We have audited the accompanying financial statements of Phyto Chem (India) Limited (‘the Company'),
which comprise the Balance Sheet as at 31 March, 2024, the Statement of Profit and Loss (including Other
Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year
then ended, and notes forming part of financial statements, including a summary of Material Accounting
Policies and other explanatory information (hereinafter referred to as ‘the financial statements').
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 Companies Act, 2013 (‘the Act') in the
manner so required and give a true and fair view in conformity with the Indian Accounting Standards
prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules,
2015 as amended (‘Ind AS') and other accounting principles generally accepted in India, of the state of
affairs of the Company as at 31 March, 2024 and its profit, total comprehensive income, changes in equity
and its cash flows for the year ended on that date.
Basis for opinion
We conducted our audit of the financial statements in accordance with the Standards on Auditing (SAs)
specified under section 143(10) of the Act. Our responsibilities under those Standards are further described
in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are
independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered
Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the
financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled
our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. 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.
Key audit matters
Key audit matters (‘KAM') are those matters that, in our professional judgement, were of most significance
in our audit of the financial statements of the current period. These matters were addressed in the context
of our audit of the financial statements as a whole and informing our opinion thereon, and we do not
provide a separate opinion on these matters. We have determined the matters described below to be the
key audit matters to be communicated in our report.
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S. No.
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Key Audit Matter
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Auditor’s Response
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1
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Timing of Revenue recognition in the
proper period as per Ind AS 115.
Refer to Note-2.18 (Material Accounting
Policies on Revenue Recognition).
In accordance with Ind AS 115, Revenue from
Contracts with Customers, revenue from
sale of goods is recognized when control of
the products being sold is transferred to the
customer based on terms of sale. Revenue
is measured at consideration to which an
entity expects to be entitled in exchange for
transferring promised goods or services to
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Our audit procedures included the following:
i. We evaluated the design and tested operating
effectiveness of the relevant controls with
respect to revenue recognition including those
relating to cut off at year end;
ii. We assessed the appropriateness of the revenue
recognition accounting policies in line with Ind
AS 115 “Revenue from Contracts with
Customers”;
iii. We performed substantive testing of revenue
transactions, recorded during the year by testing
the underlying documents which included
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S. No
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Key Audit Matter
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Auditor’s Response
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a customer, excluding amounts collected on
behalf of third parties. The transaction price
of the goods sold is net of variable
consideration on account of various
discounts offered by the Company as part
of contract.
We identified timing of revenue recognition
in the proper period as a key audit matter
since it involves higher assessed risk of
material misstatement and is required to be
recognized as per the requirements of
applicable accounting framework.
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customer order and directions, goods dispatch
notes, shipping documents and customer
acknowledgments as applicable;
iv. We tested a sample of manual journal entries
posted to revenue and assessed their
appropriateness;
v. We tested, on a sample basis, specific revenue
transactions recorded before and after the
financial year end date including examination
of credit notes issued after the year end to
determine whether the revenue has been
recognized in the appropriate financial period.
Based on the above stated procedures, no
significant exceptions were noted in revenue
recognition.
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2
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Trade Receivables:
The trade receivables stands at Rs.1568.76
lakhs which constitutes 105.92% of total
turnover for the financial year 2023-24.
This indicates a very low average collection
period of trade receivables, and the age
profile of the trade receivables indicates that
61.08% of trade receivables are over dues
are in the age-wise bucket of 6 months to 36
months.
Against the outstanding trade receivables,
the Company made a provision for doubtful
debts at (ECL) Rs.5.95 lakhs.
The Company considered current and
anticipated future economic conditions
relating to industries the Company deals with
and the areas where it operates, in
calculating expected credit losses, the
Company also considered credit reports and
other related credit information for its
customers to estimates the probability of
default in future.
The estimation of realisable debts involves
significant management judgements. Since
amount involved is material and significant
management judgement, we consider this as
one of the key audit matters.
