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Orchid Pharma Ltd.

BSE: 524372 | NSE: ORCHIDPHAR | Series: NA | ISIN: INE191A01019 | SECTOR: Pharmaceuticals

BSE Live

Jul 24, 16:00
5.25 0.00 (0.00%)
Volume
No Data Available
46,256
  • Prev. Close

    5.25

  • Open Price

    5.25

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    5.25 (76899)

Orchid Pharma is not traded on BSE in the last 30 days

NSE Live

Jul 24, 15:40
5.45 0.00 (0.00%)
Volume
No Data Available
21,970
  • Prev. Close

    5.45

  • Open Price

    5.60

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    5.45 (7230)

Orchid Pharma is not traded on NSE in the last 30 days

Annual Report

For Year :
2018 2016 2015 2013 2012 2011 2010 2009 2008

Auditor's Report

Report on the Standalone Financial Statements

The Hon’ble National Company Law Tribunal (“NCLT”), Chennai Bench, admitted the Corporate Insolvency Resolution Process (“CIRP”) application filed by an operational creditor of Orchid Pharma Limited (“the Company”) and appointed an Interim Resolution Professional (“IRP”), in terms of the Insolvency and Bankruptcy Code, 2016 (“the Code”) to manage the affairs of the Company vide CP.No. CP/ 540/ (IB)/ CB/ 2017, dated August 17, 2017. Subsequently, Mr. Ramkumar Sripatham Venkatasubramanian (IP Registration No. IBBI/ IPA-001/ IP-P00015/ 2016-17/ 10039) has been appointed as the Resolution Professional (“RP”) of the Company, by an order of NCLT with effect from October 27, 2017.

In view of pendency of the CIRP, and in view of suspension of the powers of board of directors and as explained to us, the powers of adoption of the standalone financial statements for the year ended March 31, 2018 vest with the RP.

We have audited the accompanying standalone financial statements of Orchid Pharma Limited, (“the Company”), which comprise of the Balance Sheet as at March 31, 2018, and 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 a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

The RP/ Company’s management is responsible for the matters stated in Section 134 (5) of the Companies Act, 2013 (“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, cash flows and changes in equity of the Company in accordance with the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India.

We were informed that the standalone financial statements have been approved by the RP based on representations, clarifications and explanations provided by the Managing Director, Chief Financial Officer and Key Management Personnel of the Company for the preparation and presentation of the standalone financial statements.

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.

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

We conducted our audit of the financial statements in accordance with the Standards on Auditing specified under Section 143 (10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the 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 auditor’s judgement, 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 obtained by us is sufficient and appropriate to provide a basis for our qualified audit opinion on the financial statements.

Basis of qualified opinion

We draw attention to the following matters:

(a) Note 1 to the standalone financial statements, regarding application by an operational creditor, initiating the insolvency provisions under the Insolvency and Bankruptcy Code, 2016 (‘the Code’) and the consequential appointment of RP under the Code, and adequacy of disclosures concerning the Company’s ability to meet its financial and contractual obligations including management’s technical estimates in regard to realisation of value of inventories, overdue receivables (net of provisions) amounting to Rs.2,101.42 Lakhs, loans and advances given to various parties (net of provisions) amounting to Rs.69,466.63 Lakhs (which includes capital advances of Rs.52,193.10 and other advances of Rs.17,273.53 Lakhs), provision for impairment, if any, required for property, plant and equipment (PPE), PPE under development, internally generated intangible assets comprising of DBF/ ANDA, other non-monetary assets, investments, unamortised finance charges, claims made by/ advances given to employees, financial obligations including repayment of various loans, unpaid interest and the ability to fund various obligations pertaining to operations including unpaid/ overdue creditors, for ensuring/ commencing normal operations and further investments required towards ongoing research and development projects under progress (carrying amount of Rs.1,431 Lakhs). Certain bank balances, including borrowings are yet to be confirmed by the banks and hence, the possible impact, if any, is not presently ascertainable

The above matters, other than CIRP related, have been outstanding for more than 3 years and have also been qualified by the predecessor auditors in their audit report for earlier years.

(b) The net worth of the subsidiaries as on the reporting date is negative (refer note 55 to the financial statements). The possible erosion in the carrying value of investments in subsidiaries (net of provisions) aggregating to Rs.12,369.90 Lakhs and the recoverability loans/ advances given to the subsidiaries (net of provisions) aggregating to Rs. 5,229.36 Lakhs is not ascertainable and the possible provision required, if any, is not presently determinable.

The above matters have also been qualified by the predecessor auditors in their audit report for earlier years.

(c) Confirmation of balances are not available for majority of the receivables, loans and advances given, payables, claims received from the employees and bank loans as at March 31, 2018. In the absence of the confirmation of balances, the possible adjustment, if any, required in the financial statements is not presently determinable.

