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Frontier Capital Ltd.

BSE: 508980 Sector: Financials
NSE: N.A. ISIN Code: INE977E01013
BSE 05:30 | 01 Jan Frontier Capital Ltd
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Frontier Capital Ltd. (FRONTIERCAPITAL) - Auditors Report

Company auditors report

TO THE MEMBERS OF FRONTIER CAPITAL LIMITED

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of FRONTIER CAPITAL LIMITED ("theCompany") which comprise the Balance Sheet as at 31st March 2019 theStatement of Profit and Loss and Statement of Cash Flows for the year then ended andnotes to the financial statements including a summary of the significant accountingpolicies and other explanatory information. In our opinion and to the best of ourinformation and according to the explanations given to us the aforesaid financialstatements give the information required by the Companies Act 2013 in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31 March 2019its loss 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 Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of thefinancial statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

We draw attention to Note 2.26 to the financial statements wherein it has been statedthat the net-worth of the Company has been completely eroded in view of huge losses and onaccount of provisioning for bad and doubtful debts and investments. The company has takenmeasures to recapitalise its balance sheet and to attain a positive net-worth as well asmeet the minimum stipulated Net Owned Fund requirement of Rs. 20000000/- as prescribedby the Reserve Bank of India.

Our opinion is not modified in respect of this matter.

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.

Descriptions of Key Audit Matters are given below-:

Key Audit Matters Auditor's Response
1 Impairment testing of Long Term Investment in 0% Compulsorily Convertible Debentures (CCD) of Asia Motor Works Holdings Limited (AMWHL) As at 31st March 2019 the carrying amount of investments in CCD of AMWHL is Rs. NIL (net of provision for diminution in the value of investments of Rs. 74633500/-)
(Refer Notes 2.03 and 2.09 to the accompanying financial statements) The net-worth of AMWHL is fully eroded as per its latest available financial statements and there is no likelihood of revival in the imminent future. Accordingly the management has fully provided for the said investment. Our procedures included but were not limited to the following
Considering the materiality of the amounts involved the significant management judgement required in estimating the quantum of diminution in the value of investments and such estimations and judgements being subjective this matter has been identified as a key audit matter for the current year audit. 1. Obtained an understanding of the management's process and evaluated design and tested operating effectiveness of controls around identification of indicators of impairment and around valuation of investment in AMWHL to determine recoverable value of the said investment.
2. Assessed the appropriateness of the methodology used by the management to estimate the recoverable value of investment in AMWHL.
3. Based on our procedures we also considered the adequacy of disclosure in respect of investment in the said AMWHL in the notes to the financial statements. Based on the above procedures performed we did not find any significant exceptions in impairment provision in Long Term Investments.

Information Other than the Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information; weare required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the FinancialStatements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation of the financial statements that give a true and fairview and are free from material misstatement whether due to fraud or error.

In preparing the financial statements Board of Directors 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 the Boardof Directors either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so. Those Board of Directors are also responsible foroverseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements. As part of an audit in accordance with SAs weexercise professional judgment and maintain 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company 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 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 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 Master Direction- Non-Banking Financial Companies Auditor'sReport (Reserve Bank) Directions 2016 ("the Directions") issued by the ReserveBank of India ("the Bank") in exercise of powers conferred by Section 45MA(1A)of the Reserve Bank of India Act 1934 and on the basis of such checks as we consideredappropriate and according to the information and explanations given to us we herebyreport on the matters specified in paragraphs 3 and 4 of the said Directions to the extentapplicable:

i. The Company is engaged in the business of a non-banking financial institution andhas duly obtained a Certificate of Registration (COR) from the Bank.

ii. The Company has more than 50% of its assets in financial assets and it has earnedmore than 50% of its income from financial assets. In terms of its principal businesscriteria (financial asset/income pattern) as on 31st March 2019 the Companyis entitled to continue to hold CoR issued by the Bank.

iii. The Company does not meet the Net Owned Fund requirement as laid down in theMaster Direction - Non-Banking Financial Company Non-Systemically Important Non-Deposittaking Company (Reserve Bank) Directions 2016.

iv. The Board of Directors of the company have duly passed a resolution fornon-acceptance of the "Public Deposits" within the meaning of paragraph 3 (xv)of the Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits(Reserve Bank) Directions 2016 for the financial year ended 31st March 2019.

v. The Company has not accepted any "Public Deposits" within the meaning ofparagraph 3 (xv) of the Master Direction - Non-Banking Financial Companies Acceptance ofPublic Deposits (Reserve Bank) Directions 2016 during the year ended 31st March 2019.

vi. The company has complied with the prudential norms relating to income recognitionaccounting standards asset classification and provisioning for bad and doubtful debts asapplicable to it in terms of Master Direction - Non-Banking Financial CompanyNon-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions 2016.

vii. The Company is not systematically important non-deposit taking NBFC as defined inMaster Direction - Non-Banking Financial Company - Systemically Important Non-Deposittaking Company and Deposit taking Company (Reserve Bank) Directions 2016& accordinglypara 3(C)(iv) of the Directions is not applicable.

