|BSE: 504008||Sector: Engineering|
|NSE: EMCO||ISIN Code: INE078A01026|
|BSE 00:00 | 16 Apr||1.55||
|NSE 00:00 | 16 Apr||1.50||
|Mkt Cap.(Rs cr)||11|
|Mkt Cap.(Rs cr)||10.52|
EMCO Ltd. (EMCO) - Auditors Report
Company auditors report
To the Members of EMCO Limited
Report on the Standalone Financial Statements
We have audited the accompanying Standalone financial statements ofEMCO Limited ("the Company") which comprise the Balance Sheet as at 31stMarch 2018 the Statement of Profit and Loss including the statement of OtherComprehensive Income the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and a summary of significant accounting policies and otherexplanatory information (hereinafter referred to as 'standalone financial statements').
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters statedin Section 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone financial statements that give a true and fair view of thestandalone financial position standalone financial performance cash flows and changes inequity of the company in accordance with the accounting principles generally accepted inIndia including the Indian Accounting Standards (Ind AS) specified under section 133 ofthe Act read with relevant rules issued thereunder.
This responsibility also includes maintenance of adequate accountingrecords in accordance with the provision of the Act for safeguarding the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of the appropriate accounting policies; making judgements and estimates thatare reasonable and prudent; and design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and fair presentationof the standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these standalonefinancial statements based on our audit.
We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditingspecified under Section 143(10) of the Act. Those standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the standalone financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence aboutthe amounts and disclosures in the standalone financial statements. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror. In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the standalone financial statements that give atrue and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the standalone financialstatements.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the standalone financialstatements.
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements 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 including the IndAS of the standalone financial position of the Company as at 31st March 2018and its loss ( standalone financial performance) including other comprehensive income itscash flows and the changes in equity for the year ended on that date.
Material Uncertainty Related to Going Concern
As stated in Note no. 48 of the standalone financial statementsCompany has incurred operational losses resulting into erosion of considerable net worth.As at the year end Company has overdrawn credit facilities including interest of Rs.50255.37 Lakhs and other borrowings of Rs. 5830.77 Lakhs that are due for repaymentalong with interest payable on such borrowings of Rs. 735.94 Lakhs. This factor indicatesa material uncertainty which may cast significant doubt about the Company's ability tocontinue as a going concern. However Company has approached its lenders to restructurethe debts which along-with the sale of its non-core assets will result into improvedliquidity and profitability as stated in the said note and therefore the management is ofthe view that going concern accounting is appropriate. Our opinion is not modified inrespect of the same.
Emphasis of Matter
Attention is invited to following notes of Standalone FinancialStatements:
a) Note no. 9(a) of standalone financial statements in respect of theoutstanding dues and liquidated damages / deduction made by customers aggregating to Rs.12109.75 Lakhs which are carried as Trade Receivables. The company had filed legal caseagainst the customers for the recovery of the same. Pending outcome of the matter which ispresently unascertainable no adjustments have been made in the statement.
b) Note no. 9(b) of standalone financial statements relating touncertainties relating on recoverability of trade receivables Rs. 14328.31 Lakhs as at31st March 2018 raised in the earlier years in respect of supplies or projectsclosed or substantially completed and where the claims are currently under negotiationsand discussions with the customers. Pending the ultimate outcome of these matters whichis presently unascertainable no adjustments have been made in the statement.
c) Note no. 49 of standalone financial statements relating to inventoryof Rs. 2491.62 Lakhs as at 31st March 2018 which are lying unutilised for aconsiderable period of time. Management has carried out the technical evaluation and is ofthe opinion that these inventories are in good conditions and can be utilised in projectsin future. We have not carried out physical verification of the materials lying at variousproject sites and have relied on the confirmations given by site in-charge.
