To the members of CRANES SOFTWARE INTERNATIONAL LIMITED
1. We have audited the accompanying standalone financial statements of Cranes SoftwareInternational Limited ("the Company") which comprise the Balance Sheet as at 31stMarch2017 the Statement of Profit and Loss the Cash Flow Statement for the year then endedand a summary of the significant accounting policies and other explanatory information.
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 preparationand presentation of these financial statements that give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial 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.
3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made there under.
4. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act and other applicable authoritative pronouncements issued by theInstitute of Chartered Accountants of India. Those Standards and pronouncement requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.
5. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the standalone financial statements. The procedures selected dependon the auditor's judgment including the assessment of the risks of material misstatementof the financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control 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 audital so 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.
6. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.
Basis for Qualified Opinion
7. The attached Balance Sheet as at 31st March 2017 is drawn on the basisof the Principle of Going Concern'. We opine as follows in this connection :
7.1 An advance of Rs. 23978.83 lakhs is due from a party for an inordinate period andin our opinion recovery of the same is doubtful. However the company continues toclassify such amounts as Good'.
However no evidence has been given to us to consider those amounts as recoverable ason the date of Balance Sheet.
7.2 Attention of the members is invited to note 3.10 of the Notes regarding recognitionof deferred tax credit on account of unabsorbed losses and allowances aggregating toRs.34517.47 lakhs (year ended March 31 2016 Rs. 31000.90 lakhs). This does not satisfythe virtual certainty test for recognition of deferred tax credit as laid down inAccounting Standard 22.
7.3 Reference is drawn to note no. 3.31 of the Notes regarding the amounts classifiedunder "Fixed Assets" including "Intangible Assets Under Development"amounting to Rs. 22458.78 lakhs. No evidence has been produced before us for testing itsimpairment and in the absence of the same we are unable to express any opinion on theimpairment to such asset. In our opinion such test of impairment as on the date ofBalance Sheet is mandatory especially in view of the higher degree of the obsolescence ofsoftware which is stated to be under various stages of development though no furtherdevelopments have been carried out during the recent years.
7.4 The appropriateness of the Going Concern' concept based on which the accountshave been prepared is interalia dependent on the Company's ability to infuse requisitefunds for meeting its obligations rescheduling of debt and resuming normal operations.
8 We further report that except for the effect if any of the matters stated inparagraphs 7.3 above whose effect are not ascertainable had the observations made inparagraphs 7.1 and 7.2 above been considered the loss after tax for the year ended March31 2017 would have been higher by Rs. 58496.30 lakhs.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the matters expressed in Basis for Qualified opinion and Emphasisof matter 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 31st March 2017its loss and its cashflows for the year ended onthat date.
Emphasis of Matter
1. Redemption of Foreign currency convertible bond amounting to Rs. 29085 lakhs (42million Euros) to the holders of the bonds have fallen due during April 2011 and is yet tobe redeemed as on the date of Balance Sheet. A winding up petition has been filed by thetrustees of the Foreign Currency Convertible Bond holders against the Company before theHon'ble High Court of Karnataka for non-payment of principal and the accrued interestthereon.
2. a) Term loans and working capital loans availed by the company from various banksamounting to Rs.78132.25 lakhs which includes an amount of Rs. 5961.86 lakhs taken overby an Asset Reconstruction Company remain unpaid and are overdue since 2009.
b) Legal proceedings u/s.138 of the Negotiable Instruments Act has been initiated bythe following Banks against the company. i. State Bank of Travancore. ii. Canara Bank iii.Industrial Development Bank of India iv. State Bank of Mysore v. Bank of India
These Banks have filed cases before the Debt Recovery Tribunal (DRT) / Hon'ble Courtsetc for recovery of dues. These proceedings are in various stages of disposal before the"DRT" and respective Hon'ble Courts. Winding up petitions have been filed byCanara bank and Bank of India against the company before the Hon'ble High Court ofKarnataka for non-payment of principal and the accrued interest thereon.
