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Gitanjali Gems Ltd.

BSE: 532715 Sector: Consumer
NSE: GITANJALI ISIN Code: INE346H01014
BSE LIVE 15:51 | 23 Nov 91.40 10.45
(12.91%)
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81.00

HIGH

92.85

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80.15

NSE 15:58 | 23 Nov 91.20 10.15
(12.52%)
OPEN

81.40

HIGH

92.65

LOW

80.15

OPEN 81.00
PREVIOUS CLOSE 80.95
VOLUME 1597813
52-Week high 92.85
52-Week low 50.30
P/E 26.73
Mkt Cap.(Rs cr) 1,084
Buy Price 91.40
Buy Qty 6292.00
Sell Price 0.00
Sell Qty 0.00
OPEN 81.00
CLOSE 80.95
VOLUME 1597813
52-Week high 92.85
52-Week low 50.30
P/E 26.73
Mkt Cap.(Rs cr) 1,084
Buy Price 91.40
Buy Qty 6292.00
Sell Price 0.00
Sell Qty 0.00

Gitanjali Gems Ltd. (GITANJALI) - Auditors Report

Company auditors report

To the members of Gitanjali Gems Limited

Report on the standalone Indian Accounting Standard ("Ind AS") FinancialStatements for the year ended 31st March 2017

We have audited the accompanying Standalone Ind AS financial statements of GitanjaliGems limited ("the Company") which comprise the Balance Sheet as at 31stMarch 2017 the Statement of Profit and Loss (including Other Comprehensive Income)Statement of Cash Flow and the Statement of Changes in Equity for the year then ended anda summary of significant accounting policies and other explanatory information (hereinafter referred to as "Standalone Ind AS financial statements ").

Management's Responsibility for the Standalone Ind AS financial statements

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 preparation ofthese Standalone Ind AS financial statements that give a true and fair view of the stateof affairs(financialposition) profit or loss (financial performance including othercomprehensive income) cash flows and changes in equity of the Company in accordance withthe accounting principles generally accepted in India including the Indian Accounting

Standards (Ind AS) prescribed under Section 133 of the Act read with relevant rulesissued thereunder. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and 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 effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these Standalone Ind AS financialstatements based on our audit. We have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made there under. We conductedour audit of the Standalone Ind AS financial statements in accordance with the Standardson Auditing specified under Section 143(10) of the Act. Those Standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the Standalone Ind AS financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Standalone Ind AS financial statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the Standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the Standalone Ind AS financial statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the Standalone Ind ASfinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Ind AS 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 including the Ind AS of thestate of affairs (financial position) of the Company as at 31st March 2017and its profit (financial performance including other comprehensive income) its cashflows and the changes in equity for the year ended on that date.

Emphasis of matter

We draw attention to following Notes to Standalone Ind that were operating AS financialstatements:

a. Note No. 45 A (a) relating to 12% Non-Convertible Debenture issued to LIC where thecompany has not paid overdue principal and interest aggregating to Rs. 348.94 Lakhs.Further the company has not created liquid assets of Rs. 148 Lakhs as requiredunder Rule 18 (7) (c) of the company's (Share capital & Debenture) Rule 2014 inrespect of debentures installments maturing during the following year.

b. Note No. 45 A(b) relating to overdcue principal and Interest of ECBs:

i. Principal of USD 8.75 million (equivalent Rs. 5674.38 Lakhs) and interest ofUSD 0.97 million (equivalent Rs. 631.71 Lakhs) to ICICI ECB.

ii. Principal of USD 0.73 million (equivalent Rs. 474.99 Lakhs) to IDBI (BOBportion) ECB.

c. Note No. 45 B relating to overdrawn position in the working Capital borrowing frombanks aggregating to Rs. 3115.17 Lakhs as compared with sanctioned limit; and

d. Note no. 56 relating to Loans and Advances granted to its subsidiaries Associatesand Others not in conformity with the Sec 186 of the Companies Act2013 .

(As fully described in respective notes) Our opinion is not qualified in respect ofabove matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in "AnnexureA" a statement 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 (including Other ComprehensiveIncome) and Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account;

d. in our opinion the aforesaid Standalone Ind AS financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act read with relevantrules issued thereunder;

e. on the basis of written representations received from the directors as on 31stMarch 2017 and 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 sub section (2) of section 164 of the Act.

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 unqualifiedopinion on the adequacy and operating effectiveness of the Company's internal financialcontrols over financial reporting;

g. 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 standalone Ind AS financial statements. As represented by the company thegroup does not expect any cash outgo and there will be no impact on the financial positionof the group Refer Note no. 38 to the standalone Ind AS financial Statement

ii) As represented by the company there are no foreseeable material losses in respectof long-term contracts including derivative contracts. Refer Note No. 23 to the standaloneInd AS financial statement.

iii) There has been no delay in transferring amount required to Investor Education andProtection Fund by the Company. Refer Note No. 61 to the standalone Ind AS financialStatement.

iv) The Company has provided requisite disclosures in its Standalone Ind AS financialstatements as to holdings as well as dealings in Specified Bank Notes during the periodfrom 8th November 2016 to 30th December 2016. Based on auditprocedures performed and the representations provided to us by the management we reportthat the disclosures are in accordance with the books of account maintained by the companyand as produced to us by the Management Refer Note No. 51 to the Standalone Ind ASfinancial statements.

