To the Members ofAplabLimited
Report on the Audit of the Financial Statements
We have audited the Standalone financial statements of Aplab Limited ("theCompany") which comprise the Balance Sheet as at 31st March 2019 and the statementof Profit and Loss Statement of Changes in Equity and statement of cash flows for theyear then ended and notes to the financial statements including a summary of significantaccounting policies and other explanatory information for the year ended on that date.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements prepared by the Company give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2019 and Profit Changes in Equity and its cashflows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial 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 together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key Audit Matters (KAM') are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.
|Key Audit Matters ||How our audit addressed the Key Audit Matters |
|There are various Key Audit Matters which were observed as most significant in our audit of Financial statements and specifically these are as under.: ||Our Audit Procedures on various areas in general primarily included : |
| ||Obtaining an understanding of design ERP system processes and internal controls implemented by the management across its manufacturing & sales / service divisions |
| ||Interacting with ERP System Administrators to assess the effectiveness of various process controls |
| ||Testing IT and other controls for its completeness & accuracy of financial transactions |
| ||Testing on a sample basis various types of transactions across business verticals &sales / service units. |
| ||Examination of system outputs management reports major contracts sale deeds and obtaining necessary explanations / clarifications from the concerned officials |
| ||We give below how specifically each Key Audit Matter has been dealt with by us in our Audit : |
|The Company has incurred an operating loss of Rs. 1151.80 lakhs during this year. Since last 4 years company is incurring Operating losses. The Company has made a Profit during the year due to certain exceptional items and other comprehensive Income of Rs. 1866.94 lakhs however due to substantial accumulated losses its net worth has continued to remain negative at the end of the year at Rs. 2663.87 lakhs. ||We have analysed the major reasons which are contributing to the continued operating losses & those were high cost of debtcontinuous decline in turnover and high fixed costs. |
| ||With retiring of some of the bank & other borrowings company projects to save interest costs. As per presentation made by the Company in the Audit Committee Meeting and the Management Representation given to us Company plans to increase the turnover as funds would be available for its operations. |
|The Current Liabilities have exceeded Current Assets by Rs.7940.59 lakhs at the year end || |
|During the year the Company has sold its Property at Bhosari Pune to different parties & a net gain of Rs. 1075.02 lakhs was made. These funds were utilized to settle Bank Term Loan ( which was NPA ) under One Time Settlement ( OTS ) scheme. Under the OTS the Bank had waived outstanding Interest of Rs. 575.97lacs. The balance funds were utilized to pay off old statutory dues and other operational creditors. ||The sold property was not being used by the Company. We have examined the property sale deeds other related sale documents tax computation on gain as well as Bank documentation regarding OTS to ascertain that Bank dues are fully settled. |
|Inventory includes Rs. 1396.22 lakhs which is non-moving and may include some obsolescence. It includes un- reconciledand unconfirmed stocks worth Rs. 799.73lakhs. The Company has valued entire old inventory at cost instead ofleast of Cost or NRV. (Refer Note no. 10 ). ||The gain on sale of Property has been considered as an Exceptional Item along with Interest provision no longer required.This is anon operational income generated having substantial impact on profitability of the company. We have analysed inventory records for past 3 years to ascertain its non moving character as also the periodical physical verification records. In addition we have obtained the saleability or usability of all such non moving items from the company for terming the same as obsolete. |
| ||The Company claims that there is no obsolescence in electronics industry as such items are required during servicing etc. and therefore valued inventory at Cost. However based on the inventory records we have ascertained these as "Non Current Assets"(Refer Note no. 10 ) |
|Receivables of Rs. 424.84 lakhs are overdue for more than a year and include Rs. 281.70 lakhs over 3 years. These are not reconciled or confirmed by the parties. Some of these may have become doubtful or bad. ||We have reviewed the status of subsequent realisation for the old debts. However the Company has not made identification or provision for doubtful debts in the financial statements. However based on these facts and records we have ascertained that these as "Non Current Assets"(Refer Note no. 10 ) |
|The Company during the year could not pay various statutory dues in time and the delay ranges between 2 to 12 months. Statutory Dues of Rs. 86.93 lakhs and separated employee Unpaid Gratuity / other dues are Rs. 755.53 lakhs are at the year end. ||We have examined the records towards funds utilisation of the Sale Proceeds of Bhosari property and ascertained that unpaid public deposit &old statutory dues have been substantially repaid. |
