FUTURE STRIDES ARCOLAB Auditors Report

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF STRIDES SHASUN LIMITED


Report on the Standalone Financial Statements


We have audited the accompanying standalone financial statements of STRIDES SHASUN LIMITED (“the Company"), which comprise the Balance Sheet as at 31 March, 2017, and the Statement of Profit and Loss including Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "the standalone financial statements").


Management''''s Responsibility for the Standalone Financial Statements


The Company''''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed 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 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 statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.


Auditor''''s Responsibility


Our responsibility is to express an opinion on these standalone financial statements based on our audit.


In conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act, the Rules made there under and the Order under section 143 (11) of the Act.


We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone financial statements are free from material misstatement.


An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditor''''s judgment, including the assessment of the risks of material misstatement of the standalone financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''''s preparation of the standalone financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''''s Directors, as well as evaluating the overall presentation of the standalone financial statements.


We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.


Opinion


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 Act in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards and the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March, 2017, and its profit, total comprehensive income, its cash flows and the changes in equity for the year ended on that date.


Emphasis of Matter


We draw attention to Note 39.1 to the standalone financial statements regarding the notification of claims received from Mylan under the terms of the Share Purchase Agreements (SPAs) for sale of the investments in entities in the Specialties products business in an earlier year, which the Company had disputed. As further stated in the Note, the Company has provided a guarantee in favour of Mylan and certain amounts have been set aside in escrows under the terms of the SPAs. During the current year, a significant portion of the claims notified by Mylan has been settled. As explained in the Note, given the nature of the pending claims against the Company and considering the amount held in escrow account, the Company believes that any further outflow of resources is not probable and has made the disclosures under Ind AS 37 “Provisions, Contingent Liabilities and Contingent Assets" in this regard.


Our opinion on the standalone financial statements and our report on Other Legal and Regulatory Requirements below is not modified in respect of this matter.


Report on Other Legal and Regulatory Requirements


1. As required by Section 143(3) of the Act, based on our audit, we report to the extent applicable that:


(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.


(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.


(c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.


(d) In our opinion, the aforesaid standalone financial statements, read with Note 38.1 therein, comply with the Indian Accounting Standards prescribed under section 133 of the Act.


(e) I n our opinion, any unfavorable outcome with regard to the matter referred to in Note 39.1 to the standalone financial statements resulting in outflow of resources, significantly in excess of amounts set aside in escrows stated in the said Note, may have an adverse effect on the functioning of the Company.


(f) On the basis of the written representations received from the directors as on 31 March, 2017 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March, 2017 from being appointed as a director in terms of Section 164(2) of the Act.


(g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''''s internal financial controls over financial reporting.


(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 Auditor''''s) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:


i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements.


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


iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.


iv. The Company has provided requisite disclosures in the standalone financial statements as regards its holding and dealings in Specified Bank Notes as defined in the Notification S.O. 3407(E) dated the 8th November, 2016 of the Ministry of Finance, during the period from 8th November 2016 to 30th December 2016. Based on audit procedures performed and the representations provided to us by the management we report that the disclosures are in accordance with the books of account maintained by the Company.


2. As required by the Companies (Auditor''''s Report) Order, 2016 (“the order" or “CARO 2016") issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.


We have audited the internal financial controls over financial reporting of STRIDES SHASUN LIMITED (“the Company") as of 31 March 2017 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.


Management''''s Responsibility for Internal Financial Controls


The Company''''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (“the Guidance Note") issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.


Auditor''''s Responsibility


Our responsibility is to express an opinion on the Company''''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.


Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.


We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''''s internal financial controls system over financial reporting.


Meaning of Internal Financial Controls Over Financial Reporting


A company''''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''''s assets that could have a material effect on the financial statements.


Inherent Limitations of Internal Financial Controls Over Financial Reporting


Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Opinion


In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the Institute of Chartered Accountants of India.


(i) In respect of its fixed assets:


(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.


(b) The Company has a programme of verification of fixed assets to cover all the items in a phased manner over a period of two years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In accordance with the programme, fixed assets were physically verified by the Management. According to the information and explanations given to us no material discrepancies were noticed on such verification.


(c) According to the information and explanations given to us and the records examined by us, and based on the examination of the registered sale deed / transfer deed / conveyance deed provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings which are freehold, are held in the name of the Company as at the balance sheet date, except the following:






























Particulars of land and building



Gross Block ('''' in million as at March 31, 2017)



Net Block


('''' in million as at


March 31, 2017)



Remarks



Freehold land admeasuring 7.20 Acres



257.67



257.67



The title deeds are under dispute. In respect of such dispute, the Company has been legally advised that it has the title deed in its name for the aforesaid immovable properties and that it will be able to defend any counter claims to such property



Freehold land and building admeasuring 52.61 Acre



1,302.86



1,053.21



The title deeds are in the name of erstwhile Companies that were merged with the Company under Section 391 to 394 of the Companies Act, 1956 in terms of the approval of the Honorable High Courts of judicature



Building admeasuring 750 sq.ft.



