TO THE MEMBERS OF GEM SPINNERS INDIA LIMITED
Report on the audit of the Standalone Financial Statements
We have audited the accompanying standalone Ind AS Financial Statements of GEM SPINNERSINDIA LIMITED ("the Company") which comprise the Balance Sheet as at March 312019 the Statement of Profit and Loss including Other Comprehensive Income the CashFlow Statement and the Statement of Changes in Equity for the year then ended and notesto the standalone financial statements including a summary of significant accountingpolicies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Ind AS Financial Statements give the informationrequired by the Companies Act 2013 as amended ("the Act") 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 March 31 2019its loss including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards 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 Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the Code of Ethics'issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements. .
Material uncertainty Related to Going Concern
The Company has incurred substantial operating losses during the current period andearlier. There is thus in our opinion existence of a material risk as to the Company'sability to continue as a going concern. However the financial statements of the companyhave been prepared on a going concern basis for the reasons stated in Note No.2.
Our conclusion Is not qualified In respect of these matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 312019. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. In addition to the mater describedin the Material Uncertainty Related to Going Concern section we have determined thematters described below to be the key audit matters to be communicated in our report. Wehave fulfilled the responsibilities described in the Auditor's responsibilities for theaudit of the standalone Ind AS financial statements section out of report including inrelation to these matters. Accordingly our audit included the performance of proceduresdesigned to respond to our assessment of the risks of material misstatement of thestandalone Ind AS financial statements. The results of our audit procedures including theprocedures performed to address the matters below provide the basis for our opinion onthe accompanying standalone Ind AS financial statements.
A. REVENUE RECOGNITION
Key Audit Matter Description
During the year on account of adoption of new revenue standard Ind AS 115 - Revenuefrom contracts with customer there have been changes in revenue recognition policy withregards to timing of recognition and related disclosures. Revenue recognition isinherently an area of audit risk which we have substantially focused on mainly coveringthe aspects of cut off considering the above impact of Ind AS 115 and cut-off are keyaudit matters
Response to Key Audit Matter
Principal Audit Procedures
Our audit procedures relating to revenue comprised of test of controls and substantiveprocedures including the following:
a. We assessed whether the policy of recognizing revenue was in line with Ind AS - 115.
b. We performed procedures to assess the design and internal controls established bythe management and tested the operating effectiveness of relevant controls related to therecognition of revenue.
Based on the procedures performed above we did not find any material exceptions withregards to adoption of Ind AS 115 and timing of revenue recognition.
Emphasis of Matters
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 Ind AS financial statements and our auditor's report thereon. Our opinionon the standalone Ind AS financial statements does not cover the other information and wedo not express any form of assurance conclusion thereon. In connection with our audit ofthe standalone Ind ASfinancial statements our responsibility is to read the otherinformation and in doing so consider whether the other information is materiallyinconsistent with the standalone Ind AS financial statements or our knowledge obtained inthe audit 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 for the standalone Ind AS Financial Statements TheCompany's Board of Directors is responsible for the matters stated in section 134(5) ofthe Act with respect to the preparation of these standalone Ind AS financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity 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 amended. 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 wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone Ind ASfinancial 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.
The Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial 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 Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit.
a) Identify and assess the risks of material misstatement of the standalone IndASfinancial 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.
b) Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
c) Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
d) Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 Ind AS 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 the Companyto cease to continue as a going concern.
e) Evaluate the overall presentation structure and content of the standalone IndASfinancial statements including the disclosures and whether the standalone IndASfinancial statements represent the underlying transactions and events in a manner thatachieves 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 standalone Ind ASfinancialstatements for the year ended March 31 2019 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
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 the India in terms of sub-section (11) of section 143of the Act we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order.
2. As required by Section143 (3) of the Companies Act 2013 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 Cash Flow Statement and Statement of Changes in Equity dealt with by thisreport are in agreement with the books of account;
(d) In our opinion the aforesaid standalone Ind ASFinancial Statements comply with theAccounting Standards prescribed under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended.
(e) 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 312019 from being appointed as a director in terms of Section164(2) of theAct.