|The balance amount of matured Public Deposits including interest remaining unpaid is Rs.30.26 lakhs In spite of cash losses Impairment of Assets has not been worked out or provided as required under IndAS36 ||Interest on unpaid dues has been computed and company has made a provision of the same in the financial statements. This computation has been verified by us. No action has been taken by the company and we have reported this matter to the Audit Committee. |
|In FY 2016-17 Company had entered into a MoU to sell the main Unit at Wagle Estate Thane for a sum of Rs. 35 crores this was approved by the Board of Directors of the Company. ( Refer Note no. 5 ). The Sale transaction has not yet been completed &Company continued to occupy the said premises during the year. ||We have examined the MoU entered with the party and also verified the advance received against the sale. This unit has been shown as Asset held for Sale however full depreciation has been charged during this year as Company continued to use these premises. We do not have any different opinion on this matter. |
|Interest provided of Rs. 197.67 lakhs for FY 2018-19 on Unsecured Loan of Rs. 2502.99 lakhs from one of the Directors has been reversed on her request. ||We have obtained evidence about Director's request to waive off interest on the unsecured loan given to the company. This matter has also been informed to the Board of Directors as per the records verified by us. This matter has been reported by us to the Audit Committee. |
|The Company during the year could not fully reconcile some of the important accounts. These are receipts from debtors Rs. 1521.48 lakhs payments to creditors Rs. 2551.50lakhs GST Excise Service Tax & VAT liabilities. ||The Management in their Representation has stated to resolve this on a priority basis. |
|The Company has not funded Gratuity Policy to the extent of Rs. 828.77lakhs. In addition there are unpaid Gratuity and other duesof separated employees of Rs. 755.53lakhs on the Balance Sheet date and includes dues over 5years (Refer Note no.23). No interest has been provided on these outstanding. ||The company has obtained Actuarial valuation of Employee Benefits ( Gratuity )as per Ind AS 19 and made necessary provision in the financial statements. |
| ||We have examined the employee data provided for this purpose as also sought clarifications on this valuation from the valuers. |
|The ERP System introduced during FY 2015-16 is not fully established or adequately tested for various reports and daybooks. In process and non reconciled transactions are worth Rs.133.45 lakhs at year end. ||The management has stated that due to non availability of funds the policy could not be funded or liabilities paid. We have obtained necessary clarifications from the System Administrators to understand the issues in process completion / un-reconciliation aspects. |
| ||The entire data for the year was provided to the System Administrators and they have completed at back end certain closing procedures which reduced value of un-reconciled transactions. |
| ||For the balance amount we have relied upon the guidance given by the system providers for giving necessary effects to certain financial transactions and Interim System Account balances. These were mainly in the areas of inventory processes. |
Responsibility of Management for 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 changes in equity 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. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statement that give a true and fair view andare free from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. Those Board of Directors are also responsible for overseeing thecompany's financial reporting process.
Auditor's Responsibilities 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 financial statements.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the "Annexure A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
As required by Section 143(3) of the Act we report that:
We have sought and obtained all the information and explanations which to the best ofour knowledge and belief were necessary for the purposes of our audit.
(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 the books of account.
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified 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 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164 (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 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 explanations given to us:
i. The Company has not provided the impact of pending litigations in its financialstatements. The total value of such litigations has been given in para vii(b) of theAnnexure A to this report 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. Rs. 0.65 lakhs are remaining to be transferred to the Investor Education andProtection Fund by the Company
| ||For Shahade& Associates |
| ||Chartered Accountants |
| ||(ICAI Firm Reg. No. 109840W) |
| ||Atul Shahade |
|Place: Mumbai ||Partner |
|Date: 14th May 2019 ||M. No. 35227 |
ANNEXURE - A
ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT
( Annexure referred to in paragraph under Report on Other Legal and RegulatoryRequirements' section of our report of even date on the accounts of Aplab Limitedfor the year ended on 31st March 2019. )
i. (a) The Company has maintained reasonable records showing particulars includingquantitative details and situation of fixed assets. This record is reconciled with theBooks of Account.
(b) Physical verification of items of the fixed assets was not fully conducted by themanagement during the year as per the programme however we are informed that no materialdiscrepancies were noticed in the completed verification. The verification results arebeing reconciled with Fixed Assets Register by the Company.