The above matters have also been qualified by the predecessor auditors in their audit report for earlier years.

(d) We have not been provided with sufficient, appropriate audit evidence in respect physical verification of fixed assets/ related reconciliation with the books of account, details/ valuation working for stock of stores, spares, chemicals and traded stock aggregating to Rs. 2,331 Lakhs, purchases of raw materials aggregating to Rs.3,993 Lakhs and reconciliation/ basis of restatement of foreign currency assets and liabilities. Accordingly, we are unable to comment on the possible impact, if any, arising out of the above matters.

Considering the aforesaid matters, the internal controls over financial reporting also needs to be further strengthened to make them commensurate with the size and nature of business of the Company.

(e) We have been informed by the RP that certain information including the minutes of the meetings of the Committee of Creditors, cases filed by RP against the key management personnel, suppliers, customers and other parties and the outcome of certain specific/ routine procedures carried out as part of the IBC process are confidential in nature and could not be shared with anyone, other than the Committee of Creditors and NCLT. Further, we have not been provided with sufficient, appropriate audit evidence in respect of avoidance applications filed under the IBC Code by the RP due to the confidentiality involved.

Further, we were informed that the RP has filed the resolution plan voted favourably by the Committee of Creditors with Hon’ble NCLT. However, the detailed resolution plan (including the salient features, consideration agreed, terms and conditions etc.) has not been made available for our review. In the opinion of the RP, the matter is highly sensitive, confidential and may have adverse impact of the successful implementation of the resolution plan.

Accordingly, we are unable to comment on the possible adjustments required in the carrying amount of assets and liabilities, possible presentation and disclosure impacts, if any, that may arise if we have been provided access to review of those information.

(f) The Company’s net worth as on the reporting date is also negative. However, pending completion of the successful implementation of the resolution plan as part of CIRP, this standalone financial statements have been prepared and presented by the Company on a going concern basis.

The matters referred to (a), (b) and (e) above also essentially require the Company to resolve the situations specified therein within the framework specified through the CIRP. In the absence of any specific guidance or direction that can be assessed out of CIRP, material uncertainties exist that may cause significant doubt on the Company’s ability to continue as a going concern. However, the appropriateness of preparation of standalone financial statements on a going concern basis is subject to resolution of the above matters through the CIRP or such other forum or manner as specified in note 2 to the standalone financial statements.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us and subject to matters described in the basis of qualified opinion paragraph, the aforesaid standalone financial statements for the year ended March 31, 2018 give the information required by the Act in the manner so required and give a true and fair view in conformity with Ind AS and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2018, and its loss, total comprehensive income, the changes in equity and its cash flows for the year ended as on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government in terms of Section 143 (11) of the Act, we give in 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, based on our audit 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, subject to matters given in the basis of qualified opinion paragraph;

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 subject to matters given in the basis of qualified opinion paragraph;

c) the balance sheet, the statement of profit and loss including other comprehensive income, statement of changes in equity and the statement of cash flow dealt with by this report are in agreement with the books of account

d) in our opinion, the aforesaid financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act;

e) on the basis of the written representations received from the directors of the Company as on March 31, 2018 taken on record by the board of directors, none of the directors are disqualified as on March 31, 2018 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 a modified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting; and

g) with respect to the other matters to be included in the auditors’ 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, subject to matters given in the basis of qualified opinion paragraph, the impact of pending litigations on its financial position in its financial statements -refer note 46 to the standalone financial statements;

ii. The Company has made provisions, subject to matters given in the basis of qualified opinion paragraph, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts; and

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 reporting of disclosures relating to specified bank notes is not applicable to the Company for the year ended March 31, 2018.

Other matters Without qualifying our report, we draw attention to the following matters :

(a) Note 2 to the financial statements wihich states that the Company has adopted Ind AS for the financial year commencing from April 1, 2017 and accordingly, the Statement has been prepared by the Company’’s management in compliance with Ind AS;

(b) The financial statements of the Company for the year ended March 31, 2017 prepared in accordance with Companies (Accounting Standards) Rules, 2006, were audited by another firm of chartered accountants under the Companies Act, 2013 who have expressed a modified opinion on those financial statements vide their report dated May 26, 2017.

1. In respect of the Company’s fixed assets:

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

(b) The Company has a program of verification to cover all the items of fixed assets in a phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. However, no physical verification has been carried on by the management during the year. Accordingly, we are unable to comment on whether any material discrepancies were noticed on such verification and whether they are properly dealt with in the financial statements.

