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Modern Dairies Ltd.

BSE: 519287 Sector: Agri and agri inputs
NSE: N.A. ISIN Code: INE617B01011
BSE 00:00 | 21 May 5.67 -0.25
(-4.22%)
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NSE 05:30 | 01 Jan Modern Dairies Ltd
OPEN 5.67
PREVIOUS CLOSE 5.92
VOLUME 632
52-Week high 24.65
52-Week low 5.67
P/E
Mkt Cap.(Rs cr) 13
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 5.67
CLOSE 5.92
VOLUME 632
52-Week high 24.65
52-Week low 5.67
P/E
Mkt Cap.(Rs cr) 13
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Modern Dairies Ltd. (MODERNDAIRIES) - Auditors Report

Company auditors report

To

The Members of Modern Dairies Limited

Report on The Financial Statements

1. We have audited the accompanying financial statements of Modern Dairies Limitedwhich comprise the Balance Sheet as at March 31 2017 the Statement of Profit and Lossand Cash Flow Statement for the year ended and a summary accounting policiesofsignificant and other explanatory information.

Management's Responsibility for the Financial

Statements

2. The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 with respect to the preparation and presentation ofthese standalone 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 the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

Auditor's Responsibility

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. 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.

5. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances but not for the purpose of expressing anopinion on whether the Company has in place an adequate internal financial controls systemover financial reporting and the operating effectiveness of such controls. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the financial statements

6. We believe that the audit evidence we have obtained is sufficientand appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Opinion

7. 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 subject to the issues enumerated in Emphasis ofMatters below: (a) In the case of the Balance Sheet of the state of affairs of theCompany as at March 31 2017; (b) In the case of the Statement of Profit and Loss of theProfit/ Loss of the Company for the year ended on that date; and (c) In the case of theCash Flow Statement of the cash flows of the Company for the year ended on that date.

Emphasis of Matter

1. Interest on Non-Convertible Debentures:

Referring to the point no 35 of Notes to Accounts The Company's Corporate DebtRestructuring (CDR) package was approved by Corporate Debt Restructuring Empowered Group(CDREG) vide letter dated 19 October 2011. Per CDR approval at the end of two years i.e.1 April 2013 outstanding balance of Working Capital Term Loan (WCTL) and Funded InterestTerm Loan (FITL) taken from respective banks has been converted into 496530325 unsecuredoptionally convertible debentures (OCD) at a coupon rate of 0.001%. The said OCDs had anoption of conversion into equity during 18 months from date of allotment of OCD as perthen applicable SEBI guidelines. Since the conversion could not take place because of theissue of conversion price and as suggested by the lenders the Company proposed toincrease the rate of interest from its existing level of 0.001% to Coupon rate at 5 yearG-Sec or 8.00% p.a. whichever is higher in lieu of conversion. State Bank of India videits letter dated 31 July 2015 has already conveyed its approval for increase in theinterest rate in lieu of conversion and the proposal is under consideration of PunjabNational Bank and Canara Bank. Any change in the terms of issue will require the approvalof shareholders at the general meeting. The proposal has been accepted by the State Bankof India. However the Company has still not provided for any interest payable to statebank of India in the books of accounts due to the reason as explained in point no. 2below.

2. Interest provisioning on facilities from Consortium banks:

Referring to the point no 36 of the Notes to Accounts The Company's various creditfacilities have been declared "Non Performing Assets" by its respective banks.There is a usual practice that banks discontinue to account for as "income" inrespect to the accrued interest on such assets subsequent to the declaration of these as"Non performing assets". The bankers of the Company too have not accounted as"income" in respect to the interest subsequent to NPA declaration date. In orderto achieve the desired congruency on this issue the management of the Company has notprovided for such interest i.e. interest on credit facilities subsequent to the date ofdeclaration of these credit facilities as non performing. Such interest amounts to Rs.16.11 Crores. Had the said interest been provided in the books in the normal course thepresent losses of Rs. 13.36 Crore would have risen to Rs. 29.47 Crores and the outsideliabilities of the Company would have risen by Rs. 16.11 Crores. The Earning per share hasalso been affected by the above effect in the profit & loss account.

Statement on Impact of above auditor's observation for the Financial Year ended March312017.

