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Raj Rayon Industries Ltd.

BSE: 530699 Sector: Industrials
NSE: RAJRAYON ISIN Code: INE533D01024
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VOLUME 499
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OPEN 0.48
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VOLUME 499
52-Week high 0.48
52-Week low 0.19
P/E
Mkt Cap.(Rs cr) 17
Buy Price 0.48
Buy Qty 1470397.00
Sell Price 0.00
Sell Qty 0.00

Raj Rayon Industries Ltd. (RAJRAYON) - Auditors Report

Company auditors report

To

The Members of

Raj Rayon Industries Limited

Report on the Financial Statements

We have audited the accompanying financial statements of Raj Rayon IndustriesLimited ("the Company") which comprise the Balance Sheet as at 31stMarch 2017 the Statement of Profit and Loss the Cash Flow Statement for the year thenended and a summary of the significant accounting policies and other explanatoryinformation.

Management's Responsibility for the Financial Statements

The Company's Board of Directors are responsible for the matters stated in Section 134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial position andfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified undersection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making Judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatements whether due to fraudor 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 accordance with the Standards on Auditing specified undersection 143 (10) of the Act. Those Standards require that we comply with the ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatements.

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 misstatements of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers the internal financial control relevant to the Company's preparation ofthe financial statements that give a true and fair view in order to design auditprocedures that are appropriate in the circumstances. An audit also includes evaluatingthe appropriateness of the accounting policies used and the reasonableness of theaccounting estimates made by the Company's 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 our audit opinion on the financial statements.

Basis for Qualified Opinion

The attached Balance Sheet as at 31st March 2017 is drawn on the basis ofPrinciple of 'Going Concern'. We opine as follows in this connection:

a) Due to defaults in payments of Bank loans the company's accounts have beenclassified as Non- Performing Assets (NPA) by the bankers under Consortium. The banks(except South Indian Bank which has charged Interest for April 2016) have not chargedinterest on the company's borrowings / loans or reversed the interest charged. Thereforeno provision has been made for such Interest in the books of accounts of the company andto that extent finance cost and total loss is estimated to be understated by Rs. 9501.89Lakhs for the year ended 31st March 2017.

b) The Company's account stands exited from CDR Mechanism. However in view ofclassification of Company's account as Non-Performing Asset (NPA) contingency related tocompensation payable in lieu of bank sacrifice cannot be determined currently.

c) The Net worth of the Company is fully eroded. However the management has preparedthe financial statements on going concern basis. The appropriateness of the 'GoingConcern' concept based on which the accounts have been prepared is interalia dependent onthe Company's ability to infuse requisite funds for meeting its obligations to lenders /rescheduling of debt and resuming normal operations.

We further report that except for the effect if any of the matters stated inparagraph (b) and (c) above whose effect are not ascertainable had the observations madeunder 'Basis for Qualified opinion considered the loss after tax for the year ended March31 2017 would have been higher by Rs. 9501.89 Lakhs.

Qualified Opinion

in our opinion and to the best of our information and according to the explanationsgiven to us except for the matters expressed in Basis for Qualified Opinion and Emphasisof matters paragraph the aforesaid financial statements give the information required bythe Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in india of the state of affairs of the Companyas at 31st March 2017; and its Loss and cash flow for the year ended on thatdate.

Emphasis of Matter

We draw attention to the following matter in the notes to the Financial Statements forwhich our opinion is not qualified:

a) Term Loan Working Capital Term Loan (WCTL) Funded Interest Term Loan and WorkingCapital loans availed by the Company from various banks under consortium advance includingthe loans of South Indian Bank taken over by Asset Reconstruction Company remained unpaidand overdue since 2015 - 16.

b) I n our opinion the securities provided to Banks are not adequate to cover theamounts outstanding as on the date of Balance Sheet.

Our Report is not qualified in respect of the above matter.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor's Report) Order 2016 ("the Order") asamended issued by the Central Government of india in terms of sub-section (11) of section143 of the Companies Act 2013 (hereinafter referred to as the "Order") and onthe basis of such checks of the books of accounts and records of the Company as weconsidered appropriate and according to the information and explanations given to us wegive in the "Annexure A" a statement on the matters specified in paragraphs 3and 4 of the Order.

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 Cash Flow Statement dealtwith by this Report are in agreement with the books of accounts.

(d) in our opinion except for matters expressed in Paragraph "Basis for QualifiedOpinion" the aforesaid financial statements comply with the Accounting Standardsspecified under section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.

