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Cranes Software International Ltd.

BSE: 512093 Sector: IT
NSE: CRANESSOFT ISIN Code: INE234B01023
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NSE 05:30 | 01 Jan Stock Is Not Traded.
OPEN 1.30
PREVIOUS CLOSE 1.36
VOLUME 69860
52-Week high 2.03
52-Week low 0.84
P/E
Mkt Cap.(Rs cr) 15
Buy Price 0.00
Buy Qty 0.00
Sell Price 1.30
Sell Qty 15928.00
OPEN 1.30
CLOSE 1.36
VOLUME 69860
52-Week high 2.03
52-Week low 0.84
P/E
Mkt Cap.(Rs cr) 15
Buy Price 0.00
Buy Qty 0.00
Sell Price 1.30
Sell Qty 15928.00

Cranes Software International Ltd. (CRANESSOFT) - Auditors Report

Company auditors report

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 31stMarch 2016 the Statement of Profit and Loss the Cash Flow Statement for the year thenended and a summary of the significant accounting policies and other explanatoryinformation.

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 and presentation of these financial statements that give a true and fair viewof the financial position financial performance and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement 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 materialmisstatement of the financial statements whether due to fraud or error. In making thoserisk assessments the auditor considers internal financial control relevant to theCompany’s preparation of the financial statements that give a true and fair view inorder to design audit procedures that are appropriate in the circumstances. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company’s Directors as wellas evaluating the overall 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 2016 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 and inour opinion recovery of the same is doubtful. However the company continues to classifysuch amounts as ‘Good’. However no evidence has been given to us to considerthose amounts as recoverable as on 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.31000.90 lakhs (year ended March 31 2015 Rs. 26965.82 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 theaccounts have been prepared is interalia dependent on the Company’s ability to infuserequisite funds for meeting its obligations rescheduling of debt and resuming normaloperations.

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 2016 would have been higher by Rs. 54979.73 lakhs.

Qualified Opinion

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 2016 its loss and its cash flows for the year endedon that date.

Emphasis of Matter

1. Redemption of Foreign currency convertible bond amounting to Rs. 31542 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. 67885.90 lakhs which includes an amount of Rs. 5157.50 lakhs takenover by 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’bleCourts etc for recovery of dues. These proceedings are in various stages of disposalbefore the "DRT" and respective Hon’ble Courts. Winding up petitions havebeen filed by Canara Bank and Bank of India against the company before the Hon’bleHigh Court of Karnataka 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.

(Rs in Lakhs)
Name of the Subsidiary Amount
1 Caravel Info Systems Private Limited 362.33
2 Cranes Software International Pte Limited 1553.53
3 Esqube Communication Solutions Private Limited 179.78
4 Proland Software Private Limited 781.70
5 Systat Software Gmbh 7445.22
6 Systat Software Inc. 18795.87
7 Tilak Auto Tech Private Limited 51.62
Total 29170.06

6. We further draw attention on the following non compliances under the Companies Act2013 and rules thereon a. Non-appointment of Woman Director as required under the secondproviso to Section 149(1) of the said Act. b. Non-appointment of Chief Financial Officeras required under section 203 of the said Act. c. The Company has drawn and utilised anamount Rs. 43.77 lakhs from the ‘CSIL Employees Comprehensive Gratuity Trust’fund for the purpose not intended in terms of ‘The Payment of Gratuity Act1972’.(See note No. 3.04 of the Financial 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 ("theorder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure A a statement on the matters specified inparagraphs 3 and 4 of the order to the extent applicable.

2. 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 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 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.

(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 2016 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2016 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 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. 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. 3.94 Lakhs which is required tobe transferred to the Investor Education and Protection Fund.

For S.JANARDHAN & ASSOCIATES
Chartered Accountants
Firm Registration No. 005310S
Vijay Bhatia
Bengaluru Partner
May 29 2016 Membership No.201862

ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT

The Annexure referred to in our Independent Auditor's report to the members of CranesSoftware International Limited ('the Company') on the standalone financial statements forthe year ended on 31st March 2016.

We report that:

Annexure A to the Independent Auditors Report

i) (a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. Inaccordance with this programme certain fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification. In our opinion this periodicityof physical verification is reasonable having regard to the size of the Company and thenature of its assets.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of the immovable properties areheld in the name of the Company.

ii) In our opinion and according to the information and explanations given to us themanagement has conducted the physical verification of inventory at reasonable intervalsduring the year under review and no material discrepancies were noticed on such physicalverification.

iii) The Company has in the past granted interest free loans to its subsidiarycompanies covered in the register maintained under section 189 of the Companies Act 2013.However the Company has not granted any loan secured or unsecured to firms or otherparties covered in the register maintained under section 189 of the Companies Act 2013.

