To the Members of
Bella Casa Fashion & Retail Limited
Report on the Audit of the Financial Statements
We have audited the accompanying Financial Statements of Bella Casa Fashion &Retail Limited ("the Company") which comprise the Balance Sheet as at March 312019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows for the year ended on thatdate and a summary of the significant accounting policies and other explanatoryinformation (hereinafter referred to as "the financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by CompaniesAct 2013 ("the Act") in the manner so required and give a true and fair viewin conformity with the Indian Accounting Standards prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended ("IndAs" ) and other accounting principles generally accepted in India of the state ofaffairs of the Company as at March 312019 the profit and total comprehensive incomechanges in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the Financial Statements in accordance with the Standards onAuditing (SAs) specified under section 143(10) of the Companies Act 2013 ("theact"). Our responsibilities under those Standards are further described in theAuditor's Responsibilities for the Audit of the Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the financial statements.
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. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
|Key Audit Matter ||How the matter was addressed in our audit |
|1.First time adoption of Indian Accounting Standards (Ind AS) ||We have performed the following procedures in respect of transition to Indian accounting standard as adopted in India: |
| In compliance of the regulatory requirement in India the company is required to prepare its financial statements in accordance with Companies (Indian Accounting Standards) Rules 2015 (Amended) (Refer to as "Ind AS") as issued by Ministry of Corporate Affairs wide notification dated 16th February 2015. || Assessed the appropriateness of the implementation of Ind AS in accordance with the Ind AS 101 - First time adoption of Indian Accounting Standards. |
| || Assessed the appropriateness of the accounting policies adopted. |
| For all periods up to and including the period for the year ended 31st March 2018 the company prepared and published its Audited financial statements in accordance with Companies Accounting Standards Rules 2006 (Amended) (Refer to as" Indian GAAP"). || Evaluated the GAAP differences identified by the company's management. |
| || Examined the adjustment's (including calculation and recording) made to various balances and transactions to bring them in line with Ind AS. |
| Accordingly the company has adopted Ind AS from 1st April 2018. Hence the financial statements for the year 2018-19 are prepared in compliance with Ind AS. || Assessed the appropriateness of disclosures made in relation to transition impact from Indian GAAP to Ind AS. |
| || Assessed the appropriateness of exceptions to retrospective application of other Ind AS and exemptions availed by the company from full retrospective application of certain Ind AS in preparing the financial statements. |
| We considered this as a Key Audit Matter since the first time adoption of Ind AS has significant impact on the financial statements from the recognition measurement and disclosure perspective. || |
|Related Disclosures: || |
|Refer to Note No. 42 For the details of transition and reconciliation adjustments between AS and Ind AS. || |
|2. Valuation of Inventories ||Our audit procedure: |
| The net carrying value of inventory as on 31st March 2019 constitutes 49.07 % of Total Assets of the company. || We have performed the Inventory Physical Stock Count on sample basis as at 31st March 2019. We attended inventory counts at location which is selected based on financial significance and risk and we performed the following procedures at each site: |
| Sales in the industry can be extremely volatile with consumer demand changing significantly (Seasonal) based on current trends. As a result there is a risk that the carrying value of inventory exceeds its net realizable value. ||(i) Selected a sample of inventory items and compared the quantities we counted to the quantities recorded. |
| || |
|Hence we determined the valuation of inventories as a key audit matter. ||(ii) Observed a sample of management's inventory count procedures to assess compliance with Company's policy and |
|Related Disclosures: ||(iii) Made inquiries regarding obsolete inventory items and inspected the condition of items counted. |
|Please refer to Point 5 of Significant accounting policies for details of the accounting policies of inventories and Note No. 7 for relevant disclosures of inventories of the independent auditors report. || We have also evaluated a selection of controls over inventory existence across the company. |
| || Examining the Company's historical trading patterns of inventory sold at full price and inventory sold below full price together with the related margins achieved for each product lines in order to gain comfort that stock has not been sold below cost. |
| || Evaluating the rationality of the inventory policies such as the policy of provision for inventory valuation and obsolescence and understanding whether the valuation of inventory was performed in accordance with the Company's policy. |
| || Inspecting the post period sales situation and evaluating the net realizable value of measurement applied on aging inventory in order to verify the evaluation accuracy of the estimated inventory allowance by the Company and |
| || Assessing whether the disclosures of provision for inventory valuation and obsolescence were appropriate. |
|3. Trade Receivables ||Our audit procedure: |
| The recoverability of trade receivables and the level of provisions for doubtful debts are considered to be a significant risk due to the pervasive nature of these balances to the financial statements and the importance of cash collection with reference to the working capital management of the business. || Assessed the design and implementation of key controls around the monitoring of recoverability. |
| At 31st March 2019 the trade receivables balances (net of provisions) consist of 36.75% of the total amount of assets of the company. Since the Trade receivables constitute the substantial part of the assets of the company they are determined as the key audit matters. || Discussed with the management regarding the level and ageing of trade receivables along with the consistency and appropriateness of receivables provisioning by assessing recoverability with reference to cash received in respect of trade receivables. |
