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Jindal Cotex Ltd.

BSE: 533103 Sector: Industrials
NSE: JINDCOT ISIN Code: INE904J01016
BSE LIVE 15:40 | 18 Aug 12.50 -0.10
(-0.79%)
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12.40

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12.98

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NSE 14:48 | 18 Aug 12.80 0.05
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OPEN 12.40
PREVIOUS CLOSE 12.60
VOLUME 2391
52-Week high 23.05
52-Week low 11.10
P/E
Mkt Cap.(Rs cr) 56
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 12.40
CLOSE 12.60
VOLUME 2391
52-Week high 23.05
52-Week low 11.10
P/E
Mkt Cap.(Rs cr) 56
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Jindal Cotex Ltd. (JINDCOT) - Auditors Report

Company auditors report

To

The Members of

JINDAL COTEX LTD.

Report on the Financial Statements

We have audited the accompanying financial statements of JINDAL COTEX LTD. ("theCompany") which comprise the Balance Sheet as at March 31 2016 and the Statementof Profit and Loss and Cash Flow Statement for the year then ended and a summary ofsignificant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

The Management and board of directors of the company are responsible for the mattersstated in Section 134(5) of the Companies Act 2013 ('the act') with respect to thepreparation of these financial statements that give a true and fair view of the financialposition financial performance and cash flows of 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 Companies (Accounts) Rules2014.

This responsibility includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; design implementation and maintenance of adequate internal financial controlsthat are operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these 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 accordancewith the Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.

In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the financial statements that give a true andfair view in order to design audit procedures that are appropriate in the circumstancesbut not for the purpose of expressing an opinion on whether the Company has in place anadequate internal financial controls system over financial reporting and the operatingeffectiveness of such controls An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of the accounting estimates made by theCompany's management and Board of Directors as well as evaluating the overallpresentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the financial statements give the information required by the Act in themanner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India: a) In the case of the Balance Sheet of the stateof affairs of the Company as at March 31 2016; b) In the case of the Statement of Profitand Loss of the Loss for the year ended on that date; and c) In the case of the Cash FlowStatement of the cash flows for the year ended on that date.

Emphasis of Matter

We draw our attention on the following:

a) Note No. 39 to the financial statements which indicate that the company hasaccumulated losses of Rs.227.64 Crores as at 31st March 2016 and has eroded its peak levelnet worth by more than 50% and has become potentially sick company. Reference under theprovisions of Section 23 of Sick Industrial Company (Special Provisions) Act 1985 (SICA)has been generated on 22nd January 2016. Hence there are conditions indicating anuncertainty on the going concern. However the financial statements have been prepared bythe management on a going concern basis for the reason stated in the said note.

b) Note no.10 to 12 to the financial statements regarding the company's Non-currentinvestments Non-current assets and long term loans/advances including amount recoverablefrom Jindal International FZE its foreign subsidiary company carried in the balancesheet at Rs.157.69 crores. The amount is long outstanding. There is uncertainty regardingrealization of this amount. Management should have booked provision against this amount.

c) Manufacturing facilities at present all location of the company (Except Wind Mill)have been suspended due to severe financial constraints. Company has leased out one of itsunit. d) There is non-submission of various statutory returns acknowledged by therespective authorities non provision/deposition of various overdue statutory liabilitieslike PF/Service Tax/TDS/ Vat & CST/WCT/TCS/ESI & related over dues (Interest andpenalty) non-deduction of TDS on provisional expenses and as explained by managementexact amount of which could not be ascertained in present scenario.

e) Since all the accounts of the company have been declared sub-standard over a periodof time the banks have started recovery action against the Company under SAR FAESI Act.In the absence of any information on interest on outstanding dues to the bank theprovision of interest has been made on the basis of assumptions which are not certain.Hence balances with banks are subject to confirmation.

f) Note No. 36 to the financial statement on various litigations/suits pending in thecourt of law at different levels. There is uncertainty regarding the outcome of law suitsfiled against the company.

g) Actuarial valuation of employee benefits was not conducted during the year.

h) There is diminution in value of investments in current year of Rs. 5.51Crore.

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 of India in terms of sub-section (11) of section143 ofthe Act we give in the Annexure A statement on the matters Specified in paragraphs 3 and4 of the Order.

As required by section 143(3) of the Act we report that: a) We have sought andobtained all the information and explanations which to the best of our knowledge andbelief 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 with by this Report are inagreement with the books of account.

d) In our opinion the aforesaid financial statements comply with the applicableAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

e) On the basis of written representations received from the directors as on March 312016 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2016 from being appointed as a director in terms of Section 164(2) of theAct.

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"; and

g) In our opinion and to the best of our information and according to the explanationsgiven to us we report as under with respect to other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules2014::

i. The Company did not have any long-term contracts including derivative contracts; assuch the question of commenting on any material foreseeable losses thereon does not arise.

ii. There has not been an occasion in case of the

Company during the year under report to transfer any sums to the Investor Education andProtection Fund. The question of delay in transferring such sums does not arise.

iii.The company has disclosed the impact of its pending litigations on its financialposition in its financial statements refer note no 36 to financial statements.

For Raj Gupta & Co
Chartered Accountants
FRN: 000203N
Place: Ludhiana Raj Kumar Gupta
Date : 30/05/2016 (Partner)
Membership No.: 017039

ANNEXURE A TO THE INDEPENDENT AUDITORS' REPORT

Referred to in Paragraph 1 under the heading "Report on Other Legal and RegulatoryRequirements."