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Our audit approach consisted testing of the design
and operating effectiveness of the internal
controls and substantive testing as follows:
We have evaluated the methodology for age-wise
bucketing of trade receivables and key
assumptions underlying the probability of default
estimates on the same, to ascertain that the same
were broadly in-line with the Corporation's
historical default rates.
We tested the effectiveness of controls over the
(1) development of the methodology for the
allowance for credit losses, including
consideration of the current and estimated future
economic conditions, (2) completeness and
accuracy of information used in the estimation of
probability of default, and (3) computation of the
allowance for credit losses.
For a sample of customers we tested the input
data such as credit reports and other credit related
information used in estimating the probability of
default by comparing them to external and internal
sources of information.
We evaluated the incorporation of the applicable
assumptions into the estimate of expected credit
losses and tested the mathematical accuracy and
computation of the allowances by using the same
input data used by the Company.
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3
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Downfall of Turnover and incurring of
heavy losses:
Drastic reduction in turnover of the Company
and incurring heavy losses during the
financial year 2023-24.
Refer to note no.21 of enclosed Standalone
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Our Audit procedures included and were not
limited to the following.
Reviewed the selling prices of the main products
of the Company with that of the previous year
rates to know the reason for low turnover.
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S. No
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Key Audit Matter
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Auditor’s Response
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financial statements of the Company.
During the financial year 2023-24, the
Company has incurred heavy loss of
Rs.333.93 Lakhs due to drastic reduction in
the turnover of the Company.
The turnover of the Company has been
reduced to Rs.1481.07 Lakhs from
Rs.2561.77 Lakhs in the FY.2022-23.
Management asserts that the reduction of
turnover is due to reduction in prices of
products produced by the Company due to
cut-throat competition in the market. It is
stated that consumption of pesticides
products reduced globally in the recent past
and as a result export trade of the pesticide
industry has gone down. In order to liquidate
the shelf life based products produced, the
Giant Companies of the Industry had dumped
the domestic market with their material due
to lack of export trade.
The retail buyers utilised this situation and
bargained for lower prices and higher credit
period. Both these factors contributed in
reduction of turnover and mounting of trade
receivables of the Company. As a result of
this situation, Company could not lessen
the bank credit burden and reduce the
financial cost for this year even though Low
activity during this year. In addition to the
finance cost the fixed expenses like staff
salaries, travelling expenses, depreciation
etc., have not been reduced despite of low
production activity and resulted in heavy
loss.
Since it is felt by the Management that the
situation is permanent in nature and affects
the Going Concern Status of the Company
in the long run, the management has decided
to switch over to alternative avenues and
started Ferro Alloys business to save the
existence of the Company.
As the losses incurred and turnover
reduced are material in nature, it is
considered to treat this area as a Key Audit
Matter.
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Reviewed the percentage of credit period allowed
to the buyers and noted that it is 100% higher to
that of credit period allowed by the bankers of the
Company.
Reviewed the trend of the industry by verifying
online the turnovers and profitability of the Giant
Companies of the industry and the medium sized
Companies of the industry and noted that there
was huge downfall in both turnover and
profitability.
Reviewed the minutes of the Board meetings and
Committee meetings to observe the stage of
alternative business efforts and noted that the
activity has been commenced before the signing
of the audit report after the balance sheet date.
Assesed the competence of internal and external
specialists involved in the process.
Reviewed the alternative business disclosures
made by the Board reports.
Our procedures as mentioned above has proved
the indication of downfall of pesticide industry in
the country.
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The Company's management and Board of Directors are responsible for the preparation of the other
information. The other information comprises the information included in the Management Discussion and
Analysis, Board's Report including Annexures to Board's Report, Business Responsibility and sustainable
Report, Corporate Governance and Shareholder's information, but does not include the consolidated
financial statements and financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements, or our knowledge obtained during the course of our audit or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibility of Management and those charged with Governance for the Financial Statement
The Company's management and Board of Directors are responsible for the matters stated in section
134(5) of the Act with respect to the preparation of these financial statements that give a true and fair
view of the financial position, financial performance, including other comprehensive income, changes in
equity and cash flows of the Company in accordance with the Indian Accounting Standard (‘Ind AS') and
other accounting principle generally accepted in India, including Ind AS specified 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
judgements 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.