d) Note no. 50 of standalone financial statements relating to revenuesof Rs. 5793.92 Lakhs recognised in earlier years under the percentage completion methodwhich are yet to be billed as per the contractual terms and are considered as good ofrecovery as stated in the note.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ('theOrder') issued by the Central Government of India in terms of subsection (11) of section143 of the Act we give in the "Annexure A" a statement on the matters specifiedin paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b) In our opinion proper books of account as required by law have beenkept by the Company so far as appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss the Cash FlowStatement and the Statement of Changes in Equity dealt with by this report are inagreement with the books of account.
d) In our opinion the aforesaid standalone financial statements complywith the Indian Accounting Standards specified under section 133 of the Act read withrelevant rules issued thereunder.
e) The matters described under the Material Uncertainty Related toGoing Concern and Emphasis of Matter paragraph above in our opinion may have an adverseeffect on the functioning of the Company.
f) On the basis of written representations received from the directorsas on 31st March 2018 taken on record by the Board of Directors none of thedirectors is disqualified as on 31st March 2018 from being appointed as adirector in terms of section 164(2) of the Act.
g) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B" to this report.
h) With respect to the other matters to be included in the Auditor'sReport in accordance with Rules 11 of the Companies (Audit and Auditors) Rules 2014 inour opinion and to the best of our information and according to the explanations given tous:
i) TheCompany has disclosedtheimpactofpendinglitigationsonitsfinancialposition in its standalonefinancialstatements -Refer Note 44 to thestandalone financial statements.
ii) The Company did not have any material foreseeable losses onlong-term contracts including derivative contracts that require provision under any law oraccounting standards for which there were any material foreseeable losses.
iii) There has been no delay in transferring amounts which wererequired to be transferred to the Investor Education and Protection Fund by the Company.
"Annexure A" to the Independent Auditors' Report of even dateon the Standalone Financial Statements of EMCO Limited
(Referred to in Paragraph 1 under 'Report on other legal andregulatory requirements" section of our report of even date.)
i) In respect of its fixed assets :
a) The Company has maintained proper records showing full particularsincluding quantitative details and situation of fixed assets on the basis of availableinformation.
b) As explained to us all the fixed assets have been physicallyverified by the management in a phased periodical manner which in our opinion isreasonable having regard to the size of the Company and nature of its assets. No materialdiscrepancies were noticed on such physical verification.
c) According to the information and explanations given to us and thetitle deeds / lease deeds and other records examined by us we report that the title deeds/ lease deeds in respect of all the immovable properties of lands which are freeholdimmovable properties of land that have been taken on lease and disclosed as fixed assetsin the standalone financial statement and buildings are held in the Company's name or inthe Company's erstwhile name as at the balance sheet date except freehold land andbuildings situated at Baroda and Rajkot having gross carrying value of Rs.21.02 lacs as atbalance sheet date which are in the name of Urja Engineers Limited the transferorcompany which got amalgamated in to the Company.
ii) In respect of Inventories:
As explained to us physical verification of the inventories have beenconducted at reasonable intervals by the management which in our opinion is reasonablehaving regard to the size of the Company and nature of its inventories. No materialdiscrepancies were noticed on such physical verification.
iii) The Company has granted unsecured loans to two wholly ownedsubsidiaries covered in the register maintained under Section 189 of the Act. The termsand conditions of the grant of such loans are not prejudicial to the interest of thecompany except in case of one subsidiary company has given interest free loan. There isno schedule of repayment of principal and are repayable on demand. Also there is nostipulation as to date of payment of interest. In view of this question of overdue doesnot arise.
iv) In respect of loans investments guarantees and security given bythe Company:
a) Company has not directly or indirectly advanced loan to the personsor given guarantees or securities in connection with the loan taken by persons coveredunder section 185 of the Act.
b) According to the information and explanations given to us theactivity of the Company falls under the definition of infrastructural facilities asdefined under explanation to section 186 of the Act. Since section 186 of the Act is notapplicable to such companies the requirement of clause (iv)(b) of paragraph 3 of theOrder is not applicable.