3.55



1.30



The title deeds are not in the name of the Company



Immovable properties of land and buildings whose title deeds have been pledged as security for loans, guarantees, etc., are held in the name of the Company based on the confirmations directly received by us from lenders / parties. In respect of immovable properties of land and buildings that have been taken on lease and disclosed as fixed asset in the financial statements, the lease agreements are in the name of the Company, where the Company is the lessee in the agreement.


(ii) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification.


(iii) According to the information and explanations given to us, the Company has granted loans, secured or unsecured, to companies covered in the register maintained under section 189 of the Companies Act, 2013, in respect of which


(a) The terms and conditions of the grant of such loans are, in our opinion, prima facie, not prejudicial to the Company''''s interest.


(b) The schedule of repayment of principal and payment of interest has been stipulated and repayments or receipts of principal amounts and interest have been regular as per stipulations.


(c) There is no overdue amount remaining outstanding as at the year-end.


(iv) I n our opinion and according to the information and explanations given to us, the Company has complied with the provision of Section 185 and 186 of the Companies Act, 2013 in respect of grant of loans, making investments and providing guarantees and securities, as applicable.


(v) According to the information and explanations given to us, the Company has not accepted any deposit during the year and there were no unclaimed deposits.


(vi) The maintenance of cost records has been specified by the Central Government under section 148(1) of the Companies Act, 2013. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended prescribed by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.


(vii) According to the information and explanations given to us, in respect of statutory dues:


(a) The Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Employees'''' State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Cess and other material statutory dues applicable to it to the appropriate authorities.


(b) There were no undisputed amounts payable in respect of Provident Fund, Employees'''' State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty,


Excise Duty, Value Added Tax, Cess and other material statutory dues in arrears as at March 31, 2017 for a period of more than six months from the date they became payable.


(c) Details of dues of Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty and Value Added Tax which have not been deposited as on March 31, 2017 on account of disputes are given below:

































































































































Name of Statute



Nature of Dues



Forum where Dispute is Pending



Period to which the Amount Relates



Amount ('''' in millions)



The Income-Tax Act, 1961



Income Tax



Income Tax Appellate Tribunal



AY 2008-09



190.42 (net of tax paid under protest of 223.14)



The Income-Tax Act, 1961



Income Tax



Income Tax Appellate Tribunal



AY 2009-10



251.62 (net of tax paid under protest of 307.56)



The Income-Tax Act, 1961



Income Tax



Income Tax Appellate Tribunal



AY 2011-12



86.44 (net of tax paid under protest of 59.98)



Central Excise Act, 1944



Central Excise



Customs, Excise and Service Tax Appellate Tribunal



Various dates



4.74 (net of tax paid under protest of 0.01)



Central Excise Act, 1944



Central Excise



CCE (Appeals)



FY 2012-13



0.21 (net of tax paid under protest of 0.01)



Central Excise Act, 1944



Central Excise



High Court



July 2002



3.06 (net of tax paid under protest of 0.34)



Central Excise Act, 1944



Central Excise



CCE(Appeals)



Various dates



3.59



Customs, Excise and



312.12 (net of tax paid under protest of 100.51)



Central Excise Act, 1944



Central Excise



Service Tax Appellate Tribunal



Various dates



Customs, Excise and



16.21 (net of tax paid under protest of 0.41)



The Finance Act, 1994



Service Tax



Service Tax Appellate Tribunal



Various dates



Customs, Excise and



48.17 (net of tax paid under protest of 0.35)



The Finance Act, 1994



Service Tax



Service Tax Appellate Tribunal



Various dates



The Finance Act, 1994



Service Tax



CIT (Appeals)



Various dates



1.73 (net of tax paid under protest of 0.25)



Andhra Pradesh Value Added Tax Act, 2005



Andhra Pradesh VAT



Appellate Deputy Commissioner of Commercial taxes



Various dates



2.01 (net of tax paid under protest of 0.28)



Maharashtra Value Added Tax Act, 2002



Maharashtra VAT



Joint Commissioner (Appeals)



2010-11



32.10 (net of tax paid under protest of 2.45)



Karnataka Value Added Tax Act, 2005



Karnataka VAT



High Court



2013-14



42.23 (net of tax paid under protest of 2.00)



(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of loans or borrowings to financial institutions and banks. The Company has not issued any debentures and did not have any borrowings from government.


(ix) In our opinion and according to the information and explanations given to us, term loans have been applied by the Company during the year for the purposes for which they were raised, other than temporary deployment pending application of proceeds from term loans


(x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company by its officers or employees has been noticed or reported during the year.


(xi) In our opinion and according to the information and explanations given to us, the Company has paid / provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.


(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of the Order is not applicable.


(xiii) In our opinion and according to the information and explanations given to us the Company is in compliance with Section 177 and 188 of the Companies Act, 2013, where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the financial statements etc. as required by the applicable accounting standards.


(xiv) During the year the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under clause (xiv) of the Order is not applicable to the Company.


(xv) In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its directors or directors of subsidiary or associate company or persons connected with them and hence provisions of section 192 of the Companies Act, 2013 are not applicable.


(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.


For DELOITTE HASKINS & SELLS


Chartered Accountants


(Firm''''s Registration No. 008072S)


Sathya P. Koushik


Partner


BENGALURU, May 18, 2017 (Membership No. 206920)

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