To the Members of Gati Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financialstatementsofGatiLimited("theCompany")whichcomprise the Balance sheet as atMarch 31 2019 the Statement of Profit and Loss (including Other Comprehensive Income)the Statement of Changes in Equity and the Cash Flow Statement for the year then endedand notes to the standalone financial statements including a summary of significantaccounting policies and other explanatory information(hereinafter referred to as "thestandalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for the indeterminate effect of the matter described in Basis forQualified opinion paragraph of our report the aforesaid standalone financial statementsgive the information required by the Companies Act 2013 ("the Act") in themannersorequiredandgiveatrueandfairviewinconformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019its profit including other comprehensive income changes in equity and its cash flows forthe year ended on that date.
Basis for Qualified Opinion
We draw your attention to:
i. Note 46 to the standalone financial statements which states that during the yearthe Company has received Income tax demand for RS 211.10 million relating to financialyear 2012-13 due to disallowance of capital loss for MAT computation under section 115JBof the Income tax Act 1961. The Company has filed an appeal before the Hon'ble HighCourt Telangana as the issue involves interpretation of law. Based on the legal advicereceived no provision for the said tax demand has been made in the standalone financialstatements of the company during the year. In view of the uncertainty we are unable todetermine the impact on the standalone financial statements for the said demand.
ii. Note 47 to the standalone financial statements which states that the Company hasgiven operational advances to few parties aggregating H184.90 million which is longoverdue and the full recoverability of which is doubtful. As set out in the aforesaidnote the management is making necessary efforts to ensure collection of dues from thoseparties. No impairment allowance for uncertainty in collectability has been recognizedagainst above advances. Based on the information received from the management of theCompany regarding the assumptions used in assessing the recoverability of this amount wewere unable to determine the impact on the standalone financial statements of a potentialadjustment for impairment that might have been necessary in order to present the balanceat its estimated recoverable value.
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements' section of ourreport. We are independent of the Company in accordance with the Code of Ethics'issued by the Institute of Chartered Accountants of India (ICAI) together with the ethicalrequirements that are relevant to our audit of the Standalone financial statements underthe provisions of the Act and the Rules there under 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 qualified opinion on the Standalone financial statements.
Information Other than the Standalone 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 standalone financial statements and our auditor's report 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 our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Emphasis of Matter
We draw your attention to:
i. Note 48 to the standalone financial statements which states that based on the Schemeof arrangement by the Hon'ble Andhra Pradesh High Court by its Order dated MarcRs 19 2013the company had created Special Reserve which allows its utilization for adjustment of anycapital losses arising from transfer of assets and certain other losses as specified inthe Scheme and as the Board of Directors may deem fit. The Company had adjusted an amountof RS 29.10 millions against the said Special Reserve in earlier years which has been nowrecovered during the year and adjusted in the statement of profit & loss for the yearended March 31 2019.
ii. Note 49 to the standalone financial statements regarding loans given to asubsidiary amounting to RS 200.10 millions in earlier years which are outstandingas at the reporting date. The management is confident of recovery of the amount in duecourse and no provision is considered necessary for any possible losses that may arise inthis behalf.
Our opinion is not qualified in respect of the above matters.
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 a separateopinion on these matters.
In addition to the matter described in the Basis for Qualified Opinion paragraph abovewe have determined the matters described below to be the key audit matters to becommunicated in our report.
|. || |
|Key Audit Matter ||How our audit addressed the key audit matters |
|1 Recoverability of Trade Receivable (See Note 10 to the Standalone Financial Statements) || |
|The gross balance of trade receivables as at March 31 2019 amounted to RS 492.53 million. ||Our audit included the following: |
|Due to the inherent subjectivity that is involved in making judgments in relation to credit risk exposures to determine the recoverability of trade receivables recoverability of trade receivables is considered a key audit matter. || Evaluating the Company's processes and controls relating to the monitoring of trade receivables and review of credit risks of customers. |
| || Examination of management's assessment of the credit review procedures of trade receivables obtaining trade receivable confirmations and mapping receipts from the trade receivables after the year end on test basis. |
| || Evaluation of management's assumptions used to determine the expected credit loss on the trade receivables through detailed analyses of ageing of receivables to historical patterns of receipts assessment of material overdue individual trade receivables and risks specific to the trade receivable. |
|2 Evaluation of uncertain tax positions (See Note 35 (I) to the Standalone Financial Statement || |
|The Company has material uncertain tax positions including matters under dispute which could have a significant impact on the Standalone Financial Statement if the potential expenses were to materialise. ||Our audit included the following: |
|The outcome of such matters is uncertain and the position taken by management involves significant judgement. || Assessing the appropriateness of the design and implementation of the Company's controls over the assessment of uncertain tax position including matters under dispute and completeness of disclosures. |
| ||Supporting documentation are tested for the positions taken by the management meetings are conducted with in-house legal team to confirm the operating effectiveness of these controls. |
| || Involving our internal experts to review the management's underlying assumptions in estimating the tax provisions and the possible outcome of the disputes. Our internal experts also considered legal precedence and other rulings in evaluating the management's position on these uncertain tax positions including matters under dispute. |
| || Additionally we considered the effect of new information in respect of uncertain tax positions as at April 1 2018 to evaluate whether any change was required in the management's position on these uncertainties as at March 31 2019. |
Management's Responsibility for the Standalone 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 standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income changes in equity and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding the assets of the Company and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error and estimation to determine the likelihood and/or timing ofcashflows and the interpretation of preliminary and pending court rulings.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement 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 for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
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 expressing our opinion on whether the companyhas adequate internal financial controls system in place and the operating effectivenessof 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified 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 standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor'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 ("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 inparagraphs 3 and 4 of the Order to the extent applicable.
