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Future Market Networks Ltd.

BSE: 533296 Sector: Others
NSE: FMNL ISIN Code: INE360L01017
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OPEN 15.90
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VOLUME 3167
52-Week high 45.05
52-Week low 8.55
P/E
Mkt Cap.(Rs cr) 91
Buy Price 15.90
Buy Qty 2367.00
Sell Price 15.90
Sell Qty 131.00
OPEN 15.90
CLOSE 15.15
VOLUME 3167
52-Week high 45.05
52-Week low 8.55
P/E
Mkt Cap.(Rs cr) 91
Buy Price 15.90
Buy Qty 2367.00
Sell Price 15.90
Sell Qty 131.00

Future Market Networks Ltd. (FMNL) - Auditors Report

Company auditors report

To the Members of

FUTURE MARKET NETWORKS LIMITED

Report on the Standalone Financial Statements

We have audited the standalone financial statements of FUTURE MARKET NETWORKS LIMITED("the Company") which comprise the Balance Sheet as at March 31 2019 thestandalone Statement of Profit and Loss (including Other Comprehensive Income) thestandalone Cash Flow Statement and the standalone Statement of Changes in Equity for theyear then ended and a summary of significant accounting policies and other explanatoryinformation.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 (the Act) in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India includingInd AS specified under Section 133 of the Act of the state of affairs of the Company asat March 31 2019 its profit and other comprehensive income its cash flows and changes inequity 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 StandaloneFinancial 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 thestandalone financial statements under the provisions of the Act and the Rules there-underand 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.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.

The Key Audit Matter How the Matter was addressed in our auditRs.
Revenue Recognition: (Refer Note 15 of the Standalone Financial Our audit procedures on Revenue recognition included the following
Statements)
Revenue from leasing out of commercial units/ shops represents 95% of the total revenue from operations of the company and hence revenue from lease rentals virtually represents the total revenue. Assessing the appropriateness of the revenue recognition accounting policies the amount of revenue recognized as per the agreement entered into with the tenants along with IND AS 17.
Revenue pertaining to lease rents is recognized on straight line basis over the lease term in accordance with IND AS 17. We tested the design implementation and operating effectiveness of controls over the recognition of lease rent due from the parties.
Contingent rent is that portion of the lease payments that is not fixed in amount but is based on the future amount of a factor that changes other than with the passage of time (eg. percentage of future sales amount of future use future price indices future market rates of interest). Such rent is recognized in the Statement of Profit & Loss in the period they are earned. We performed substantive testing on a test check basis by verifying the lease rent received during the year with the documents which included the agreements entered into with the tenants.
Analytical procedures were performed to identify deviations in monthly rent received from the tenants / lessees / sub-lessees.
We undertook site visits during the year for selected malls to evaluate the effectiveness of the company's internal control policies to test check the adequacy of the revenue recognized in the financial statements.
With regards to contingent rent we performed substantive testing by verifying the implementation and operating effectiveness of controls over the data set collected by the management with regards to the revenue of shops and the computation of such contingent rent.
Adequate accrual for contingent rent at the year-end based on previous statistics / trends.
We tested the design implementation and operating effectiveness of controls over the calculation of discount and rebates.
Asset Classified as Held For Sale (Refer Note 9 of the Financial Statements) Our audit procedures on Revenue recognition included the following
An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. We assessed the appropriateness of the accounting policies and estimates.
The asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. The asset to qualify for recognition as held for sale the sale should be expected to be completed within one year of such classification. We challenged the assumptions and critical judgments made by management which impacted their estimate of fair value less cost to sell the estimated time to sell the assets & their carrying value at each reporting date.
An entity shall measure a non-current asset (or disposal group) classified as held for sale at the lower of its carrying amount and fair value less costs to sell. We discussed the status of the sale transaction and the possible impact of any changes to the sale terms on the financial statements with the management.
The company has classified one of its investment properties (10 Acres Mall Ahmedabad) as held for sale during July 2016. The said property was pledged for guarantee given to bank for Acute Realty Private Limited. (Refer Note 36). During the year the borrowing pertaining to the guarantee is now repaid and asset is free of any encumbrance. The sale terms are finalized and the transaction is pending for some legal compliances which the board believes to be finalized in a short time. Further the Company also in January 2019 resolved to sell the entire stake of their wholly owned subsidiaries Gati Realtors Private Limited & Future Retail Destination Limited. The buyer has been identified and the particulars of the sale deed are at an advance stage of finalization. The sale is expected to be completed in next 12 Months. The investments are presented separately under asset held for sale. We assessed the appropriateness of classifications of the assets upon expiry of one year of initial classification and adequacy of the continuance of such classification.
Income from the said assets held for sale being earned by the Company properly classified under discontinued operations.
Recognition and measurement of deferred tax assets Our audit procedures included:
The carrying amount of the deferred tax assets represents 10.85 % of the Company's total assets. Through discussions with management we understood the Company's process for recording deferred tax assets;
The Company has deferred tax assets in respect of brought forward losses and other temporary differences as set out in note 6. We have analyzed the projected business plans and profitability of the Company based on definitive agreements and other documentation;
The recognition of deferred tax assets involves judgment regarding the likelihood of the reasonable certainty of realization of these assets in particular whether there will be taxable profits in future periods that support recognition of these assets. We have performed sensitivity analysis and inquired into the basis of the projections for the reasonable certainty of utilization of the brought forward business losses and therefore recognition of deferred tax assets; and
Management records deferred tax assets in respect of brought forward business losses in cases where it is reasonably certain based on the projected profitability determined on the basis of approved business plans that sufficient taxable income will be available to absorb the brought forward business loss. We tested the underlying data for the key deferred tax and tax provision calculations.