S. No. Particulars Audited Figures (as reported before adjusting for auditor's observation) (Amt. Rs. in Cr.) Adjusted Figures (audited figures after adjusting for auditor's observation) (Amt. Rs. in Cr.)
1 Turnover/Total Income 457.72 457.72
2 Total Expenditure 471.08 487.19
3 Net Profit/ (Loss) (13.36) (29.47)
4 Earnings Per Share (5.73) (12.64)
5 Total outside Liabilities 222.72 238.83

3. Referring to the point no 37 of the Notes to Accounts The Company has applied andpursuing with its lenders for restructuring its credit facilities including term loans.The Company has requested its lenders for deferment of the installments of the term loan.In light of the above and the expert opinion available with the Company the Board ofDirectors of the Company has decided that the installments of the term loans falling duefor repayment within one year from the end of the balance sheet date as per existing CDRsanctions has not been shown as current liability as otherwise required as perSchedule-III under section 129 of the Companies Act 2013. The detail of such installmentsof the term loans falling due for repayment within one year from the end of the balancesheet date i.e. 31st March 2017 are as follows:

Type of Loan Amount ( Rs. in lacs)
(Not shown as Current Liability)
Term Loan 903.71
Corporate Loans 360.15
Total 1263.86

This has resulted in understatement of current liabilities by Rs. 1263.86 lacs andoverstatement of long term liabilities by the same amount.

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 section 143 ofthe Act we give in the Annexure a statement on the matters specified in the paragraph 3and 4 of the Order to the extent applicable.

2. As required by Section 227(3) of the Act we report that: a. We have obtained allthe information and explanations which to the best of our knowledge and belief werenecessary for the purpose of our audit; b. In our opinion proper books of account asrequired by law have been kept by the Company so far as appears from our examination ofthose books. c. The BalanceSheettheStatement Profitand Loss and the Cash FlowStatement dealt with by this Report are in agreement with the books of account. d. In ouropinion the Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementcomply with Accounting Standards specified under section 133 of the Act read with Rule 7The Companies (Accounts) Rules 2014. e. On the basis of the written representationsreceived from the directors as on March 31 2017 taken on record by the Board ofDirectors none of the directors is disqualified as on March 31 2017 from beingappointed as a director in terms of Section 164(2) of the Act. f. With respect to theother matters to be included in the

Auditor's Report in accordance with Rule 11 of the

Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of ourinformation and according to the explanations given to us: The Company has disclosed theimpact of pending litigations on its financial position in its financial statements; TheCompany has made provision as required under the applicable law or accounting standardsfor material foreseeable losses if any on long-term contracts including derivativecontracts; There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

3. With respect to the other matters to be included in the Auditor's Report inaccordance with the Rule 11 of the Companies(Audit and Auditors) Rules 2014 in ouropinion and to the best of our information and according to the explanation given to us:The Company has provided requisite disclosures in the Financial Statements as to holdingsas well as dealings in Specified Bank Notes during the period from 8 November 2016 to 30December 2016. Based on audit procedures and relying on the management representation wereport that the disclosures are in accordance with books of account maintained by theCompany and as produced to us by the Management.

For Aaryaa & Associates
Chartered Accountants
Firm's Registration No.: 015935N
Harsharanjit Singh Chahal
Place: Chandigarh Partner
Date: 27th May 2017 Membership No.:091689

The Annexure 1 referred to in our report to the members of the Company for the yearended 31st March 2017.

To the best of our knowledge and belief and information & explanation given to uswe further report that:-

(i) (a) The Company has maintained proper records showing full particulars includingquantitative . details and situation of fixed assets (b) The Company has a regular programof physical verification of its fixed assets under which fixed assets are verified in aphased manner over a period of three years which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. In accordance with thisverified during program certain fixed the year and no material discrepancies were noticedon such verification.

(c) According to information and explanations given to us the title deeds of all theimmovable properties (which are included under the head "fixed assets") aremortgaged with banks from which borrowings are obtained by the Company. The Company hasmaintained certified copies of the title deeds. Based on our examination of these recordsand other sufficient appropriate audit evidences in our opinion the title deeds of allthe immovable properties (which are included under the head ‘fixed assets') are heldin the name of the Company.

(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year except for goods-in-transit and stocks lying withthird parties. For stocks lying with third parties at the year-end written confirmationshave been obtained by the management. No material discrepancies were . noticed on theafore said verification (iii) The Company has not granted any loan secured or unsecuredto companies firms limited liability partnerships or other parties covered in theregister maintained under Section 189 of the Act. Accordingly the provisions of clauses3(iii)(a) 3(iii)(b) and 3(iii)(c) of the Order are not applicable.

(iv) In our opinion the Company has not entered into any transaction covered underSections 185 and 186 of the

Act. Accordingly the provisions of clause 3(iv) of the Order are not applicable.

(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable. (vi)We have broadly reviewed the books of account maintained by the Company pursuant to theRules made by the Central Government for the maintenance of cost records under sub-section(1) of Section 148 of the Act in respect of Company's products/services and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.

(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of customs duty of excise valueadded tax cess and other material statutory dues as applicable have generally beenregularly deposited to the appropriate authorities though there has been a slight delayin a few cases. Further no undisputed amounts payable in respect thereof were outstandingat the year-end for a period of more than six months from the date they became payable.

