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AGC Networks Ltd.

BSE: 500463 Sector: Telecom
NSE: AGCNET ISIN Code: INE676A01019
BSE 15:40 | 23 Feb 121.75 -1.00
(-0.81%)
OPEN

125.85

HIGH

125.85

LOW

120.20

NSE 15:28 | 23 Feb 122.00 2.00
(1.67%)
OPEN

121.65

HIGH

125.90

LOW

120.55

OPEN 125.85
PREVIOUS CLOSE 122.75
VOLUME 4414
52-Week high 170.70
52-Week low 82.00
P/E 102.31
Mkt Cap.(Rs cr) 347
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 125.85
CLOSE 122.75
VOLUME 4414
52-Week high 170.70
52-Week low 82.00
P/E 102.31
Mkt Cap.(Rs cr) 347
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

AGC Networks Ltd. (AGCNET) - Auditors Report

Company auditors report

To the Members of AGC Networks Limited Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of AGC NetworksLimited (‘the Company') which comprise the Balance Sheet as at 31 March 2017 theStatement of Profit and Loss and the Cash Flow Statement for the year then ended and asummary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

2. The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 (‘the Act') with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsprescribed under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014 (as amended). This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the standalone financial statements that give a true and fair view and arefree from material misstatement whether due to fraud or error.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

4. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

5. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthese standalone financial statements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial controls relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.

7. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on these standalone financial statements.

Basis for Qualified Opinion

8. As stated in Note 44 to the Standalone financial statements during the year ended31 March 2015 the Company had recognised sale of two properties having carrying value of `0.74 crores and ` 0.35 crores respectively and profit on such sale amounting to ` 40.85crores and ` 5.19 crores (net of incidental selling expenses amounting to ` 3.04 croresand ` 0.35 crores) respectively under ‘exceptional items'. In our opinion sincethe significant risks and rewards for the said properties were not transferredrecognition of such sale and the accounting treatment followed by the Company is not inaccordance with the principles laid under Accounting Standard (AS) 9 ‘RevenueRecognition' and AS 5 ‘Net Profit or Loss for the Period Prior Period Items andChanges in Accounting Policies' as notified under the Companies (Accounting Standards)Rules 2006 (as amended) and should have been reversed. Our audit opinion on the standalonefinancial statements for the year ended 31 March 2016 was qualified in respect of thismatter. During the month of April 2016 significant risks and rewards in respect of one ofthe said property having a carrying value of ` 0.35 crores was transferred. Accordinglyin our opinion sale of this property should have been recognised during the year ended 31March 2017. Hence our audit opinion on the standalone financial statements for the yearended 31 March 2017 is qualified to this extent. With respect to the other property havingcarrying value of ` 0.74 crores our audit opinion on the standalone financial statementsfor the year ended 31 March 2017 continues to be qualified.

Had the Company followed the principles of AS 9 and AS 5 during the year ended 31 March2017 the prior period expenses would have been higher by ` 46.04 crores (31 March 2016: `46.04 crores) and profit on sale of property would have been higher by ` 5.19 crores forthe year ended on that date (31 March 2016: Nil); loss before tax would have been higherby

` 40.85 crores for the year ended on that date (March 2016: ` 46.04 crores); taxexpenses for the year ended 31 March 2017 would have been lower by ` 3.27 crores (31 March2016: ` 3.27 crores); long term loans advances carrying value of tangible assets andother current liabilities as at 31 March 2017 would have been higher by ` 3.27 crores (31March 2016: ` 3.27 crores) ` 0.74 crores (31 March 2016: `1.09 crores) and ` 0.16 crores(31 March 2016: lower by ` 0.19 crores) respectively; reserves and surplus and othercurrent assets as at that date would have been lower by ` 37.58 crores (31 March 2016:

` 42.77 crores) and ` 47.32 crores (net of ` 3.20 crores received during previous year)(31 March 2016: ` 47.32 crores) respectively.

Qualified Opinion

9. In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matters described in the Basis for QualifiedOpinion paragraph the aforesaid standalone financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at 31 March 2017 and its loss and its cash flows for the year ended on thatdate.

