SMS PHARMA Auditors Report

We have audited the accompanying financial statements of SMS
PHARMACEUTICALS LIMITED("the Company") which comprise the Balance Sheet
as at March 31, 2016, the Statement of Profit and Loss and the Cash
Flow Statement for the year then ended, and a summary of significant
accounting policies and other explanatory information.

Management''''s Responsibility for the Financial Statements

The Company''''s Board of Directors is responsible for the matters stated
in Section 134(5) of the Companies Act, 201 3 ("the Act") with respect
to the preparation of these 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
specified under Section 133 of the Act, read with Rule 7 of the
Companies (Accounts) Rules, 2014. 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.

Auditors'''' Responsibility

Our responsibility is to express an opinion on these 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 and the Order under Section 143( I I) of the Act.

We conducted our audit 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 financial statements
are free from material misstatement.

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 Auditors'''' 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.

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


Opinion

In our opinion and to the best of our information and according to the
explanations given to us, the aforesaid 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 accounting principles
generally accepted in India, of the state of affairs of the Company as
at March 3 1, 2016, and its Profit and its Cash Flow for the year ended
on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors'''' Report) Order, 2016 ("the
Order"), as amended, issued by the Central Government of India in terms
of sub-section (I I) of section 143 of the Act, we give in the
"Annexure A" a statement on the matters specified in paragraphs 3 and 4
of the Order.

2. 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 best of our knowledge and belief were necessary for the
purpose 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 financial statements comply with the
Accounting Standards specified under section I 33 of the Act, read with
Rule 7 of the Companies (Accounts) Rules, 2014.

e. On the basis of written representations received from the directors
as on March 3 1, 2016 taken on record by the Board of Directors, none
of the director is disqualified as on March 31, 2016 from being
appointed as a director in terms of Section 164 (2) of the Act.

f. 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".

g. With respect to the other matters to be included in the Auditors''''
Report in accordance with Rule

I I of the Companies (Audit and Auditors) Rules, 2014 and 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 as at
31st March 2016 on its financial position in its financial statements
as referred to in note 30, 3 I, and 32 to the financial statements.

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

iii. The Company has been regular in transferring amounts to the
Investor Education and Protection Fund in accordance with the relevant
provisions of the Companies Act 201 3 and the Rules made there under.


Referred to in paragraph I under the heading ''''Report on Other Legal &
Regulatory Requirement'''' of our report of even date to the financial
statements of the Company for the year ended March 31, 2016:

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

b) The Company has a regular program of physical verification of its
fixed assets by which all fixed assets are verified in a phased manner.
In our opinion the periodicity of physical verification is reasonable
having regard to the size of the Company and the nature of its assets.
According to the information and explanations given to us, no material
discrepancies were noticed on such verification.

ii) In respect of Inventories:.

a) As explained to us the inventories except goods in transit and
stocks lying with third parties have been physically verified during
the year by the management at reasonable intervals.

b) In our opinion and according to the information and explanations
given to us the procedures of physical verification of inventories
followed by the management were reasonable and adequate in relation to
the size of the Company and nature of its business.

c) In our opinion and according to the information and explanations
given to us the Company has maintained proper records of its
inventories and no material discrepancies were noticed on physical
verification.

iii) The Company has not granted any loans, secured or unsecured to
companies, firms, Limited Liability partnerships or other parties
covered in the Register maintained under section 189 of the Act.
Accordingly, the provisions of clause 3 (iii) (a) to (C) of the Order
are not applicable to the Company and hence not commented upon.

iv) In our opinion and according to the information and explanations
given to us, the Company has complied with the provisions of section
185 and 186 of the Companies Act, 2013 in respect of loans,
investments, guarantees, and security.

v) The Company has not accepted any deposits from the public and hence
the directives issued by the Reserve Bank of India and the provisions
of Sections 73 to 76 or any other relevant provisions of the Act and
the Companies (Acceptance of Deposit) Rules, 2015 with regard to the
deposits accepted from the public are not applicable.

vi) We have broadly reviewed the cost records maintained by the Company
pursuant to the rules prescribed by the Central Government of India
under Section 148(1) 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) a) According to information and explanations given to us and on
the basis of our examination of the books of account, and records, the
Company has been generally regular in depositing undisputed statutory
dues including Provident Fund, Employees State Insurance, Income-Tax,
Sales tax, Service Tax, Duty of Customs, Duty of Excise, Value added
Tax, Cess and any other statutory dues with the appropriate
authorities. According to the information and explanations given to us,
no undisputed amounts payable in respect of the above were in arrears
as at March 31, 2016 for a period of more than six months from the date
on when they become payable.


