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AGC Networks Ltd.

BSE: 500463 Sector: Telecom
NSE: AGCNET ISIN Code: INE676A01019
BSE LIVE 15:40 | 01 Dec 91.80 1.45
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NSE LIVE 15:30 | 02 Dec 90.55 -1.45
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OPEN 92.15
PREVIOUS CLOSE 90.35
VOLUME 2437
52-Week high 112.35
52-Week low 56.60
P/E
Mkt Cap.(Rs cr) 261.35
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 92.15
CLOSE 90.35
VOLUME 2437
52-Week high 112.35
52-Week low 56.60
P/E
Mkt Cap.(Rs cr) 261.35
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 March2016 the Statement of Profit and Loss and the Cash Flow Statement for the year thenended and a summary of the significant accounting policies and other explanatoryinformation.

Management’s Responsibility for the Standalone Financial Statements

2. The Company’s Board of Directors is responsible for the matters stated inSection 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone financial statements that give a true and fair view ofthe financial position financial performance and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014 (as amended). This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act; safeguarding theassets of the Company; preventing and detecting frauds and other irregularities; selectionand application of appropriate accounting policies; making judgments and estimates thatare reasonable and prudent; and design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement 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 whetherthe 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 ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial controls relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company’s Directors as well as evaluating theoverall presentation of the financial statements.

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

Basis for Qualified Opinion

8. As stated in Note 28 (b) to the Standalone financial statements during the yearended 31 March 2015 the Company had recognized sale of properties having aggregatecarrying value of Rs. 1.09 crores and profit on such sale amounting to Rs. 46.04 crores(net of incidental selling expenses amounting to Rs. 3.39 crores) under ‘exceptionalitems’. In our opinion as the significant risks and rewards for the said propertieshad not been transferred recognition of such sale was not in accordance with theprinciples laid under Accounting Standard (AS) 9 Revenue Recognition and the sale shouldhave been reversed during the year ended 31 March 2016. Had the Company followedprinciples of AS 9 and reversed the sale transaction during the year ended 31 March 2016the prior period items and loss before tax would have been higher by Rs. 46.04 croreseach. (March 2015: Exceptional items and profit before tax would have been lower by Rs.46.04 crores each). Tax expense for the year ended 31 March 2016 would have been lower byRs. 3.27 crores (March 2015: Rs. 3.27 crores). Long-term loans and advances and carryingvalue of tangible assets as at 31 March 2016 would have been higher by Rs. 3.27 crores(March 2015: Rs. 3.27 crores) and Rs. 1.09 crores (March 2015: Rs. 1.09 crores)respectively; reserves and surplus other current assets and other current liabilities asat that date would have been lower by Rs. 42.77 crores (March 2015: Rs. 42.77 crores) Rs.47.32 crores (net of Rs. 3.20 crores received during the year) (March 2015: Rs. 50.52crores) and Rs. 0.19 crores (March 2015: Rs. 3.39 crores) respectively. Our audit opinionon the financial statements for the year ended 31 March 2015 was qualified in respect ofthis matter.

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 2016 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 ("theOrder") issued by the Central Government of India in terms of Section 143(11) of theAct we give in the Annexure I a statement on the matters specified in paragraphs 3 and 4of the Order.

11. 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 bestof our knowledge and belief were necessary for the purpose of our audit;

b. except for the effects of the matter 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 standalone financial statements dealt with by this report are in agreement withthe 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 specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 (as amended);

e. the matter described in Basis for Qualified Opinion paragraph in our opinion mayhave an adverse effect on the functioning of the Company;

f. on the basis of the written representations received from the directors as on 31March 2016 and taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2016 from being appointed as a director in terms of Section164(2) of the Act;

g. the qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph;

h. we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as at 31 March 2016 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 19 May 2016 as per Annexure II expressed a qualified opinion.

i. with respect to the other matters to be included in the Auditor’s Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. as detailed in Note 37 to the standalone financial statements the Company hasdisclosed the impact of pending litigations on its standalone financial position;

ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;

iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company

For Walker Chandiok & Co LLP

(Formerly Walker Chandiok & Co)

Chartered Accountants

Firm’s Registration No.: 001076N/N500013

per Adi P. Sethna

Partner

Membership No.: 108840

Place : Mumbai

Date : 19 May 2016

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 2016

Annexure 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 full particulars includingquantitative 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 deed of an immovable property is 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) (a) The Company has not granted any loan secured or unsecured to companiesfirms limited liability partnerships (LLPs) or other parties covered in the registermaintained under Section 189 of the Act during the year. Accordingly the provision ofclauses (a) of the Order is not applicable

(b) The principal and the interest for the loan granted to foreign subsidiary in anearlier year was repayable on demand and the entire amount of loan has been repaid duringthe year as stipulated.

(c) There is no overdue amount in respect of loan granted to foreign subsidiary.Accordingly the provisions of clause (c) of the Order is 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 tothe Company.

