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Avon Mercantile Ltd.

BSE: 512265 Sector: Financials
NSE: N.A. ISIN Code: INE471D01019
BSE 05:30 | 01 Jan Avon Mercantile Ltd
NSE 05:30 | 01 Jan Avon Mercantile Ltd

Avon Mercantile Ltd. (AVONMERCANTILE) - Auditors Report

Company auditors report

TO

THE MEMBERS OF

AVON MERCANTILE LIMITED

Report on the Audit of the Ind AS Financial Statements Qualified

Opinion

We have audited the accompanying Ind AS financial statements of AVON MERCANTILE LIMITED("the Company") which comprise the Balance sheet as at March 312021 theStatement of Profit and Loss including the statement of Other Comprehensive Income theCash Flow Statement and the Statement of Changes in Equity for the year then ended andnotes to the Ind AS Financial Statements including a summary of significant accountingpolicies and other explanatory information.

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 paragraph the aforesaid financial statements give the information required by theCompanies Act 2013 ("Act") in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2021 and its loss and its cash flows forthe year ended on that date.

Basis for Qualified Opinion

1. A total amount of Rs. 685956310 (previous year Rs. 531996748/-) on account ofloan receivables (including interest outstanding thereon) is outstanding as at 31 March2021. Based on explanations and information provided by management Rs. 289478494/-(previous year Rs. 279681754/-) (including interest outstanding thereon) have beenoutstanding unsettled/unadjusted for significantly long period of time. The managementbased on internal assessments and evaluations have represented that these outstandingloan receivables are recoverable and that no accrual for diminution in value of loanreceivable is necessary as at 31 March 2021. However the management has provided Rs.17231134/-) (previous year) as expected credit loss against these outstanding loanreceivables. Further the management has represented that they are seriously undertakingall steps to recover/adjust these amounts at the earliest. Pending the above we arecurrently unable to ascertain whether these long overdue outstanding loan receivables arefully recoverable. Accordingly we are unable to ascertain the impact if any on thestatement of assets and liabilities that may arise in case any of these remaining loanreceivables are subsequently determined to be doubtful of recovery.

We conducted our audit of the Ind AS financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India (ICAI) together with the independence requirements thatare relevant to our audit of the financial statements under the provisions of the Act andthe Rules made thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the ICAI's Code of Ethics. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for ourqualified audit opinion on the Ind AS financial statements.

KEY AUDIT MATTERS

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Ind AS financial statements of the current period. Thesematters were addressed in the context of our audit of the financial statements as a wholeand in forming our opinion thereon and we do not provide a separate opinion on thesematters. We have no key audit matters to be communicated in our report.

Sr. No Key Audit Matter Auditor's Response
1 NA NA

Information Other than the Ind AS Financial Statements and Auditor s Report thereon

The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the Ind AS financial statements and our auditor's report thereon.

Our opinion on the Ind AS financial statements does not cover the other information andwe do not express any form of assurance conclusion thereon.

In connection with our audit of the Ind AS financial statements our responsibility isto read the other information and in doing so consider whether the other information ismaterially inconsistent with the Ind AS financial statements or our knowledge obtainedduring the course of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Management s Responsibility for the Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation and presentation of these Ind ASfinancial statements that give a true and fair view of the financial position financialperformance and cash flows of the Company in accordance with the Accounting Standardsprescribed under section 133 of the Act as applicable and other accounting principlesgenerally accepted in India. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the Ind AS financial statements that give a true and fair view and arefree from material misstatement whether due to fraud or error.

In preparing the Ind AS financial statements management is responsible for assessingthe Company'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.

The Board of Directors are responsible for overseeing the Company's financial reportingprocess.

Auditor s Responsibilities for the Audit of the Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the Ind AS 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 Ind AS financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the Ind AS 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 in orderto 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 reasonableness ofaccounting estimates and related disclosures made by management.

- Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 Ind AS financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

- Evaluate the overall presentation structure and content of the Ind AS financialstatements including the disclosures and whether the Ind AS financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

Materiality is the magnitude of misstatements in the Ind AS financial a statement thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the Ind AS financial statements may be influenced.

We consider quantitative materiality and qualitative factors in (i) planning the scopeof our audit work and in evaluating the results of our work; and (ii) to evaluate theeffect of any identified misstatements in the Ind AS financial statements.

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 Ind AS financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when 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 Section 143(3) of the Act based on our audit we report that:

a) We have sought except for the possible effects of the matter described in the Basisfor Qualified Opinion paragraph above and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.

b) Except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph above in our opinion proper books of account as required by law havebeen 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 the Cash Flow Statement andStatement of Changes in Equity dealt with by this Report are in agreement with the booksof account.

d) Except for the effects of the matter described in the Basis for Qualified Opinionparagraph in our opinion the aforesaid Ind AS 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 March312021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312021 from being appointed as a director in terms of Section 164 (2) of theAct.

f) With respect to the adequacy of the internal financial controls with reference toInd AS financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure A".

g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended:

In our opinion and to the best of our information and according to the explanationsgiven to us no remuneration was paid by the Company to its directors during the year.

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 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The company does not have any pending litigations which would impact its financialposition.

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 to be transferred to the InvestorEducation 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.

3. As required by Non- Banking Financial Companies Auditor's Report (Reserve Bank)Directions 2016 ("Directions") we give in "Annexure C" a separatereport on the matters specified in the said Directions.

ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1(f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of AVON MERCANTILE LIMITED of evendate)

Report on the Internal Financial Controls with reference to Ind AS financial statementsunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")

We have audited the internal financial controls with reference to Ind AS financialstatements of AVON MERCANTILE LIMITED ("the Company") as of March 312021 inconjunction with our audit of the financial statements of the Company for the year endedon that date.

