To the Members of
AANANDA LAKSHMI SPINNING MILLS LIMITED SECUNDERABAD
Report on the Audit of the Financial Statements
We have audited the financial statements of AANANDA LAKSHMI SPINNING MILLS LIMITED(the company) which comprise the Balance Sheet as at March 312019 theStatement of Profit and Loss (including other comprehensive income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date and asummary of the significant accounting policies and other explanatory information (hereinafter referred to as the financial statements)
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the basis for qualifiedopinion para the afore said Ind As financial statements give the information required bythe Companies Act 2013 (the Act) in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standard) Rules 2015 asamended (Ind AS) and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at 31st March 2019 and its loss (includingother comprehensive income) changes in equity and its cash flows for the year ended onthat date.
Basis for Qualified Opinion
i) The company did not provide interest on working capital loans and term loans withSBI and Andhra Bank amounting to Rs.633.01 Lakhs for the year under review and Rs. 1235.85Lakhs up to 31st March 2019 from the date of account became NPA. Due to non-provisioningof interest on bank loans post the accounts of the company were classified as NPA andfurther amount towards penal interest any other penalty etc' as may be charged bylenders.
In the absence of statement of account the above amount has been arrived at as percalculation made by the company.
ii) Substantial amount of statutory dues related to Income tax Employee's providentfund Employee state insurance act sales tax and professional tax amounting to Rs.18332638/- have become overdue and remain unpaid interest penalty if any in respectof the same has remained unascertained and unaccounted for.
Consequent to the above loss for the year and Liabilities as at 31st March 2019 wasunderstated and Shareholders funds are overstated to this extent.
We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) specified under Section 143(10) of the Act. Our responsibilities underthose standards are further described in the Auditors responsibility for the Audit ofFinancial Statements section of our report. We are independent of the company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (ICAI) together with the ethical requirements that are relevant to our audit offinancial statements under the provisions of the Act and the Rules made thereunder and wehave fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our qualified audit opinion on the financialstatements.
Material Uncertainty Related to Going Concern
i). we draw attention to note no. 42 of the financial statements with regard to theCompany has recorded accumulated losses of Rs. 4285.66 lakhs as at 31st March 2019resulting in complete erosion of net worth and current liabilities exceed current assetsby Rs. 2482.87 Lakhs. Further there were lower cash inflows from existing businessactivities and the Company has defaulted in payment of dues to banks/ FinancialInstitutions and could not comply with the terms of sanction and /or repayment schedule ofthe lending institutions and banks. Banks have issued notices under SARFAESI Act. Theseconditions indicate the existence of material uncertainty that may cast significant doubtabout the Company's ability to continue as a Going Concern. However the accompanyingfinancial have been prepared on Going Concern basis for the reasons stated inthe said note.
Our opinion is not modified in respect of this matter.
Emphasis of Matter
We draw attention to the following matters in the notes to the financial statements
i) Note No 40 of the financial statements relating to non-provision of interest fordelay in payment to MSME suppliers
ii) Note No. 46 of financial statements relating to confirmation of balances inrespect of trade receivables and trade payables
Our opinion is not qualified in respect of these matters.
Key Audit Matters
Key Audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Inaddition to the matter described in the Basis for Qualified Opinion section and MaterialUncertainty Related to Going concern section of our report we have determined the mattersdescribed below to be the key audit matters to be communicated in our report.
|Key Audit Matters ||Auditor's Response |
|Evaluation of uncertain tax positions ||Principal audit procedures |
|The Company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes Refer to Notes: no 40 to the Financial Statements ||Our audit procedures include the following substantive procedures: |
| || Obtained understanding of key uncertain tax positions; and |
| || We along with our internal tax experts - |
| || evaluated the Design and tested the operating effectiveness of controls around the assessment of the matter; |
| || Read and analysed select key correspondences external legal opinions / consultations by management for key uncertain tax positions; |
| || Discussed with appropriate senior management and evaluated management's underlying key assumptions in estimating the tax provisions; and |
| || Assessed management's estimate of the possible outcome of the disputed cases; |
| ||Assessed the appropriateness of disclosures made under the head Contingent Liabilities' in the financial Statements. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe standalone financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above and in doing so consider whether the otherinformation is materially inconsistent with the financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
When we read the Annual report if we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.