(a) The terms and conditions of the grant of such loans are not prejudicial to thecompany’s interest.

(b) In the case of the loans granted to the bodies corporate listed in the registermaintained under section 189 of the Act the terms of arrangements do not stipulate anyrepayment schedule and the loans are repayable on demand. Accordingly paragraph 3(iii)(b)of the Order is not applicable to the Company in respect of repayment of the principalamount.

(c) There are no overdue amounts of more than ninety days in respect of the loansgranted to the bodies corporate listed in the register maintained under section 189 of theAct. iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loan and investments made.

v) The Company has not raised any deposits from public as covered by provisions ofSections 73 to 76 or any other relevant provisions of the Companies Act and the rulesframed thereunder.

vi) The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Act for any of the services rendered by the Company.

vii) (a) On Examination of the books of accounts and other records of the Company wereport that the company has defaulted in depositing its undisputed statutory duesincluding Provident Fund Investors Education and Protection Fund Employees’ stateInsurance Income Tax Sales Tax Service Tax Wealth Tax Customs duty and Cess with theappropriate authorities. The following statutory liabilities are pending for payment for aperiod of more than six months from the date they became payable:

(Rs. In Lakhs)
Name of the Statute Nature of dues Amount to be paid
Employee's Provident Fund & Miscellaneous Provision Act Provident Fund 30.43
Employees State Insurance Act ESI 5.01
Income Tax Act Withholding Taxes 289.76
Service Tax Service Tax 190.64
Commercial Taxes Act Sales Tax/Value Added Tax 83.91
Income Tax Act Self Assessment Tax 89.02
Wealth Tax Act Wealth Tax 0.88
Income Tax Act Dividend Distribution Tax 273.88
Income Tax Act Fringe Benefit Tax 0.41
Investor Education Protection Fund Unclaimed Dividend 3.94

(b) According to the information and explanations given to us there are no disputedamounts as at 31st March 2016 in respect of Provident Fund Employees’State Insurance Income Tax Sales Tax Service Tax Wealth Tax Customs duty and Cess andother applicable statutory dues with the exception of the following:

(Rs. In Lakhs)
Name of the statute Nature of dues Amount Period to which amount relates Forum where dispute is pending
Income Tax Act 1961 Income Tax 6728.44 2009-10 Income Tax Appellate Tribunal
Chapter V of the Finance Act 1994 Service Tax 756.02 2004-05 to 2007-08 Customs Excise and Service Tax Appellate Tribunal
Chapter V of the Finance Act 1994 Service Tax 1261.00 2008-09 to 2012-13 Commissioner Service Tax Bangalore
The Employees Provident Employer and 51.87 1996-1997 to Assistant / Regional
Fund and Miscellaneous Provisions Act 1972 Employee Provident Fund 2013-14 Provident Fund Commissioner
The Foreign Exchange Regulation Act 1999 Penalty for Contravention of Section 42(1) of the FEMA 1999 50.00 2006 Director Directorate of Enforcement.

viii) There are defaults in repayment of dues to various financial institutions andbanks as at the balance sheet date. The amount of defaults and the period are tabulatedbelow

(Rs. In Lakhs)
Name of the Banks & financial institutions Amount of default (including accrued interest) Period of Default
Bank of India 29392.00 From 2009 to Till Date
Canara Bank 7902.08 From 2009 to Till Date
Industrial Development Bank of India 5392.98 From 2009 to Till Date
State Bank of Mysore 4768.13 From 2009 to Till Date
Bank of India 6809.98 From 2009 to Till Date
State Bank of Travancore 6194.04 From 2009 to Till Date
Jammu and Kashmir Bank Limited 2268.19 From July 2013 to Till Date

ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Accordinglyparagraph 3 (ix) of the Order is not applicable.

x) According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.

xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.

xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.

xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.

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

For S.JANARDHAN & ASSOCIATES
Chartered Accountants
Firm Registration No. 005310S
Bengaluru Vijay Bhatia
May 30 2016 Partner
Membership No.201862

ANNEXURE - B TO THE AUDITORS’ REPORT

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of CranesSoftware International Limited ("the Company") as of 31 March 2016 inconjunction with our audit of the financial statements of the Company for the year endedon that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (‘ICAI’). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company’s policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor’s judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company’s internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that

(1) Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(2) Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and

(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company’s assets that could havea material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Qualified Opinion

In our opinion subject to the qualifications and the matters specified in the‘Emphasis of Matter’ paragraph as appearing in our Independent Auditor’sReport of even date the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For S.JANARDHAN & ASSOCIATES
Chartered Accountants
Firm Registration No. 005310S
Bengaluru Vijay Bhatia
May 30 2016 Partner
Membership No.201862