(c) According to the information and explanations given to us, the records examined by us, we report that, the title deeds, comprising all the immovable properties of land and buildings which are freehold, are held in the name of the Company as at the balance sheet date. In respect of immovable properties pledged as security for borrowings, the Company is in the process of obtaining confirmation of title deeds deposited with the lenders. Accordingly, we are not unable to express our comment on those items of immovable properties.

2. The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable.

3. According to information and explanation given to us, the company has not granted any loan, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register required under section 189 of the Companies Act, 2013. Accordingly, paragraph 3 (iii) of the order is not applicable.

4. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

5. In our opinion and according to the information and explanations given to us, the company has not accepted any deposits and accordingly paragraph 3 (v) of the order is not applicable.

6. In our opinion and according to the information and explanations given to us, pursuant to the rules made by the Central Government of India, the Company is required to maintain cost records as specified under Section 148(1) of the Act in respect of its products. We have broadly reviewed the same, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained.

7. According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has not been regular in depositing undisputed statutory dues, including Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Service Tax, Goods and Service Tax, Value Added Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities. There has been continuous delay in payment of the statutory dues.

(b) There were no undisputed amounts payable in respect of Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Service Tax, Value Added Tax, Goods and Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues in arrears as at March 31, 2018 for a period of more than six months from the date they became payable.

(c) Details of dues of Income Tax, Sales Tax, Service Tax, Excise Duty, Value Added Tax and Goods and Service Tax which have not been deposited as at March 31, 2018 on account of dispute are given below:

Statute

Nature of dues

Amount (Rs. in Lakhs)

Period to which the amount relates

Forum where the dispute is pending

Excise Duty

Duty

338.40

2005-06 to 2015-16

CESTAT/ Commissioner of Appeals

Service Tax

Tax

85.26

2005-06 to 2011-12

CESTAT/ Commissioner of Appeals

Sales Tax

Sales Tax dues

498.89

2008-09 to 2012-13

Appellate DCCT, Chennai

According to the information and explanation given to us and records examined by us, the Company has defaulted in repayment of its dues to the banks, financial institutions and loans taken from government since December 2016. The total amount of principal and interest unpaid aggregate to Rs.79,048.24 Lakhs.

8. In our opinion and according to the information and explanations given to us, the company has no outstanding dues to any debenture holders during the year.

9. In our opinion and according to the information and explanations given to us, no term loans have been taken during the year under consideration. The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) during the year. Accordingly, reporting of the end use of funds so raised is not applicable for the year.

10. We have not been provided with sufficient, appropriate audit evidence in respect of purchases of raw materials aggregating to Rs. 3,993 Lakhs during the year. We were informed that the RP, inter alia, has declared the purchases made as preferential transactions and filed Company Application in May 2018 before the Hon’ble National Company Law Tribunal (NCLT). We were further informed that the hearings are going on in NCLT, the next hearing is posted on September 5, 2018, the Orders are yet to be pronounced and the matter is subjudice.

Further, we have not been provided with sufficient, appropriate audit evidence in respect of avoidance applications filed under the IBC Code by the RP due to the confidentiality involved. The matter is also subjudice.

Since sufficient appropriate audit evidence as aforesaid is not provided to us, we are unable to comment on whether any material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year in respect of the above matters.

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

12. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of the Order is not applicable to the Company.

13. 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 section 177 and 188 of the Act. Where applicable, the details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

14. 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. Accordingly, paragraph 3(xiv) of the order is not applicable.

15. 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 them. Accordingly, paragraph 3(xv) of the order is not applicable.

16. According to the information and explanations given to us and based on our examination of the records of the company, the company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of Orchid Pharma Limited (“the Company”) as of March 31, 2018, in conjuction with our audit of the financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The RP/ the board of directors of the Company 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. 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, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors’ Responsibility

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

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

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

Meaning of Internal Financial Controls Over Financial Reporting

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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 of 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.

Basis of qualified opinion

We observed significant deficiencies in the internal financial controls relating to maintenance of sufficient, appropriate audit trail/ documentation in respect of (a) physical verification of fixed assets/ related reconciliation with the books of account, (b) details/ valuation working for stock of stores, spares, chemicals and traded stock aggregating to Rs. 2,331 Lakhs, (c) purchases of raw materials aggregating to Rs. 3,993 Lakhs; and (d) reconciliation/ basis of restatement of foreign currency assets and liabilities.

Qualified Opinion

In our opinion and according to the information and explanations given to us, the Company has to further strengthen in all material respects, the internal financial control system over financial reporting to make such internal financial controls over financial reporting to operate effectively as at March 31, 2018, 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 CNGSN & Associates LLP

Chartered Accountants

Firm Registration No.004915S/ S200036

CHINNSAMY GANESAN

Place: Chennai Partner

Date: August 21, 2018 Membership No. 027501