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HFCL Ltd.

BSE: 500183 Sector: Telecom
NSE: HFCL ISIN Code: INE548A01028
BSE 00:00 | 17 Jan 17.25 -0.50
(-2.82%)
OPEN

17.70

HIGH

17.90

LOW

17.25

NSE 00:00 | 17 Jan 17.25 -0.50
(-2.82%)
OPEN

17.55

HIGH

17.85

LOW

17.20

OPEN 17.70
PREVIOUS CLOSE 17.75
VOLUME 262250
52-Week high 25.30
52-Week low 16.75
P/E 8.80
Mkt Cap.(Rs cr) 2,216
Buy Price 17.25
Buy Qty 1449.00
Sell Price 17.25
Sell Qty 551.00
OPEN 17.70
CLOSE 17.75
VOLUME 262250
52-Week high 25.30
52-Week low 16.75
P/E 8.80
Mkt Cap.(Rs cr) 2,216
Buy Price 17.25
Buy Qty 1449.00
Sell Price 17.25
Sell Qty 551.00

HFCL Ltd. (HFCL) - Auditors Report

Company auditors report

To the Members of

Himachal Futuristic Communications Limited

Report on the Audit of the Standalone Financial Statements

1. Opinion

We have audited the accompanying standalone financial statements of HimachalFuturistic Communications Limited ("the Company") which comprise thebalance sheet as at March 31 2019 the statement of Profit and Loss (including othercomprehensive income) the statement of changes in equity and the statement of cash flowsfor the year then ended and notes to the financial statements including a summary ofsignificant accounting policies and other explanatory information.

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 trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at March 31 2019 and profit (including othercomprehensive income) changes in equity and its cash flows for the year ended on thatdate.

2. 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 Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

3. 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.

