To the Members of Gufic Biosciences Limited
Report on the Financial Statements
1. We have audited the accompanying standalone financial statements of Gufic Biosciences Limited ("the Company"), which comprise the Balance Sheet as at March 3l, 20l7, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.
Management Responsibility for the Financial Statements
2. The Company''''s Board of Directors is responsible for the matters stated in Section l34(5) of the Companies Act, 20l3 ("the Act") with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards referred in under Section l33 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 20l4. 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
3. Our responsibility is to express an opinion on these standalone financial statements based on 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 and the Rules made there under.
4. We conducted our audit in accordance with the Standards on Auditing specified under Section l43(l0) 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 financial statements are free from material misstatement.
5. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. 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. In making those risk assessments, the auditor considers internal financial control relevant to the Company''''s preparation of the 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 financial statements.
6. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.
Basis for Qualified Opinion
7. Amount of Rs, 124.04 lakhs (2015 - 2016: Rs, 124.04 lakhs) has been shown as recoverable under the head other non-current assets relating to misappropriation done by the marketing employee of the company in earlier year. However, no provision has been made against the said amount as the management has initiated steps for the recovery of the said amount and is confident of recovery In our opinion the recovery of the amount is doubtful and consequently the profit is over stated by Rs, 124.04 lakhs (2015 - 2016: Rs, 124.04 lakhs) with consequential impact on Shareholders Fund and other non-current assets which are over stated by the said amount. (Refer Note 56)
8. We are unable to express our opinion on recoverability of debts of Rs, 209.08 lakhs (2015 - 2016 Rs, 185.45 lakhs) and advances ofRs, 68.37 lakhs shown under the head long term loans and advances as at Balance sheet date (2015 - 2016: Rs,. 68.46 lakhs), which are outstanding for more than one year. In the absence of appropriate evidences, we are unable to ascertain its recoverability and its impact on the accounts of the company. However, in the opinion of the management no provision is required in respect of such debts since they are good and recoverable in nature (Refer Note 55).
9. In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter specified in para 7 and possible effects of the matter specified in para 8 in the Basis for Qualified Opinion paragraph above, the aforesaid standalone financial statements, read together with notes to the accounts thereon, give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
a. in case of balance sheet of the state of affairs of the Company as at March 31,2017,
b. in the case of Profit and Loss Account, of the profit for the year ended on that date; and
c. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.
Emphasis of Matter
10. In the absence of information, we have relied upon the segment wise report prepared by the management based on the nature of product, risk and returns and organization structure. The figures have been regrouped and reclassified wherever necessary by the management.
11. The company has introduced implementation of ERP system in stages and only certain modules are operational, accuracy of which are yet to be tested. The audited financial amounts for year ended March 3l, 20l7 has been compiled from various sources by the management, including introduced ERP Modules. We have relied on management representation that it has taken enough care and diligence to ensure that the presented data and accounts, so compiled, are true & correct. (Refer Note No. 57)
12. We did not participate in physical counting of the Inventory and its valuation. The Company has appointed an internal
auditor, an independent firm of Chartered Accountants to carry out physical verification and valuation of inventories and also to conduct audit of stock records maintained by the company. We have relied upon certificate issued by them in this regard. (Refer Note No. 5l & 52)
Report on Other Legal and Regulatory Requirements
13. As required by the Companies (Auditors’ Report) Order, 20l6 (“the Order”) issued by the Central Government of India in terms of sub-section (ll) of section l43 of the Act, we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order.
14. As required by Section l43 (3) of the Act, we report that:
(a) We have sought and except for the matters described in the para 8 of the Basis for Qualified Opinion paragraph, 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, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.
(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section l33 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 20l4.
(e) The matter described in the Basis for Qualified Opinion paragraph 7 & 8 above in our opinion, 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 March 3l, 20l7 taken on record by the Board of Directors, none of the directors is disqualified as on March 3l, 20l7 from being appointed as a director in terms of Section l64 (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 B”; and
(h) With respect to the other matters to be included in the Auditor''''s Report in accordance with Rule ll of the Companies (Audit and Auditors) Rules, 20l4, 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 financial statements as referred to in Note 33 to the financial statements.
(ii) The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.
(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
(iv) The company has provided requisite disclosures in its standalone financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8 November, 20l6 to 30 December, 20l6, refer Note 34 to the standalone financial statements. As per the information and explanation provided to us and based on the representation received from the management, the said disclosure are in accordance with the books of accounts maintained by the Company.
Annexure Referred to in Paragraph 13 of Our Report of Even Date On The Standalone Financial Statements
For The Year Ended March 31, 2017 of Gufic Biosciences Limited:
i. In respect of Fixed Assets :
(a) The company has updated its records showing quantitative details and situation of the fixed assets.
(b) According to information and explanations provided to us, the fixed assets are physically verified by the management according to a phased programme designed to cover all the items over a period of five years which in our opinion, is reasonable having regard to the size of the company and nature of its business. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year. We have been informed that necessary adjustments in respect of discrepancies if any between physical asset and book record have already be made in the books upon reconciliation.