b) According to the information and explanation given to us, there are
no dues of income tax, sales tax, service tax, duty of customs, duty of
excise, value added tax outstanding on account of any dispute, except
the following:

Forum where

SI. Name of Nature of dispute is Year
No. the Statute the dues pending

1 Central
Excise Central AP High Court 1995-96 to
Act, 1944 Excise 1997-98

2 Income Tax Income Tax BIFR 1988-89
Act, 1961

3 Income Tax Income Tax BIFR 1991-92
Act, 1961

4 Income Tax Income Tax BIFR 1992-93
Act, 1961

5 Income Tax Income Tax BIFR 1993-94
Act, 1961

6 Income Tax Income Tax BIFR 1994-95
Act, 1961

7 Income Tax Income Tax BIFR 1994-95
Act, 1961

8 Income Tax Income Tax BIFR 2003-04
Act, 1961

9 Income Tax Income Tax BIFR 2005-06
Act, 1961

10 Income Tax Interest BIFR 1992-2015
Act, 1961 on IT

11 Central Excise Interest
on AP High
Court 1992-2010
Act, 1944 CEX

12 Central
Excise Interest on AP High
Court 1995-2011
Act, 1944 CEX

Total



Name of THE Statute Amount Amount Amount not
Involved Deposited Deposited
Rs, in Lakhs Rs, in Lakhs Rs, in Lakhss

Central
Excise 38.91 38.91 --
Act, 1944

Income Tax 0.01 - 0.01
Act, 1961

Income Tax 0.09 - 0.09
Act, 1961

Income Tax 11.19 - 11.19
Act, 1961

Income Tax 2.47 - 2.47
Act, 1961

Income Tax 14.25 - 14.25
Act, 1961

Income Tax 1.02 - 1.02
Act, 1961

Income Tax 36.50 - 36.50
Act, 1961

Income Tax 9.54 - 9.54
Act, 1961

Income Tax 102.23 - 102.23
Act, 1961

Income Tax 66.48 - 66.48
Act, 1961

Central
Excise 16.40 - 16.40
Act, 1944

Central Excise 299.09 38.91 260.18
Act, 1944


c) The Company has been regular in transferring amounts to the Investor
Education and Protection Fund in accordance with the relevant
provisions of the Companies Act 2013 and the Rules made there under.

viii) In our opinion and according to the information and explanations
given to us, the Company has not defaulted in the repayment of dues to
banks. The Company has not issued any debentures.

ix) Based upon the audit procedures performed and the information and
explanations given by the management, the Company has not raised moneys
by way of initial public offer or further public offer including debt
instruments and term Loans. Accordingly, the provisions of clause 3
(ix) of the Order are not applicable to the Company and hence not
commented upon.

x) Based upon the audit procedures performed and the information and
explanations given by the management, we report that no fraud by the
Company or on the Company by its officers or employees has been noticed
or reported during the year.

xi) Based upon the audit procedures performed and the information and
explanations given by the management, the managerial remuneration has
been paid or provided in accordance with the requisite approvals
mandated by the provisions of section 197 read with Schedule V to the
Companies Act,2013.

xii) In our opinion, the Company is not a Nidhi Company. Therefore, the
provisions of clause 4 (xii) of the Order are not applicable to the
Company.

xiii) In our opinion, all transactions with the related parties are in
compliance with section 177 and 188 of Companies Act, 2013 and the
details have been disclosed in the Financial Statements as required by
the applicable accounting standards.

xiv) Based upon the audit procedures performed and the information and
explanations given by the management, the Company has not made any
preferential allotment or private placement of shares or fully or
partly convertible debentures during the year under review.
Accordingly, the provisions of clause 3 (xiv) of the Order are not
applicable to the Company and hence not commented upon.

xv) Based upon the audit procedures performed and the information and
explanations given by the management, the Company has not entered into
any non-cash transactions with directors or persons connected with him.
Accordingly, the provisions of clause 3 (xv) of the Order are not
applicable to the Company and hence not commented upon.

xvi) In our opinion, the Company is not required to be registered under
section 45 IA of the Reserve Bank of India Act, 1934 and accordingly,
the provisions of clause 3 (xvi) of the Order are not applicable to the
Company and hence not commented upon.

(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 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 March 31, 2016, 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.

for RAM BABU & Co.,

Chartered Accountants

FRN : 002976S



RAVI RAMBABU

Place : Hyderabad Partner

Date : 14-05-2016 M. No. 018541

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
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