(f) With respect to the adequacy of the Internal Financial Controls Over FinancialReporting of the Company with reference to these standalone Ind ASfinancial statements andthe operating effectiveness of such controls refer to our separate report in"Annexure B" to this report;
(g) In our opinion the managerial remuneration for the year ended March 312019 hasbeen paid/provided by the Company to its directors is in accordance with the provisions ofsection 197 read with Schedule V to the Act;
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditor's) Rules 2014 as amended inour opinion and to the best of our information and according to the explanation given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS Financial Statements. (Refer note 20 to the standaloneInd AS financial statements;
ii. The company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at March 312019.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
| ||For K Arun Kumar & Associates |
| ||Chartered Accountants |
| ||FRN: 016215S |
| ||K. Arun Kumar |
|Place : Chennai ||Partner |
|Date : 14-08-2019 ||M.No. 237426 |
ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT
The annexure referred to Independent Auditor report to the members of the company onthe financial statements for the year ended 31 March 2019 we report that:
1. The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets (Property Plant and Equipment andintangible assets). These fixed assets have been physically verified by the management atreasonable intervals and as explained to us no material discrepancies were noticed onsuch verification during the year. In our opinion the periodicity of physicalverification is reasonable having regard to the size of the company and nature of itsassets.
2. Physical verification of inventory has been conducted at reasonable intervals by themanagement. The procedures of physical verification of inventory followed by themanagement are reasonable and adequate in relation to the size of the Company and thenature of its business. The Company is maintaining proper records of inventory. Asexplained to us the discrepancies noticed on physical verification were not material andthe same have been properly dealt with in the books of account.
3. According to the Information and Explanation given to us the Company has not grantedany loans secured or unsecured to companies firms or other parties covered in theregister maintained under Section 189 of the Companies Act 2013.
4. 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 Loans and investments made.
5. The Company has not accepted any deposits from the public during the year.
6. We have broadly reviewed the books of account maintained by the Company pursuant tothe Rules made by the Central Government for the maintenance of cost records under section148 of the Act and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained.
7. According to the information and explanations given to us and based on ourexamination of the records of the company the Company is regular in depositing undisputedstatutory dues including provident fund employees' state insurance income taxsales-tax wealth tax service tax duty of customs duty of excise value added tax cessand other statutory dues with the appropriate authorities . There are no undisputedstatutory dues payable in respect of above which were outstanding as at 31st March 2019for a period of more than six months from the date they became payable.
According to the information and explanation given to us there are no statutory duesoutstanding on account of any dispute except:
(Rs. In Lakhs)
|Name of the statute ||Nature of dues ||Amount ||Period to which the amount relates ||Forum where dispute is pending |
|Service tax ||Service tax ||58.60 ||2004-07 2008-09 2010-11 2011-12 ||CESTAT |
|Sales tax ||Sales tax ||22.89 ||2005-06 to 2009-10 ||Commercial tax |
8. According to information and explanation given to us the company has not taken anyloan either from financial institution bank Government or not issued any debentures.
9. The company did not raise money by way of initial public offer or further publicoffer.
10. We have neither came across any instances of material fraud by the company or onthe company by its officers or employees during our examination of books and records ofthe company based on generally accepted auditing standards in India nor have beeninformed of such case by the management.
11. According to the information and explanations given to us and based on ourexamination of the records of the company the company has paid/provided managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Companies Act.
12. The Company is not a Nidhi company. Accordingly paragraph 3(xii) is notapplicable.
13. According to the information and explanations given to us and based on ourexamination of the records of the company the transactions with the related parties arein compliance with sections 177 and 188 of Companies Act 2013 where applicable and thedetails have been disclosed in the Financial Statements etc. as required by theapplicable accounting standards.
14. 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 under review.
15. According to the information and explanations given to us the company has notentered into non- cash transactions with the directors of the company or persons connectedwith him.
16. The company is not required to be registered u/s 45 IA of the Reserve Bank of Indiaact 1934.
| ||For K Arun Kumar &Associattes |
| ||Chartered Accountants |
| ||FRN:016215S |
|Place: Chennai ||K Arun Kumar |
|Date: 14-08-2019 ||MRN: 237426 |
Annexure - B to Auditor's Report
Report on Internal Financial Controls Under Clause (i) of Sub-section 3 ofSection 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of GemSpinners Limited. ("the Company") as of March 31 2019 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate
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") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act2013 to the extent applicableto an audit of internal financial controls both applicable to an audit of InternalFinancial Controls and both issued by the Institute of Chartered Accountants of India.
Those Standards and the Guidance Note require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls over financial reporting was established and maintained and ifsuch controls operated effectively 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 judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the Company's internal financial controls system overfinancial 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 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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and
(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial 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.
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 March 31 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
| ||For K Arun Kumar &Associattes |
| ||Chartered Accountants |
| ||FRN: 016215S |
|Place: Chennai ||K Arun Kumar |
|Date: 14-08-2019 ||MRN : 237426 |