Report on Other Legal and Regulatory Requirements

10. As required by the Companies (Auditor's Report) Order 2016 (‘the Order')issued by the Central Government of India in terms of Section 143(11) of the Act we givein the Annexure I a statement on the matters specified in paragraphs 3 and 4 of the Order.

11. Further to our comments in Annexure I as required by Section 143(3) of the Act wereport that: a. we have sought and obtained all the information and explanations which tothe best of our knowledge and belief were necessary for the purpose of our audit; b.except for the effects of the matters described in the Basis for Qualified Opinionparagraph in our opinion proper books of account as required by law have been kept bythe Company so far as it appears from our examination of those books; c. the standalonefinancial statements dealt with by this report are in agreement with the books of account;d. except for the effects of the matter described in the Basis for Qualified Opinionparagraph in our opinion the aforesaid standalone financial statements comply with theAccounting Standards prescribed under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 (as amended); e. the matter described in paragraph 8under the Basis for Qualified Opinion paragraph in our opinion may have an adverseeffect on the functioning of the Company; f. on the basis of the written representationsreceived from the directors and taken on record by the Board of Directors none of thedirectors is disqualified as on 31 March 2017 from being appointed as a director in termsof Section 164(2) of the Act; g. the qualification relating to the maintenance of accountsand other matters connected therewith are as stated in the Basis for Qualified Opinionparagraph; h. we have also audited the internal financial controls over financialreporting (IFCoFR) of the Company as on 31 March 2017 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 24 May 2017 as per Annexure II expressed a qualified opinion; i. with respectto the other matters to be included in the Auditor's Report in accordance with Rule 11 ofthe Companies (Audit and Auditors) Rules 2014 (as amended) in our opinion and to thebest of our information and according to the explanations given to us: i. the Company asdetailed in Note 36 to the standalone financial statements has disclosed the impact ofpending litigations on its financial position; ii. the Company did not have any long-termcontracts including derivative contracts for which there were any material foreseeablelosses; iii. there has been no delay in transferring amounts required to be transferredto the Investor Education and Protection Fund by the Company; iv. the Company as detailedin Note 35 to the standalone financial statements has made requisite disclosures in thesestandalone financial statements as to holdings as well as dealings in Specified Bank Notesduring the period from 8 November 2016 to 30 December 2016. Based on the audit proceduresperformed and taking into consideration the information and explanations given to us inour opinion these are in accordance with the books of account maintained by the company.

For Walker Chandiok & Co LLP

Chartered Accountants

Firm Registration No: 001076N/N500013

per Adi P. Sethna

Partner

Membership No. 108840

Place: Mumbai

Date : 24 May 2017

Annexure I to the Independent Auditor's Report of even date to the members of AGCNetworks Limited on the standalone financial statements for the year ended 31 March 2017Annexure I

Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that: (i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management during the yearand no material discrepancies were noticed on such verification. In our opinion thefrequency of verification of the fixed assets is reasonable having regard to the size ofthe Company and the nature of its assets.

(c) The title deeds of all the immovable properties (which are included under the head‘fixed assets') are held in the name of the Company.

(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year and no material discrepancies between physicalinventory and book records were noticed on physical verification.

(iii) The Company has not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships (LLPs) or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly the provisions of clauses 3(iii)(a) 3(iii)(b)and 3(iii)(c) of the Order are not applicable.

(iv) In our opinion the Company has not entered into any transaction covered underSections 185 and 186 of the Act. Accordingly the provisions of clause 3(iv) of the Orderare not applicable.

(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.

(vi) The Central Government has not specified maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products/services.Accordingly the provisions of clause 3(vi) of the Order are not applicable.

(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of customs duty of excise valueadded tax cess and other material statutory dues as applicable have generally beenregularly deposited with the appropriate authorities though there has been a slight delayin a few cases. Further no undisputed amounts payable in respect thereof were outstandingat the year-end for a period of more than six months from the date they became payable.

