under the provision of Income Tax Act 1961. The balance of MAT credit receivable as at 31 March 2019 is Rs 721.82 crores (refer note 20 to the standalone financial statements). In respect of such deferred tax assets we assessed recoverability from a tax perspective by performing the following procedures:
The recognition and recoverability of deferred tax asset on account of MAT credit requires significant judgement regarding the Company's future profitability and taxable income which will result in utilization of the MAT credit within the time limits available under the applicable Income tax laws. • understanding why the MAT credit entitlement arose and understanding whether the MAT credit entitlement can be utilized
• assessing any restriction in use of the MAT credit entitlement and
• determining when the MAT credit entitlement will expire
Further we assessed the applicability of Ind AS 12 Income Taxes by assessing management's assessment of recoverability of MAT credit entitlement against forecast income streams including reliability of future income projections.
We validated the appropriateness of the related disclosures in note 20 to the standalone financial statements including the enhanced disclosures made in respect of the utilization period of deferred tax assets in relation to MAT credit entitlement.

Information other than the Standalone Financial Statements and Auditor's Report thereon(other information)

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual 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 informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.

Management's Responsibility for the Standalone Financial Statements

The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgements and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the standalone financial statements that give atrue 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 areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

Auditor's responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalonefinancial 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 standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgement andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• 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 company hasadequate internal financial controls with reference to standalone financial statements inplace and the operating effectiveness 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 Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control 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 standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematter or 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

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 Orderto 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 bestof 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 theCompany so far as it appears from our examination of those books.

c) The standalone balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account.

d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164(2) of the Act.

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

(B) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 31 March 2019 onits financial position in its standalone financial statements - Refer Note 41 to thestandalone financial statements;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

iv. The disclosures in the financial statements regarding holdings as well as dealingsin specified bank notes during the period from 8th November 2016 to 30thDecember 2016 have not been made since they do not pertain to the financial year ended 31stMarch 2019.

(C) With respect to the matter to be included in the Auditors' Report under section197(16):

In our opinion and according to the information and explanations given to us theremuneration paid by the company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.

For B S R & Co. LLP
Chartered Accountants
(Firm's Registration No. 101248W/W-100022)
Jamil Khatri
Ahmedabad Partner
20th May 2019 Membership No. 102527

(Referred to in our report of even date)

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified by the management in a phased manner over a period ofthree years. In accordance with this programme certain fixed assets were verified duringthe year and no material discrepancies were noticed on such verification. In our opinionthis periodicity of physical verification is reasonable having regard to the size of theCompany and the nature of its assets.

(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed / transfer deed /conveyance deed provided to us we report that the tittle deeds of immovable propertiesare held in the name of the Company. Immovable properties of land and building whosetittle have been pledged as security for loans are held in the name of the Company. Inrespect of immovable properties of land and buildings that have been taken on lease anddisclosed as fixed asset in the financial statements the lease agreements are in the nameof the Company where the Company is the lessee in the agreement.

(ii) The inventory has been physically verified by the management during the year. Inour opinion the frequency of such verification is reasonable. The discrepancies noticedon verification between the physical stocks and the book records were not material andhave been appropriately dealt with in the books of accounts.

(iii) During the current year the Company has not granted any loans secured orunsecured to parties covered in the register maintained under section 189 of the CompaniesAct 2013. However in earlier years an interest bearing unsecured loan was granted to onewholly owned subsidiary covered in the register maintained under Section 189 of the Actwhich was repaid along with interest before the date of the balance sheet.

(a) In our opinion and according to the information and explanations given to us theterms and conditions under which the aforesaid loan was granted is not prejudicial to theCompany's interest.

(b) In respect of aforesaid loan repayment of the principal amount is as stipulatedand payment of interest has been regular.

(c) In respect of aforesaid loan there is no amount which is overdue for more thanninety days.

(iv) In our opinion and according to the information and explanations given to us theCompany has not granted any loans or provided any guarantees or security to the partiescovered under Section 185 of the Act during the year. The Company has complied with theprovisions of Section 186 of the Act in respect of grant of loans making investments andproviding guarantees and securities as applicable.

(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public in accordance with the provisions ofsection 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder. Accordingly paragraph 3(v) of the Order is not applicable to the Company.

(vi) We have broadly reviewed the records maintained by the Company pursuant to therules prescribed by the Central Government for maintenance of cost records undersub-section 1 of section 148 of the Act and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. However we have not made adetailed examination of the records with a view to determine whether they are accurate orcomplete.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund Employees' StateInsurance Income-Tax Goods and Service Tax Duty of Customs Cess and other materialstatutory dues have been generally regularly deposited during the year by the Company withthe appropriate authorities. Pending clarity on the matter as explained in Note 41 to thestandalone financial statements the Company is currently unable to determine the extentof arrears of such provident fund due as at 31 March 2019 outstanding for a period of morethan six months from the date they become payable.

According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income-Tax Goods andService Tax Duty of Customs Cess and other material statutory dues were in arrears as at31 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 there are no dues ofIncome-tax Sales-Tax Service Tax Goods and Service Tax Duty of customs Duty ofExcise Value Added Tax Cess as at 31 March 2019 which have not been deposited with theappropriate authorities on account of any dispute other than those mentioned in EnclosureI to this report.

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of dues to its bankers government financialinstitution and its debenture holders.

(ix) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not raised any money by way ofinitial public offer further public offer (including debt instruments) during the year.In our opinion and according to information and explanations given to us the term loanshave been applied by the Company during the year for the purposes for which they wereraised.

