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You can view full text of the latest Auditor's Report for the company.

BSE: 532531ISIN: INE939A01011INDUSTRY: Pharmaceuticals

BSE   ` 782.60   Open: 772.10   Today's Range 770.10
795.85
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838.10
Year End :2023-03 

Strides Pharma Science Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of Strides Pharma Science Limited (the “Company”) which comprise the standalone balance sheet as at 31 March 2023, and the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information.

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 (“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 31 March 2023, and its profit and other comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those SAs 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 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 thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence by us is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.

Key Audit Matter(s)

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. 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.

The key audit matter

How the matter was addressed in our audit

The gross carrying amount of investments in subsidiaries and associates (aggregates to H 25,067.68 Million) accounts for 44% of the total assets of the Company as at 31 March 2023. Company’s assessment of impairment contains a number of parameters which involve significant judgements and estimates including revenue growth, cash flow forecasting, weighted average cost of capital and other recent financing transactions. Changes in these assumptions, could lead to an impact over fair value of investment and accordingly impairment provision.

The annual impairment testing was significant to our audit, because of the financial quantum of the assets as well as the involvement of critical judgements, estimates and assumptions.

Based on the impairment assessment of the Company has recorded H 150 Million as provision for diminution in value of non-current investments.

For disclosure relating to this impairment please refer Note 8 to the standalone financial statements.

In view of the significance of the matter, following audit

procedures were applied, among others, to obtain sufficient

audit evidence:

• Tested the design and operating effectiveness of the relevant key controls around the impairment testing of the carrying value of investment in subsidiaries and associates.

• Performed a retrospective analysis to assess the reasonableness of Company’s projections by comparing historical forecast to actual results.

• Tested reasonability of projections used by the Company relating to the sales growth, operating costs, cashflow forecasts.

• Engaged valuation specialists to assist in testing the reasonableness of the valuation by evaluating the assumptions and methodologies used by the Company, in particular for weighted average cost of capital, terminal growth rate, etc.

• Tested whether the Company’s analysis about the sensitivity on the outcome of impairment to possible changes in key assumptions reflect the risks inherent in the valuation.

Taxation:

Refer Significant Accounting Policies and note 32 to standalone financial statements

The key audit matter

How the matter was addressed in our audit

The Company is subjected to various domestic and foreign tax

In

view of the significance of the matter we applied the

regulations with respect to taxability of income received in

following audit procedures in this area, among others to obtain

India including repatriation of any profits as dividends.

sufficient appropriate audit evidence:

Assessing the applicability of tax and accounting of such

We tested the design of internal financial controls and

repatriation may involve complexities with respect to various

operating effectiveness of the relevant key controls in

tax positions on availability of tax incentives / exemptions

respect of taxation.;

resulting in possible tax litigations/assessments.

We analyzed relevant correspondences with the tax

Judgment is required in assessing the availability of tax

authorities; and

incentives / exemptions. These judgments could change

We used subject matter experts to evaluate the Company’s

over time as each of the matter progresses with the relevant

judgment regarding their assessment of availability of tax

tax authorities and accordingly may impact the accounting

incentives /exemptions and the accounting treatment

treatment followed by the Company.

done.

Given the complexities and judgement involved in assessing

We also considered external legal opinions and

the availability of tax incentives / exemptions and its impact

consultations made by the Company for key uncertain tax

on accounting, we assessed this to be an area of focus for our

positions during current and past periods.

audit.

Going Concern assessment

Refer Significant Accounting Policies to standalone financial statements

The key audit matter

How the matter was addressed in our audit

Refer note 2 to the standalone financial statements.