2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of Section 143 ofthe Act we give in the Annexure "A" a statement on the matters specified inthe paragraph 3 and 4 of the Order to the extent applicable.

3. As required by Section 143 (3) of the Act we report that:

i) 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.

ii) 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.

iii) The Balance Sheet the Statement of Profit and Loss and the Statement of CashFlows dealt with by this Report are in agreement with the books of account.

iv) In our opinion the aforesaid financial statements comply with the IndianAccounting Standards specified under section 133 of the Act read with Rule 7 of theCompanies (Accounts) rules 2014.

v) On the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164(2) of the Act.

vi) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B".

vii) 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 opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of the Act.

viii) 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:

a. The Company does not have any pending litigations which would impact its financialposition.

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

c. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

Annexure 'A' to Independent Auditor's Report referred to in Paragraph 2 under theheading of "Report on Other Legal and Regulatory Requirements" of our report ofeven date.

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

(b) The Fixed Assets have been physically verified by the management during the yearwhich in our opinion is reasonable having regard to the size of the company and the natureif its business. No discrepancies were noticed on such verification.

(c) The Company does not have an immovable property held as fixed assets thereforeparagraph 3(i)(c) of the Order is not applicable.

(ii) The Company does not have any inventory and therefore paragraph 3(ii) of the Orderis not applicable.

(iii) In our opinion and according to the information and explanations given to us andexamination of records we considered necessary the Company has not granted any loansecured or unsecured to Companies firms limited liability partnerships or partiescovered in the register maintained under Section 189 of the Companies Act 2013 (‘theAct'). Accordingly paragraph 3(iii)) of the Order is not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us theCompany has not given any loan/guarantee/security to or on behalf of any party referred toin Section 185 of the Companies Act 2013. The Company being a Non-Banking Finance Companyis engaged in the business of financing of companies hence provisions of Section 186 ofthe Companies Act 2013 is not applicable to the Company.

(v) On the basis of our examination of books and records of the Company in our opinionand according to the information and explanations given to us the company has notaccepted deposits during the year and therefore the directives issued by the Reserve bankof India and the provisions of Sections 73 to 76 or any other relevant provisions of theCompanies Act 2013 and the rules framed there under are not applicable to the Company.

(vi) In our opinion the Company is not required to maintain Cost records under section148(1) of the Companies Act 2013.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the books and records of the Company the company is regular indepositing undisputed statutory dues including income-tax and other material statutorydues with the appropriate authorities. According to the information and explanations givento us and on the basis of our examination of the books and records of the Company noundisputed amounts payable in respect of income tax GST cess and other materialstatutory dues were in arrears as at 31st March 2019 for a period of more than six monthsfrom the date they became payable except for Service tax payable under reverse chargemechanism amounting to Rs. 18600/- Profession tax of Rs. 8100/- and Goods and ServicesTax of Rs. 75600/-.

(b) According to the information & explanation give to us there are no dues ofIncome tax and other applicable Statutory Dues which have not been deposited on account ofany dispute.

(viii) The Company does not have any loans or borrowings from any financialinstitution banks or government. The company has not issued any debentures during theyear. Accordingly paragraph 3(viii) of the Order is not applicable.

(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Accordinglyparagraph 3 (ix) of the Order is not applicable.

(x) On the basis of our examination of books and records of the Company and accordingto the information and explanation provided to us no fraud by the company or on theCompany by its officers or employees has been noticed or reported during the year.

(xi) On the basis of our examination of books and records of the Company and accordingto the information and explanation provided to us the managerial remuneration paid isaccording to the provisions of Section 197 read with Schedule V of the Companies Act 2013.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.

(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 Companies Act 2013. Details of transactionswith the related parties have been disclosed in the financial statements as required bythe applicable accounting standards.

(xiv) According to the information and explanations give 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.

(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 non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.

(xvi) The Company is required to be registered under section 45-IA of the Reserve Bankof India Act 1934 as a Non-Banking Finance Company and the registration has been soobtained.

Annexure ‘B' to the Independent Auditors' 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 over financial reporting of FrontierCapital Limited ("the Company") as of 31st March 2019 in conjunction withour audit of the financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (‘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 Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the 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 the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects. Our auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion on the Company's internal financial controls system over financialreporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2019based on the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.

For A.C. Bhuteria & Co.
Chartered Accountants
(Firm's Registration No. 303105E)
Sd/-
Mohit Bhuteria
Partner
(Membership No.056832)
Place of Signature: Kolkata
Date: 23-05-2019