(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by themanagement.

(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act.

(xii) I n our opinion and according to the information and explanations given to usthe Company is not a Nidhi company as prescribed under section 406 of the Act.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 ourexamination of the records of the Company transactions with the related parties are incompliance with the provisions of Sections 177 and 188 of the Act where applicable. Thedetails of such related party transactions have been disclosed in the Standalone financialstatements as required by the applicable Indian Accounting Standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe 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 ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with directors or persons connected with them. Accordingly paragraph 3(xv)of the Order is not applicable to the Company.

(xvi) In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934. Accordingly paragraph 3(xvi) of the Order is not applicable to the Company.

For B S R & Co. LLP
Chartered Accountants
(Firm's Registration No. 101248W/W-100022)
Jamil Khatri
Ahmedabad Partner
20th May 2019 Membership No. 102527

ENCLOSURE I

Name of the Statute Nature of Dues Forum where dispute is pending Period to which the amount relates Amount demanded (Rs in crores) Amount unpaid (Rs in crores)
The E.S.I. Act1948 E.S.I. Contribution Gujarat High Court 1993-94 to 2018-19 13.25 13.25
The Central Excise Act 1944 Demand of Excise duty/Interest/ Penalty Deputy Commissioner of CGST & Central Excise Kalol 2005-06 0.05 0.03
The Central Excise Act 1944 Demand of Excise duty/Interest/ Penalty CESTAT - Ahmedabad 2005- 06 to

2006- 07 and 2009-10 to 2010-11

0.17 0.15
The Central Excise Act 1944 Cenvat Credit/Input service tax/demand of duty & penalty/ Refund CESTAT - Kolkatta 2011-12 2.37 2.07
Cenvat Credit Rules 2004 Cenvat Credit/Input service tax/ demand of duty & penalty CESTAT - Ahmedabad 2006-07 to 2008-09 0.34 0.15
Cenvat Credit Rules 2004 Cenvat Credit/Input service tax/demand of duty Interest & penalty Commissioner (Appeals) Central Excise and CGST Silliguri 2012-13 to July-2015 0.04 0.04
Cenvat Credit Rules 2004 Cenvat Credit/Input service tax/ demand of duty & penalty Commissioner (Appeals) Central Excise and CGST Indore 2015- 16 to

2016- 17

0.45 0.45
Finance Act 1994 Demand of Service Tax/Interest/ Penalty CESTAT - Ahmedabad 2013-14 4.61 4.61
Finance Act 1994 Demand of Service Tax/Interest/ Penalty Commissioner (Appeals) CGST Ahmedabad 2011-12 to 2013-14 0.66 0.65
Finance Act 1994 Demand of Penalty CESTAT - Ahmedabad 2008-09 to 2010-11 0.18 0.18
Finance Act 1994 Interest on refund CESTAT - Ahmedabad 2014-15 1.14 1.14
Finance Act 1994 Demand of Service Tax/Interest/ Penalty Supreme Court of India 2007-08 to June 2012 53.30 53.30
Kerala Value Added Tax Act 2003 Demand of Tax Deputy Commissioner Appeals 2006- 07 to

2007- 08

0.47 0.47
Kerala Value Added Tax Act 2003 Demand of Tax Deputy Commissioner Appeals 2009-10 to 2010 11 0.07 0.07
Kerala Value Added Tax Act 2003 Demand of Tax Deputy Commissioner Appeals 2012-13 to 2015-16 0.04 0.04
Madhyapradesh Vat Act 2002 Demand of Tax Assistant Commissioner of Commercial Tax Madhyapradesh 2014- 15 and

2015- 16

0.10 0.10
Uttar Pradesh Trade Tax Act 1948 Demand of Tax Joint Commissioner Commercial Tax Uttar Pradesh 2003-04

and

2005-06

0.41 0.41
Uttar Pradesh Trade Tax Act 2008 Demand of Tax Joint Commissioner Commercial Tax Uttar Pradesh 2012-13 1.13 1.13
West Bengal Value Added Tax Act 2003 Demand of Tax Additional Commissioner of Commercial Tax West Bengal 2008-09 1.22 1.22
West Bengal Value Added Tax Act 2003 Demand of Tax Joint Commissioner Commercial Tax West Bengal 2015-16 1.02 1.02
Bihar Value Added Tax Act 2005 Demand of Tax Assistant Commissioner of Commercial Tax Bihar 2015-16 0.01 0.01

on standalone financial statements of Torrent Pharmaceuticals Limited for the yearended 31 March 2019

Report on the internal Financial controls with reference to the aforesaid standalonefinancial statements under clause (i) of Sub-section 3 of Section 143 of the companiesAct 2013.

(referred to in paragraph 1(A)(f) under ‘report on other legal and regulatoryrequirements' section of our report of even date)

Opinion

We have audited the internal financial controls with reference to financial statementsof Torrent Pharmaceuticals Limited (‘the Company') as of 31 March 2019 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date.

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at 31 March 2019 based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the "Guidance Note").

Management's responsibility for internal Financial Controls

The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial control withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013 (‘the Act').

Auditor's responsibility

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 prescribed undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements was established and maintained and whether such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.

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 withreference to financial statements.

Meaning of internal Financial controls with reference to Financial Statements

A company's internal financial control 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 control withreference to financial statements includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of internal Financial Controls with Reference to FinancialStatements

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 control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

For B S R & Co. LLP
Chartered Accountants
(Firm's Registration No. 101248W/W-100022)
Jamil Khatri
Ahmedabad Partner
20th May 2019 Membership No. 102527


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