TO THE MEMBERS OF SHRENUJ & COMPANY LIMITED
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Shrenuj &Company Limited ("the Company") which comprise the Balance Sheet as at March31 2016 the Profit and Loss Statement and the Cash Flow Statement for the year thenended and a summary of the significant accounting policies and other explanatoryinformation.
Management's Responsibility for the Standalone 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 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 Accounting Standardsprescribed under Section 133 of the Act.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and 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 whetherdue to fraud or error.
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 thereunder and the Order under section 143 (11)of the Act.
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under Section 143(10) of the Act. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the standalone financial statements are free frommaterial misstatement.
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 thestandalone 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 Board of Directors as well as evaluating theoverall presentation of the standalone financial statements.
We believe that the audit evidence obtained by us read with the notes to the financialstatements dealing with inventories and current assets is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us and read with the Other Matters section of our Report the aforesaidstandalone financial statements give the information required by the Act in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2016and its loss and its cash flows for the year ended on that date.
We draw your attention to the following:
(a) Attention is invited to Point I of Significant Accounting Policies attached tofinancial statements regarding Inventories which continue to be as Valued Verified andCertified by the Management. Since the same is technical in nature we have relied on theManagement's certificate.
(b) Attention is invited to Note No. 8(b) and 16(b) of Notes to financial statementsregarding balances of Receivables and Trade Payables which are subject to Confirmation andreconciliation and netting of receivables against payables to the same party in respectwhereof the necessary approvals are pending.
(c) Attention is invited to Notes No. 3(b) of Notes to financial statements dealingwith non-payment of amounts overdue on External Commercial Borrowing and 9(c) interestthereon; Note No. 9 on dividend declared and Dividend Distribution Tax being unpaid andNote No. 9(a) regarding Undisputed Statutory dues being outstanding beyond 6 months.
(d) Attention is invited to Notes No. 35 of Notes to financial statements dealing withreceivable from Subsidiary Companies and amounts invested therein being stated at theircarrying values. Audited / reviewed Financial Statements have not yet been received andhence we are not able to verify the recoverability of these sums and have thereforerelied upon the representation made by the management.
(e) The company has faced severe liquidity pressure resulting in various statutory andother payments being delayed or becoming overdue including those stated above. However wehave been informed that in the Management's opinion the realisable value of inventoriesand other assets including overdue assets are expected to be adequate to repay alloutstanding liabilities. Based on the said assertion by the Management these financialstatements are prepared on a going concern basis.
Our opinion is qualified / modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. 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 Profit and Loss Statement and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account.
d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards prescribed under section 133 of the Act as applicable.
e) On the basis of the written representations received from the directors as on 31stMarch 2016 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2016 from being appointed as a director in termsof Section 164 (2) of the Act.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A".
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 as referred to in Note to the standalone financialstatements.
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company..
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
For Rajendra & Co.
Chartered Accountants (Registration No.108355W)
A. R. Shah
Membership No.047166 Mumbai
Dated: 28th May 2016
ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT ON THE STANDALONE FINANCIALSTATEMENTS OF SHRENUJ & COMPANY LIMITED
(Referred to in paragraph 1 (f) under Report on Other Legal and RegulatoryRequirements' of our report of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of SHRENUJ& COMPANY LIMITED ("the Company") as of March 31 2016 in conjunction withour audit 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 Reporting (the"Guidance Note")issued by the Institute of Chartered Accountants of India. 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.
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 and the Standards on Auditing prescribed under Section 143(10) ofthe Companies Act 2013 to the extent applicable to an audit of internal financialcontrols. 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 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 subject to the notes regarding inventories where we continue torely only on the verification and valuation made by the management on account of technicalissues related thereto. Further internal financial controls on seeking confirmations onReceivables need strengthening.
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.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects established and put in place a system ofinternal financial controls over financial reporting. In our opinion such internalfinancial controls over financial reporting need to be significantly strengthened in orderto operate more effectively as at March 31 2016 based on the internal control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note.
For Rajendra & Co.
