1. We have audited the accompanying Standalone Financial
Statements of HINDUSTAN ORGANIC CHEMICALS LIMITED (CIN:
L99999KL1960GOI082753) (“the Company’’) which comprises of the
Balance Sheet as at 31st March, 2025, the Statement of Profit and Loss
(including Other Comprehensive Income) for the year ended 31st March
2025 the Cash Flow Statement, the Statement of Changes in Equity
for the year ended and notes to the Standalone Financial Statements
including material accounting policies and other explanatory information
(hereinafter referred to as “the Standalone Financial Statements”).
2. 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 (“the Act”)
in the manner so required and give a true and fair view in conformity
with the Indian Accounting Standards (‘Ind AS') specified under Section
133 of the Act read with the Companies (Indian Accounting Standards)
Rules, 2015 and other accounting principles generally accepted in
India, of the state of affairs of the Company as at 31 March 2025, and
its profit (including other comprehensive income), its cash flows and the
changes in equity for the year ended on that date.
Basis for Opinion
3. We conducted our audit 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 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 Companies Act, 2013 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 we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Emphasis of Matters
4. Attention is drawn to note no. 30(a) and 35(vii)(viii) of the accompanying
standalone financial statements regarding the waiver of principal of
loan and preference shares, interest and penal interest amounting to
Rs.1,35,136.71 lakhs due to Government of India as on 30.09.2024.
5. Attention is drawn to note no. 47 of the accompanying standalone
financial statements regarding the registration of satisfaction of
charge with the Registrar of Companies (ROC). The company is in
correspondence with the Ministry regarding certain formalities in this
regard.
6. Attention is drawn to note no. 32(b) of the accompanying standalone
financial statements. The company has advanced loan amounting to
Rs. 453.01 lakhs to its subsidiary at an interest rate ranging from 10.25
to 14.50 %. As the subsidiary has failed to pay interest, the company
has stopped charging interest on the loan from the year 2023-24.
7. Attention is drawn to note no. 41 of the accompanying standalone
financial statements regarding composition of the Board of Directors
which is not in compliance with the provisions of the Companies Act
2013 and SEBI (LODR) Regulations, 2015.
8. Attention is drawn to note no. 56 of the accompanying standalone
financial statements. The standalone financial statements approved by
the Board of Directors have not been reviewed by the Audit Committee,
as required under section 177 of the Companies Act, 2013 and clause
A (5) of the Part C of the Schedule II of the Securities and Exchange
Board of India (Listing Obligations and Disclosure Requirements)
Regulations, 2015. We are informed that the Audit Committee is not
functional due to the absence of the independent directors of the
company.
9. Attention is drawn to note no. 42 of the accompanying standalone
financial statements detailing the status of implementation to the
Government approved restructuring plan.
Our opinion is not modified in respect of the above matters.
Key Audit Matters
10. Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the Standalone Financial
Statements for the financial year ended March 31, 2025. 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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The Key Audit Matter
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How the matter was addressed in
our audit?
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Exceptional Item and Other
Equity- Waiver of GOI Loan,
Interest, Preference share
capital, interest thereon
(Refer note no.17 of the standalone
financial statements)
• The waiver of loan, preference
shares granted by the Govt.
Of India and interest thereon is
considered key area during our
audit.
• The company had an outstanding
loan of Rs. 43,586.46 lakhs from
GOI and redeemable preference
shares of Rs. 27,000.00 lakhs
along with the outstanding
interest thereon of Rs 47,359.79
lakhs and Rs. 7,222.50 lakhs
respectively as at 30 Sep 2024,
which have been waived off by
Govt. Of India.
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Our audit procedures including and
not limited to the following
• We have examined digitally
signed Govt of India Order
No. 1600/9/2024-IFD dated
21.03.2025 from the ministry for
waiver of the liability and interest
accrued
• Examined the letter send by the
Company Secretary to the BSE
disclosing the waiver of liability
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Recognition, Measurement, and
Depreciation of PPE
• The company, being an asset-
based entity, the recognition,
measurement and depreciation
of the PPE is very significant.
• The company was shut down
for over 2 months during
the current financial year
involving overhauling of certain
machineries and plants.
• The audit was mainly focused
on the compliance of the
provisions of the Ind AS 16 -
Property, Plant and Equipment's
and the other aspects of asset
accounting.
