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Fomento Resorts & Hotels Ltd.

BSE: 503831 Sector: Services
NSE: N.A. ISIN Code: INE241E01014
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NSE 05:30 | 01 Jan Fomento Resorts & Hotels Ltd
OPEN 135.30
PREVIOUS CLOSE 135.50
VOLUME 924
52-Week high 146.50
52-Week low 59.00
P/E
Mkt Cap.(Rs cr) 217
Buy Price 135.35
Buy Qty 100.00
Sell Price 139.00
Sell Qty 107.00
OPEN 135.30
CLOSE 135.50
VOLUME 924
52-Week high 146.50
52-Week low 59.00
P/E
Mkt Cap.(Rs cr) 217
Buy Price 135.35
Buy Qty 100.00
Sell Price 139.00
Sell Qty 107.00

Fomento Resorts & Hotels Ltd. (FOMENTORESORTS) - Auditors Report

Company auditors report

To the Members of

Fomento Resorts and Hotels Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the accompanying financial statements of Fomento Resorts and HotelsLimited ("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 theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the Indian Accounting Standards prescribed under Section 133of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 the profit and total comprehensiveincome changes in equity and its cash flows 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 Act. Our responsibilities under those SAs are furtherdescribed in the Auditor’s Responsibilities for the Audit of the Financial StatementsSection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI) together with theethical requirements 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 Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.

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.

Sr. No. KeyAudit Matter How our audit addressed the Key Audit Matter
1 Accuracy of recognition measurement presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 "Revenue from Contracts with Customers" Our audit approach was a combination of test of internal controls and substantive procedures which included but was not limited to the following
Revenue is a key driver of the business and in respect of services provided there is a risk that revenue is recorded inappropriately relative to the provision of the underlying service. • Documenting our understanding of the systems and controls around the recording of the revenue and assessing the design and effectiveness of such controls.
We have therefore identified revenue recognition as a key audit matter because of significant assessed risks of material misstatement. • Evaluation of the revenue recognition policies for compliance with Ind AS 115 ‘Revenue from contracts with customers’ and consistency with the earlier period.
• Assessing of revenue transactions on sample basis against the supporting documentation to determine whether the income has been appropriately recognised in accordance with the Ind AS and the Company’s accounting policy.
• Comparison of the revenue with that of previous year and obtaining of explanations for significant or unusual variances.
Key observations:
Based on our verification and according to the information and explanation given to us we have found that revenues were being accounted for in accordance with the Company’s accounting policy and Ind AS 115 ‘Revenue from contracts with customers’.
2. Carrying Value of Property Plant and Equipment Our audit procedures included but was not restricted to the following:
We identified the carrying value of Property Plant and equipment as one of the key audit matter because of it’s significant risks of material misstatement. • Assessing the methodologies used for valuation of the property by the external valuer;
As at March 31 2019 the Company has incurred a capital outlay of Rs. 72 Crores on the New Hotel Project situated at Aravalli Maharastra which is under construction. • Evaluating the independent external valuer’s competence capabilities and objectivity;
There is a significant delay in completion of the project which has led to Cost overruns. • Checking on a sample basis the accuracy and relevance of the input data provided by management to the external valuer;
• Considering the potential impact of reasonably possible downside changes in these key assumptions.
The management has concluded that the recoverable amount was higher than the carrying value of the property plant and equipment and that no impairment provision was required based on report of the independent external valuer. Key observation:
Based on our audit work and according to the information and explanation given to us the valuation of Property Plant and Equipment including Capital Work in Progress is accounted for in accordance with the Company’s accounting policy Ind AS 16 – Property Plant and Equipment and Ind AS 36 – Impairment of Assets.

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 ReportBusiness Responsibility Report Corporate Governance and Shareholder’s Informationbut does not include the financial statements and our auditor’s report thereon. Ouropinion on the financial statements does not cover the other information and we do notexpress any form of assurance conclusion thereon. In connection with our audit of thefinancial statements our responsibility is to read the other information and in doingso consider 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. If based on the work we have performed we conclude thatthere is a material misstatement of this other information we are required to report thatfact. We have nothing to report in this regard.

