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Athena Financial Services Ltd.

BSE: 511718 Sector: Financials
NSE: N.A. ISIN Code: INE139C01014
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Athena Financial Services Ltd. (ATHENAFINSERV) - Auditors Report

Company auditors report

ATHENA FINANCIAL SERVICES LIMITED ANNUAL REPORT 2004-2005 AUDITORS' REPORT TO THE MEMBERS OF ATHENA FINANCIAL SERVICES LIMITED 1. We have audited the attached Balance Sheet of ATHENA FINANCIAL SERVICES LIMITED, (the Company) as at 31st March, 2005, the Profit and Loss Account and also the Cash Flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with Auditing Standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956 and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Attention is invited to: a. Sundry debtors amounting to Rs.205.56 crores are not fully supported. During the year the Company has made attempts to reconcile stock on hire, unmatured finance charges, repossessed stock, sundry debtors, security deposit, advance EMI, individual hirer account in institutional finance business, control account etc., but has not been able to reconcile all items. In view of the above, we are unable to express an opinion on the realisibility of the sundry debtors. 5. Attention is invited to the following Notes in the schedule Q: a. Note No.4 regarding amount due to UTI Bank Ltd., in relation to arrangement entered into with the bank. In the absence of adequate information and reconciliation of account, we are. unable to express an opinion about the extent of liability and its consequential effect on loss for the year and accumulated loss as stated in the balance sheet. b. Note No. 8 regarding non provision of interest. We are unable to express an opinion on the loss for the year and liabilities and accumulated loss as stated in the balance sheet. c. Note No. 4 regarding lie-up debtors account which is under reconciliation. We are unable to express an opinion on the loss for the year, assets and accumulated loss as stated in the balance sheet. d. Note No. 24 regarding bank accounts which are under reconciliation. We are unable to express an opinion on the loss for the year, liabilities, assets and accumulated loss as stated in the balance sheet. e. Note No. 19 regarding non availability of balance confirmation in respect of sundry debtors, sundry creditors, loans and advances given and taken, balance with bank and assets under hire purchase and lease. We are unable to express an opinion on the loss for the year, liabilities, assets and accumulated loss as stated in the balance sheet. 6. The Company incurred a net loss of Rs.122.42 crores during the year ended March 31, 2005 and, as of that date, the Company's total liabilities exceeded its total assets. Further considering our comments in paragraph 4 & 5 above with consequential aggregate effects on the loss for the year and accumulated loss, there is total erosion of networth of the Company. Some of the lenders have initiated legal steps for recovery as well as issued notices for winding up of the Company. The Company does not have means to discharge the liability fully. These facts raise substantial doubt that the Company will be able to continue as a going concern. Consequently, adjustments may be required to the recorded assets and classification of liabilities. 7. Subject to our comments in paras 4, 5 and 6 above, and further to our comments in the Annexure referred to above, we report that: (i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; (ii) 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; (iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (iv) In our opinion, the Balance Sheet, the Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ; (v) On the basis of written representation received from the directors, as on 31st March, 2005 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2005 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. (vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the notes thereon give the information required by the Companies Act, 1956, in the manner so required. 8. In view of our comments in paras 4, 5 and 6 above, the consequential aggregate effect could not be determined on the loss for the year, accumulated losses, reserve and surplus, assets and liabilities as at the Balance Sheet date. Subject to above and notes thereon give a true and fair view in conformity with the accounting principles generally accepted in India: a. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2005; b. in the case of the Profit and Loss Account, of the loss of the Company for the year ended on that date; and c. in case of Cash Flow statement, of the cash flows for the year ended on that dare. For Pawan Jain & Associates Chartered Accountants Pawan Jain Place : Pune M. No 32900. Date : 15.10.2005 Annexure referred to in paragraph 3 of our report of even date on the accounts of ATHENA FINANCIAL SERVICES LIMITED for the year ended 31st March, 2005. (i) (a) The Company is in the process of updating records showing particulars including quantitative details and situation of fixed assets. (b) Majority of the fixed assets other than the assets given on lease have been physically verified by the management during the year and no material discrepancies have been noticed on such verification. According to the information and explanations given to us, there is a regular program of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. (c) In our opinion, a substantial part of fixed assets has not been disposed off by the Company during the year. (ii) The Company is in the business of financing and hence it does not hold any finished goods, stores, spare parts and raw materials, Accordingly, clause 4(ii) of the Companies (Auditors' Report), Order 2003 is not applicable. (iii) (a) The Company has taken unsecured loans from the companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.10,97,56,495/-, and the year-end balance of loans taken from such companies was Rs.10,97,56,495/-. The Company has not given any loans to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. (b) In our opinion, the rate of interest, wherever applicable and other terms and conditions of such loans taken are not, prima facie, prejudicial to the interest of the Company. (c) The Company is irregular in making the payment of interest. There is no stipulation for repayment of the loans taken. (d) As informed to us, there is no overdue amount of unsecured loans taken from the companies taken u/s 301 of the Companies Act, 1956 as on 31st March, 2005 since there is no repayment stipulation. (iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of fixed assets. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control procedures. (v) (a) According to the information and explanations given to us, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered. (b) In our opinion and according to the information and explanations given to us, there are no transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of each party during the year. (vi) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rule, 1975 with regard to the deposits accepted by the public. (vii) In our opinion, the Company does not have an internal audit system commensurate with the size and nature of its business. (viii) According to the information and explanations given to us, maintenance of cost records has not been prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 with regard to the nature of the business of the Company. Therefore the provisions of clause 4(viii) of the Companies (Auditors' Report), Order 2003 is not applicable. (ix) (a) According to the information and explanations given to us and the records of the,Company examined by us, in our opinion, the undisputed statutory dues including provident fund, employees' state insurance, income tax, sales tax, wealth tax, custom duty, excise duty, cess and other material statutory dues as applicable have generally been regularly deposited with Appropriate Authorities though there has been delay in few cases The Company has not regularly deposited the service tax and there has been delay in a large number of cases. The Company has not d&posited service tax for the period July, 2003 to March, 2005. The Company has not deposited amount due for transfer to Investor Education and Protection Fund. (b) According to the information and explanations given to us, no undisputed dues payable in respect of income tax, wealth tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31st March, 2005 for a period of more than six months from the date they became payable except in case of Service Tax as mentioned below : Name of Nature of the Amount Period to Due date Date of the statute dues (Rs.) which the payment amount relates Central Service Tax 1,20,000 July' 03 25/08/03 Not paid Excise Act 1,00,000 August' 03 25/09/03 Not paid Income tax TDS 2,09,453 July 2004 to Various 24.3.2005 Act. September 2004 and 12.7.2005 respectively (c) According to the records of the Company and information and explanations given to us, dues of sales tax which has not been deposited on account of dispute and the forum where it is pending is as under: Name of Nature of the Amount Period to Forum where dispute the dues (Rs.) which is pending statute amount relates Sales Tax Act Assessment 3,66,000/- 1997-98 First Appeal Level Dues decided in favor of the Company. (x) The accumulated losses at the end of the financial year is more than 50% of its networth. The Company has not incurred cash. losses during the financial year covered by our audit. xi) (a) The Company has defaulted in repayment of dues to financial institutions, banks and debenture holders. The default is made in respect of Rs 190.39 crores. The duration of such default is based on the dates on which the amount has become due. The default starts from 3rd July, 2003 being the first due date on which the amount has become due and payable but not paid. In respect of all defaults there are various due dates on which the installments have became due and payable and default continues from the due dates to the year end. (b) The Company has made repayment of dues of Rs.14,69,02,940/- to financial institutions, banks and debenture holders with certain delay during the year. (xii) Based on our examination and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4(xii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. (xiii) In our opinion, the Company is not a chit fund or a nidhi mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report). Order, 2003 are not applicable to the Company. (xiv) The Company is not engaged in dealing or trading in shares, securities, debentures and other investments. All the investments are held as long term investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. (xv) According to the information and explanation given to us, the Company has not given any guarantee for loans taken by others, from banks or financial institutions during the year. Accordingly, the provisions of clause 4(xv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. (xvi) To the best of our knowledge and belief and according to the information and explanations given to us, no term loan was availed by the Company during the year. (xvii) According to the information and explanations given to us and on the basis of our examination of the cash flow statement and overall examination of the balance sheet of the Company, in our opinion no funds raised on short term basis have, prima facie, been used during the year for long term investment. The Company has not raised any funds during the year on long term basis. (xviii) The Company has. not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act 1956. Accordingly, the provisions of clause 4(xviii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. (xix) The Company has created securities in respect of debentures, as mentioned in the Note No. 5(f) of Schedule Q to the Balance Sheet. (xx) The Company has not raised any money by public issues during the year. Accordingly, the provisions of clause 4(xx) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. (xxi) Based upon the audit procedures performed and according to the information and explanation given and representations made by the management, we report that no fraud on or by the Company had been noticed or reported during the year. For Pawan Jain & Associates Chartered Accountants Pawan Jain Place : Pune M. No 32900. Date : 15.10.2005

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