(e) On the basis of the written representations received from the directors as on 31stMarch 2017 taken on record by the Board of Directors none of the directors aredisqualified as on 31st March 2017 from being appointed as a director in termsof section 164 (2) of the Act.

(f) With reference 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".

(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 explanation given to us :

i. The Company has disclosed the impact of pending litigation on its financial positionin its financial statements - Refer "Note 32" to the financial statements.

ii. The Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.

iii. There is no amount outstanding which needed to be transfer to investor educationand protection fund.

iv. in the absence of requisite information/details regarding Specified Bank Notes andother denomination notes appropriate disclosure as required vide MCA Notification No. GSR308(E) dated 31 March 2017 could not be made.

For K. M. Garg & Co.
Chartered Accountants
(FRN - 120712W)
(CA. K K Garg)
Place: Mumbai Partner
Date: 30th May 2017 M No. 033940

ANNEXURE REFERRED TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph under the heading of ‘Report on

Other Legal and Regulatory Requirements' section of our report of even date to thefinancial statements of the Company for the year ended 31st March 2017)

(i) a. In our opinion the Company has maintained proper records showing fullparticulars including quantitative details and situation of its fixed assets.

b. As per the information and explanation given to us the fixed assets have beenphysically verified by the management according to a programme of verification which inour opinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies with respect to book records were reported on suchverification by the management.

c. The title deeds of immovable properties as disclosed in Note - 12 on Fixed Assets tothe financial statements are held in the name of the Company.

(ii) a. As explained to us Physical verification of inventory excluding stock withthird party has been conducted by the management at reasonable intervals. In respect ofInventory lying with third party these have substantially been confirmed by them. In ouropinion the frequency of verification is reasonable.

b. The Discrepancies noticed on verification of Inventory as compared to books recordswere not material and these have been properly dealt with in the books of accounts.

(iii) The Company has not granted any Unsecured Loan to Companies as covered in theregister maintained under section 189 of the Companies Act 2013.

(iv) In our opinion and according to the information and explanation given to us thecompany has complied with provisions of Section 185 and 186 of the Companies Act 2013 inrespect of Loans Investments guarantees and security.

(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposit within the meaning of section 73 to 76 of theCompanies Act 2013 and the rules framed there under.

(vi) Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under section 148 (1) of the Act in respectof its Products. We have broadly reviewed the same and are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We have nothowever made a detailed examination of the records with a view to determine whether theyare accurate or complete.

(vii) a) According to the records of the Company and the information and explanationsgiven to us the company is regular in depositing with appropriate authorities undisputedstatutory dues including Provident Fund Employee's State Insurance Income tax salestax Service Tax Custom Duty Excise duty Value Added Tax Cess and other statutory duesto the extent applicable to it. There are no undisputed statutory dues as referred toabove as at 31st March 2017 outstanding for a period of more than six monthsfrom the date they become payable.

c) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of Income Tax or sales tax or service tax orduty of customs or duty of excise or value added tax or cess except the following:

Name of the Statute Nature of the Dues Amount in (Rs.) (Excluding penalties and interest if any except otherwise stated) Period to which the amount relate Forum where dispute is pending
Central Excise Duty Excise Duty 23.89 1995-1996 Additional Directorate of Anti Evasion
32.09 1996-1997
38.30 1997-1998
25.82 1998-1999
7.40 1999-2000
127.50
0.09# 1999-2000 The Company is in the process of refund
2.95 2003-2004 Appellate Tribunal of Central Excise
3.35 2003-2004 & 20042005 The Company has filed reply to show Cause Notice received from Superintendent of Central Excise
2.84# 2003-2004 The Company has filed the Appeal in the Customs Excise & Service Tax Appellate Tribunal Ahmedabad
332.04 2009-2010 The Company has filed Appeal & Stay application with Custom Excise & Service Tax Appellate Tribunal Ahmedabad
174.57 2012-2013 The Company has filed an Appeal before the Custom Excise & Service tax Appellate Tribunal Ahmedabad
283.52 (**) 2005 - 2006 & 2006 - 2007 The Company is in the process of filing the Appeal with the Customs Excise & Service Tax Appellate Tribunal Ahmedabad
Textile Committee Act Cess 0.35 1997-1998
0.88 1998-1999 Textile Cess
2.13 1999-2000 Appellate Tribunal
3.10 2000-2001
1.37 2001-2002
7.82
Gujarat Tax on Entry of Specified Goods into Local Area Act 2001 (Including Penalties & Interest) Entry tax 308.83 (Net of ' 250.00 lakhs being amount Recovered by the Department) 01.04.2012 to 31.01.2014 The Company has filed an appeal before the Deputy Commissioner of Commercial Tax Surat (Gujarat).

