To the members of Birla Cotsyn (India) Limited
Report on financial statements
We have audited the accompanying financial statements of Birla Cotsyn (India)Limited (the Company) which comprise the Balance Sheet as at 31st March 2014 and thestatement of Profit and Loss and Cash Flow Statement for the period then ended and asummary of significant accounting policies and other explanatory information.
Managements responsibility for the Financial statements
Management is responsible for the preparation of these financial statements that give atrue and fair view of the financial position financial performance and cash flows of theCompany in accordance with the Accounting Standards notified under the Companies Act 1956(which continues to be applicable in respect of Section 133 of the Companies Act 2013 interms of General Circular 15/2013 dated 13th September 2013 of the Ministry of CorporateAffairs) and in accordance with the accounting principles generally accepted in India.This responsibility includes the design implementation and maintenance of internalcontrol relevant to the preparation and presentation of the financial statements that givea true and fair view and free from material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain evidence about the amounts anddisclosure in the financial statements. The procedures selected depend on theauditors judgment including the assessment of the risk of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal control relevant to the Companys preparation and fairpresentation of the financial statements in order to design audit procedures that areappropriate in the circumstances but not for the purpose of expressing an opinion on theeffectiveness of the Companys internal control. An audit also includes evaluatingthe appropriateness of the accounting policies used and the reasonableness of theaccounting estimates made by Management as well as evaluating the overall presentation ofthe financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified opinion.
Basis for Qualified opinion
1) With reference to note no. 8(b) regarding inter corporate deposits ofRs.198595895/- taken from various parties as at 31 March 2014 in the absence of 3rdparty confirmation reconciliation if any and other supportive audit evidence we areunable to comment upon such balances.
Further few such parties have already filed winding up petition under section 433 and434 of the Companies Act 1956 (the act") against the Company for non-paymentof dues. These matters are sub-judice and the impact if any of the outcome isunascertainable of this stage.
2) With reference to note no. 8(d) regarding dues to related parties ofRs.92969145/- and note no. 9(a) trade payables of Rs.249836255/- as at 31 March2014 in the absence of third party confirmation reconciliation if any and othersupportive audit evidence we are unable to comment upon such balances.
3) With reference to note no. 13(a) regarding capital advances of Rs. 980226844/- asat 31 March 2014 given to various parties in the absence of third party confirmationreconciliation if any and other supportive audit evidence we are unable to comment uponits recoverability in cash or kind if any. The amounts represent balances outstanding formore than 5 years in respect of projects of the Company which have not taken off.
4) With reference to note no. 18(a) regarding loans of Rs. 72998404/- given to onerelated party which has incurred losses and also has negative net worth as at 31 March2013 in the absence of the audited accounts and detailed information of projected cashflows as at 31 March 2014 or other supportive audit evidence we are unable to commentupon its impairment if any.
5) With reference to note no. 16(a) regarding trade receivable of Rs.853014604/- asat 31 March 2014 the company has made provision for doubtful debts of Rs.848536833/-including provision of Rs.50514751/- for the current period. In the absence of thirdparty confirmation reconciliation if any and other supportive audit evidence we areunable to comment upon its balance recoverability if any.
6) With reference to note no. 11(4) regarding Plant & Machinery of Rs.Rs.373548883/- situated at one factory unit of the company has been generally operatingat lower capacity. In the absence of future cash flow projection and information about thevalue in use we are unable to comment upon its impairment provision if any as perAccounting Standard 28 "Impairment of Assets".
In our opinion and to the best of our information and according to the explanationsgiven to us subject to the effects of the matter described in the Basis for QualifiedOpinion paragraph and read with points mentioned in Emphasis of Matter paragraph thefinancial statements give the information required by the Act in the manner so requiredand give a true and fair view in conformity with the accounting principles generallyaccepted in India:
(a) in the case of the Balance Sheet of the state of affairs of the Company as at 31stMarch 2014;
(b) in the case of the statement of Profit and Loss of the loss for the period endedon that date; and
(c) in the case of the Cash Flow statement of the cash flows for the period ended onthat date.
Emphasis of Matter
1. We draw attention to the note no. 3(e) in the financial Statements. The company hasincurred net loss of Rs.545476827/- during the period ended 31st March 2014 and as ofthe date; the companys current liabilities exceeded its current assets byRs.2870090359/- subject to the effects of matters described in the Basis for QualifiedOpinion paragraph. These factors along with other matters as set forth in said note raisesubstantial doubt about the companys ability to continue as a going concern in theforeseeable future. However the companys financial statement has been prepared ongoing concern basis as disclosed by management in said note.
2. With reference to note no. 4(a) regarding notice issued by consortium of banks undersection 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcementof Security Interest (SARFAESI) Act 2002 for non-payment of installments and interestthereon after the due date by the company and therefore all loans accounts became NonPerforming Assets with effective from respective dates mentioned in such notice. We areinformed that the company is contesting the action taken under section 13(4) of SARFAESIAct and therefore the matter is sub judice. These factors along with other matters as setforth in said notice raise substantial doubt about the companys ability to continueas a going concern in the foreseeable future. However the companys financialstatements have been prepared on going concern basis as disclosed by management in saidnote.
