To the members Gitanjali Gems Limited
Report on the Financial Statements for the year ended 31st March 2016
We have audited the accompanying financial statements of Gitanjali Gems Limited("the Company") which comprise the balance sheet as at 31st March2016 the Statement of Profit and Loss and the Cash Flow Statement for the year then endedand a summary of significant accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
The Companys Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthe financial statements that give a true and fair view of thefinancialpositionfinancialperformanceandcashflowsof the Company in accordance with theaccounting 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 and its policies; making judgments and estimatesthat are 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.
Our responsibility is to express an opinion on the financial statements based on ouraudit.
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 there under.
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 financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditors 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 control relevant to the Companyspreparation 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 Companys Directors as well as evaluating theoverall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at 31stMarch 2016 and its profit cash flows for the year ended on that date.
Emphasis of matter
We draw attention to
a. Note No. 27 (a) relating to 12% Non-Convertible Debenture issued to LIC wherecompany has not paid overdue principal and interest aggregating to Rs. 241.74 lacs.Further in respect of debentures installments maturing during the following year theCompany has not created liquid assets of Rs. 211 lacs as required under Rule 18 (7)(c) of the Companys (Share capital and Debenture) Rule 2014.
b. Note No. 27 (b) relating to IDBI ECB where principal of USD 2.79 million (INRequiv 1850.21 lacs ) is overdue. c. Note No. 27 (c) relating to overdrawn position of s.5295 Lacs in working capital borrowing from consortium of bankers.
d. Note No. 33 relating to non- payment of Self-Assessment Tax of Rs. 1759.92lacs for Assessment year 2013-14 and Assessment Year 2015-16.
e. Note No. 46 relating to loans and advances not in conformity with section 186 of thecompanies act 2013 (As fully described in respective notes) Our opinion is not qualifiedin respect of above matter
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order 2016 ("theOrder") as issued by Central Government of India in terms of sub section (11) ofsection 143 of Companies Act 2013 (18 of 2013) we give in the Annexure A astatement on the matters specified in paragraphs 3 and 4 of the Order.
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 purpose of our audit;
b. in our opinion proper books of account 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 account;
d. in our opinion the Balance Sheet Statement of Profit and Loss and Cash FlowStatement comply with the Accounting Standards referred to in Section 133 of the Act readwith Rule 7 of the Companies (Accounts) Rules 2014 ; and
e. On the basis of written representations received from the directors as on 31stMarch 2016 and 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 sub section (2) of section 164 of the Companies Act 2013.
f. 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. Our report expresses an unqualified opinion on theadequacy and operating effectiveness of the Companys internal financial controlsover financial reporting.
g. With respect to the other matters to be included in the Auditors 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. As represented by the company the group does notexpect any cash outgo and there will be no impact on the financial position of the group.Refer Note No. 29 and 53 to financial statement.
ii. As represented by the company there are no foreseeable material losses in respectof long-term contracts including derivative contracts; Refer Note 49 to financialstatement.
iii. There has been no delay in transferring amount required to be transferred toInvestor Education and Protection Fund by the Company. Refer Note 48 to financialstatement.
For FORD RHODES PARKS & CO.LLP
ICAI Firm Registration no.102860W/W100089
Date : 28th May 2016
ANNEXURE A TO THE AUDITORS REPORT
[Referred to in paragraph pertaining to "Report on Other Legal and RegulatoryRequirement" of our Report of even date to the members of Gitanjali Gems Limited onthefinancialstatementsfor the year ended 31st March 2016]
i. a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
b) During the year Fixed Assets have been physically verified by the management.The discrepancies between the book records and the physical inventory are not material andhave been adjusted in the books. In our opinion the frequency of verification isreasonable.
c) According to the information and explanations given to us and the recordsexamined by us we report that the title deeds of immovable properties are held in thename of the company except in respect of few land pieces where procedure for transfer inthe name of the company are yet to be completed.
ii. The inventory has been physically verified by the management during the year and asat the year end. In our opinion the frequency of verification is reasonable.