In preparing the financial statements, management is responsible for assessing the Company's ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management and Board of Directors either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors of the Company are responsible for overseeing the Company's financial reporting
process.
Auditor’s Responsibility for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with SAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
As part of an audit in accordance with SAs, we exercise professional judgement and maintain professional
skepticism throughout the audit. We also:
* Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
* Obtain an understanding of internal financial controls relevant to the audit in order to design 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 has adequate internal financial controls with reference
to financial statements in place and the operating effectiveness of such controls.
* Evaluate the appropriateness of accounting policies used and reasonableness of accounting estimates
and related disclosures made by management.
* Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company's ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
Auditor's Report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
* Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Financial Statements that, individually or in aggregate,
makes it probable that the economic decisions of a reasonably knowledgeable user of the Financial
Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning
the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any
identified misstatements in the Financial Statements.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the financial statements of the current period and are therefore
the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order, 2020 (‘the Order') issued by the Central
Government of India in terms of sub-section (11) of section 143 of the Act, we give in ‘Annexure-A'
a statement on the matters specified in paragraphs 3 and 4 of the Order.
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 Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report
are in agreement with the relevant books of account.
d. In our opinion, the aforesaid financial statements comply with the Ind AS specified under
section 133 of the Act.
e. On the basis of the written representations received from the directors as on March 31,
2024 taken on record by the Board of Directors, none of the directors is disqualified as on
March 31, 2024 from being appointed as a director in terms of section 164 (2) of the Act.
f. With respect to the adequacy of the internal controls over financial reporting of the Company
and the operating effectiveness of such controls, refer to our separate Report in ‘Annexure-
B'. Our report expresses an unmodified opinion on the adequacy and the operating
effectiveness of the Company's internal financial controls with reference to Financial
Statements.
g. With respect to other matters to be included in the Auditors Report in accordance with
requirements of section 197(6) of the Act, as amended:
In our opinion and to the best of our information and according to the explanation given to us,
the remuneration paid by the Company to its directors during the year is within the limits
prescribed as per the provisions of section 197 of the Act.
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 Auditors) 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
financial statements. Refer note.38 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.
a. The Management has represented that, to the best of its knowledge and belief, no
funds (which are material either individually or in the aggregate) have been advanced
or loaned or invested (either from borrowed funds or share premium or any other
sources or kind of funds) by the Company to or in any other person or entity,
including foreign entity (“Intermediaries”), with the understanding, whether recorded
in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend
or invest in other persons or entities identified in any manner whatsoever by or on
behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security
or the like on behalf of the Ultimate Beneficiaries;
b. The Management has represented, that, to the best of its knowledge and belief, no
funds (which are material either individually or in the aggregate) have been received
by the Company from any person or entity, including foreign entity (“Funding Parties”),
with the understanding, whether recorded in writing or otherwise, that the Company
shall, whether, directly or indirectly, lend or invest in other persons or entities identified
in any manner whatsoever by or on behalf of the Funding Party (“Ultimate
Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate
Beneficiaries;
c. Based on the audit procedures that have been considered reasonable and appropriate
in the circumstances, nothing has come to our notice that has caused us to believe
that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided
under (a) and (b) above, contain any material misstatement.
v. No dividend is declared or paid during the year by the Company and accordingly,
compliance with section 123 of the Act is not applicable to the Company.
vi. The reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 is
applicable from 1 April 2023.
Based on our examination which included test checks, the Company has used accounting
software for maintaining its books of account, which have a feature of recording audit
trail (edit log) facility and the same has operated throughout the year for all relevant
transactions recorded in the respective software. Further, we did not come across any
instance of the audit trail feature being tampered with.
For M/s. Yelamanchi & Associates
Chartered Accountants
Firm Regn. No. 000041S
Y. P. Rao
Place : Hyderabad Partner lyi.Nlo.25266
Date :29th May 2024 ICAI UDIN: 24025266BKEIYK7420
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