We have audited the accompanying Standalone Financial Statements of SIGACHI INDUSTRIES LIMITED (the "Company"), which comprise the Balance Sheet as at March 31,2024, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Changes in Equity and the Statement of Cash Flows ended on that date, and a summary of material accounting policies and other explanatory information (hereinafter referred to as the "Standalone Financial Statements").
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 Companies Act, 2013 as amended (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 March 31, 2024, the profit and 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 Standalone Financial Statements in accordance with the Standards on Auditing ("SA"s) 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 Standalone 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 Standalone 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 obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Financial Statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements for the financial year ended March 31,2024. These matters were addressed in the context of our audit of the Standalone Financial Statements as a whole, and in forming 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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Sr.
No
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Key Audit Matter
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How our audit addressed the key audit matter
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1
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Appropriateness of capitalization of costs included in Property Plant and Equipment/ Capital work in progress as per Ind AS 16 Property, Plant and Equipment.
Refer to Note - 2.06 (Material Accounting Policies on Property, Plant and equipment), Note - 3 (Property, plant and equipment and Capital work-in progress) of the enclosed standalone financial statements.
During the year, the Company has incurred significant capital expenditure towards setting up of additional production plants at Dahej and Jhagadia.
Opening Balance of CWIP as on 1st April 2023 was Rs.3490.37 lakhs. During the year there was addition of Rs. 6613.96 lakhs to CWIP (including borrowing cost of Rs.140.92 lakhs) and capitalization of assets worth Rs.1047.88lakhs.
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Our Audit procedures included the following:
i. We understood from the management details of the projects in process.
ii. Understood, evaluated and tested the design and operating effectiveness of key controls relating to capitalization of various costs incurred in relation to Property Plant and Equipment.
iii. Performed test of details with focus on those items that we considered significant due to their amount or nature and tested a sample of items capitalized during the year against underlying supporting documents to ascertain nature of costs and whether they meet the recognition criteria provided in the Ind AS 16, Property, Plant and Equipment in this regard.
iv. Verified the other related costs including those incurred towards repairs and maintenance and debited to Statement of Profit and Loss, to ascertain whether these meet the criteria for capitalization.
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Sr.
No
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Key Audit Matter
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How our audit addressed the key audit matter
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The CWIP balance majorly includes below projects
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v. Reviewed the management's procedure to review the
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undertaken by the Company:
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periodic progress of the projects based on certification by
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a) The Company is Expanding additional production
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the project management consultants and correspondent
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plant unit Dahej & Jhagadia situated at Bharuch,
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running bills submitted by the contractors.
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Gujarat-393110, which will be used for production of
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vi. As it is a Qualifying Asset at the management discretion
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Micro Crystalline Cellulose.
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and the period of completion involves Substantial period of
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b) The Company is expanding its capacity of Dahej Sez
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time the related Borrowing costs have been appropriately
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From 4800 MTPA to 6600 MTPA in Dahej and from
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capitalized to the Capital work in progress according to the
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2750 MTPA To 6350 MTPA in Jhagadia
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compliances mentioned in the Ind AS-23 (i.e., Borrowing
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Given the significance of the capital expenditure during
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Cost).
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the year, there is a risk that elements of costs that are
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vii. Discussion of audit observations with the management/
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ineligible for capitalization in accordance with the
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accounts and finance team for clarification as and when
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recognition criteria provided in Indian Accounting
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required
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Standard 16 -Property, Plant and Equipment are
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Our procedures as mentioned above did not identify any costs
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capitalized and that costs that should have capitalized
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that had been inappropriately capitalized and that costs that
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have been expensed.
Since the amounts involved in the development of the above project was significant and material, the audit of the above area was considered to be a key audit matter for reporting purpose
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should have capitalized have been expensed
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2
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Share Capital:
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Our Audit procedures included the following:
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Preferential Allotment of shares:
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i. Enquiry with those charged with the governance and
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The Company made an allotment of Convertible Equity
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the key managerial personnel about the procedure
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share warrants which were in compliance of Sec 42(7)
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followed for issue of the Convertible Warrants
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of the Companies Act, 2013(read with the respective rules) and in accordance with Chapter-V of SEBI(ICDR)
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ii. review of the minute books of
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Regulations 2018, on a preferential allotment basis
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• the board of directors and
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consisting of 1,09,75,000 warrants of ' Rs.10 each at a premium of ' 251 per share amounting to' 28,644.75
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• shareholders;
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lakhs which was then spilt into the ratio of 10:1.
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iii. Referred the relevant provisions of the Companies Act 2013
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The warrants were converted into equity shares in the
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read with the Companies (Share Capital and Debenture
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two allotments as stated below:
On 09th October 2023 the company made an allotment
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Rules) 2014, as applicable to ascertain whether the same have been complied with;
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1,60,51,900 equity shares of Rs.1/- each to non -promoters Group on conversion of 16,05,190 warrants at an issue
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iv. Review of compliance with respect to applicable guidelines of SEBI regulations
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price of Rs.261/- per share of Rs.10/- each.