Key Audit Matters Response to Key Audit Matters
1 Customer contracts – accuracy of revenue recognition valuation of contract assets work in progress (WIP) trade and other receivables and accuracy of contract liabilities Our procedures included among others obtaining an understanding of the project execution processes and relevant controls relating to the accounting for customer contracts.
For the year ended March 31 2019 revenue from customer contracts amounts to INR 4366.20 Crores whereas as at March 31 2019 contract assets amount to INR 3.34 Crores contract liabilities to INR 49.52 Crores the balance of work in progress (WIP) amounts to INR 58.16 Crores and retention amounts to INR 140.54 Crores. With regard to the implementation of Ind AS115 we verified management's conclusion on assessing different types of contracts and the accuracy of the Company's revised accounting policies in light of the industry specific circumstances and our understanding of the business. We tested the appropriateness of the accounting treatment on a sample basis and recalculated the resulting adjustments recorded in the opening balance. In addition we verified the accuracy of Ind AS115 related disclosures.
Following the first-time application of the new revenue recognition standard (Ind AS 115 Revenue from Contracts with Customers) the Company adopted its accounting policies and adjusted its opening balances as at April 1 2018 applying the cumulative effect method with no restatement of the comparative period. For the revenue recognized throughout the year we tested selected key controls including results reviews by management for their operating effectiveness and performed procedures to gain sufficient audit evidence on the accuracy of the accounting for customer contracts and related financial statement captions.
The application of the new revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations determination of transaction price of the identified performance obligations the appropriateness of the basis used to measure revenue recognized over a period. Additionally new revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. These procedures included reading significant new contracts to understand the terms and conditions and their impact on revenue recognition. We performed enquiries with management to understand their risk assessments relating to customer contracts.
On a sample basis we reconciled revenue to the supporting documentation validated costs tested the mathematical accuracy of calculations and the adequacy of accounting of customer contracts.
Refer Notes 32 and 43 to the Standalone Financial Statements.
During order fulfillment contractual obligations may need to be reassessed. In addition change orders or cancellations have to be considered. As a result total estimated contract costs may exceed total contract revenues and therefore require write-offs of contract assets receivables and the immediate recognition of the expected loss as a provision. We further performed testing on a sample basis to confirm the appropriate application of revenue recognition policies and to verify valuation of WIP balances. This included reconciling accounting entries to supporting documentation. When doing this we specifically put emphasis on those transactions occurring close before or after the balance sheet date to obtain sufficient evidence over the accuracy of cut-offs.
Regarding the revenue recognized at a point in time (PIT) the risks include inappropriate revenue recognition from revenue being recorded in the wrong accounting period or at amounts not justified as well as overstated WIP that requires impairment adjustments. We further reviewed samples of contracts with unbilled revenues to identify possible delays in achieving milestones which require change in estimated efforts to complete the remaining performance obligations.
Based on our knowledge gained through contract and project reviews we assessed the need for and the accuracy of provisions and deductions in revenue for variable consideration for expected liquidated damages.
Performed analytical procedures and test of details for reasonableness of incurred and estimated efforts..
Our procedures did not identify any material exceptions
2 Valuation of accounts receivable – risk of credit losses Our audit incorporated the following activities:
Company has a concentration of credit exposure on a number of major customers mainly Government and large organisation. Some of these major customers are facing difficult business conditions. In order to avoid significant credit losses proper monitoring and management of credit risk is key factor. Accounts receivable is a significant item in the Company's standalone financial statements amounting to INR 1530.37 crores as of March 31 2019 and provisions for impairment of receivables is an area which is influenced by management's estimates and judgment. The provision for impairment of receivables amounted to INR 4.75 crores as at March 31 2019. Assessing and updating our understanding of internal controls over financial reporting with respect to credit risk;
Assessment of the Company's credit policy outlining authority for approving and responsibility to manage credit limits;
Inquiries with Committee in order to understand and assess governance and follow-up/monitoring of key customers;
• Analytical procedures and inquiries with Business Area;
• Detailed testing and assessment of receivables to ensure these are in line with Ind AS with a focus on significant new provisions.
Refer to the Note 15 – Trade receivables. We had a particular focus in our audit on how Company manage credit risk for key customers with respect to credit insurance and procedures for credit management. We also assessed and challenged management's assumptions and adherence to Company's accounting policies with respect to provisions for impairment of receivables.
The level of the provision made against accounts receivables and accrued balances was deemed appropriate and corresponds to the risks identified.
3 Recoverability of Other Advances Our audit procedures involve the following activities:
As at March 31 2019 current financial assets include INR 503.51 crores in respect of Advances to vendors and sub-contractors and are pending to be adjusted/settled. Assessing and updating our understanding of internal controls over financial reporting with respect to advances given;
Management exercises significant judgment when determining whether to record any impairment loss on advances As the carrying amount of Other Advances accounts for a relatively high proportion of assets there would be a material impact on the financial statements if such advances cannot be settled on schedule or fail to be recovered /settled. Therefore we regard the recoverability of Other Advances as a key audit matter. Assessment of the Company's procurement policy outlining authority for approving and responsibility to manage vendor advances;
Inquiries with management in order to understand and assess governance and follow-up/monitoring of key vendors;
Analytical procedures and inquiries with Business Area;
Obtain balance confirmations from selected parties to ensure existence thereof
Refer Note 19 to the Standalone Financial Statements. • Review of Purchase orders and/or agreements for selected parties and enquire management regarding reasons for unsettled advances as on date.
We agree with management's view that there is no reduction in the value of the advances outstanding in the books.
4 Recoverability relating to Goods and Services Tax recoverable Our audit procedure involves the following activities:
As at March 31 2019 under other current assets indirect taxes recoverable include INR 59.03 crores in respect of GST Input Tax credit receivables. Assessing and updating our understanding of internal control over financial reporting with respect to recording of invoices of suppliers
The Company has accounted for input credit on material and services received from suppliers and is carrying out continuous process of reconciliation. Reviewing the management continuing process for reconciliation updation and follow up with the vendors.
We focused on management's estimate of getting input tax credit which involves significant judgment. We have relied upon the management's assessment.
Refer Note 21 to the Standalone Financial Statements.
5 Recoverability and Contingencies relating to other Indirect tax We performed the following substantive procedures:
As at March 31 2019 "Indirect Tax Recoverable" includes INR 19.76 crores in respect of Commercial taxes recoverable which are pending adjudication. • Understanding the process of estimation recording and reassessing tax provisions and contingencies.
Involving tax specialists to assist in analyzing the judgements used to determine provisions for tax matters
The Company has open/pending tax assessments in various states. The determination of provisions and contingent liabilities arising from the open tax assessments make this a particular area of significant judgement. We have involved our internal experts to review the nature of the amounts recoverable the sustainability and the likelihood of recoverability upon final resolution.
We focused on management's assessment of the likely outcome and quantification of tax exposures which involves significant judgement. Inspection the correspondence with tax authorities.
Refer Note 21 to the Standalone Financial Statements. Inspecting reports on open tax assessments prepared by the Company and other appropriate documentation considered necessary to understand the position and conclusions made by the Company.
We also assessed the adequacy of the Company's financial statements disclosure in respect of the tax positions and contingent liabilities.
We agree with management's evaluation.