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 financial statements that give a true and fair view of the financial positionfinancial performance including other comprehensive income cash flows and changes inequity of the Company
in accordance with the Indian Accounting Standards (Ind AS) prescribed under Section133 of the Companies Act 2013 read with relevant rules issued there under and otheraccounting principles generally accepted in India.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the companyand for preventing and detecting the 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 offinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the financial statements the Board of Directors is responsible forassessing the company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessthe Board of Directors either intends to liquidate the company or to cease operations orhas no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibility for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these Standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1) As required by the Companies (Auditor's Report) Order2016 (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 a statement on the matters specified in the paragraph3 and 4 of the Order to the extent applicable.
2) As required by Section 143(3) of the Companies Act2013 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 except for the indeterminate effects of the matters referred to inBasis for Qualified opinion paragraph above proper books of account as required by lawhave been kept by the Company so far as it appears from our examination of those books
c) the Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of account
d) Except for the matters referred to in Basis for Qualified opinion paragraph abovein our opinion the aforesaid financial statements comply with the Indian AccountingStandards (Ind AS) prescribed under Section 133 of the Companies Act 2013 read with Rule7 of Companies (Accounts) Rules 2014.
e) On the basis of written representations received from the directors as on 31stMarch2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March2019 from being appointed as a director in terms of Section164(2) of the Act
f) With respect to the adequacy of internal financial controls over financial reportingof the Company and the operating effectiveness of such controls refer to our separatereport in Annexure B.
g) No managerial remuneration was paid during the year under review. So reporting underrequirements of section 197 doesn't apply.
h) 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 no 40 (b) to(g) of financial statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required required to be transferred to theInvestor Education and Protection Fund by the Company.
for K.S.RAO & CO.
Firm's Regn No. 003109S
Membership No. 231388
Date : 30.05.2019
Annexure - A to the Auditor's Report:
The Annexure referred to in Para 1 under the heading of Report on Other Legal andRegulatory Requirements of our report of even date to the members AANADA LAKSHMISPINNING MILLS LIMITED SECUNDERABAD for the year ended March 312019.
1. a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. As explained to us the management has physically verified the fixed assets duringthe year and there is a regular programme of physical verification which in our opinionis reasonable having regard to the size of the Company and the nature of the assets. Nodiscrepancies were noticed on such verification.
c. According to the information and explanation given to us and on the basis of ourexamination of the records of the Company the immovable properties have been transferredto AANANDA LAKSHMI SPINNING MILLS LIMITED (Resulting company) as per the scheme ofdemerger approved by Hon'ble High Court at Hyderabad.
2. According to information and explanation given to us physical verification ofinventory has been conducted at reasonable intervals by the management. However we didnot have occasion to overview the physical stock taking. Further according to informationand explanation given to us no material discrepancy was noticed in such verification bymanagement
3. a. During the year the Company has not granted any loans secured or unsecured toCompanies firms limited liability partnerships or other parties covered in the registermaintained under Section 189 of the Companies Act 2013.
b. In view of our comments in para (a) above Clause (III) (a) (b) and (c) ofparagraph 3 of the aforesaid order are not applicable to the Company.
4. In our opinion and according to the information and explanation given to us theCompany has not advanced any loan to any Director and no investments were made during theyear as referred to in sections 185 and 186 of the Act. Therefore the provisions ofParagraph 3(iv) of the Companies (Auditor's Report) Order 2016 are not applicable to theCompany.
5. The Company has not accepted any deposits from the public. Hence the provisions ofSections 73 to 76 or any other relevant provisions of the Companies Act 2013 and therules framed there under do not apply to this Company.
6. We have broadly reviewed the cost records maintained by the Company pursuant tosub-section (1) of section 148 of the Companies Act 2013 and are of the opinion thatprime facie the prescribed accounts and records have been made and maintained. We havehowever not made a detailed examination of the cost records with a view to determinewhether they are accurate or Complete.