(b) The dues outstanding in respect of income-tax sales-tax service tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:

Name of the statute Nature of dues Amount ( ` in Amount Paid under protest Period to which the amount relates Forum where dispute is pending
Crore) ( ` in Crore)
The Central Excise Act1944 Demand on account of incorrect duty credit/short payment 0.47 0.04 1991-92 to 1996-97 Customs Excise and Service Tax Appellate Tribunal
Finance Act1994 Service tax demand on RTU activation and penalty thereon 0.50 0.05 2006-07 2007-08 & 2011-12 Commissioner of Central Excise and Service Tax - Appeals
Finance Act1994 Service tax demand on RTU activation and penalty thereon 4.17 0.35 2003-04 to 2006-07 Customs Excise and Service Tax Appellate Tribunal

Annexure I to the Independent Auditor's Report of even date to the members of AGCNetworks Limited on the standalone financial statements for the year ended 31 March 2017

Name of the statute Nature of dues Amount ( ` in Crore) Amount Paid under protest ( ` in Crore) Period to which the amount relates Forum where dispute is pending
Finance Act1994 Service tax demand on Royalty payment 0.74 - 2004-05 to 2006-07 Commissioner of Central Excise and Service Tax - Appeals
Finance Act1994 Excise Duty on CT 3 Clearance and 4.73 0.05 2003-04 to 2007-08 Customs Excise and Service Tax
Incorrect Input Tax Credit of Service Appellate Tribunal
Tax paid on Foreign Service Provider
Finance Act1994 Service tax demand along with penalty on excess cenvat utilization 7.04 0.50 2004-05 to 2007-08 Commissioner of Central Excise and Service Tax - Appeals
Finance Act1994 Interest and penalty on Service tax payable under reverse charge as a recipient of foreign service 0.06 0.03 2005-06 Commissioner of Central Excise and Service Tax - Appeals
The Customs Act1962 Demand for the payment of custom duty on Royalty Payments 6.60 - Various Financial Years Customs Excise and Service Tax Appellate Tribunal
West Bengal Sales Tax1994 Interest on Works Contract tax / Sales tax 0.03 - 2003-04 2005-06 & 2006-07 Assistant Commissioner of Commercial Taxes West Bengal
Kerala Value added Tax act 2003 Differential VAT rate demand 0.08 - 2008-09 Kerala VAT Tribunal
Kerala Value Added Tax Act 2003 Non - submissions of F-forms 0.05 0.02 2011-12 Assistant Commissioner Appeals
0.03 0.01 2009-10
Maharashtra Value Added Tax Act 2002 Demand on account of disallowance of Works Contract Tax TDS credit and applicability of VAT on service tax 0.09 0.02 2009-10 Joint Commissioner of Sales Tax Appeals
0.54 0.20 2008-09
0.13 0.08 2010-11
0.18 - 2011-12
Uttar Pradesh Value VAT and interest payable on the basis 0.28 0.08 2008-09 Additional Commissioner Appeals
Added Tax Act 2008 of regular assessment
Gujarat Value added tax Act 2003 Demand on Non receipt of statutory forms 0.74 - 2011-12 Gujarat VAT Tribunal
Gujarat Value added tax Act 2003 Demand on Non receipt of statutory forms 1.74 - 2012-13 Joint Commissioner of Commercial Tax
Income Tax Act 1961 Reopening of assessment u/s 147 0.62 0.62 2003-04 Income Tax Appellant Tribunal
(ITAT)
Income Tax Act 1961 Tax and penalty on deferred revenue treated as revenue 13.01 13.01 2004-05 Income Tax Appellant Tribunal (ITAT)
2.13 2.13 2005-06
5.12 5.12 2006-07
Income Tax Act 1961 Penalty levied on concealment of Income u/s 271(1)(C ) 0.28 0.28 2007-08 Commissioner of Income Tax (Appeal)
1.89 - 2008-09
Income Tax Act 1961 Tax and penalty on deferred revenue treated as revenue 5.53 5.53 2009-10 Commissioner of Income Tax
(Appeal)
Income Tax Act 1961 Demand on account of disallowance of certain expenditures 4.73 4.28 2011-12 Income Tax Appellant Tribunal (ITAT)
Income Tax Act 1961 Demand on account of disallowance of expenditure incurred towards employee separation scheme 1.61 - 2008-09 Commissioner of Income Tax
(Appeal)
Income Tax Act 1961 Demand on account of disallowance of certain expenditures 4.28 - 2012-13 Commissioner of Income Tax (Appeal)

Annexure I to the Independent Auditor's Report of even date to the members of AGCNetworks Limited on the standalone financial statements for the year ended 31 March 2017

(viii) The Company has not defaulted in repayment of loans or borrowings to any bank orfinancial institution or government during the year. The Company did not have anyoutstanding debentures during the year.