The company had given loan to three related parties in earlier years and the amountoutstanding as at 31st March 2014 Rs.420279268/- (including interest till 31st March2014) which is not in compliance with the requirements of section 295 of the CompaniesAct 1956.
Report on other Legal and regulatory requirements
1. As required by the Companies (Auditors Report) Order 2003 ("theOrder") issued by the Central Government of India in terms of sub-section (4A) ofsection 227 of the Act we give in the Annexure a statement on the matters specified inparagraph 4 and 5 of the Order.
2. As required by section 227(3) of the Act we report that:
a. we have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of audit except for the matterdescribed in the Basis for Qualified Opinion Paragraph;
b. in our opinion proper books of accounts as required by law have been kept by thecompany so far as appears from our examination of those books;
c. the Balance Sheet Statement of Profit and Loss and Cash Flow Statement dealt withby this report are in agreement with the books of accounts;
d. except for the effects of the matters described in the Basis for Qualified OpinionParagraph and read with points mentioned in emphasis of Matter paragraph in our opinionthe Balance Sheet Statement of Profit and Loss and Cash Flow Statement comply with theAccounting Standards notified under the Act (which continues to be applicable in respectof Section 133 of the Companies Act 2013 in terms of General Circular 15/2013 dated 13thSeptember 2013 of the Ministry of Corporate Affairs);
e. on the basis of written representation received from the directors as on 31st March2014 and taken on record by the Board of Directors none of the director is disqualifiedas on 31st March 2014 from being appointed as a director in terms of clause (g) of Sub-Section (1) of Section 274 of the Companies Act 1956.
| ||For samria & Co. |
| ||Chartered Accountants |
| ||FRN: 109043W |
| ||Adhar samria |
|place: Mumbai ||(Partner) |
|date: 1st June 2014 ||M.No. 049174 |
ANNEXURE TO THE INDEPENDENT AUDITORS REPORT
[Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements in the Independent Auditors Report of even date to the members ofBirla Cotsyn (India) Limited ("the Company") on the financial statementsfor the period ended 31st March 2014]
1 Fixed Assets:
1.1 The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.1.2 All the fixed assets have not been physically verified by the Management during theperiod but there is a regular programme of verification which in our opinion isreasonable having regard to the size of the company and the nature of its assets. Nomaterial discrepancies were noticed on such verification by the management between thebook and physical verification records. 1.3 In our opinion and according to theinformation and explanations given to us a substantial part of fixed assets has not beendisposed off by the Company during the period. However in the previous year the Companyhad taken advances for sale of factory land situated at two separate units of the Companyand according to the information and explanation given to us we are of the opinion thatthe future disposal of said part fixed assets will not affect the going concern status ofthe company.
2.1 As per the information given to us Inventory has been physically verified by themanagement during the period. In our opinion the frequency of verification is reasonable.
2.2 In our opinion and according to the information and explanation given to us theprocedures of physical verification of such inventory followed by the Management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness 2.3 The Company is maintaining records of inventory and no major discrepancieswere noticed between physical stock and the book records at the end of the period.
3 Loans borrowed or given:
3.1 According to information and explanations given to us the Company has granted loanto three companies covered in the register maintained under section 301 of Companies Act1956. The maximum amount involved during the period was Rs.420279268/-and theperiod-end balance of loan granted to such parties was Rs. Rs.420279268/- (includinginterest accrued till 31st March 2014). 3.2 In our opinion and according to theinformation and explanation given to us the rate of interest and other terms andconditions for such loans are not prima facie prejudicial to the interest of theCompany.
3.3 The said loans (including interest thereon) are repayable on demand and there areno repayment schedules. Accordingly the question of overdue amount does not arise.
3.4 As mentioned in point 3.3 above in the absence of agreed repayment schedule thereis no overdue amount in excess of Rs. 1 Lakh in respect of loan granted to Companieslisted in the Register maintained under 301 of the Companies Act 1956.
3.5 The Company has taken during the period fresh unsecured loan from Company coveredin the register maintained under section 301 of the Act. The maximum amount involvedduring the period is Rs.106418008/- and the period end balance of such loan isRs.104113524/-.
3.6 In our opinion the rate of interest and other terms and conditions of such loansare not prima facie prejudicial to the interest of the Company.
3.7 In respect of the aforesaid loans since there are no terms for repayment ofinterest and principal amount we cannot comment upon the regularity of the same.
4 Internal Control system:
4.1 In our opinion and according to the information and explanations given to us thereis adequate internal control procedure commensurate with the size of the Company and thenature of its business for the purchases of inventory and fixed assets and for the sale ofgoods and services. 4.2 As regards purchase of fixed assets and capitalization of work inprogress the Company needs to strengthen internal controls for keeping properidentification of Assets. During the year Rs.33905855/- of Capital Advances has beenadjusted against Creditors as the materials were not supplied by them. 4.3 During theperiod under audit the Company did not have any purchase or sale of traded goods.
5 transactions covered u/s 301 of the Companies Act 1956:
5.1 According to the information and explanation given to us we are of opinion thatthe particulars of contract or arrangement referred to in section 301 of the Companies Act1956 that need to be entered into the register maintained under section 301 have been soentered.