v) According to the information and explanations given to us theCompany has not accepted any deposits within the meaning of provisions of sections 73 to76 or any other relevant provisions of the Act and the rules framed there under.Therefore the clause (v) of paragraph 3 of the Order is not applicable to the Company.
vi) We have broadly reviewed the cost records maintained by the Companypursuant to the Companies (Cost Records and Audit) Rules 2014 prescribed by the CentralGovernment under sub section (1) of Section 148 of the Act applicable in respect ofcertain activities undertaken by the company and are of the opinion that prima facie theprescribed cost records have been maintained. We have however not made a detailedexamination of the cost records with a view to determine whether they are accurate orcomplete.
vii) In respect of Statutory dues :
a) According to the records of the Company there have been delays indepositing undisputed statutory dues of Tax Deducted at Source Sales Tax VAT ServiceTax Goods and Services Tax LBT Excise Duty with appropriate authorities. According tothe information and explanations given to us and on the basis of our examination of thebooks of account the Company is generally regular in depositing undisputed statutory duesof income tax custom duty Provident Fund ESIC and other material statutory dues duringthe year with the appropriate authorities. According to the information and explanationsgiven to us no undisputed amounts payable in respect of the aforesaid dues wereoutstanding as at 31st March 2018 for a period of more than six months fromthe date they became payable.
b) According to the records of the Company and the information andexplanations given to us the disputed dues on account of income tax sales tax servicetax duty of customs duty of excise value added tax cess that have not been depositedwith appropriate authorities are as under:
viii) In our opinion and according to the information and explanationsgiven to us the Company has not delayed in repayment of loans to a financial institutionor government or dues to debenture holders of the company. The Company has delayed inrepayment of dues to banks during the year. The lender wise details are tabulated asunder:
ix) The company did not raise any money by way of Initial public offeror further public offer (including debt instruments) and term loans during the year.Accordingly paragraph 3(ix) of the order is not applicable.
x) Based on the audit procedures performed for the purpose of reportingthe true and fair view of the standalone financial statements and as per information andexplanations given to us no fraud by the Company or on the Company by its officers oremployees has been noticed or reported during the year.
xi) Company has not paid any managerial remuneration during the yearand hence clause (xi) of paragraph 3 of the Order is not applicable to the Company.
xii) in our opinion company is not a niani company. inererare meprovisions ot clause (xnj ot paragrapn 3 ot me uraer are not appncaDie to the company.
xiii) In our opinion and according to the information and explanationsgiven to us all transactions with related parties are in compliance with sections 177 and188 of the Act and their details have been disclosed in the standalone financialstatements as required by the applicable accounting standards.
xiv) In our opinion and according to the information and explanationsgiven to us the Company has not made any preferential allotment or private placement orfully or partly convertible debentures during the year and hence clause (xiv) of paragraph3 of the Order is not applicable to the company.
xv) In our opinion and according to the information and explanationsgiven to us the Company has not entered into any non-cash transaction with the directorsor persons connected with him and covered under section 192 of the Act. Hence clause (xv)of the paragraph 3 of the Order is not applicable to the Company.
xvi) To the best of our knowledge and as explained the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.
"Annexure B" to the Independent Auditors' Report of even dateon the Standalone Financial Statements of EMCO Limited
(Referred to in paragraph 2(g) under Report on other legal andregulatory requirements" section of our report of even date.)
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the Internal Financial Control over financial reportingof EMCO Limited ("the company") as of 31st March 2018 in conjunctionwith our audit of the Standalone Financial Statements of the Company for the year thenended.
Management Responsibility for the Internal Financial Controls
The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India (ICAI).These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding 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 internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (the "Guidance Note") and the Standards on Auditing issued by ICAIand deemed to be prescribed under section 143(10) of the Act to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the ICAI. Those Standards and the Guidance Note require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting 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 andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting 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 control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standalonefinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations 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 Over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting 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 overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31st March2018 based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.