(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 to 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 and service tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:

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 2016

Name of the statute Nature of dues Amount Amount Paid Under Protest Period to which the amount relates Forum where dispute is pending
(Rs. in Crore) (Rs. 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
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 Incorrect Input Tax Credit of Service Tax paid on Foreign Service Provider 4.73 0.05 2003-04 to 2007-08 Customs Excise and Service Tax Appellate Tribunal
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
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
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
West Bengal Sales Interest on Works Contract tax / 0.03 - 2003-04 Assistant Commissioner of
Tax1994 Sales tax 2005-06 & 2006-07 Commercial Taxes West Bengal
Kerala Value added Tax act 2003 Differential VAT rate demand 0.08 - 2008-09 Kerala VAT Tribunal
Uttar Pradesh Value Added Tax Act 2008 VAT and interest payable on the basis of regular assessment 0.28 0.08 2008-09 Additional Commissioner Appeals
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
Kerala Value Added Tax Act 2003 Non-submissions of F-forms 0.05 0.02 2011-12 Assistant Commissioner Appeals
Kerala Value Added Tax Act 2003 Non-submissions of F-forms 0.03 0.01 2009-10 Assistant Commissioner Appeals
Maharashtra Value Added Tax Act 2002 Demand on account of disallowance of Works Contract Tax TDS credit and applicability of VAT and service tax 0.54 0.20 2008-09 Joint Commissioner of Sales Tax Appeals
Maharashtra Value Added Tax Act 2002 Demand on account of disallowance of Works contract Tax TDS credit and applicability of VAT and service tax 0.13 0.08 2010-11 Joint Commissioner of Sales Tax Appeals
Maharashtra Value Added Tax Act 2002 Demand on account of disallowance of Works contract Tax TDS credit and applicability of VAT and service tax 0.18 - 2011-12 Joint Commissioner of Sales Tax Appeals
Gujarat Value added tax act 2003 Demand on Non-receipt of statutory forms 0.74 - 2011-12 Gujarat VAT Tribunal
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)
Income Tax Act 1961 Tax and penalty on deferred revenue treated as revenue 2.13 2.13 2005-06 Income tax Appellant Tribunal (ITAT)
Income Tax Act 1961 Tax and penalty on deferred revenue treated as revenue 5.12 5.12 2006-07 Income tax Appellant Tribunal (ITAT)

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 2016

Name of the statute Nature of dues Amount Amount Paid Under Protest Period to which the amount relates Forum where dispute is pending
(Rs. in Crore) (Rs. in Crore)
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)
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 Tax and penalty on deferred revenue treated as revenue 5.00 - 2011-12 Dispute Resolution Panel
Income Tax Act 1961 Penalty levied on concealment of Income u/s 271(1)(C) 1.89 - 2008-09 Commissioner of Income tax (Appeal)

(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) Managerial remuneration for the year ended 31 March 2016 has been paid andprovided in accordance with the requisite approvals mandated by the provisions of section197 of the Act read with Schedule V to the Act.

(xii) In our opinion the Company is not a Nidhi Company. Accordingly the provisionsof clause 3(xii) of the Order are not applicable to the Company.

(xiii) In our opinion all transactions with the related parties are in compliance withsections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable accountingstandards.

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

(xv) In our opinion the Company has not entered into any non-cash transactions withdirectors or persons connected with them. (xvi) The Company is not required to beregistered under section 45-IA of the Reserve Bank of India Act 1934.

For Walker Chandiok & Co LLP

(Formerly Walker Chandiok & Co)

Chartered Accountants

Firm’s Registration No.: 001076N/N500013

per Adi P. Sethna

Partner

Membership No.:108840

Place : Mumbai

Date : 19 May 2016

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 2016

Annexure II

Independent Auditor’s Report on the Internal Financial Controls under Clause (i)of Sub-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 of and for the year ended 31 March 2016 we haveaudited the internal financial controls over financial reporting (IFCoFR) of the Companyas of that date.

Management’s Responsibility for Internal Financial Controls

2. The Company’s Board of Directors is responsible for establishing andmaintaining internal financial controls based on 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 tocompany’s policies the safeguarding of its assets the prevention and detection offrauds and errors 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 onour audit. We conducted our audit in accordance with the Standards on Auditing issued bythe Institute of Chartered Accountants of India (ICAI) and deemed to be prescribed undersection 143(10) of the Act to the extent applicable to an audit of IFCoFR and theGuidance Note issued by the ICAI. 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 includingthe assessment of the risks of material misstatement of the financial statements whetherdue to fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified 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 assuranceregarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accountingprinciples. A company’s IFCoFR includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the Company are being made only in accordance withauthorisations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company’s assets that could have a material effect on thefinancial 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 2016

Inherent 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 been identified in the operatingeffectiveness of the Company’s IFCoFR as at 31 March 2016:

The Company’s internal financial control over evaluation of accounting ofnon-routine transactions was not operating effectively. This has during the yearresulted in non-reversal of transaction for sale of properties recorded in the previousyear due to inappropriate evaluation of timing of transfer of risk and reward. This hasled to misstatements of long-term loans and advances tangible assets other currentassets other current liabilities prior period items tax expense and resultant impact onthe loss before tax and the reserves and surplus as at and for the year ended 31 March2016.

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 ona timely basis.

Qualified Opinion

10. In our opinion the Company has in all material respects maintained adequateIFCoFR as at 31 March 2016 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance note and except for the effects of the material weaknessdescribed above in the Basis for Qualified Opinion paragraph the Company’s IFCoFRwere operating effectively as at 31 March 2016.

11. We have considered the material weakness identified and reported above indetermining the nature timing and extent of audit test applied in our audit of the 31March 2016 standalone financial statements of the Company and the material weakness hasaffected our opinion on the standalone financial statements of the Company and we haveissued a qualified opinion on the standalone financial statements.

For Walker Chandiok & Co LLP

(Formerly Walker Chandiok & Co)

Chartered Accountants

Firm’s Registration No.: 001076N/N500013

per Adi P. Sethna

Partner

Membership No.: 108840

Place : Mumbai

Date : 19 May 2016

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