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Sri Chakra Cement Ltd.

BSE: 518053 Sector: Industrials
NSE: N.A. ISIN Code: INE827D01020
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Sri Chakra Cement Ltd. (SRICHAKRACEM) - Auditors Report

Company auditors report

SRI CHAKRA CEMENTS LIMITED ANNUAL REPORT 2004-2005 AUDITORS' REPORT To The Members of Sri Chakra Cements Limited We have audited the Balance Sheet of Sri Chakra Cements Limited as at 31st March, 2005 and the Profit and Loss account for the period 1st October, 2004 to 31st March, 2005 annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with accounting standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assistance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 1. As required by the Companies (Auditors' Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in the paragraphs 4 and 5 of the said order. 2. Further to our comments in the Annexure referred to in paragraph 1 above, we state that a. We have obtained all the information and explanations which to the best of 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 the Company so far as appears from our examination of such books. c. The Balance Sheet and the Profit and Loss Account referred to in this report are in agreement with the Books of account. d. In our opinion, the Balance Sheet and Profit and Loss account dealt with by this report are in compliance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956 'except AS-6 and AS-10 regarding non-provision of depreciation upto 31-3-2001 and over statement of fixed assets, AS-15 regarding non provision of liability in respect of gratuity and leave encashment liability, AS-2 regarding valuation of WIP and AS-20 earnings per share which are not in accordance with the prescribed accounting standards and generally accepted accounting principles'. e. Reference is invited to Note No. 17 regarding preparation of accounts on a going concern basis, inspite of huge accumulated losses, in view of the reasons given therein. f. On the basis of written representations received from the Directors and placed on record, none of the Directors is disqualified as on 31st March, 2005 from being appointed as Directors of this Company under Section 274(1)(g) of the Companies Act, 1956. g. In our opinion and to the best of our information and according to the explanations given to us, the said Balance Sheet and the Profit and Loss account 'subject to note no. 10 regarding non-provision of lease rentals in respect of 250 acres of land allotted to the Company, not quantified in the absence of a lease agreement, note no. 11 regarding non-provision of 9gratuity liability and liability towards leave encashment payable to employees, the amount where of is not quantified, note no. 12 regarding non-provision of interest and other charges on Term Loans amounting to Rs. 125.48 lakhs, note no. 13 a & b regarding non-provision of interest on term loans and funded interest term loans given by banks amounting to Rs. 52.47 lakhs and interest on dealers deposits not quantified, note no. 14 regarding non-provision of depreciation on Plant & Machinery and Electrical Equipment to an extent of Rs.760.76 lakhs, upto 31-3-2001 and over statement of fixed assets by alike amount, note no. 15 regarding non- writing off of deferred revenue expenditure amounting to Rs. 367.06 lakhs, Non-compliance with AS-2 Valuation of Inventories, due to absence of relevant details, non reconciliation of inter office accounts, non-review of Capital Work in Progress items requiring adjustment, non reconciliation of chit account, non confirmation of balances in Sundry Debtors accounts, Sundry Creditors accounts including banks and financial institutions, the cumulative effect of which resulted in understatement of loss by alike amount to the extent quantified and note no. 18 regarding non-furnishing of information relating to dues to SSI,' read in conjunction with other notes thereon give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view, in confirmity with the accounting principles generally accepted in India. i) In so far as it relates to the Balance Sheet and the state of affairs of the Company as at 31st March, 2005 and ii) In so far as it relates to the Profit and Loss account of the loss for the period ended on that date. iii) In case of cash flow statement of the cash flows for the period ended on that date. For Satyanarayana & Co., Chartered Accountants G. VENKATA RATNAM Partner Place : Hyderabad Date : 31.08.2005 ANNEXURE TO THE AUDITOR'S REPORT Re : Sri Chakra Cements Limited Referred to in paragraph 1 of our report of even date . 1. a. The Company has generally maintained proper records showing full particulars including Quantitative details and situation of fixed assets. b. All fixed assets have not been physically verified by the Management during the period but there is a regular programme of verification which in, our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were identified on such verification. c. There was no substantial disposal of fixed assets during the period. 2. a. The management has conducted physical verification of inventory at reasonable intervals during the period. b. The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. c. The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification. 3. The Company has neither granted nor taker, any loans, secured or unsecured to / from Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act 1956. 4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures Commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods. During the course of our audit, no major weakness has been noticed in the internal controls in respect of these areas. 5. a. According to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under Section 301 have been so entered. b. In our opinion and according to the information and explanation given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of Rupees Five Lakhs in respect of any party during the period, have been made at prices, which are reasonable, having regard to the prevailing market prices at the relevant time, except sale of goods with two parties which in our opinion have not been made at prevailing market prices at the relevant time. 6. The Company has not accepted any deposits from the public. 7. In our opinion the Company has an internal audit system commensurate with the size and nature of its business. 8. We have broadly reviewed the books of account maintained by the Company pursuant to the order made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 in respect of the products of the Company, and are of the opinion that primafacie, the prescribed accounts and records have been made and maintained. 9. a Undisputed statutory dues including, investor education and protection fund, income-tax, sales-tax, have not been regularly deposited with the appropriate authorities. However other Material Statutory dues viz Provident Fund, Employees State Insurance dues, Excise Duty, have generally been paid regularly. The extent of arrears of outstanding statutory dues as at 31.03.2005 for a period of more than six months from the date they became payable is as under Rs. in lakhs 1. Income Tax (TDS) 28.17 2. Sales Tax 359.59 3. Royalty & Cess 524.44 b. According to the records of the Company and on the basis of the information and explanations given to us, the dues in respect of sales tax, income tax, custom duty, wealth tax, excise duty, cess which have not been deposited on account of any dispute, are as under Name of the Nature of Amount Period to Forum where statute dues (Rs. which the dispute is lakhs) amt relates pending Tamilnadu Sales 42.89 1983 II Jr. Civil Judge, General Tax Hyderabad Sales Tax Act Commissioner Central 982.24 1999 Office of the of Customs & Excise to Commissioner or Central Excise 2005 Customs & Central Excise, Guntur. 10. The Company has accumulated losses to the extent of Rs.3814.30 Lakhs at the end of the period which is more than fifty percent of its net worth and has incurred cash losses in the current and immediately preceding period. 11. Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has continuously defaulted in repayment of dues to financial institutions and banks. The total amount under Secured Loans amounting to Rs. 4085.44 Lakhs is in default for a period more than 10 years. The Company has not issued debentures. The Company has been registered with the BIFR and One Time Settlement proposals with the Banks and Institutions have been submitted. 12. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. 14. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. 15. According to the information and explanations given to us, the Company has not given guarantee for loans taken by others from bank or financial institutions. 16. Based on information and explanations given to us by the management, the Company did not take any term loans during the period. 17. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flow statement of the Company, we report that no funds raised on short term basis have been used for long term investment. 18. The Company has not made preferential allotment of shares to parties and Companies covered in the register maintained under Section 301 of the Companies Act, 1956. 19. The Company did not issue debentures during the period. 20. The Company has not raised money by Public Issue during the period. 21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit. For Satyanarayana & Co., Chartered Accountants G. VENKATA RATNAM Place : Hyderabad Partner Date : 31.08.2005