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v. review of various e-forms submitted to the Ministry of Corporate Affairs (MCA) in compliance with the provisions
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On 06th March 2024 the company made an allotment 47,18,080 equity shares of Rs.1/- each to non -promoters
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of the Companies Act 2013 and the relevant rules; vi. review of valuation report issued by the registered valuer
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Group on conversion of 4,71,808 warrants at an issue
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in accordance with the provisions of the Companies
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price of Rs.261/- per share of Rs.10/- each.
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(Registered Valuers and Valuation) Rules 2017 for fair value
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Since the amount involved is material and significant,
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for issue of the shares at the price at which theses equity
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audit of above area was considered to be key audit matter
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shares were issued during the year
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for reporting purpose
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vii. appropriate disclosure in the financial statements in accordance with the IND AS, and the requirements of schedule III
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3
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Timing of Revenue recognition in the proper period as
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Our audit procedures included the following:
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per Ind AS 115.
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i. We evaluated the design and tested operating effectiveness
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Refer to Note-2.14 (Material Accounting Policies on
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of the relevant controls with respect to revenue recognition
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Revenue Recognition) and Note-24 (Revenue from operations) of the consolidated financial statements.
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including those relating to cut off at year end;
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Sr.
No
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Key Audit Matter
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How our audit addressed the key audit matter
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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 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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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 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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4
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Fair Valuation of Investments In accordance With IND
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Our audit procedures included and were not limited to the
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AS-103(i.e., Business Combinations) Read with IND AS-
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following:
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32/109(Financial Instruments)
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• Reviewed the fair valuation reports provided by the
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As at March 31,2024, the Company has made investments
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management by involvement of internal specialist /
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of Rs.100 crores as 2,88,00,000 Equity shares of Rs.10/-each of Trimax Bio Sciences Private Limited constituting
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external valuation experts.
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80% of paid up- Equity share Capital in Trimax Bio Sciences Private Limited which are measured at fair value as per Ind AS 109 read with Ind AS 113.
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• Review of Resolution passed in the board Meeting
• Obtaining A Due Diligence report from the management.
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These investments are Level 3 investments as per the fair
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• Ascertained the Valuation in the books of accounts on
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value hierarchy in Ind AS 113 (i.e., Fair value Measurement) and accordingly determination of fair value is based on a
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account of Goodwill/Capital reserve.
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high degree of judgement and input from data that is not
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• Had a Briefing of the Share purchase Agreement entered
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directly observable in the market. Further, the fair value is
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between the parties.
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significantly influenced by the expected pattern of future
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• Assessed the objectivity and competence of our internal
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benefits of the tangible assets of Trimax Bio Sciences
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expert and Company's internal/external specialists involved
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Private Limited. Refer Note No: 04 of the Standalone
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in the process. Reviewed the disclosures made by the
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financial statements.
Since the amount involved is material and significant, audit of above area was considered to be key audit matter for reporting purpose.
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Company in the financial statements.
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Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Management & Board of Directors is responsible for 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 Report, Corporate Governance and Shareholder's Information, but does not include the Standalone Financial Statements and our auditor's report thereon. The Company's annual report is expected to be made available to us after the date of this auditor's report.
Our opinion on the Standalone 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 Standalone Financial Statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the Standalone 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.
Management's & Board of Directors' Responsibilities for the Standalone Financial Statements
The Company's Management &Board of Directors is responsible for the matters stated in section 134(5) of 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, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. 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.
In preparing the Standalone 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 either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the Standalone 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 Standalone Financial Statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the Standalone 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 control.
• Obtain an understanding of internal financial control 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 system in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.
• Conclude on the appropriateness of Management & Board of Directors use of the going concern basis of accounting in preparation of standalone financial statements 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 Standalone 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 Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Standalone Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone 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 Standalone 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 Standalone 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
1. As required by 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 the "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. 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 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 of account
c) The Standalone Balance Sheet, the Standalone Statement of Profit and Loss including Other Comprehensive Income, the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows dealt with by this Report are in agreement with the relevant books of account.
d) In our opinion, the aforesaid Standalone Financial Statements comply with the Ind AS specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended.
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 financial 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 operating effectiveness of the Company's internal financial controls over financial reporting.
g) 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:
a) The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements.
b) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
c) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company and its subsidiary companies incorporated in India.
d) i. 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;
ii. 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;
iii. 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 (i) and (ii) above, contain any material misstatement.
e) The dividend paid by the Company during the year, in respect of the same declared for the previous year is in accordance with Section 123 of the Act to the extent it applies to payment of dividend.
f) 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.
3. With respect to the matter to be included in the Auditor's Report under Section 197(16) of the Act:
In our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which are required to be commented upon by us.
For Rakesh S Jain & Associates
Chartered Accountants Firm Reg No :010129S
CA Pankaj Chandak
Partner
Membership No:229355 Date: 27/05/2024 Place: Hyderabad UDIN: 24229355BKAQFY5301
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