( c ) The Company has immovable properties of freehold and leasehold land and buildingsand the original title deeds are given to the Banks as security against various loansobtained. The Company has copies of these title deeds and on examination of these copiesand other documents we observed that all the title deeds of the properties are held inthe name of the Company or amalgamated subsidiary.
ii. As explained to us the inventory has been physically verified during the year bythe Management at the various locations. In our opinion the frequency of suchverification needs to be substantially improved at regional offices. As informed to usthe discrepancies noticed in physical verification of inventory as compared to the bookrecords were Rs. 799.73 lakhs at various locations and the Company is in the process ofreconciling the same with the books of account.
iii. According to the information and explanations given to us the Company has notgranted any loans to the parties listed in the Register maintained under Section 189 ofthe Companies Act 2013. Consequently the requirements of Clause (a) to (c) are notapplicable. iv. The Company has not granted any loans made investments or providedguarantees and hence reporting under clause 3 ( iv ) of the Order is not applicable.
v. In our opinion and according to the information and explanations given to us theCompany has not fully complied with the directives issued by the Reserve Bank of Indiathe provisions of Section 73 to 76 of the Companies Act 2013 and the rules framed thereunder with regard to the deposits accepted from the public.
Company has not repaid on due dates matured Public deposits of Rs. 30.26 Lakhsincluding interest as on 31st March 2019. The Company had not maintained liquid assetsagainst deposits during the year as per the rules.
vi. We have broadly reviewed the cost records maintained by the Company pursuant to theCompanies ( Cost Accounting Records ) Rules 2011 prescribed by the Central government u/s148 (1) of the Companies Act 2013 and are of the opinion that prima facie the prescribedcost records have been maintained. We have however not made a detailed examination of theCost records with a view to determine whether they are accurate or complete.
vii. (a) According to the records of the Company and information and explanations givento us the Company has not been regular in depositing statutory dues including ProvidentFund Employees State Insurance TDS GST Excise Duty Value Added Tax and otherstatutory dues with the appropriate authorities during the year as there are cases ofdelay throughout the year. Total outstanding of all these statutory dues is Rs. 86.93lakhs on the year end date. There are undisputed statutory dues of Rs. 86.93 lakhsoutstanding as of March 31 2019 for a period of more than six months since they becamepayable. The Company has not transferred necessary amount to Investor Education andProtection Fund as on Balance Sheet date.
(b) As at the year-end according to the records of the Company and information andexplanations given to us the following are particulars of disputed amounts on account ofvarious Statutory Dues :-
|Nature of Dues ||Rs. in Lakhs ||F.Y. ||Forum where dispute is pending |
|Excise Duty ||6.60 ||2012-13 ||Appeal Pending with Commissioner of Central Excise (Appeals) CBD Belapur |
|Excise Duty ||3.53 ||2013-14 ||Appeal Pending with Asst. Commissioner of Central Excise (Appeals) |
|Excise Duty ||3.81 ||2014-15 ||Appeal Pending With CESTAT |
|Sales Tax ||6.11 ||2002-03 ||Dy. Commissioner Appeals New Delhi. |
|Sales Tax ||2.10 ||2003-04 ||Dy. Commissioner Appeals New Delhi. |
|Sales Tax ||2.18 ||2004-05 ||Joint Commissioner Appeals New Delhi. |
|Sales Tax ||3.48 ||2004-05 ||Joint Commissioner Appeals New Delhi. |
|Sales Tax ||0.83 ||2005-06 ||Additional Commissioner Grade II Appeal III Commercial Taxes (Lucknow) |
|Sales Tax ||1.70 ||2006-07 ||Additional Commissioner Grade II Appeal III Commercial Taxes (Lucknow) |
|Sales Tax ||1.09 ||2007-08 ||Additional Commissioner Grade II Appeal III Commercial Taxes (Lucknow) |
|Sales Tax ||3.55 ||2008-09 ||Sales Tax Tribunal Mumbai VAT |
|Sales Tax ||109.15 ||2008-09 ||Sales Tax Tribunal Mumbai VAT |
|Income Tax ||7.28 ||2004-05 ||Additional Commissioner Grade II Appeal filed with Tribunal Mumbai |
|Income Tax ||125.40 ||2009-10 ||Additional Commissioner Circle 1 Thane |
|Income Tax ||682.31 ||2010-11 ||Commissioner of IT Range 1 |
|Income Tax ||124.02 ||2011-12 ||CIT II Thane |
|Total ||1083.14 || || |
|Gratuity ||Many separated employees have filed cases in District Court for non payment of their Gratuity dues. Though the Gratuity amount has been provided there would be claims of Interest and other charges amount not determined at this stage. |
viii. The Company had taken Term loans & Working Capital Loans from banks but hasnot issued any debentures. During the year Company has defaulted repayment of theseloans. The details of these defaults are as under:
|Particulars ||Amt of Default as on 31st March 2019 ||Period of Default ||Remarks |
| ||Rs. in lakhs || || |
|Corporation Bank Working Capital Loan ||276.51 (sum of overdrawn amount in various months) ||Over 3 years ||Default is the excess amount drawn over the Drawing Power each month. During the year in most of the months the account was overdrawn. |
ix. The Company has not raised moneys by way of initial public offer or further publicoffer ( including debt instruments ) or term loans and hence reporting under clause 3(ix)of the Order is not applicable.