7. a. According to the records the company is not regular in depositing undisputedstatutory dues including provident fund employees state insurance Income-taxSales-tax Service tax Goods and Services Tax Duty of customs Duty of excise Valueadded tax Cess and all other statutory dues with the appropriate authorities. Accordingto the information and explanations given to us there are no arrears of outstandingstatutory dues as at March 312019 for a period more than six months from the date theybecame payable are as follows.
|Name of Statute ||Nature of the dues ||Amount (In Lakhs) ||Period to which the amount relates (Financial Year) ||Due Since ||Date of Payment |
|AP GST ACT ||Sales tax Deferment ||118.24 ||2015-16 2016-17 2017-18 ||June 2015 ||Not yet paid |
|TS VAT ||VAT ||2.29 ||2017-18 ||Apr 2017 ||Not yet paid |
|Central Sales Tax Act 1956 ||CST ||2.59 ||2016-17 ||Mar 2017 ||Not yet paid |
|Employees provident Fund Act ||Provident Fund Contribution ||45.05 ||2016-2017 20172018 & 2018-2019 ||June 2016 ||Not Yet Paid |
|Employees State Insurance Act ||Employees State Insurance ||6.80 ||2017-2018 & 20182019 ||Apr 2017 ||Not Yet Paid |
|Professional Tax ||Professional Tax ||0.45 ||2016-17 2017-18 & 2018-19 ||Apr2017 ||Not yet Paid |
|Income tax Act 1961 ||TDS ||7.92 ||2016-17 2017-18 & 2018-19 ||Oct 2016 ||Not Yet Paid |
b. According to the records of the Company and the information and explanations givento us the dues of Sales tax Income tax Custom Duty Wealth Tax Service Tax ExciseDuty Cess which have not been deposited on account of dispute are as follows:
|Name of Statute ||Nature of the dues ||Amount (In Lakhs) ||Period to which the amount relates (Financial Year) ||Forum where dispute is pending |
|Andhra Pradesh General Sales Tax (APGST) Act 1957 ||Sales Tax dues ||3.25 ||2001-2002 ||Hon'ble High Court Hyderabad |
|Andhra Pradesh General Sales Tax (APGST) Act 1957 (Case filed by Bharat Petroleum Corporation Ltd) ||Sales Tax dues ||40.28 ||1997-98 ||Additional-chief Judge City Civil Court Secunderabad |
8. In our opinion and according to the information and explanations given to us theCompany has defaulted in repayment of loans to financial institutions and Banks.
|Name of the Bank ||Amount of default as at the Balance Sheet date (Rs in Lakhs)* ||Due from |
|i) Andhra Bank - II ||177.93 ||From Sep'2016 |
|ii) Andhra Bank - III ||1032.00 ||From Sep'2016 |
|iii) SBH - Corp ||442.70 ||From Sep'2016 |
|iv) ICICI Bank Ltd ||19.80 ||From Sep'2016 |
|v) OCC-Andhra Bank ||1000.00 ||From Sep'2016 |
|vi) OCC -SBH ||433.84 ||From Sep'2016 |
*Total Principal dues excluding interest
9. During the year under review the company has not raised any moneys by way ofinitial public offer or further public offer (including debt instruments) and Term loansduring the year. Accordingly the provisions of paragraph 3(ix) of the Companies(Auditor's Report) Order 2016 is not applicable.
10. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.
11. No managerial remuneration has been paid or provided during the year under audit;Hence paragraph 3(xi) of the Companies (Auditor's Report) Order 2016 is not applicable.
12. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Companies (Auditor'sReport) Order 2016 is not applicable.
13. According to the information and explanations 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.
14. 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 convertible debentures duringthe year.
15. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Companies (Auditor's Report) Order 2016 is not applicable.
16. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
| ||for K.S.RAO & CO. |
| ||Chartered Accountants |
| ||Firm's Regn No. 003109S |
| ||(M.NAGA PRASADU) |
|Place: Hyderabad ||Partner |
|Date : 30.05.2019 ||Membership No. 231388 |
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 AANANDALAKSHMI SPINING MILLS LIMITED SECUNDERABAD (the Company) as of 31st March2019 in conjunction with our audit of the financial statements of the Company for the yearended on that date.
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.
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 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material aspects.
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 and error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion. Meaning of Internal Financial Controls overFinancial 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 expenditure of the Company are being made only inaccordance with authorisations of management and directors of the Company; and
3. provide reasonable assurance regarding prevention or timely detection ofunauthorised 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 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 policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2019 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.
| ||for K.S.RAO & CO. |
| ||Chartered Accountants |
| ||Firm's Regn No. 003109S |
| ||(M.NAGA PRASADU) |
|Place: Hyderabad ||Partner |
|Date : 30.05.2019 ||Membership No. 231388 |