(b) The dues outstanding in respect of income-tax sales-tax service tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:

Statement of Disputed Dues

Name of the statute Nature of dues Amount Rs. ( ) in lac Amount paid under protest ( Rs. ) in lac Period to which the amount relates Forum where dispute is pending
The Haryana Murrah Buffalo and Other Milch Animal Breed (Preservation and Develop- ment of Animal Husbandry and Dairy Development Sector) Act 2001 Milk Cess 1742.91 591.00 2001-02 to 2016-17 Hon'ble Supreme Court of India
The Haryana Murrah Buffalo and Other Milch Animal Breed (Preservation and Develop- ment of Animal Husbandry and Dairy Development Sector) Act 2001 Interest on milk cess 2022.04 - 2001-02 to 2016-17 Hon'ble Supreme Court of India
Central Excise Act 1944 CENVAT credit interest 82.4 82.4 2005-06 Custom Excise and Service Tax Appellate Tribunal.
Central Excise Act 1944 Customs Act 1962 CENVAT credit interest Penalty and redemption fine 178.85 10.6 15 10.6 2007-08 to 2009-10 2011-12 Service Tax Custom Excise and Service Tax Appellate Tribunal. Custom Excise and Appellate Tribunal.
Haryana Tax on Entry of Goods into Local Areas Act 2003 Entry Tax 157.08 - 2007-08 to 2016-17 Hon'ble Supreme Court of India

(viii) There are no loans or borrowings payable to financial institutions or governmentand no dues payable to debenture-holders. The Company has defaulted in repayment ofloans/borrowings (as per Corporate Debt Restructuring package) to the following banks:

Sr. No. Name of the bank Nature of Loan Amount of default Period of default
1 Punjab National Bank
-Interest Cash Credit 69122858 31.12.2015
To
31.03.2017
-Interest Packing 9924736 31.12.2015
Credit To
31.03.2017
-Interest Term Loan 29078499 30.11.2015
To
31.03.2017
-Interest Corp Loan 12245634 30.11.2015
To
31.03.2017
-Principal Term Loan 60895500 31.12.2015
To
31.03.2017
-Principal Corp Loan 32370900 31.12.2015
To
31.03.2017
2 State Bank of India
-Interest Cash Credit 36757297 31.01.2016
To
31.03.2017
-Interest Term Loan 19794966 30.11.2015
To
31.03.2017
-Interest Corp Loan 10175719 30.11.2015
To
31.03.2017
-Principal Term Loan 31160700 31.12.2015
To
31.03.2017
-Principal Corp Loan 18862200 31.12.2015
To
31.03.2017
3 Canara Bank
-Interest Cash Credit 7113935 28.02.2016
To
31.03.2017
-Interest Term Loan 31051189 31.10.2015
To
31.03.2017
-Interest Corp Loan 1683932 31.10.2015
To
31.03.2017
-Principal Term Loan 43500000 31.12.2015
To
31.03.2017
-Principal Corp Loan 2790000 31.12.2015
To
31.03.2017

(ix) In our opinion the Company has applied moneys raised by way of the term loans forthe purposes for which these were raised. The Company did not raise moneys by way ofinitial public offer/ further public offer (including debt instruments) during the year.(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.

(xi) Managerial remuneration has been paid and provided by the Company in accordancewith the requisite approvals as required under Section 197 of the Act read with Schedule Vto the Act.

(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.

(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable accountingstandards.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.

(xv) In our opinion the Company has not entered into any non-cash transactions withthe Directors or persons connected with them covered under Section 192 of the

Act.

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

For Aaryaa & Assocites
Chartered Accountants
Firm Registration No. 0015935N
Harsharanjit Singh Chahal
Place : Chandigarh Partner
Date : 27th May 2017 Membership No.: 091689

Annexure 2

Independent Auditor's report on the Internal Financial

Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013("the Act")

1. In conjunction with our audit of the financial statements of Modern Dairies Limited("the Company") as of and for the year ended 31st March 2017 we have auditedthe internal financial controls over financial reporting (IFCoFR) of the Company of as ofthat date.

Management's Responsibility for Internal Financial

Controls

2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the

Guidance Note on Audit of Internal Financial Controls over Financial Reporting issuedby the Institute of Chartered Accountants of India. These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the orderly and efficient conduct of the Company'sbusiness 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 Act.

Auditors' Responsibility

3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India (ICAI) and deemed to be prescribed underSection 143(10) of the Act to the extent applicable to an audit of IFCoFR and theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") issued by the ICAI. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate IFCoFR were established and maintained and ifsuch controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A Company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with Generally Accepted Accounting Principles. A Company'sIFCoFR includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the Company are being made only in accordance with authorisations ofmanagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of theCompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.

Opinion

8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at 31st March 2017 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls over Financial Reporting issued by the Institute ofChartered Accountants of India.

For Aaryaa & Assocites
Chartered Accountants
Firm Registration No. 0015935N
Harsharanjit Singh Chahal
Place : Chandigarh Partner
Date : 27th May 2017 Membership No.: 091689