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Namaste Exports Ltd.

BSE: 526059 Sector: Others
NSE: NAMASTEXP ISIN Code: INE583A01017
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Namaste Exports Ltd. (NAMASTEXP) - Auditors Report

Company auditors report

TO THE MEMBERS OF NAMASTE EXPORTS LIMITED

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Namaste ExportsLimited (“the Company”) which comprise the Balance Sheet as at 31st March 2017the Statement of Profit and Loss and Cash Flow Statement for the year then ended and asummary of the significant accounting policies and other explanatory information.

Management's Responsibility for the 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 financial statements that shall give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordance withthe accounting 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 provisions of the Act for safeguarding of the assets of the Company andpreventing and detecting frauds and other irregularities; the selection and application ofappropriate accounting policies; making judgements and estimates that are reasonable andprudent; and the design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whether due to fraud or error.

Auditor's Responsibility

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 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 requirement 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 andthe 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. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Director's as well as evaluating the overall presentationof 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 standalone financial statements.

Basis of qualified opinion

a. The Company has paid Rs. 20512000/- to Industrial Development Bank of India on19/09/2016 to buy back 2051200 equity shares of Re. 1 each of the Company. The buybackof shares was done even though Company did not have reserves or security premium or notraised further equity to fund the buy back as required under the provisions of section 68of the Companies Act 2013 read with Rule 17 of Companies (Share Certificate &Debentures) Rules 2014. The Company has not obtained necessary approvals / made filingsunder 68 of the Companies Act 2013 read with Companies (Share Certificate &Debentures) Rules 2014 Securities Exchange Board of India Stock Exchange (refer note no2.01 B). b. As detailed in Note No 2.01A the Company has not filed required documents withRegistrar of Companies Karnataka Bangalore regarding increase in authorized capitalpaid up capital reduction in the face value of paid up capital and other documentsrelating to amalgamation / restructuring for a substantial period. c. As referred in note2.05 advance of Rs. 1.8376956 is due for substantial period from a firm in whichrelatives of a director are interested. As per the documents produced before us theCompany has neither taken steps to register the property nor taken steps to recover thesaid dues.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us subject to the effect of the matters described in the basis of qualifiedopinion paragraph the aforesaid standalone financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at 31st March 2017 and its profits and its cash flows for the yearended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 (CARO 2016 or “theOrder) issued by the Central Government of India in terms of subsection (11) of section143 of the Act and on the basis of such checks of the books and records of the Company aswe considered appropriate and according to the information and explanations given to uswe give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of theOrder.

2. As required by Section 143(3) of the Act we report that:

a. We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;

b. In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

c. The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with books of account;

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

e. On the basis of the written representations received from the directors as on March31st 2017 taken on record by the Board of Directors none of the directorsare disqualified as on March 31st 2017 from being appointed as a director interms of Section 164(2) of the Act.

f. With respect to the adequacy of the internal financial controls over financialreporting of the Company and operating effectiveness of such controls refer to ourseparate report in Annexure B and

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 financial statements- Refer Note 2 (18) of Notes to the financialstatements;

ii) The Company has made provisions as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contacts includingpending derivative contracts wherever applicable;

iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

iv) The Company has provided requisite disclosures in the financial statements as toholdings as well as dealings in Specified Bank Notes during the period from 8th November2016 to 30th December 2016.

Based on audit procedures and relying on the management representation we report thatthe disclosures are in accordance with books of account maintained by the Company and asproduced to us by the Management.

For Ishwar & Gopal

Chartered Accountants

Registration No: 001154S

K.V Gopalakrishnayya

Partner

Membership No: 21748

Place: Bangalore

Date: 30/05/2017.

ANNEXURE -‘A' TO THE AUDITOR'S REPORT

The Annexure referred to in Independent Auditors' Report to the members of the Companyon the standalone financial statements for the year ended 31st March 2017 we report that:

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

b. The fixed assets of the Company have been verified by the management during theyear. No material discrepancies were noticed on such verification and the same have beenproperly dealt with in the books of account. In our opinion the periodicity of physicalverification is reasonable having regard to the size of the Company and nature of itsbusiness;

c. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deed of immovable properties are heldin the name of the Company except for one free hold land with gross value amounting to Rs.29480826/- which are held in the name of Success Apparels Private Limited which wasamalgamated with this Company with effect from 1st April 2012.

ii. Inventories other than those lying with third parties have been physically verifiedduring the year by the management. In our opinion the frequency of verification wasreasonable.

The discrepancies between the physical stocks and the book records where applicableas noticed on physical verification were not material and have been properly dealt with inthe books of account;

iii. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company in pursuance of the scheme of amalgamationapproved by the Board of Industrial and Financial Reconstruction (BIFR) dated 20thDecember 2013 the balance of interest free unsecured capital advance to a party listed inthe register maintained under section 189 of the Companies Act 2013 has been included andgrouped in the books of the Company.