Chartered Accountants (Registration No. 108355W)
A. R. Shah
Membership No.:47166 Mumbai
Date : 28th May 2016
ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT ON THE STANDALONE FINANCIAL STATEMENTSOF SHRENUJ & COMPANY LIMITED
(Referred to in paragraph 2 under the heading Report on Other Legal andRegulatory Requirements' of our Report of even date)
i. In respect of its fixed assets:
a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
b) As explained to us all the fixed assets have been physically verified by themanagement in a phased periodical manner which in our opinion is reasonable having regardto the size of the Company and nature of its assets. No material discrepancies werenoticed on such physical verification.
c) As per the information and explanations provided to us title deeds of immovableproperties are generally in the name of the Company or in the name of the erstwhilecompanies which have since been amalgamated into the Company based on an Order of a Courtin the past.
ii. As explained to us inventories have been physically verified at reasonableintervals during the year by the Management and that no material discrepancies werenoticed on such physical verification as certified by the Management. The Industry inwhich the Company is operating and the nature of its inventories being technical in naturewe have relied on the certificate of the Management for reporting under this clause as hasbeen relied upon in earlier years.
iii. In respect of the loans secured or unsecured granted by the Company tocompanies firms Limited Liability Partnerships or other parties covered in the registermaintained under Section 189 of the Companies Act 2013:
a) According to the information given to us in respect of interest free loans grantedto subsidiaries having regard to the long term involvement of the Company with itsSubsidiaries we are of the opinion that the other terms and conditions of the said loansare prima facie not prejudicial to the interest of the Company. However some of theloanees have a negative net worth but the Management is hopeful of recovering the saidsums. We have not independently verified the adequacy of the assets in the hands of theloanees to repay the sum and offer no opinion on the Management's assertion ofrecoverability.
b) The schedule of repayment of principal and payment of interest wherever applicablehave been stipulated and repayments of principal amounts and /or receipts of interest havebeen regular as per stipulations except interest receivable for the year from onesubsidiary amounting to Rs. 18.61 (in million).
c) There is an overdue interest amount of Rs 72.55 (in million) receivable fromsubsidiaries as at the year-end.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 of the Companies Act 2013 inrespect of grant of loans making investments and providing guarantees and securities tothe extent applicable as the provisions are not applicable in respect of wholly ownedsubsidiary companies. However the Company has not complied with the provisions of Section186 of the Companies Act 2013 as the aggregate amount of investments loans andguarantees given to the wholly owned subsidiary companies exceed the limits specified inthe said section.
v. The company has not accepted any deposit from public during the year. In respect ofadvances received from the customers against which sales could not be completed within oneyear continue to be shown as Current Liabilities under the head "Advance Receivedfrom the Customers" as in the past.
vi. The provisions of the clause 3 (vi) of the CARO 2016 are not applicable to theCompany as the Company is not covered by the Companies (Cost Records and Audit) Rules2014.
vii. In respect of statutory dues:
a) According to the records of the Company undisputed statutory dues includingProvident Fund Employees' State Insurance Income Tax Sales Tax Service Tax CustomsDuty Excise Duty Value Added Tax Cess and other material statutory dues have not beengenerally regularly deposited with the appropriate authorities. According to theinformation and explanations given to us undisputed amounts payable in respect of theaforesaid dues were outstanding as at March 31 2016 for a period of more than six monthsfrom the date of becoming payable are as under:
|Sr. No ||Name of the Statute ||Nature of Dues ||Amount (Rs. in million) ||Period to which amount relates (Rs. in million) |
|1 ||Income Tax Act 1961 ||Tax Deducted at Sources ||11.27 12.12 ||FY 2014-15 Upto September 2015 |