2. As required by section 143 (3) of the Act based on our audit 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 except for matter described in Basis for Qualified Opinionparagraph above proper books of account as required by law have been kept by the Companyso 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 the Cash Flow Statement dealt with by thisReport are in agreement with the books of account;
(d) Except for the indeterminate effects of the matter described in the Basis forQualified Opinion paragraph above in our opinion the aforesaid standalone financialstatements comply with the Accounting Standards specified under section 133 of the Actread with the relevant rules thereon.
(e) The outcome of the matter described in Basis for Qualified Opinion and Emphasis ofMatter paragraph above in our opinion may have an adverse effect on the functioning ofthe company.
(f) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164(2) of theAct;
(g) The reservation relating to maintenance of accounts and other matters connectedtherewith are as stated in the Basis for Qualified Opinion paragraph above.
(h) With respect to the adequacy of the internal financial controls over financialreporting with respect to standalone financial statement of the Company and the operatingeffectiveness of such controls refer to our separate Report in "Annexure B".
(i) 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 opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.
(j) 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 Note 35 (I) 45 and 46 to the standalonefinancial statements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.
iii. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company. iv. The reporting on disclosurerelating to the Specified Bank Note is not applicable to the Company for the year endedMarch 31 2019.
Annexure - A to theIndependentAuditor'sReport
(Referred to in paragrapRs 1 under the heading Report on Other Legal andRegulatory Requirements' section of our report of even date in respect to statutory auditof Gati Limited for the year ended March 31 2019)
We report that:
i. a). The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
b). As per the information and explanations given to us physical verification ofproperty plant and equipment have been carried out in terms of the phased program of itsverification adopted by the Company and no material discrepancies were noticed on suchverification. In our opinion the frequency of verification is reasonable having regard tosize of the Company and nature of its business.
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. As explained to us inventories were physically verified during the year by themanagement at reasonable intervals and no material discrepancies were noticed on suchverification.
iii. The Company has not granted any loans secured or unsecured to companies firmslimited liability partnership or other parties listed in the register maintained underSection 189 of the Companies Act 2013. Accordingly the provisions of paragraph 3(iii)3(iii) (a) to 3(iii) (c) of the said Order are not applicable.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans investments made and providing guarantees and securities as applicable.
v. According to information and explanations given to us the company has complied withthe directives issued by Reserve Bank of India and the provisions of Section 73 to 76 orany other relevant provisions of the Act and the rules framed there under with respect todeposits (from public). According to the information and explanation's given to us noorder has been passed by the Company Law Board or National Company Law Tribunal or ReserveBank of India or any Court or any other Tribunal on the Company in respect of theaforesaid deposits.
vi. The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Act for any of the services rendered by the Company.
vii. a). According to the information and explanations given to us and on the basis ofour examination of the records of the company examined by us the company is generallyregular in depositing undisputed statutory dues Including Provident Fund Employees'State Insurance Income-tax Goods and Services Tax duty of customs cess and othermaterial statutory dues as applicable to the appropriate authorities.
There are no arrears in respect of the aforesaid dues as at March 31 2019 for a periodof more than six months from the date they became payable except professional tax of RS0.08 millions and provident fund of RS 0.04 million which are due for more than 6 months.
b). According to the information and explanations given to us the dues outstanding inrespect of dues of income tax sales tax duty of excise service tax duty of customsvalue added tax and goods and services tax has not been deposited by the Company onaccount of disputes are as follows:
|Name of the Statute ||Nature Of Dues ||Amount (Rs in Millions) ||Period to which the amount relates ||Forum where dispute is pending |
|Finance Act 1994 ||Service Tax ||425.70 ||From Year 2005 -2018 ||CESTAT Audit Commissionerate |
|Income tax Act ||Income tax ||211.1 ||2012-2013 ||Hon'ble High Court Telangana |
viii. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not defaulted in repayment ofloans or borrowings to any financial institution bank or Government. The Company hadneither any outstanding debenture at the beginning of the year nor has it issued anydebenture during the year.
ix. The Company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments) during the year. According to the informationand explanation given to us by the management term loans were applied for the purpose forwhich the loans were obtained.
x. According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during thecourse 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 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 Act where applicable and details of suchtransactions have been disclosed in the standalone 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. Accordingly paragraph 3 (xiv) of the order is not applicable to the company.
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 not required to be registered under section 45-IA of the ReserveBank of India Act 1934. Accordingly paragraph 3 (xvi) of the order is not applicable tothe company.
Annexure B to theIndependentAuditor'sReport
(Referred to in paragrapRs 2(h) under Report on Other Legal and RegulatoryRequirements' section of our report of even date in respect to statutory audit of GatiLimited for the year ended March 31 2019)
Report on the Internal Standalone Financial Controls Over Financial Reporting underClause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls over financial reporting of GatiLimited (the Company') as of March 31 2019 in conjunction with our audit of thestandalone 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'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
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') issued by the Institute of Chartered Accountants of India andthe Standards on Auditing prescribed under section 143(10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls .Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
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 standalone financial statements for external purposes in accordance withgenerally 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 standalonefinancial 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.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial control over financialreporting were operating effectively as at March 31 2019 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the ICAI. However financial control overcontract revenue mapping in information technology system need to be further strengthened.
| ||For Singhi & Co. |
| ||Chartered Accountants |
| ||(ICAI Firm's Registration No. 302049E) |
| ||(Anurag Singhi) |
|Date: May 28 2019 ||Partner |
|Place: Kolkata ||Membership No. 066274 |