Other Information

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the standalone financial statements and our auditor'sreport thereon.

Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon. In connection with ouraudit of the standalone financial statements our responsibility is to read the otherinformation and in doing so consider whether the other information is materiallyinconsistent with the standalone 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.

Management's Responsibility for the Standalone Financial Statements

The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit/loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the standalone financial statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.In preparing the standalone financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

Auditor's Responsibilities for the Audit of the Standalone 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 standalone financial statements.

As part of an audit in accordance with Standards on Auditing we exercise professionaljudgment and maintain 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i)of the Act we are also responsible for explaining our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch 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.

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 Companies (Auditors' 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 1" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

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) the Statement of Cash Flow and the Statement of Changes in Equity dealt with bythis Report are in agreement with the books of account;

d. In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act;

e. On the basis of written representations received from the directors as on March 312019 and taken on record by the Board of Directors none of the directors are disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct;

f. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 2".

g. 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 standalone financial statements – Refer Note 35 on ContingentLiabilities to the standalone financial statements;

(ii) The Company did not have any long-term contracts including derivative contracts.Hence the question of any material foreseeable losses does not arise;

(iii) there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended March 312019; and

3. In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director 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.

For Viren Gandhi & Co
Chartered Accountants
ICAI Firm Registration No. 111558W
Chintan Gandhi
Place: Mumbai Partner
Date: May 21 2019 Membership No.137079

ANNEXURE I TO THE AUDITOR'S REPORT

(As referred to in paragraph 1 under "Report on Other Legal and RegulatoryRequirements" section of our report of even date)

(i) In respect of Fixed Assets:

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

(b) As explained to us these fixed assets and investment properties have beenphysically verified by management at regular intervals which in our opinion is reasonableconsidering the size of the company and the nature of its assets. The frequency ofphysical verification is reasonable and no material discrepancies were noticed on suchverification.

(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the conveyance deed provided to us we report thatthe title deeds comprising all the immovable properties of land and buildings which arefreehold are held in the name of the Company as at the balance sheet date.

(ii) In respect of its Inventories:

As explained to us physical verification of inventory has been conducted at reasonableintervals by the management and no material discrepancies were noticed on physicalverification.

(iii) In respect of the loans secured or unsecured granted by the Company tocompanies firms Limited Liability Partnerships or other parties covered in the registermaintained under Section 189 of the Companies Act 2013 (a) In our opinion and accordingto the information given to us the terms and conditions of the loans given by the Companyare prima facie not prejudicial to the interest of the Company.