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Our audit procedures included and
were not limited to the following:
• Evaluating management's
processes and controls over
the identification, capitalization,
classification, and subsequent
measurement of PPE. We
assessed the company's policies
for determining the initial cost,
subsequent measurement, and
depreciation of PPE, including
the application of appropriate
depreciation methods and useful
lives.
• We also tested a sample of PPE
additions and disposals to verify
the accuracy and completeness
of their recognition and
measurement.
• We assessed the consistency
of depreciation policies and
their compliance with applicable
accounting standards and the
accuracy of the calculation of
depreciation.
• We verified the compliance with
the provisions of Ind AS 16 for
adopting the Revaluation model
and its impact on the asset
disclosures
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Valuation of Inventory
See Note 6 to the Standalone
Financial Statements
• The verification and valuation of
semi- finished, good for captive
consumption and finished
goods is a meticulous manual
undertaking involving various
reports, parameters, estimations
and judgements.
• Indirect production costs are
estimated and integrated into
inventory costs, involving
judgment and estimation.
• The inventory levels of major raw
materials, finished goods, semi¬
finished goods are monitored
through meters installed in the
tanks.
• The meter readings are recorded
on daily basis.
• Inventories are valued at lower
of cost and net realizable value
except by-products.
• In addition, management
exercises judgment in
identifying and evaluating
obsolete inventories and slow-
moving stock items, while also
estimating the appropriateness
of necessary provisions.
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Our audit procedures included and
were not limited to the following:
• Obtaining an understanding of
the system controls and designs
for production and inventory
monitoring.
• Reviewing data from software
used by the company such as
Distributed Control System for
plant operations, independent
PLC for the safety of the
Plant, Tank Level Monitoring
System “LMS” for the detailed
statistics about stock of raw
materials, finished products, and
intermediate products along with
various alarms, warnings and
history of the tank operations
etc.
• Testing the design,
implementation and operating
effectiveness of key internal
financial controls, including
controls over valuation of
inventory.
• Testing and cross verifying on
sample basis the accuracy of
inventory levels in inventory
valuation with BOMs issued and
meter reading generated from
inventory tanks by the respective
departments.
• Testing on a sample basis the
accuracy of cost for inventory
by verifying the actual purchase
cost.
• Testing the net realizable value
by comparing actual cost with
most recent selling price.
• Being a party to the physical
verification of monitoring meters
installed for raw materials,
finished products and semi¬
finished products at the end of
the financial year.
Based on the above procedures
performed, we did not identify
any material exceptions in the
measurement of inventory.
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Evaluation of Provisions,
disclosures and analysis with
respect Contingencies, including
litigations and tax
Refer Note 2(d) and note 35 to the
financial statements.
• The Company has various
disputes/litigations related to
shut-down of its operations,
school and land held by the
company at Rasayani.
• The Company also has various
disputes/litigations related to
direct and indirect taxes in
various states and at various
levels of appellate authorities.
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Our audit procedures included and
were not limited to the following:
• Assessing the management's
processes and tested the
internal controls implemented
for the identification, recognition
and measurement of legal and
tax positions and its assessment
of the potential impact on the
Company.
• We received a statement of
all ongoing disputes/litigations
along with the necessary
documentation and from the
company's in-house legal team
who is an advocate.
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• The evaluation of the Company's
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• We evaluated management's
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position
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and determination
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assessments including advice/
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of possible outcome of these
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opinion obtained from external
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disputes
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and provisions and
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consultants/legal advisors with
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related
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disclosures, if any,
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respect to prospects of success
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required
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to be made in the
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of appeals and tax proceedings.
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books involves significant
management judgment.
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• We involved our internal experts
to challenge the management's
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position on the select litigations
and to consider legal precedence
and other rulings in evaluating
management's position on these
tax positions.
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Information Other than the Financial Statements and Auditor’s Report
thereon:
11. The Company's management and Board of Directors are responsible for
the other information. The other information comprises the information
included in the Company's annual report, but does not include the
Standalone Financial Statements and our auditors' report thereon. The
said other information is expected to be made available to us after the
date of this audit 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 when made available to
us and, in doing so, consider whether the other information is materially
inconsistent with the Financial Statements or our knowledge obtained
in the 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.