Our audit procedures to assess the going concern assumption

As at 31 March 2023, the Company has recorded a profit

and whether a material uncertainty exists related to events or

amounting to H 46.82 Million and has generated positive cash

conditions that may cast a significant doubt on the Company’s

flows amounting to H 2,417.40 Million.

ability to continue as a going concern included the following audit procedures to obtain sufficient appropriate audit

The Company has concluded that the going concern basis is

evidence:

appropriate in preparing the standalone financial statements

of the Company and that no material uncertainty exists as of

• Gaining an understanding and assessing the design,

balance sheet date.

implementation and operating effectiveness of Company’s

key internal controls over preparation of cash flow forecasts

The Company evaluated its ability to continue as a going concern based upon an assessment of the Company’s cash

to assess its liquidity;

position, assessment of the exposure with respect to the

• Comparing the forecasted statement of profit and loss and

financial guarantees provided by the Company to an associate

cash flows with the Company’s business plan approved by

company, future cash flow forecasts, its debt repayment

the board of directors;

obligations and other commitments and its availability of

• Evaluating the key assumptions in the cashflow forecasts

financing facilities, after considering material breaches of its

with reference to historical information, current

existing debt covenants and the related subsequent temporary

performance, future plans, and market and other external

relaxations obtained from the lenders for compliance with

available information;

such debt covenants.

• Performing sensitivity analysis on the forecasted statement

Considering the significance of the area to the overall financial

of profit and loss and cash flows by considering plausible

statements and our audit, this is considered as a key audit

changes to the key assumptions adopted by the Company.

matter.

• Performing a retrospective review to assess the reasonableness of Company’s past projections by comparing historical forecasts to actual results;

• Assessing the availability of banking and other financing facilities by inspecting underlying documentation;

• Evaluating Company’s judgment of invoking of guarantees provided to the lenders of the associate;

• Assessing the impact of any existing covenants and the related relaxations and other restrictive terms therein which may impact Company’s ability to raise further debts.

• Assessing the adequacy of the disclosures related to application of the going concern assumption.

Information Other than the Standalone Financial Statements and Auditor’s Report Thereon

The Company’s Management and Board of Directors are responsible for the other information. The other information comprises the Management Reports such as Board’s Report, Management Discussion and Analysis, Corporate Governance Report and Business Responsibility Report, but does not include the financial statements and auditor’s report thereon, which we obtained prior to the date of this auditor’s report, and the and the remaining sections of the Company’s Annual Report, which are expected to be made available to us after that date.

Our opinion on the standalone financial statements does not cover the other information and we do not and will 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 and, in doing so, consider whether the other information is materially

inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, 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.

When we read the other sections of Annual Report (other than those mentioned above), if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take necessary actions, as applicable under the applicable laws and regulations.

Management’s and Board of Directors’ Responsibilities for the Standalone Financial Statements

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 standalone financial statements that give a true and fair view of the state of affairs, profit/ loss and 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. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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, the Management and Board of Directors are 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 the 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 is also 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 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 with reference to financial statements 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 and Board of Directors.

• Conclude on the appropriateness of the Management and 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.

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.

effectiveness of such controls, refer to our separate Report in “Annexure B”.

B. 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, 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 as at 31 March 2023 on its financial position in its standalone financial statements - Refer Note 39 to the 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.

d (i) The management has represented that, to the best of it’s knowledge and belief, as disclosed in the Note 48 to the standalone financial statements, no funds 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(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall 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 it’s knowledge and belief, as disclosed in the Note 48 to the standalone financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Parties (“Ultimate

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 the Companies (Auditor’s Report) Order, 2020 (“the Order”) issued by the Central Government of India in terms of Section 143(11) 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.

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 books of account.

d. In our opinion, the aforesaid standalone 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 31 March 2023 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2023 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 with reference to financial statements of the Company and the operating

Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(iii) Based on the audit procedures performed 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. As stated in Note 52 to the standalone financial statements, the Board of Directors of the Company has proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with Section 123 of the Act to the extent it applies to declaration of dividend.

C. With respect to the matter to be included in the Auditor’s Report under Section 197(16) of the Act:

We refer to Note 10 of the standalone financial statements which more fully explains the decision of the Board of Directors to recover the excess

remuneration paid to the Company’s erstwhile Managing Director and Chief Executive Officer in the previous year. Accordingly, the Company continues to have a recoverable of H 141.90 Million as at 31 March 2023 in accordance with the requirements of Section 197 of the Companies Act, 2013. 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 B S R & Co. LLP

Chartered Accountants

Firm’s Registration No.:101248W/W-100022

Sampad Guha Thakurta

Partner

Membership No.: 060573

ICAI UDIN:23060573BGYNDS6229

Place: Bengaluru

Date: 25 May 2023