(b) The schedule of repayment of principal and payment of interest has been stipulatedand repayments of principal amounts and/or receipts of interest have been regular as perstipulations.

(c) There are no overdue amounts as at the year-end in respect of both principal andinterest.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Companies Act2013 in respect of grant of loans making investments and providing guarantees andsecurities.

(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public covered under Section 73 to 76 of the Companies Act2013 and accordingly paragraph 3(v) of the Order is not applicable.

(vi) To the best of our knowledge and as explained the Central Government has notspecified maintenance of cost records under sub-section (1) of section 148 of theCompanies Act for the products of the company.

(vii) In respect of statutory dues:

(a) According to the information and explanations given to us and the records of theCompany examined by us the Company is regular in depositing undisputed statutory dues asapplicable with the appropriate authorities with respect to Provident Fund Income-taxGoods & Service Tax Cess and other material statutory dues.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employee's state insurance income-tax Goods &Service Tax cess and other material statutory dues were outstanding as at March 31 2019for a period of more than six months from the date they became payable.

(c) Details of dues of service tax which have not been deposited as at March 31 2019on account of dispute are given below.

Name of the Statute Nature of the dues Amount Period to which the amount relates Forum where dispute is pending
( Rs. In lakhs)
Finance Act 1994 Service Tax 95.80 Prior to 2014 High Court

The above disputed service tax amount is due and payable by the third party (Refer note35)

(viii) Based on our audit procedures and as per the information and explanations givenby management we are of the opinion that the Company has not defaulted in repayment ofdues to banks and financial institutions. The Company does not have any loans orborrowings from government and has not issued any debentures. Accordingly the Paragraph3(viii) of the order is not applicable to the Company.

(ix) The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments). The Company has also not raised any money by way ofterm loans during the year.

(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no fraud on the Company by its officers oremployees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to usManagerial remuneration has been paid or provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with schedule V to the CompaniesAct 2013.

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

(xiii) In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Act where applicable for alltransactions with the related parties and the details of related party transactions havebeen disclosed in the standalone financial statements as required by the applicableaccounting standards.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause 3(xiv) of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or persons connected with him and hence reporting under clause (xv) of Paragraph3 of the Order is not applicable to the Company.

(xvi) The Company is not required to be registered under Section 45-I of the ReserveBank of India Act 1934.

For Viren Gandhi & Co
Chartered Accountants
ICAI Firm Registration No. 111558W
Chintan Gandhi
Place: Mumbai Partner
Date: May 21 2019 Membership No.137079

ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT

Referred to in paragraph 2(f) under ‘Report on Other Legal and RegulatoryRequirements' in the Independent Auditor's Report of even date

Report on the Internal Financial Controls over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of FUTUREMARKET NETWORKS LIMITED ("the Company") as of March 31 2019 in conjunction withour audit of the standalone financial statements of the Company for the year ended on thatdate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to standalone financial statements and such internal financialcontrols were operating effectively as at March 31 2019 based on the internal financialcontrols with reference to standalone financial statements 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 theInstitute of Chartered Accountants of India (the "Guidance Note").

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. These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note and the Standards on Auditing issued by the ICAI and deemed to beprescribed under Section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to standalone financial statements. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with respect to the standalone financial statementand their operating effectiveness.

Our audit of internal financial controls with respect to standalone financialstatements included obtaining an understanding of internal financial controls with respectto standalone financial statements assessing the risk that a material weakness existsand testing and evaluating the design and operating effectiveness of internal controlbased on the assessed risk. The procedures selected depend on the auditor's judgementincluding the assessment of the risks of material misstatement of the standalone financialstatements 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 systemover financial reporting.

Meaning of Internal Financial Controls with reference to Standalone FinancialStatements

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.

For Viren Gandhi & Co
Chartered Accountants
ICAI Firm Registration No. 111558W
Chintan Gandhi
Place: Mumbai Partner
Date: May 21 2019 Membership No.137079

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