Responsibility of Management and Those Charged with Governance
for Standalone Financial Statements:
12. The Company's 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
financial position, financial performance and cash flows of the Company
in accordance with the accounting principles generally accepted in
India, including the Accounting Standards specified under Section 133
of the Act, read with Rule 7 of Companies (Accounts) Rules, 2014.
This responsibility also includes maintenance of adequate accounting
records in accordance with the provisions of the Act for safeguarding
the assets of the Company and for preventing and detecting frauds and
other irregularities; selection and application of appropriate accounting
policies; making judgments and estimates that are reasonable and
prudent; and design, implementation and maintenance of adequate
internal financial controls, that were operating effectively for ensuring
the accuracy and completeness of the accounting records, relevant to
the preparation and presentation of the Financial Statements that give
a true and fair view and are free from material misstatement, whether
due to fraud or error.
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.
Those Board of Directors are also responsible for overseeing the
company's financial reporting process.
Auditor’s Responsibility for the Audit of Standalone Financial
Statements:
13. 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 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 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 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.
14. 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.
15. 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.
16. 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
17. 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 a statement on the matters specified in
paragraphs 3 and 4 of the Order to the extent applicable attached as
Annexure 1.
18. As required by the directions and sub directions issued by the office of
the Comptroller & Auditor General of India under section 143 (5) of the
Act, we give in the “Annexure 2” a statement on the matters referred in
those directions.
19. As required by Section 143(3) of the Act, we report that:
a) We have sought and obtained all the information and explanations
which to the best of our knowledge and belief were necessary for
the purpose of our audit;
b) In our opinion proper books of account as required by law have
been kept by the Company so far as appears from our examination
of those books;
c) The Balance Sheet, the Statement of Profit and Loss including
Other Comprehensive Income, the Statement of Cash Flows and
Statement of Changes in Equity 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
Indian Accounting Standards specified under Section 133 of the
Act, read with Rule 7 of Companies (Accounts), Rules 2014;
e) As per Notification No. G.S.R. 463(E) dated June 5, 2015, the
Government Companies are exempted from provisions of section
164(2) of the Act. Accordingly, we are not required to report
whether any directors are disqualified in terms of provisions
contained in the said section
f) The report on internal financial control as required under clause (i)
of sub section 3 of section 143 of the Act is attached as Annexure
3;
g) Being a Government company, the provisions of section 197 of
the Act with respect to the matters to be included in the Auditors
Report is not applicable vide notification no. G.S.R. 463(E) dated
June 5, 2015 and as amended by notification no. G.S.R. 582(E)
dated June 13, 2017 issued by the Ministry of Corporate Affairs.
h) With respect to other matters to be included in the Auditors Report
in accordance with Rule 11 of Companies (Audit and Auditors)
Rules, 2014, 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 statement.
(ii) The company did not have any long-term contracts including
derivative contracts for which there were any material
foreseeable losses.
(iii) The company has made provisions, as required under
any law or accounting standard, for material foreseeable
losses, if any, on the long-term contracts including derivative
contracts;
(iv) There were no amounts which were required to be transferred
to Investor Education and Protection Fund by the company.
(v) (a) The management has represented that, to the best
of its knowledge and belief, 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 persons
or entities, 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;
(b) The management has represented, that, to the best
of its knowledge and belief, no funds have been
received by the company from any persons or entities,
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 Party (“Ultimate
Beneficiaries”) or
• provide any guarantee, security or the like on
behalf of the Ultimate Beneficiaries;
(c) Based on such audit procedures 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 (v)(a) and (v)(b)
contain any material mis-statement.
(vi) The company has not declared or paid dividend during the
year.
(vii) Based on our examination, which included test checks, the
Company has used accounting software for maintaining its
books of account for the financial year ended March 31,
2025 which has a feature of recording audit trail (edit log)
facility and the same has operated throughout the year for
all relevant transactions recorded in the software except that
audit trail was not enabled at the database level to log direct
data changes, if any. Further, during the course of our audit
we did not come across any instance of the audit trail feature
being tampered with.
For Balan & Co.
Chartered Accountants
FRN 340S
M. Venugopal
Partner
Place: Ernakulam Membership No. 244882
Date: 16.05.2025 UDIN: 25244882BMKTZO9628
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