|2 ||Income Tax Act 1961 ||Dividend Distribution Tax ||7.85 ||FY 2014-15 |
|3 ||Income Tax Act 1961 ||Self Assessment Tax ||114.73 ||FY 2014-15 |
|4 ||Maharashtra Value Added Tax Act 2002 ||Sales Tax/VAT ||2.16 ||Upto September 2015 |
|5 ||The Municipal Corporation of Greater Mumbai ||Property Tax ||1.26 3.19 ||FY 2014-15 FY 2015-16 |
| ||TOTAL || ||236.25 || |
b) Details of dues of Income Tax Sales Tax Service Tax Customs Duty Excise Duty andValue Added Tax which have not been deposited as on March 31 2016 on account of disputesare given below:
|Sr. No ||Name of the Statute ||Nature of Dues ||Amount (Rs. in million) ||Period to which the amount relates ||Forum where dispute is pending |
|1. ||Income Tax Act 1961 ||Income Tax ||0.21 ||FY 2000-01 ||Commissionner of |
| || || ||5.37 ||FY 2001-02 ||Income Tax (Appeals) |
| || || ||0.92 ||FY 2002-03 || |
| || || ||2.35 ||FY 2005-06 || |
| || || ||40.17 ||FY 2009-10 || |
| || || ||77.56 ||FY 2010-11 || |
| || || ||0.39 ||FY 1989-90 ||Income Tax Appellate |
| || || ||0.35 ||FY 1999-00 ||Tribunal |
| || || ||40.40 ||FY 2007-08 || |
| || || ||69.44 ||FY 2008-09 || |
|2. ||Maharashtra Value Added ||Sales Tax/VAT and ||0.34 ||FY 1994-95 ||Commissioner (Appeals) |
| ||Tax Act 2002 ||Entry Tax || || || |
| ||TOTAL || ||237.50 || || |
viii. In our opinion and according to the information and explanations given to us theCompany has defaulted in the repayment of loans or borrowings to financial institutionsand banks as under.
|Name of the Lenders ||Total Amount in default (Rs.in Millions) ||Date of default started |
|Banks: || || |
|ICICI Bank- New York (ECB) ||46.38 ||15-Jan-2016 |
|ICICI Bank- New York (ECB) ||21.76 ||ECB Loan delayed payment - Due on 15/07/2015 paid on 27/08/2015 |
|Allahabad Bank ||85.74 ||Various Dates |
|Andhra Bank ||48.16 ||Various Dates |
|Bank of Baroda ||205.09 ||Various Dates |
|Name of the Lenders ||Total Amount in default (Rs.in Millions) ||Date of default started |
|Bank of India ||517.73 ||Various Dates |
|Corporation Bank ||59.74 ||Various Dates |
|ICICI Bank ||639.01 ||Various Dates |
|IDBI Bank ||87.98 ||Various Dates |
|Karnataka Bank ||254.78 ||Various Dates |
|State Bank of Hyderabad ||112.44 ||Various Dates |
|State Bank of Patiala ||30.77 ||Various Dates |
|Standard Chartered Bank ||54.32 ||Various Dates |
|Syndicate Bank ||103.73 ||Various Dates |
|Union Bank of India ||721.94 ||Various Dates |
|Punjab National Bank ||325.65 ||Various Dates |
|Financial Institution || || |
|Housing Development Finance Corporation Limited ||40.00 ||Default in repayment of loan Rs. 40 million. The said loan has been rescheduled on 15/01/2016 |
|Total ||3355.23 || |
The Company does not have any outstanding due from Government and dues to debentureholders.
ix. In our opinion and according to the information and explanations given to us thereare no monies raised by way of debt instruments or term loans during the year.
x. Based on the audit procedures performed and according to the information andexplanations given to us by the Management no material fraud by the Company or on theCompany by its officers or employees has been noticed or reported during the year nor havebeen informed of any such case by the Management. We report that we have not come acrossany instance of fraud by the Company.
xi. In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
xii. The Company is not a Nidhi Company and hence reporting under clause (xii) ofParagraph 3 of the Order is not applicable.
xiii. In our opinion and according to the information and explanations given to us theCompany's transactions with its related parties are in compliance with Sections 177 and188 of the Companies Act 2013 where applicable and details of related partytransactions have been disclosed in the financial statements etc. as required by theapplicable accounting standards.
xiv. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause (xiv) of Paragraph 3 of the Order is not applicable to the Company.
xv. In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or persons connected with its directors as covered under section 192 of theCompanies Act 2013and hence reporting under clause (xv) of Paragraph 3 of the Order isnot applicable to the Company
xvi. In our opinion and according to information and explanations provided to us theCompany is not required to be registered under section 45-IA of the Reserve Bank of IndiaAct 1934.
For Rajendra & Co.
A. R. Shah
Membership No. 47166
Dated: 28th May 2016