# Payment made under protest

* Assessment year

** Represents Penalty demand

(viii) Based on our audit procedures and according to the information and explanationgiven by the management the company has defaulted in repayment of dues to bank /financial institution as detailed in Annexure "C" to this report. The Companyhas not issued any debentures.

(ix) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not raised moneys by way of initial public offeror further public offer including debt instruments and term Loans. Accordingly theprovisions of clause 3 (ix) of the Order are not applicable to the Company and hence notcommented upon.

(x) Based on the audit procedures performed and information and explanations given tous by the management we report that no fraud on or by the Company has been noticed orreported during the course of our audit.

(xi) Based upon the audit procedures performed and the information and explanationsgiven by the management the managerial remuneration has been paid or provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Companies Act;

(xii) As the Company is not a Nidhi Company and the Nidhi Rules 2014 are notapplicable to it the provisions of clause 4 (xii) of the Order are not applicable to theCompany.

(xiii) In our opinion all transactions with the related parties are in compliance withsection 177 and 188 of Companies Act 2013 and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.

(xiv) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not made any preferential allotment of Sharesduring the year under review. The Company has not made any private placement of shares orfully or partly convertible debentures.

(xv) Based upon the audit procedures performed and the information and explanationsgiven by the management the company has not entered into any non-cash transactions withdirectors or persons connected with him. Accordingly the provisions of clause 3 (xv) ofthe Order are not applicable to the Company and hence not commented upon.

(xvi) In our opinion the company is not required to be registered under section 45 IAof the Reserve Bank of India Act 1934 and accordingly the provisions of clause 3 (xvi)of the Order are not applicable to the Company and hence not commented upon.

For K. M. Garg & Co.
Chartered Accountants
(FRN - 120712W)
(CA. K K Garg)
Place: Mumbai Partner
Date: 30th May 2017 M No. 033940

"Annexure B" to the Independent Auditor's Report of even date on theStandalone Financial Statements of Raj Rayon Industries limited

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 Raj RayonIndustries Limited ("the Company") as of March 31 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". 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 ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting were 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 judgement including the assessment of the risks ofmaterial misstatement 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 may 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 has in all material respects an adequate internalfinancial control system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2017 based on"the Internal Financial control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by TheInstitute of Chartered Accountants of India".

For K. M. Garg & Co.
Chartered Accountants
(FRN - 120712W)
(CA. K K Garg)
Place: Mumbai Partner
Date: 30th May 2017 M No. 033940

Annexure "C" to Independent Auditors' Report

Default in Repayment of dues to Banks towards Term Loans

(Rs. in lakhs)

Particulars Period of Default

As at 31.03.2017

Principal Interest
State Bank of India Since 2015 - 16 5357.76 4793.91
State Bank of Hyderabad Since 2015 - 16 2954.64 3195.98
State Bank of Mysore Since 2015 - 16 1287.41 1035.58
State Bank of Travancore Since 2015 - 16 1066.92 940.07
State Bank of Bikaner & Jaipur Since 2015 - 16 477.87 441.04
State Bank of Patiala Since 2015 - 16 604.97 711.77
Phoenix ARC Pvt. Ltd. (*) Since 2015 - 16 1313.38 603.12
Total 13062.95 11721.47

Default in Repayment of dues to Banks towards Working Capital Facilities

(Rs. in lakhs)

Particulars Period of Default

As at 31.03.2017

Principal Interest
State Bank of India Since 2015 - 16 4753.33 2074.36
State Bank of Hyderabad Since 2015 - 16 1689.99 215.82
State Bank of Travancore Since 2015 - 16 820.13 109.53
State Bank of Mysore Since 2015 - 16 491.61 86.76
State Bank of Bikaner & Jaipur Since 2015 - 16 1415.78 183.46
Phoenix ARC Pvt. Ltd. (*) Since 2015 - 16 1010.73 118.19
Total 10181.57 2788.12

The facilities being classified as Non-Performing Assets (NPAs) the lenders havereduced the Drawing Power to "Nil" hence entire outstanding amount isconsidered as default by the Company.

(*) Phoenix ARC Pvt. Ltd. (an Assets reconstruction Company) has acquired the loansfrom South Indian Bank