For FORD RHODES PARKS & CO.LLP

Chartered Accountants

ICAI Firm Registration No.102860W/W100089

A.D. Shenoy

Partner

Membership No.11549

Place: Mumbai

Date : May 30 2017

ANNEXURE A

[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 onthe Standalone Ind AS financial statements for the year ended 31st March 2017]

i. a) The company is maintaining proper records showing full particularsincluding quantitative details and situation of fixed assets.

b) Fixed assets are physically verified by the management at reasonable intervals. Thediscrepancies 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 in case of properties earlier held by merged entity namely GitanjaliExports Corporation Limited we report that the title deeds of immovable properties are yetto be transferred in the name of the company. In respect of few land pieces procedure fortransfer in the name of the company are yet to be completed. The company has clear titlein respect of other immovable properties

ii. The inventory has been physically verified by the management during the year aswell as at year end. In our opinion the frequency of verification is reasonable. On thebasis of our examination of the inventory records in our opinion the company ismaintaining proper records of inventory and there is no material discrepancies noticed onphysical verification of inventory.

iii. The Company has granted unsecured loans to companies firms Limited LiabilityPartnership or other parties covered in the register maintained under Section 189 of theCompanies Act 2013. These loans are Interest free and there are no stipulation as torepayment of the loan. In our opinion and according to the information and explanationgiven to us the terms and conditions of the loans given by company are prima facie notprejudicial to the interest of the company for the reasons fully explained in Note No. 35and 48 to the standalone Ind AS financial statements

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.We are informed that due to bad financial position some of these subsidiaries are unableto regularize the advances given earlier as described in Note No 48 to the standalone IndAS financial statements.

v. The Company in earlier year has accepted deposits from the public within themeaning of Sections 73 to 76 of Companies Act 2013 and the rules framed there under. Inour opinion and according to the information and explanations given to us the company hascomplied with the provision of Section 73 to 76 of the Companies Act 2013 and theCompanies (Acceptance of Deposits) Rules 2014. There are no further deposit accepted bythe Company.

vi. Reporting under clause 3 (vi) of the order is not applicable to the company as thecompany's business activities / products are not covered by the companies (cost recordsand audit) Rule 2014 as prescribed under section 148 of the Company Act 2013.

vii. a) According to the information and explanation 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 employee's state insurance fundwealth tax custom duty excise duty cess and any other statutory dues with theappropriate authorities. There are no undisputed statutory dues payable for a period ofmore than six month from the date they become payable as at 31st March 2017.

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 service tax customs duty andcess as at 31st March 2017 which has not been deposited on account of disputeexcept the following:-

Period Rs. in Lakhs Remark Authority where appeal is pending
INCOME TAX
AY 2006-2007 587.73 Section 143(3) r.w.s 153 A CIT (A)
AY 2007-2008 610.79 Section 143(3) r.w.s 147 CIT (A)
AY 2007-2008 334.96 Section 143(3) r.w.s 147 (Amalgamating company) CIT (A)
AY 2008-2009 6065.15 Section 143(3) r.w.s 153 A CIT (A)
AY 2008-2009 713.62 Section 143(3) r.w.s 147 (Amalgamating Company) CIT (A)
AY 2009-2010 1381.85 Section 143(3) r.w.s 153 A CIT (A)
AY 2009-2010 885.74 Section 143(3) r.w.s 147 (Amalgamating Company) CIT (A)
AY 2009-2010 3768.74 Section 143(3) r.w.s 147 CIT (A)
AY 2009-2010 25.95 Section 271(1) (amalgamating company) CIT (A)
AY 2010-2011 5020.32 Section 143(3) r.w.s 153 A CIT (A)
AY 2010-2011 550.79 Section 143(3) r.w.s 147 (Amalgamating Company) CIT (A)
AY 2010-2011 5861.02 Section 143(3) r.w.s 147 CIT (A)
AY 2010-2011 530.90 Section 271(g) CIT(A)
AY 2011-2012 8411.78 Section 143(3) r.w.s 153 A CIT (A)
AY 2011-2012 1789.60 Section 143(3) r.w.s 144C (Amalgamating company) CIT (A)
AY 2011-2012 9654.74 Section 143(3) r.w.s 147 CIT (A)
AY 2011-2012 594.63 Section 271(g) CIT (A)
AY 2012-2013 1072.36 Section 143(3) r.w.s 144C (Amalgamating company) CIT (A)
AY 2012-2013 1115.59 Section 271(g) CIT (A)
AY 2013-2014 850.41 Section 143(3) r.w.s 144C CIT (A)
AY 2013-2014 1074.38 Section 143(3) r.w.s 144C (amalgamating company) CIT (A)
AY 2013-2014 1760.18 Section 271(g) CIT (A)
AY 2013-2014 various years 815.57 Section271(g) (Amalgamating company) CIT (A)
17.97 Tax demand as per TRACES Rectification pending to file
Various years 580.54 Appeal filed with Service tax authorities Commissioner of Service tax and CESTAT
18.04.2006 to
31.03.2011 22.21 Service tax (Amalgamating company) Appeal pending before commissioner
01.05.2006 to
31.03.2011 13.01 Service tax (Amalgamating company) Appeal pending before commissioner
2011-12 5.76 Service tax (Amalgamating company) Appeal pending before commissioner
FY 2005-2006 1746.32 VAT Assessment Deputy Commissioner of Sales Tax (Appeals)
FY 2005-2006 22.33 CST Assessment Deputy Commissioner of Sales Tax (Appeals)
FY2010-2011 104.94 CST Assessment Joint commissioner of Sales Tax (Appeals)
FY2010-2011 51.33 VAT Assessment Joint commissioner of Sales Tax (Appeals)
FY2012-2013 154.48 CST Assessment Appeal to be filed
FY 2012-2013 344.49 VAT Assessment Appeal to be filed