5.2 According to the information and explanation given to us we are of opinion thatthe transaction made in pursuance of such contracts or arrangement exceeding the value ofRupee Five Lakh in respect of such parties during period have been made at a price whichare reasonable having regards to prevailing market price at the relevant time.
6 deposit from public:
6.1 The Company has defaulted in repayment of dues of Rs. 22957000 till 31st March2014
6.2 The Company has made fixed deposit which is lower than 15% of the principal amountof its deposits maturing during the period ending 31st March 2014.
6.3 The Company has not made provision for penal interest as per the Companies(Acceptance of deposits) Rules 1975.
7 Internal audit systems:
7.1 The Company has appointed an external firm of Chartered Accountants as InternalAuditors of the Company. In our opinion the scope of Internal Audit needs to be widened.
8 Maintenance of Cost records:
8.1 We have been informed by the Management that proper records under clause (d) of subsection 1 of section 209 of the Companies Act 1956 have been maintained.
9 remittance of statutory dues:
9.1 Undisputed statutory dues including provident fund investor education andprotection fund employees state insurance income-tax sales-tax wealth-tax servicetax customs duty excise duty cess have not been regularly deposited with theappropriate authorities and there has been significant delay in the same.
9.2 According to the information and explanation given to us no undisputed amountspayable in respect of provident fund investor education and protection fund employeesstate insurance income tax wealth tax service tax sales tax custom duty excise dutycess and other undisputed statutory dues were outstanding at the end for the period ofmore than six month from the date they became payable except as stated below
|name of the statute ||nature of dues ||Amount (rs) ||period to which the Amount relates ||due date ||date of payment |
|Income Tax ||Dividend Distribution tax ||19332677 ||2009-10 ||04-10-2010 ||Not paid |
|Income Tax ||TDS ||2068460 ||2012-13 ||01-04-2012 to 31-12-2012 ||Not Paid |
9.3 According to the information and explanations given to us and as per the records ofthe Company examined by us there are no dues outstanding of sales tax income tax customduty wealth tax service tax excise duty and cess which have not been deposited onaccount of any dispute.
10 Accumulated Cash Losses:
10.1 In our opinion the accumulated losses of the company are more than fifty percentof its net worth. The Company has not incurred any cash losses during the period andimmediately preceding current period.
11 dues to Bank and Financial Institutions
11.1 In our opinion and according to the information and explanation given to us theCompany has defaulted in repayment of dues to financial institutions and banks forprincipal amount of Rs.2326484049/- and interest amounting of Rs.552005217/- sinceMay 2012 and onwards. The Company has received notice issued by consortium of banks undersection 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcementof Security Interest (SARFAESI) Act 2002 for non-payment of installments and interestthereon after the due date by the company and therefore all loans accounts became NonPerforming Assets with effective from respective dates mentioned in such notice. We areinformed that the company is contesting the action taken under section 13(4) of SARFAESIAct and therefore the matter is sub judice.
12 Loans and Advances against securities:
12.1 According to the information and explanation given to us and based on thedocuments and records produced to us the Company has not granted any loans and advanceson the basis of securities by way of pledge of shares debentures or other securities.
13 provisions applicable to nidhi and Chit Fund Companies:
13.1 The Company is not a Chit Fund or a Nidhi / mutual benefit fund / society.Therefore clause 4(xiii) of the Order is not applicable to the Division.
14 dealing in shares and securities
14.1 The Company is not dealing in or trading in shares securities debenture andother investments. Therefore clause 4(xiv) of the Order is not applicable to theDivision.
15 Guarantees given by the division for Loans taken by others:
15.1 According to the information and explanations given to us the Company has notgiven any guarantee for loans taken by others from banks or financial institutions.
16 end use of term Loans raised:
16.1 The Company has not taken any term loans during the period under audit. Hence thequestion of application of term loans for the purposes for which they were obtained doesnot arise.
17 utilisation of short term Funds:
17.1 According to the information and explanations given to us and on an overallexamination of the balance sheet of the Company we report that no funds raised on shortterm basis have been used for long-term investments during the period under audit.
18 preferential Allotment of shares security of debentures and public Issue
18.1 According to the information and explanations given to us the Company has notmade any preferential allotment of shares to parties covered in the register maintainedunder section 301 of the Act.
19 Issue of debentures
19.1 The Company has not issued any secured debentures during the period covered by ourreport. Accordingly provisions of clause (xix) of the Companies (Auditors Report) order2003 are not applicable.
20 public Issue
20.1 The company has not raised any money by public issues during the period covered byour report. Accordingly provisions of clause (xx) of the Companies (Auditors Report)order 2003 are not applicable
21.1 During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanation given to us we have neither come across anyinstance of fraud on or by the Company noticed or reported during the period nor havebeen informed of any such case by the management.
| ||For samria & Co. |
| ||Chartered Accountants |
| ||FRN: 109043W |
| ||Adhar samria |
|place: Mumbai ||(Partner) |
|date: 1st June 2014 ||M.No. 049174 |