On the basis of our examination of the inventory records in our opinion the companyis maintaining proper records of inventory and there is no material discrepancies noticedon physical verification of inventory.
iii. The Company has granted unsecured loans to companies firms or other partiescovered in the register maintained under Section 189 of the Companies Act 2013. Theseloans are Interest free and there are no stipulation as to repayment of the loan. In ouropinion and according to the information and explanation given to us the terms andconditions of the loans given by the company are prima facie not prejudicial to theinterest of the company.
iv. In our opinion and according to information and explanation given to us thecompany has complied with the provision of Section 186 of the Act with respect to itsInvestments. The company has given guarantees and security in compliance with section 185and 186 of the Act. The company has granted Loans and advances u/s. 185 and 186 of the Actwhich as per the information and explanations given by the company to us and as describedin the financial statements are interest free and given to promote the interest of thecompany are not in conformity of the provision of Section 186 of the Companies Act 2013.However due to bad financial position some of these subsidiaries are unable to regularizethe advances given earlier.
v. The Company has accepted deposits from the public within the meaning of Sections 73to 76 of Companies Act 2013 and the rules framed there under. In our opinion and accordingto the information and explanations given to us the company has complied with theprovision of Section 73 to 76 of the Companies Act 2013 and the Companies (Acceptance ofDeposits) Rules 2014.
vi. Reporting under clause 3(vi) of the order is not applicable as the Companysbusiness activities/ products are not covered by the Companies (Cost records and audit)Rule 2014 as prescribed under Section 148 of the Companies Act 2013.
vii. a) According to the information and explanations given to us and records of theCompany examined by us in our opinion the Company is generally regular in depositingundisputed statutory dues including provident fund investor education and protectionfund employees state insurance income tax sales tax wealth tax service tax customduty excise duty cess and any other material statutory dues as applicable with theappropriate authorities however it is noticed that there has been delays in payment ofsome of the statutory dues. There are no undisputed statutory dues payable for a period ofmore than six months from the date they became payable as at 31st March 2016except Self - Assessment Tax of Rs. 1503.32 Lacs payable on or before 30th November 2013for Assessment Year 2013-14 and the Self - Assessment tax of Rs. 256.60 lacs forAssessment Year 2015-16 which is outstanding for a period of more than six months from thedate it became payable. We are informed that this is due to continuing liquidityconstraints faced by the company since May 2013 as described in Note no 33.
b) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of income tax wealth tax service tax customsduty and cess as at 31st March 2016 which has not been deposited on account ofdispute except the following:-
|Sr. no. ||Assessment Year ||Amount in Rs. in Lacs ||Remark ||Forum where dispute is pending |
|Income Tax Act1961 || || || || |
|1 ||2006-2007 ||587.72 Section 143(3) r.w.s 153 A ||Commissioner of Income Tax (Appeals) || |
|2 ||2007-2008 ||610.79 ||Section 143(3) r.w.s 147 ||Commissioner of Income Tax (Appeals) |
|3 ||2007-2008 ||473.90 ||Section 143(3) r.w.s 153 A ||Commissioner of Income Tax (Appeals) |
|4 ||2008-2009 ||6065.15 Section 143(3) r.w.s 153 A ||Commissioner of Income Tax (Appeals) || |
|5 ||2009-2010 ||1381.85 ||Section 143(3) r.w.s 153 A ||Commissioner of Income Tax (Appeals) |
|6 ||2010-2011 ||5020.32 Section 143(3) r.w.s 153 A ||Commissioner of Income Tax (Appeals) || |
|7 ||2011-2012 ||8666.78 Section 143(3) r.w.s 153 A ||Commissioner of Income Tax (Appeals) || |
|8 ||2010-2011 ||530.90 ||Section 271(g) ||Commissioner of Income Tax (Appeals) |
|9 ||2011-2012 ||594.63 ||Section 271(g) ||Commissioner of Income Tax (Appeals) |
|10 ||2012-2013 ||1115.59 ||Section 271(g) ||Commissioner of Income Tax (Appeals) |
|Service tax || || || || |
|11 ||Various Years ||576.41 ||Appeal filed with Service Tax authorities ||Commisioner of Service tax & CESTAT |
|Sales Tax || || || || |
|12 ||2005-2006 ||1746.32 ||VAT Assessment ||Deputy Commissioner of Sales Tax (Appeals) |
|13 ||2005-2006 ||22.33 ||CST Assessment ||Deputy Commissioner of Sales Tax (Appeals) |
viii. Based on our audit procedures and as per the information and explanations givento us by the management during the year there has been delay in timely repayment of itsdues to banks for ECB and to financial institution for debentures. In respect of workingcapital facilities from banks there has been over drawings in the accounts and as at 31 stMarch 2016 the accounts were overdrawn by Rs. 5295 Lacs as given in Note No 27c.Following amounts which were due during the year are outstanding as at 31stMarch 2016:
|Lender ||Due date ||Nature ||Currency ||Amount ||Date of payment Subsequent to 31st March 16 |
|LIC ||30/03/2016 ||Interest ||INR ||774333.02 ||22/04/2016 |
|LIC ||22/02/2016 ||Principal ||INR ||11700000.00 ||22/04/2016 |
|LIC ||22/03/2016 ||Principal ||INR ||11700000.00 ||22/04/2016 |
|IDBI ECB ||31/03/2016 ||Principal ||USD ||2304266.75 ||*Outstanding |
|BOB ECB ||31/03/2016 ||Principal ||USD ||488293.70 ||*Outstanding |
*The amount is not paid till date of this report. ix. During the year the Company hasnot raised any Initial Public Offer or further public offer and the Company has notobtained any term loans except for External Commercial Borrowing from foreign branch ofIndian Banks in preceding years. The loan has been utilized for the purpose for which itwas availed.
x. Based upon the audit procedures performed and information and explanations given bythe management we report that we have not come across any instances of fraud by theCompany and no material fraud on the company by its officers /employees has been noticedor reported during the year nor have we been informed of any such case by the management.
xi. In our opinion and according to information and explanation given to us thecompany has paid /provided Managerial remuneration during the year in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theCompanies Act 2013.
xii. The Company is not a Chit Fund Company/or nidhi/ mutual benefit fund/society andhence reporting under clause XII of the Order is not applicable.
xiii. In our opinion and according to information and explanations given to us alltransactions with related parties are in compliance with Sections 177 and 188 of theCompanies Act 2013 wherever applicable and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.
xiv. The Company had in earlier year on receipt of 25% of the consideration as thesubscription money issued fully convertible warrants. These warrants were issued onpreferential basis to persons other than promoters. During the year the company hasissued equity shares in respect of these warrants against which balance amount has beenreceived as fully described in Note no 26 (j). Requirement of Section 42 of the CompaniesAct 2013 has been complied and amount raised was used for purpose for which it wasraised.
xv. In our opinion and according to information and explanations given to us duringthe year the company has not entered into non-cash transactions covered under Section 192of Companies Act 2013 with directors or persons connected with its directors and henceprovision under Section 192 is not applicable.
xvi. The company is not engaged in the business of non-banking financial institution(NBFI) and it is not required to obtain a Certificate of Registration (CoR) from ReserveBank of India in terms of Section 45-IA of the RBI Act 1934.
For FORD RHODES PARKS & CO.LLP
ICAI Firm Registration no.102860W/W100089
Date : 28th May 2016
[Referred to in paragraph pertaining to "Report on Other Legal and RegulatoryRequirement" of our Report of even date to the members of Gitanjali Gems Limited onthefinancialstatementsfor the year ended 31st March 2016] Report on theInternal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of theCompanies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of GITAnJALIGEMS LIMITEd ("the Company") as of March 31 2016 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
Managements Responsibility for Internal Financial Controls
The Companys 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 Reporting (IFCOFR)issued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to companys policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial informationCompaniesAct 2013. asrequired underthe
Our responsibility is to express an opinion on the Companys 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 included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditors judgments including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence I/we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Companys internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companys 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 companys 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 financialstatements 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 companys 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.
In our opinion the Company has in all material respects an adequate internalfinancial controls system reporting and such internal financial controls over financialreporting were operating effectively as at based on the internal control over financialreporting criteria 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 FORD RHODES PARKS & CO.LLP
ICAI Firm Registration no.102860W/W100089
Date : 28th May 2016