3. In our opinion the securities provided to Banks are not adequate to cover theamounts outstanding to them as on the date of Balance Sheet.
4. We would like to draw the attention of the members to note no. 3.25 of the financialstatements regarding default of payments to various statutory authorities.
5. We draw attention to Note No. 3.35 of the financial statements regarding theinvestments (including receivables) made in wholly owned subsidiaries. As explained by themanagement it being a long term and strategic investment there is a reasonable certaintythat there will be no diminution in the value of the investment and is confident ofrecovery of receivables and therefore no provisioning has been considered necessary. Thedetails of investments (including receivables) in subsidiaries are as under.
|Name of the Subsidiary ||Amount |
|1 Cranes Software Inc ||5369.02 |
|2 Cranes Software International Pte Limited ||1503.33 |
|3 Systat Software UK Ltd ||243.62 |
|4 Proland Software Private Limited ||462.81 |
|5 Systat Software Gmbh ||187.11 |
|6 Systat Software Inc. ||13103.69 |
|7 Dunn Solutions Groups Inc ||109.94 |
|Total ||20979.51 |
6. The company had invested in the below mentioned wholly owned subsidiaries. Due tothe cumulative losses in the subsidiaries the value of investment is eroded.
|Name of the Subsidiary ||Investment ||Shareholder Funds |
|1 Esqube Communication Solutions Pvt Ltd ||179.78 ||(50.72) |
|2 Proland Software Pvt Ltd ||318.89 ||(643.69) |
|3 Tilak Auto Tech Private Limited ||51.62 ||(182.63) |
|4 Systat Software Inc. USA ||1851.18 ||(6105.97) |
|5 Cranes Software International Pte Limited ||44.31 ||(575.23) |
|TOTAL ||2445.78 ||(7558.25) |
The company has not provided for diminution / impairment in the value of itsinvestments in the above wholly owned subsidiaries as required by the Accounting Standard13.
7. The company has provided interest on the term loans from banks including penalinterest at the rates provided in the loan sanction letters. No confirmation is obtainedfrom lenders for the dues as these have been classified as Non- Performing Assets (NPA) bythe respective banks.
8. We further draw attention on the following non compliances under the Companies Act2013 and rules thereon a. Non-appointment of Chief Financial Officer as required undersection 203 of the said Act. b. The Company has drawn and utilised an amount Rs. 43.77lakhs from the CSIL Employees Comprehensive Gratuity Trust' fund for the purpose notintended in terms ofThe Payment of Gratuity Act 1972'. (See note No. 3.04 of theFinancial Statements)
Our Report is not qualified in respect of the above matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2015 ("the order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure A a statement on the matters specified in paragraphs 3and 4 of the order to the extent applicable.
2. As required by Section143 (3) of the Actwe 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 purposes of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
(d) In our opinion except for the matters expressed in paras 7.2 and 7.3 of the Basisfor Qualified opinionthe a fore said standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7of theCompanies (Accounts) Rules 2014.
(e) In our opinion the qualifications and matters specified in the Emphasis ofMatter" paragraph may have an adverse effect on the functioning of the Company.
(f) On the basis of the written representations received from the directors as on 31stMarch 2017 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2017 from being appointed as a director in termsof Section 164(2) of the Act.
(g) with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"; and
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule11 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. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements Refer Note No. 3.25 to the financialstatements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. The Company has not transferred an amount of Rs. 7.21 Lakhs which is required tobe transferred to the Investor Education and Protection Fund.
iv. The Company has not provided requisite disclosures in its standalone financialstatements as to holdings as well as dealings in Specified Bank Notes during the periodfrom 8 November 2016 to 30 December 2016.
| ||For S.JANARDHAN & ASSOCIATES |
| ||Chartered Accountants |
| ||Firm Registration No. 005310S |
| ||Vijay Bhatia |
|Bengaluru ||Partner |
|May 30 2017 ||Membership No.201862 |