| || In addition we have considered the Company's previous experience of bad debt exposure and the individual counter-party credit risk. |
| || Tested these balances on a sample basis through agreement to post period end invoicing and cash receipt. |
|Related Disclosures: Please refer to Point 19 of Significant accounting policies for details of the accounting policies of accounts receivable and Note No. 8 for relevant disclosures of accounts receivable of the independent auditors' report. || The accuracy and completeness was verified through cutoff test analytical reviews and balance confirmation. |
| || Analyzing the aging schedule of trade receivable past collection records industry boom and concentration of customers' credit risk. |
|4. Revenue Recognition ||Our audit procedure: |
| Revenue is an important measure used to evaluate the performance of the Company. There is a risk that the revenue is presented for amounts higher than what has been actually generated by the Company. Consequently we considered revenue recognition to be a significant key audit matter. || Assessing the design implementation existence and operating effectiveness of internal control procedures implemented as well as test of details to ensure accurate processing of revenue transactions. |
| || Inspecting underlying documentation for any book |
| The Company's revenue are recognized based on passage of title to goods which generally coincides with delivery and acceptance and on transfer of all significant risk and rewards of ownership to the buyer. ||entries which were considered to be material or met other specified risk-based criteria on a sample basis. |
|Related Disclosures: || Inspecting the key terms and conditions of agreements with major customers on a sample basis to assess if there were any terms and conditions that may have affected the accounting treatment of the revenue recognition. |
|Refer Point 10 of Significant accounting policies for details of the accounting policies of Revenue Recognition and Note No. 24 for relevant disclosures of Revenue Recognition of the independent auditors' report. || The accuracy and completeness of revenue was verified through cut-off test analytical reviews and balance confirmation. |
Information Other than the 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 CorporateGovernance and Shareholder's Information but does not include the financial statementsand our auditor's report thereon. The other information as identified above is expected tobe made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and wewill not 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 when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained during the course of our audit or otherwise appearsto be materially misstated.
When we read the other information as identified above if we conclude that there is amaterial misstatement therein we are required to communicate the matter to those chargedwith governance.
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 thefinancial positionfinancial performance total comprehensive income changes in equity and cash flows of theCompany in accordance with the Ind AS and other accounting principles generally acceptedin India. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error
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.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
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.
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.
Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the 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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships 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) Order 2016("the order) issuedby the Central Government in terms of Section 143(11) of the act we give in"Annexure I" a statement on the matters specified in paragraph 3 and 4 of theOrder.
2) As required by section 143(3) of the Act based on our audit we report:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;
(b) In our opinion and to the best of our information and according to the explanationsgiven to us proper books of accounts as required by law have been kept by the Company sofar as 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 Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.
(d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.
(e) On the basis of written representations received from the directors as on March312019 and taken on record by the Board of Directors none of the Directors aredisqualified as on March 312019 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 toAnnexure 'II' to this report.
(g) With respect to the other matter 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 the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.
(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. 41).
ii. The Company did not have any long term contracts including derivative contractsfor which there were any material foreseeable losses.
iii. There are no amounts which are required to be transferred to the InvestorEducation and Protection Fund by the Company.
For Kalani & Company
Chartered Accountants (FRN: 000722C)
Membership No.- 108170
Date: 27th May 2019
ANNEXURE 1 TO THE INDEPENDENT AUDITORS' REPORT
The Annexure referred to in paragraph (1) of 'Report on other Legal and RegulatoryRequirements' of our Independent Auditors' Report of even date to the members of the BellaCasa Fashion & Retail Limited Jaipur on the Financial statements for the year endedon 31st March 2019 we report that:
(i) a) The Company has generally maintained proper records showing full particularsincluding quantitative details and situation offixed assets (Property Plant andEquipments).
b) As explained to us the fixed assets (Property Plant and Equipments) have beenphysically verified by the management during the year in a phased periodical manner whichin our opinion is reasonable having regard to the size of the company and nature of itsassets. No material discrepancies were noticed on such physical verification.
c) Based on our verification and according to information and explanations given to usthe title deeds of immovable properties are held in the name of the company except for theI and II Floor of building premises constructed on the land situated at Plot No. E-103EPIP Sitapura Industrial Area Jaipur the land appurtenant thereto is owned to M/s GuptaExports a firm in which Companies Promoters are partners and such land has been taken bycompany on lease.