Management's Responsibility for Internal Financial Controls

The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control with reference to Ind ASfinancial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia. These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to the company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under The Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the internal financial controls withreference to Ind AS financial statements of the Company based on our audit. We conductedour audit in accordance with the Guidance Note on Audit of Internal Financial ControlsOver Financial Reporting (the "Guidance Note") issued by the Institute ofChartered Accountants of India and the Standards on Auditing prescribed under Section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to Ind AS financial statementswas established and maintained and if such controls operated effectively in all materialrespects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to Ind AS financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference toInd AS financial statements included obtaining an understanding of internal financialcontrols with reference to Ind AS financial statements assessing the risk that a materialweakness exists and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. The procedures selected depend on theauditor's judgement including the assessment of the risks of material misstatement of theInd AS 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 internal financial controls system withreference to Ind AS financial statements of the Company.

Meaning of Internal Financial Controls with reference to Ind AS financial statements

A company's internal financial control with reference to Ind AS financial statements isa process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Ind AS financial statements for external purposes inaccordance with generally accepted accounting principles. A company's internal financialcontrol with reference to Ind AS financial statements includes those policies andprocedures 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 Ind AS financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance 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 Ind AS financial statements.

Inherent Limitations of Internal Financial Controls with reference to Ind AS financialstatements

Because of the inherent limitations of internal financial controls with reference toInd AS financial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to Ind AS financial statements to future periods are subject to the risk thatthe internal financial control with reference to Ind AS financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem with reference to Ind AS financial statements and such internal financial controlswith reference to Ind AS financial statements were operating effectively as at March 312021 based on the internal control with reference to Ind AS financial statements 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.

ANNEXURE "B" TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 2 under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of AVON MERCANTILE LIMITED of evendate)

i. In respect of the Company's fixed assets (Property Plant and Equipment):

(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets (Property Plant and Equipment).

(b) Property Plant and Equipment have been physically verified by the managementduring the year and no material discrepancies were identified on such verification.

(c) As per books of accounts verified by us and according to the information andexplanations given by the management the company does not have immovable properties and assuch the sub clause is not applicable.

ii. The company is not carrying on any manufacturing or trading activity. Thereforeclause 3(ii) of the Order is not applicable to the company.

iii. As per the information and explanations given to us and certified by themanagement and verified from the books of account the company has not granted any loanssecured or unsecured to companies firms limited liability partnerships or other partiescovered in the register maintained in pursuance of Section 189 of the Companies Act 2013.

iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto grant of loans making investments and providing guarantees and securities asapplicable. The company being a non banking financial company nothing contain in section186 except sub section (1) shall apply.

v. The Company does not have any deposits as at March 31 2021 and therefore theprovisions of the clause 3 (v) of the Order are not applicable to the Company.

vi. To the best of our knowledge and as per information and explanations given to us bythe management the central government has not prescribed maintenance of cost recordsunder section 148(1) of the Companies Act 2013.

vii. According to the information and explanations given to us in respect of statutorydues:

(a) The Company is regular in depositing undisputed statutory dues including IncomeTax Service Tax Goods and Service Tax and other material statutory dues applicable to itwith the appropriate authorities. We are informed that the provisions of Provident FundEmployees' State Insurance Sales Tax Value Added Tax Customs Duty Excise Duty and Cessare not applicable to the company.

(b) According to information and explanations given to us there are no dues of incometax Service Tax and Goods and Service Tax which have not been deposited with theappropriate authorities on account of any dispute.

viii. The Company does not have any loan from Bank financial Institutions or Debentureholders. Therefore clause 3(viii) of the Order is not applicable to the company.

ix. The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments). Further based on our audit procedures and according tothe information and explanations given to us we are of the opinion that money raised bythe company by way of term loan has been applied for the purpose for which it was raised.

x. To the best of our knowledge and according to the information and explanations givento us no fraud by the Company or no fraud on the Company by its officers or employees hasbeen noticed or reported during the year.

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 Act.

xii. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of theOrder is not applicable to the Company.

xiii. In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the Ind AS financial statements as required by theapplicable Indian accounting standards.

xiv. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 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 year the Company has not entered into any non-cash transactions with itsDirectors or persons connected to its directors and hence provisions of section 192 of theCompanies Act 2013 are not applicable to the Company.

xvi. The company is registered under section 45-IA of the Reserve Bank of India Act1934.

ANNEXURE "C" TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 3 under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of AVON MERCANTILE LIMITED of evendate)

a. The company is engaged in the business of Non-Banking Financial institution. Thecompany being a Non-Banking Finance Company has obtained a certificate of registrationfrom the Reserve Bank of India to carry on such business. Further the company is entitledto continue to hold such certificate of registration in terms of its asset & incomepattern as on 31st March 2021.

b. The board of Directors of the Company has passed a resolution for the nonacceptanceof any public deposits.

c. The company has not accepted any public deposits during the year ended 31st March2021.

d. The company has complied with the prudential norms relating to income recognitionaccounting standards assets classification and provisioning for bad and doubtful debts asapplicable to it in terms of Non- Banking Financial (Non- Deposit Accepting or Holding)Companies Prudential Norms (Reserve Bank) Directions2007 amended upto date. In ouropinion and according to the information and explanations given to us as per the updatedcircular DNBR (PD) CC. No.044/03.10.119/2015-16 dated 11th April 2016 the prudentialnorms except para 15 shall not apply to the Company as the Company is non-bankingfinancial company having asset size of less than Rs. 500 crores and further it does notaccept/hold any public funds.

For Goel Garg & Co. Chartered Accountants
Firm's Registration Number 000397N
Sd/-
Ashok Kumar Agarwal Partner
Membership No. 084600
Place of Signature: Delhi
UDIN: 21084600AAAAAW9928
Date: 30th June 2021

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