On the basis of such checks as we considered appropriate and according to theinformation and explanations given to us during the course of our audit we report that:

I. In respect of fixed assets:

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

(b) As explained to us the Fixed Assets have been physically verified by the managementin a phased manner designed to cover all the items over a period of regular intervalswhich in our opinion is reasonable having regard to the size of the company and nature ofits business.

(c) According to information and explanation given to us the title deeds of immovableProperty is held in the name of the company.

ii. In respect of Inventories :-

(a) According to information and explanations given to us the inventories have beenphysical verified during the year by the management. In our opinion the frequency ofverification is reasonable.

(b) In our opinion and according to the information and explanations given to us theprocedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the company and the nature of itsbusiness.

(c) The company has maintained proper records of inventory. Since all the manufacturingactivities have been suspended it does not hold any kind of raw material and finishedstock; it is only engaged in trading activity & hold Inventory of stock in trade.

iii. According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited Liabilitypartnerships or other parties covered in the Register maintained under section 189 of theAct. Accordingly the provisions of clause 3 (iii) (a) to (C) of the Order are notapplicable to the Company and hence not commented upon.

iv. In our opinion and according to the information and explanations given to usthere is adequate internal control system commensurate with the size of the

Company and the nature of its business for the purchase of fixed assets and for thesale of material. Further on the basis of our examination of the books and records of theCompany and according to the information and explanations given to us no major weaknesshas not been noticed or reported.

v. In our opinion and according to the information and explanations given to usthe company has not accepted any deposit from the public covered under Section 73 to 76 ofthe Companies Act 2013. However for the repayment of the fixed deposits received inearlier years by the company from the public the company has taken permission from theHon'ble Company Law Board New Delhi for extension of time for repayment of fixeddeposits as the company was unable to repay the same on due dates due to financial crisis.

vi. We have broadly reviewed the records maintained by the company pursuant to therules prescribed by the central government for maintenance of cost records undersub-section (l) of section 148 of the act and are of the opinion that prima facie theprescribed accounts have been prepared and maintained. However we have not made thedetailed examination of records.

vii. (a) According to the information and explanations given to us and based on therecords of the company examined by us the company is not regular in depositing theundisputed statutory dues including Provident Fund Employees' State InsuranceIncome-tax Sales-tax Service Tax Custom Duty Excise Duty and other material statutorydues as applicable with the appropriate authorities in India as follows; TDS Rs.1960978TCS Rs.534001 VAT Rs.8325251 CST Rs.466303 PF Payable Rs.5768010 & ESI PayableRs.3850029.

b) There has not been an occasion in case of the Company during the year under reportto transfer any sums to the Investor Education and Protection Fund. The question ofreporting delay in transferring such sums does not arise. viii The company has accumulatedlosses at the end of the financial year which has exceeded 50% peak level net worth of thecompany in the preceding 4 financial years. As such company has become potentially sick.However the company has not incurred any cash losses during the current financial yearcovered by our audit as compared to the immediately preceding financial year.

ix. According to the records of the Company examined by us and the information andexplanations given to us the Company has defaulted in repayment of loans or borrowings tobanks and financial institution and also has not issued debentures during the year. TheCompany has also not taken any fresh loans or borrowings from Government.

x. Based on our audit procedures and according to the information and explanationsgiven to us we are of the opinion the company has defaulted in repayment of dues tofinancial institutions or banks. During the year 2013-14 CDR cell had approved the debtrestructuring of the company and CDR package was implemented with cutoff date as 1stApril 2013.However during the year end review the accounts of the company with all thebanks have been slipped into the sub standard category due to which the bankers' of thecompany have sent mandate to CDR cell for withdrawal of CDR package to the company whichwas approved by CDR cell in its meeting held on 27 Nov 2014. Banks have recalled entireoutstanding of the company and started recovery proceedings under SARFAESI ACT.

xi. In our opinion and according to the information and explanations given to us theCompany has not given any guarantee for loan taken by others from a bank or financialinstitution during the year .However Company has outstanding corporate guarantees ofRs.327.20 crore for loan outstanding by its subsidiaries from banks and financialinstitutions.

xii. 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.

xiii. 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.

xiv. According to the information and explanations give 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 non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.

xvi. During the course of our examination of the books and records of the companycarried in accordance with the auditing standards generally accepted in India we haveneither come across any instance of fraud on or by the Company noticed or reported duringthe course of our audit nor have we been informed of any such instance by the Management.

xvii. Based upon the audit procedures performed and the information and explanationsgiven by the management all transactions with the related parties are in compliance withsection 177 and 188 of Companies Act 2013 where applicable and the details have beendisclosed in the Financial Statements as required by the applicable accounting standards.

For Raj Gupta & Co
Chartered Accountants
FRN: 000203N
Place: Ludhiana Raj Kumar Gupta
Date : 30/05/2016 (Partner)
Membership No.: 017039

Annexure - B to Independent Auditors' Report (Referred to in our report of even date)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 of JINDALCOTEX LTD. as of 31st March 2016 in conjunction with our audit of the financial statementsof the Company for the year ended on 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'). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's 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 information asrequired 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 ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls over financial reporting was established and maintained and ifsuch controls operated effectively in all material respects. Our audit involves performingprocedures to obtain audit evidence about the adequacy of the internal financial controlssystem over financial reporting and their operating effectiveness.

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 judgment 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 financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting 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 Authorizations of management and directors of the company; and

(3) provide reasonable Assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial 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.

Opinion

In our opinion the Company is not fully in operation so we cannot assure theeffectiveness of internal financial controls system over financial reporting and givereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withAuthorizations of management and directors of the company.

For Raj Gupta & Co
Chartered Accountants
FRN: 000203N
Place: Ludhiana Raj Kumar Gupta
Date : 30/05/2016 (Partner)
Membership No.: 017039