This advance is in the nature of unsecured loan to a party covered in the registermaintained under section 189 of the Companies Act 2013.

a. We are not able to express an opinion as to whether the terms and conditions of theadvance referred to above are prima facie prejudicial to the interest of the Company.

b. We have been informed that pending completion of legal formalities the terms andconditions of repayment of principal has not been stipulated. We are not able to expressan opinion as to whether repayments are regular.

c. We are able to express an opinion as to whether any amount is overdue and whetherreasonable steps have been taken by the Company for recovery of principal.

iv. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not granted any loansinvestments guarantees and securities to parties covered under section 185 and 186 ofthe Companies Act 2013.

v. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not accepted any deposits andhence the requirement of clause 3 (v) of Companies (Auditor's Report) Order 2016 is notapplicable to the Company during the year under review.

vi. We have been informed that maintenance of books of accounts pursuant to the rulesmade by the Central Government under subsection (1) of Section 148 of the Companies Act2013 for maintenance of Cost records in respect of products of the Company are notapplicable to the Company for the year under review and hence the requirement of clause 3(vi) of Companies (Auditor's Report) Order 2016 is not applicable to the Company duringthe year under review.

vii.a. The Company has been generally regular in depositing with the appropriateauthorities 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 applicable.

There were no undisputed amounts payable in respect of Provident Fund Employees' StateInsurance Income Tax Sales Tax Service Tax duty of customs duty of excise valueadded tax cess and other material statutory dues applicable in arrears as at March 312017 for a period of more than six months from the date they became payable.

b. According to the information and explanation given to us the following amounts ofincome tax or sales tax or service tax or duty of customs or duty of excise or value addedtax or cess which have not been deposited with the relevant authorities on account of anydispute are detailed under:

Name of the Statute Nature of dues Amount (Rs.) Related Period Forum where dispute is pending
Income Tax Act 1961 Income Tax 1610494/- 2005-06 Honourable High Court of Karnataka

viii. In our opinion and according to the information and explanations given to us asper the amendment / modifications in the rehabilitation scheme sanctioned by the Board ofIndustrial and Financial Reconstruction on August 23 2005 the Company has not defaultedin repayment of dues to banks financial institutions government or debenture holders.

ix. In our opinion and according to the information and explanations given to usduring the year the Company did not raise any money by way of initial public offer orfurther public offer (including debt instruments) or term loans. Accordingly clause 3(ix) of Companies (Auditor's Report) Order 2016 is not applicable to the Company duringthe year under review.

x. According to the information and explanations given to us no material frauds by theCompany or on the Company by its officers and employees have been noticed or reportedduring the course of the audit.

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

xii. In our opinion and according to the information and explanation given to us theCompany is not a nidhi Company. Accordingly clause 3 (xii) of Companies (Auditor'sReport) Order 2016 is not applicable to the Company during the year under review.

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

xiv. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly paid debentures during theyear.

xv. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has not entered into any non cashtransactions with directors or persons connected with him. Accordingly clause 3 (xv) ofCompanies (Auditor's Report) Order 2016 is not applicable to the Company during the yearunder review. xvi. According to the information and explanation given to us and based onour examination of the records of the Company the Company is not required to beregistered under section 45-IA of the Reserve Bank of India Act 1934.

For Ishwar & Gopal

Chartered Accountants

Registration No: 001154S

K.V Gopalakrishnayya

Partner

Membership No: 21748

Place: Bangalore

Date: 30/05/2017.

ANNEXURE - B TO THE AUDITOR'S REPORT

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

We have audited the internal financial controls over financial reporting of NamasteExports Limited (“the Company”) as of 31st March 2017 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.

Management's Responsibility for Internal Financial Controls

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

Auditors' Responsibility

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

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Company's internal financial controls system overfinancial 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 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

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.

Adverse Opinion

According to the information and explanation given to us and based on our audit thefollowing material weakness has been identified as at 31st March 2017.

The Company did not have an appropriate internal control system for receipt of materialand reconciliation of material consumption which could potentially result in the Companylosing revenue.

A ‘material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company's annual or interim financialstatements will not be prevented or detected on a timely basis. In our opinion because ofthe effect of the material weakness/es described above on the achievement of theobjectives of the control criteria the Company has not maintained adequate and effectiveinternal financial controls over financial reporting as of March 31 2017 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India”.

We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 31 2017financial statements of the Company and the same is reported under emphasis of matters inour audit report of even date.

For Ishwar & Gopal

Chartered Accountants

Registration No: 001154S

K.V Gopalakrishnayya

Partner

Membership No: 21748

Place: Bangalore

Date: 30/05/2017.