(c) According to information and explanations provided to us there are no immovable properties in the name of the company and as regards the building shown in fixed asset schedule represents capital expenditure incurred on extension/renovation of factory building acquired on lease. Hence question of title deeds of immovable properties in the name of the company does not arise.
ii. In respect of Inventories:
As explained to us, inventory have been physically verified by the management during the year. The discrepancies if any between physical verification of inventory as compared to book records have been be adjusted in the books of account.
iii. In respect of Granting of Loan:
According to the information and explanations given to us, the Company has not granted any loans to parties covered in the register maintained u/s. l89 of the Companies Act, 20l3 (“The Act”). (other than interest free security deposits or advances given for its business purpose. Refer Note No. 51 & 52) Thus the clause relating to terms and conditions of grant of loan, schedule repayment of principal and interest and amount overdue are not applicable to the company.
iv. In our opinion and according to information and explanations provided to us, the company has not granted any loan, made any investment or provided any securities covered under section l85 and l86 of the Act during the year under review, except loans to employees as part of condition of services. In respect of guarantees given the company has complied with the provision of section l86 of the Act.
v. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of section 73 to 76 or any other relevant provision of the Companies Act and the rule framed there under during the year. No order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any Tribunal.
vi. We have broadly reviewed the cost records pursuant to the Rules made by the Central Government for the maintenance of cost records under Section l48 (l) of the Companies Act, 20l3 and we are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made detailed examination of records with a view to determine whether they are accurate.
vii. In respect of Statutory dues:
(a) According to the information and explanations given to us and according to the records of the company examined by us, the company is generally regular in depositing undisputed statutory dues in respect of excise duty and custom duty with appropriate authorities. However, we have observed delays in depositing undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Service Tax and Profession tax applicable to it with the appropriate authorities. According to the information and explanations given to us, there are no statutory dues outstanding as at the last day of the financial year for a period of more than six months from the date they became payable except the Income Tax - Dividend Distribution Tax Rs, 15.75 lakhs, Income Tax Rs, 446.34 lakhs, Sales tax Rs,.89.93 lakhs, Profession Tax Rs,15.73 lakhs, ESIC Rs, 20.47 lakhs and Provident Fund Rs, 69.43 lakhs.
(b) According to the information and explanations given to us, there are no dues of Wealth Tax, Service Tax, Customs Duty or Cess outstanding on account of any dispute except following dues have not been deposited with appropriate authorities on account of dispute:
Name of the Statute
Period to which
Forum where matter is pending
(Rs, in Lakhs)
Income Tax Act, l96l
Income Tax - TDS
2007 - 2008 to 20l2 - 20l3
20l3 - 20l4
20l4 - 20l5
20l5 - 20l6
20l6 - 20l7
l999 - 2000 to 2009 - 20l0& 20l2 - 20l3
20l0 - 20ll & 20ll - 20l2
Appeal preferred by the company to the Commissioner of Income Tax (Appeal)
Central Excise Act, l944
Central Excise Duty
200l - 2008
Appeal preferred by the company to the Tribunal
2008 - 2009
Appeal preferred by the company to the Commissioner Appeal
Gujarat Value Added Tax Act, 2003
20l0 - 20ll
Appeal preferred by the company to the Commissioner Appeal
viii. We have relied on the representation and confirmation received from the bank that the company has not defaulted in repayment of dues to a bank.
ix. According to the information and explanations given to us, the term loans were applied for the purpose for which the loans were obtained. The company has not raised any moneys by way of further public offer (including debt instruments).
x. Based on the audit procedures performed and information and explanations given by the management, we report that no fraud on the company by its officers or employees or by the Company have been noticed or reported during the year.
xi. According to the information and explanations given to us and based on our examination of the records of the company, the company has paid / provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section l97 read with schedule V to the Act.
xii. In our opinion and according to the information and explanations given to us, the Company is not a Nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.
xiii. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections l77 and l88 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.
xiv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.
xv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him.
xvi. In our opinion and according to the information and explanations given to us, the Company is not required to registered under section 45-IA of the Reserve Bank of India Act l934.
ANNEXURE: B REFERRED TO IN PARA 14(g) OF THE INDEPENDENT AUDITORS REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENT OF GUFIC BIOSCIENCES LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013
1. We have audited the internal financial controls over financial reporting of Gufic Biosciences Limited (the “Company”) as of March 3l, 20l7 in conjunction with our audit of the standalone financial statements for the year ended on that date.
2. 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 issued by the Institute of Chartered Accountants of India (“ICAI”). 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, 20l3.
3. Auditors'''' Responsibility: Our responsibility is to express an opinion on the Company''''s internal financial controls over financial reporting based on our audit. We have conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing issued by ICAI and deemed to be prescribed under section l43(l0) of the Companies Act, 20l3, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the ICAI. 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 to the extent applicable.
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 Qualified audit opinion on the Company’s internal financial controls system over financial reporting.
4. 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 (l) 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.
5. 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.
6. Qualified opinion: According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified as at March 3l, 20l7:
The company did not have an appropriate internal control system:
a) for review of debtors, other recoverable including loans and advances and creditors outstanding balances, obtaining their confirmations and reconciliation of their outstanding balances with the books of accounts. This could potentially affect the balance in the trade receivable, other recoverable, trade payable, income and expenses account balances.
b) for timely payment of statutory due, which could potentially give rise to liabilities.
A ‘material weakness'''' is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company''''s annual or interim financial statements will not be prevented or detected on a timely basis.
7. Opinion: In our opinion, except for the possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as of March 3l, 20l7, 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 issued by the Institute of Chartered Accountants of India.
8. We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the standalone financial statements of the Company for the year ended March 3l, 20l7 and these material weaknesses do not affect our opinion on the standalone financial statements of the Company, other than qualification reported by us in our Independent Audit Report.
For S H R & Co.
FRN : l2049lW
Deep N. Shroff
Membership No. l22592
Mumbai : 29th May, 20l7