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance total comprehensiveincome changes in equity and cash flows of the Company in accordance with the Ind AS andother accounting principles generally accepted in India. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting frauds andother irregularities; 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 statements that give a true and fair viewand are 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.

The Board of Directors are responsible for overseeing the Company’s financialreporting 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 ahigh level of assurance but is not a guarantee that an audit conducted in accordance withSAs will always detect a material misstatement when it exists. Misstatements can arisefrom fraud 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 skepticism 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 concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor’s report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor’s report. However future events or conditions may cause theCompany to cease to continue as a 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 also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor’s report unless law or regulation precludes public disclosure about thematter or 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 the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of Section 143 (11) of theAct we give in the "Annexure A" a statement on the matters specified inparagraphs 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 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 including Other ComprehensiveIncome Statement of Changes in Equity and Statement of Cash Flow dealt with this Reportare in agreement with the books of account;

d) in our opinion the aforesaid financial statements comply with the Indian AccountingStandards prescribed under Section 133 of the Act;

e) on the basis of written representations received from the Directors of the Companyas on March 31 2019 taken on record by the Board of Directors none of the Directors isdisqualified as on March 31 2019 from being appointed as a Director in terms of Section164(2) of the Act;

f) with respect to the adequacy of internal financial controls with reference to thefinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".

g) With respect to other matters to be included in the Auditor’s Report inaccordance with the requirements of Section 197 (16) of the Act as amended: In ouropinion and to the best of our information and according to the explanations given to usthe remuneration paid by the Company to its Directors during the year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to the Directors isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197 (16) which arerequired to be commented upon by us.

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 has disclosed the impact of pending litigations on its financialposition in its financial statements – Refer Note 38 to the financial statements;

ii. The Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses and

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For Sudha Suresh Pai & Associates
Chartered Accountants
Firm Regn. No. 118006W
Suresh M V Pai
Partner
Membership No. 046235
Place: Margao-Goa
Date : May 30 2018.

Annexure "A" to the Independent Auditor’s Report

(Referred to in paragraph 1 under ‘Report on Other Legal and RegulatoryRequirements’ Section of our report of even date to the Members of Fomento Resortsand Hotels Limited for the year ended 31st March 2019)

On the basis of such checks as we considered appropriate and according to theinformation and explanations given to us during the course of our audit we report that:

i. In respect of the Company’s fixed assets:

a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

b. As explained to us considering the nature of fixed assets the same have beenphysically verified by the Management at reasonable intervals during the year which in ouropinion is reasonable. No material discrepancies were noticed on such verification.

c. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.

ii. According to the information and explanations given to us the management hasconducted physical verification of inventories at reasonable intervals and no materialdiscrepancies were noticed between the physical stock and book records on such physicalverification.

iii. The Company has not granted any loans secured or unsecured to companies firms orother parties covered in the register maintained under Section 189 of the Companies Act2013 (‘the Act’) and accordingly reporting under paragraph 3 (iii) of the orderis not applicable to the Company.

iv. The Company has not granted any loans made any investments or provided guaranteesand accordingly reporting under paragraph 3 (iv) of the order is not applicable to theCompany.

v. In our opinion and according to information and explanations given to us theCompany has not accepted any deposits as per the directives issued by the Reserve Bank ofIndia and the provisions of Section 73 to 76 or any other relevant provisions of the Actand rules framed thereunder. Accordingly reporting under paragraph 3 (v) of the order isnot applicable to the Company.