(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). The Company did not raise any term loan during theyear. Accordingly provisions of clauses 3(ix) of the Order are not applicable to theCompany.

(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.

(xi) The Company has not paid or provided for any managerial remuneration. Accordinglythe provisions of Clause 3(xi) of the Order are not applicable.

(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable. (xiii) In our opinion all transactions withthe related parties are in compliance with Sections 177 and 188 of Act where applicableand the requisite details have been disclosed in the financial statements etc. asrequired by the applicable accounting standards.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.

(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.

(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm Registration No: 001076N/N500013
per Adi P. Sethna
Partner
Membership No. 108840
Place: Mumbai
Date : 24 May 2017

Annexure II to the Independent Auditor's Report of even date to the members of AGCNetworks Limited on the standalone financial statements for the year ended 31 March 2017Annexure II

Independent Auditor's report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

1. In conjunction with our audit of the standalone financial statements of AGC NetworksLimited ("the Company") as at and for the year ended 31 March 2017 we haveaudited the internal financial controls over financial reporting ("IFCoFR") ofthe Company as at that date.

Management's Responsibility for Internal Financial Controls

2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Institute of Chartered Accountants of India ("the GuidanceNote"). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of the Company's business including adherence to Company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditors' Responsibility

3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India ("the ICAI") and deemed to beprescribed under section 143(10) of the Act to the extent applicable to an audit ofIFCoFR and the Guidance Note. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate IFCoFR were established and maintained and if suchcontrols operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Company's IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A Company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A Company'sIFCoFR include those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the Company are being made only in accordance with authorisations ofmanagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of theCompany's assets that could have a material effect on the financial statements.

Annexure II to the Independent Auditor's Report of even date to the members of AGCNetworks Limited on the standalone financial statements for the year ended 31 March 2017Inherent Limitations of Internal Financial Controls over Financial Reporting

7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.

Basis of Qualified Opinion

8. In our opinion according to the information and explanations given to us and basedon our audit the following material weakness has have been identified in the operatingeffectiveness of the Company's IFCoFR as at 31 March 2017: The Company's internalfinancial control over evaluation of accounting of non-routine transactions was notoperating effectively. This has during the year resulted in non-reversal of transactionfor sale of one property for which risks and rewards not transferred till the reportingdate and non-recognition of sale of the other property for which risks and rewards weretransferred during the current year due to inappropriate evaluation of timing of transferof risk and reward during an earlier year. This has led to misstatements of long-termloans and advances tangible assets other current assets other current liabilitiesprior period items profit on sale of property tax expense and resultant impact on theloss before tax and the reserves and surplus as at and for the year ended 31 March 2017.

9. A ‘material weakness' is a deficiency or a combination of deficiencies inIFCoFR such that there is a reasonable possibility that a material misstatement of theCompany's annual or interim financial statements will not be prevented or detected on atimely basis.

Qualified Opinion

10. In our opinion the Company has in all material respects adequate IFCoFR as at 31March 2017 based on the internal control over financial reporting criteria established bythe Company considering the essential components of internal control stated in theGuidance note and except for the effects of the material weakness described above in theBasis for Qualified Opinion paragraph on the achievement of the objectives of the controlcriteria the Company's IFCoFR were operating effectively as at 31 March 2017.

11. We have considered the material weakness identified and reported above in the Basisfor Qualified Opinion paragraph in determining the nature timing and extent of audittests applied in our audit of the standalone financial statements of the Company as at andfor the year ended 31 March 2017 and the material weakness has affected our opinion onthe standalone financial statements of the Company and we have issued a qualified opinionon the standalone financial statements.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm Registration No: 001076N/N500013
per Adi P. Sethna
Partner
Membership No. 108840
Place: Mumbai
Date : 24 May 2017