viii. Based on our audit procedures and as per the information and explanation given tous by the management during the year there has been delay in timely repayment of its duesto banks for ECB and to financial institution for debentures. In respect of workingcapital facilities from Banks there has been over drawings in the accounts during the yearas well as at year end. Accounts were overdrawn by Rs. 3115.17 Lakhs as at 31stMarch 2017. Following amounts which were due during the year are outstanding as at 31stMarch 2017:

Lender Due Date Nature Currency Amount Remark
LIC 30/03/2017 Interest INR 11493939.00 Fully paid till signing date
LIC 22/02/2017 Principal INR 11700000.00 Fully paid till signing date
LIC 22/03/2017 Principal INR 11700000.00 Unpaid
ICICI ECB 31/03/2017 Principal USD $ 8750000.00 $ 1950000 paid till signing date
ICICI ECB 31/03/2017 Interest USD $ 974108.01 Fully paid till signing date
BOB ECB 31/03/2016 Principal USD $ 732440.47 Unpaid

ix. During the year the Company has not raised any Initial Public Offer or furtherpublic offer. The Company has raised term loan from a financial institution during theyear. The Company has External Commercial Borrowing from foreign branch of Indian banks inearlier years. The Term loan and ECB proceeds has been utilized for the purpose for whichthey were 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 or any material fraud on the company by its officers or employees that have beennoticed or reported during the year nor have we been informed of such a case bymanagement.

xi. In our opinion and according to information and explanation given to us thecompany has paid / provided Managerial remuneration during the year as per the Boardresolution which is subject to approval by the shareholders in the forthcoming meeting asfully explained in Note No 52 to the standalone Ind AS financial statements.

xii. The Company is not a Chit Fund Company/or Nidhi/ mutual benefit fund/society.

xiii. In our opinion and according to information and explanation given to us alltransactions with the related parties are in compliance with sections 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the standaloneInd AS Financial Statements as required by the applicable accounting standards.

xiv. The Company had issued fully convertible warrants in earlier year on receipt of25% of the consideration as the subscription money. These warrants were issued onpreferential basis to persons other than promoters. During the year the company has issuedequity shares in respect of warrants against which balance amount has been received asfully described in note no 16(H)). Requirement of Section 42 of the Companies Act 2013 hasbeen complied and amount raised was used for purpose for which it was raised.

xv. In our opinion and according to the information and explanation given to us duringthe year company has not entered into non-cash transactions covered by Section 192 ofCompanies Act 2013 with directors or persons connected with him. Hence the provision ofsection 192 is not applicable to the company.

xvi. The company is not engaged in the business of non-banking financial institution(NBFI) and not required to obtain a Certificate of Registration (CoR) from Reserve Bank ofIndia to commence/ carry on business of NBFI in terms of Section 45-IA of the RBI Act1934.

For FORD RHODES PARKS & CO.LLP

Chartered Accountants

ICAI Firm Registration No.102860W/W100089

A.D. Shenoy

Partner

Membership No.11549

Place: Mumbai

Date : May 30 2017

ANNEXURE B

[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 onthe standalone Ind AS financial statements for the year ended 31st March 2017]Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting ofGitanjaliGems Limited ("the Company") as of March 31 2017 in conjunction with ouraudit of the standalone Ind AS financial statements of the Company for the year ended onthat 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 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 company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe 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 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 auditor's 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 we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of standalone Ind AS financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standaloneInd AS financial statements in accordance with generally accepted accounting principlesand that receipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.

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.

Opinion

In our opinion to the best of our information and according to explanation given to usthe Company has in all material respects an adequate internal financial controls systemover financial reporting and such internal financial controls over financial reportingwere operating effectively as at March 31 2017 based on the internal control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

For FORD RHODES PARKS & CO.LLP

Chartered Accountants

ICAI Firm Registration No.102860W/W100089

A.D. Shenoy

Partner

Membership No.11549

Place: Mumbai

Date : May 30 2017