x. To the best of our knowledge and according to the information and explanations givento us no fraud by the Company and no material fraud on the Company by its officers oremployees has been noticed or reported during the period.
xi. The Company has employees covered under section 197 of the Act and the remunerationpaid is below the limit specified under section 197 read with Schedule V of the CompaniesAct 2013.
xii The Company is not a Nidhi Company and hence reporting under clause 3 ( xii ) ofthe Order is not applicable
xiii. The company has taken prior approval of Audit Committee and Board of Directorsfor Related Party Transactions during the year. In our opinion and according to theinformation and explanations given to us the Company is in compliance with Section 177and 188 of the Act for some of the transactions with the related parties and the detailsof related party transactions have been disclosed in the financial statements as requiredby the applicable accounting standards.
xiv. During the period the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause 3 ( xiv ) of the Order is not applicable to the Company.
xv. In our opinion and according to the information and explanations given to usduring the period the Company has not entered into any non-cash transactions with itsdirectors or persons connected with him and hence provisions of section 192 of the Act arenot applicable.
xvi. The Company is not required to be registered under section 45-I of the ReserveBank of India Act 1934.
| ||For Shahade & Associates |
| ||Chartered Accountants |
| ||( ICAI Firm Reg. No. 109840W ) |
| ||Atul Shahade |
|Place: Mumbai ||Partner |
|Date: 14th May 2019 ||M. No. 35227 |
ANNEXURE - B
ANNEXURE TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIALSTATEMENTS OF APLAB LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013
We have audited the internal financial controls over financial reporting of AplabLimited as of 31st March 2019 in conjunction with our audit of the financial statementsof the Company for the year ended 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe 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 Reportingand the Standards on Auditing to the extent applicable to an audit of internal financialcontrols both issued by the Institute of Chartered Accountants of India. Those Standardsand the Guidance Note require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated 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 included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement 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 adverse audit opinion on the Company's internal financial controlssystem over 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) pertains 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 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.
According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified as at 31st March 2019 :
(a) The ERP system was not fully established tested and appropriate reports notavailable leading to inherent weakness to obtain and test the desired level of internalfinancial controls.
(b) The Company did not have appropriate internal controls for periodic reconciliationof physical inventory with the inventory records which may have resulted in misstatementof inventory values in the books of account.
(c) The consumption of material for production and other purposes is not reconciledwith Cost of Goods sold as appearing in the ERP System mainly due to lack of productionbatch closing procedures.
(d) The adequacy of internal financial control over Servicing and Rental of MachinesIncome is inadequate in terms of In Warranty & Out of Warranty / AMC billingconsumption of spares and its invoicing follow up on renewals etc.
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 the Company has in all material respects maintained adequate internalfinancial controls over financial reporting as of March 31 2019 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India and except for the effects/ possible effects of the materialweaknesses described above on the achievement of the objectives of the control criteriathe Company's internal financial controls over financial reporting were operatingeffectively as of March 31 2019.
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 2019financial statements of the Company and these material weaknesses do not affect ouropinion on the standalone financial statements of the Company.
For Shahade & Associates
( ICAI Firm Reg. No. 109840W )
M. No. 35227
Date: 14th May 2019