vi. The Central Government has not prescribed the maintenance of cost records underSection 148 (1) of the Act for the Company. Accordingly reporting under paragraph 3 (v) ofthe order is not applicable to the Company. vii. In respect of statutory dues:

a. The Company is regular in depositing with appropriate authorities undisputedStatutory dues including provident fund employees state insurance income tax sales tax customs duty cess goods and service tax value added tax and other material statutorydues applicable to it. According to the information and explanations given to us thereare no undisputed amounts payable in respect of income tax service tax sales taxcustoms duty excise duty goods and service tax value added tax and cess which wereoutstanding as at 31st March 2019 for a period of more than six months from thedate they became payable.

b. According to the information and explanations given to us the following are thedisputed statutory dues which have not been deposited on account of disputed matterspending before the appropriate authorities:

(Rs. in lakhs)

Name of the Statute Nature of dues Forum where dispute is Pending Amount Period to which the amount relates
Expenditure Tax Act 1987 Expenditure Tax High Court of Bombay Panaji Bench Goa. Rs.676.88 Assessment Years 1996-97 to 2002-03
Income Tax Act 1961 Income Tax Commissioner of Income Tax (Appeals)-1 Panaji Goa Rs. 23.44 Assessment Year 2017-18

viii. In our opinion and according to the information and explanation given to us theCompany has not defaulted in repayment of loans to banks. The Company did not have anyoutstanding dues to financial institutions Government and Debenture holders.

ix. In our opinion and according to the information and explanation given to us themoneys raised by way of term loan have been applied for the purpose for which they wereobtained. The Company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments).

x. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.

xi. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act.

xii. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly reporting under paragraph 3 (xii) of the orderis not applicable to the Company.

xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Sections 177 and 188 of the Act wherever applicable and the details ofsuch transactions have been disclosed in the financial statements as required by theapplicable accounting standards.

xiv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year and hence reporting under paragraph 3 (xiv) of the order is not applicable to theCompany.

xv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with Directors or persons connected with him. Accordingly reporting underparagraph 3 (xv) of the order is not applicable to the Company.

xvi. In our opinion and according to the information and explanation given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934.

For Sudha Suresh Pai & Associates
Chartered Accountants
Firm Regn. No. 118006W
Suresh M V Pai
Place: Margao-Goa Partner
Date : May 30 2019. Membership No. 046235

Annexure "B" to the Independent Auditor’s Report

(Referred to in paragraph 2 (f) under ‘Report on Other Legal and RegulatoryRequirements’ Section of our report of even date to the Members of Fomento Resortsand Hotels Limited for the year ended 31st March 2019)

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 Fomento Resorts and Hotels Ltd. ("the Company") as at 31st March2019 in conjunction with our audit of the financial statements of the Company for the yearended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internalfinancial controls based on the internal controls with reference to financial statementscriteria established by the Company considering the essential components of internalcontrols stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting ("the Guidance Note") issued by the Institute of CharteredAccountants of India (‘ICAI’). These responsibilities include designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to Company’s policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under theCompanies Act 2013.

Auditor’s Responsibility

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 and Standards on Auditing issued by ICAI and deemedto be prescribed under Section 143 (10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by ICAI. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls withreference to financial statements 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 with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of internal financial controls withreference to financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal controls basedon the assessed risk. The procedures selected depend on the auditor’s judgmentincluding the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.

We believe that the evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Company’s internal financial controls withreference to financial statements.

Meaning of Internal Financial Controls with reference to financial statements

A Company’s internal financial controls with reference to financial statements isa process 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 financialcontrols with reference to financial statements includes those policies and proceduresthat (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) 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 unauthorized acquisition use ordisposition of the Company’s assets that could have a material effect on thefinancial statements.

Inherent limitations of internal financial controls with reference to financialstatements

Because of the inherent limitations of internal financial controls with reference tofinancial 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 financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

Opinion

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 31stMarch 2019 based on the internal controls with reference to financial statementscriteria established by the Company considering the essential components of internalcontrols stated in the Guidance Note issued by ICAI.

For Sudha Suresh Pai & Associates
Chartered Accountants
Firm Regn. No. 118006W
Suresh M V Pai
Place: Margao-Goa Partner
Date : May 30 2019. Membership No. 046235

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