(ii) As per the information and explanation given to us the Company's management hascarried out physical verification of inventory at regular intervals. No materialdiscrepancies were noticed on such physical verification.
(iii) The Company has not granted any loans secured or unsecured to any companiesfirms limited liability partnership or other parties covered in register maintained undersection 189 of the Companies Act 2013 hence reporting under (iii)(a) (iii)(b) and(iii)(c) is not applicable.
(iv) The Company has not granted any loans or given any guarantee and security coveredunder section 185 of the Act. In respect of investments made Company has complied withthe provisions of section 186 of Act.
(v) The company has not accepted deposits from the public within the meaning ofSections 73 to 76 of the Companies Act 2013 and the rules made there under hence thisclause is not applicable.
(vi) We have broadly reviewed the accounts and records maintained by the Companypursuant to the Rules made by the Central Government for the maintenance of cost recordsunder sub-section (1) of Section 148 of the Companies Act 2013 read with Companies (CostRecords & Audit) Rules 2014 and we are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. We have not however made detailedexamination of the records with a view to determine whether they are accurate andcomplete.
(vii) a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/accrued in the books ofaccounts in respect of undisputed statutory dues including provident fund employee stateinsurance income tax sales tax service tax goods & service tax duty of customsduty of excise value added tax cess and other material statutory dues have generallybeen regularly deposited with the appropriate authorities and there are no undisputed duesoutstanding as on 31st March 2019 for a period of more than six months from the date theybecame payable.
b) According to the information and explanations given to us there are no unpaid duesof income tax sales tax service tax Goods & Services Tax duty of customs duty ofexcise or value added tax under dispute.
(viii) Based on examination of books of accounts and information and explanation givento us the Company has not defaulted in repayment of loans or borrowings to a financialinstitution or bank. Company has not issued any debentures hence nothing is due todebenture holders.
(ix) According to the information and explanations given to us the company has notraised money by way of initial public offer or further public offer and the money raisedby the company by way of term loan have been applied for the purpose for which they wereobtained.
(x) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company no material fraud by the company or any fraudon the Company by its officers or employees has been noticed or reported during the year.
(xi) The managerial remuneration has been paid in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct.
(xii) The company is not a Nidhi Company hence reporting under this clause is notapplicable.
(xiii) The Company has complied with the provisions of Section 177 and 188 of the Actw.r.t. transactions with the related parties wherever applicable. Details of thetransactions with the related parties have been disclosed in the financial statements asrequired by the applicable Indian Accounting Standards.
(xiv) Company has made allotment of equity shares through convertible warrants duringthe year under audit. Such allotment was made in compliance with provisions of section 42of the Companies Act 2013 and other applicable provisions including SEBI (ICDR)Regulations 2009. According to the information and explanations given to us and on thebasis of our examination of the records of the Company the funds so received on suchallotment has been utilized for the purposes for which it was raised.
(xv) The company has not entered into any non-cash transactions with directors orpersons connected with him as covered under section 192 of Companies Act 2013.
(xvi) According to the information and explanations given to us the company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.Accordingly provision of clause 3(xvi) of the order is not applicable to the company.
For Kalani & Company
Chartered Accountants (FRN: 000722C)
Membership No.- 108170
Date: 27th May 2019.
Annexure "II" forming part of Independent 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 with reference to financial statementsof Bella Casa Fashion & Retail Limited ("the Company") as of March 312019in 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 with reference to financial statements based on the internal controlover financial reporting 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 company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. 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 financial statements wasestablished 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 financial statements and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.
Inherent Limitations of Internal financial controls with reference to financialstatements
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls with reference to financial statements and such internal financialcontrols with reference to financial statements were operating effectively as at March 312019 based on the internal financial controls with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Institute of Chartered Accountants of India.
|Place: Jaipur || |
|Date: 27th May 2019 || |
| ||For Kalani & Company |
| ||Chartered Accountants (FRN: 000722C) |
| ||Bhupender Mantri |
| ||Partner |
| ||Membership No.- 108170 |