4. Other Information

The Company's Board of Directors is responsible for the preparation of otherinformation. The other information comprises the information included in the in theManagement Discussion and Analysis Board's Report including Annexures to Board's ReportBusiness Responsibility Report Corporate Governance and Shareholder's Information butdoes not include the financial statements and our auditor's report thereon. The otherinformation comprising the above documents is expected to be made available to us afterthe date of this auditor's report.

Our opinion on the standalone financial statements does not cover the other informationand we will 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.

When we read the other information comprising the above documents if we conclude thatthere is a material misstatement therein we are required to communicate the matter tothose charged with governance and take necessary actions as per applicable laws andregulations.

5. 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 Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance total comprehensive income changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the Indian Accounting Standards specified under Section 133 of the

Act. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statement that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

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.

The Board of Directors are also responsible for overseeing the Company's financialreporting process.

6. Auditor's Responsibilities for the Audit of the Standalone FinancialStatements

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 skepticism 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 financial controls relevant to the auditin order to design audit procedures that are appropriate in the circumstances. UnderSection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls system in place and theoperating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the going concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.

Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent 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 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 defficiencies 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.

7. Report on Other Legal and Regulatory Requirements

A. 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 Companies Act 2013 we give in the "Annexure-A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order.

B. 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 flows 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 theIndian Accounting Standards specified under Section 133 of the Act read with relevantrules issued thereunder.

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

(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 B".

(g) 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.

(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 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 financial statements – Refer Note 46 to the financial 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 – Refer Note 46 to the financial statements;

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

For S. Bhandari & Co. For Oswal Sunil & Company
Chartered Accountants Chartered Accountants
Firm Registration No. 000560C Firm Registration No. 016520N
(P. D. Baid) (Sunil Bhansali)
Partner Partner
Membership No: 072625 Membership No: 054645
Place: New Delhi
Date: 15th May 2019

ANNEXURE ‘A' TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in "Paragraph-A" under ‘Report on Other Legal andRegulatory Requirements' section of our report to the Members of Himachal FuturisticCommunications Limited of even date)

1. In respect of the Company's fixed assets we report that:

(a) The Company has maintained proper records showing full particulars includingquantitative details and situations of its Fixed Assets.

(b) Fixed assets have been physically verified by the management during the year andthere is a regular program of verification which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets and as informed nomaterial discrepancies were noticed on such verification.

(c) According to the information and explanation given to us the title deeds ofimmovable properties are held in the name of the Company except the following:

Particular of Assets Gross Value of Assets WDV of Assets Remark
Leasehold Land at Solan 2829496/- 2099050/- Refer Note No.3 to Balance Sheet

2. As per the information furnished the Inventories have been physically verified bythe management at reasonable intervals during the year. In our opinion having regard tothe nature and location of stocks the frequency of physical verification is reasonable.No material discrepancy were noticed on such physical verification.

3. In respect of the loans secured or unsecured granted by the Company to companiesfirms Limited Liability Partnerships or other parties covered in the register maintainedunder Section 189 of the Companies Act 2013:

a) During the year the Company has not granted any loans secured or unsecured tocompanies firms Limited Liability Partnerships or other parties covered in the registermaintained under Section 189 of the Companies Act 2013.

b) In respect of opening balances the schedule of repayment of principal and payment ofinterest has been stipulated and repayments or receipts of principal amounts and interesthave been regular as per stipulations.

c) There is no overdue amount remaining outstanding as at the balance sheet date.

4. In our opinion and according to the information and explanations given to us theCompany has in respect of loans investments guarantees and security complied with theprovisions of Section 185 and 186 of the Companies Act 2013.

5. According to the information and explanation given to us the Company has notaccepted any deposits within the directives issued by the Reserve Bank of India and theprovisions of Section 73 to 76 or any other relevant provisions of the Companies Act2013. Hence the provisions of clause 3(v) are not applicable to the Company.

6. Pursuant to the rules made by the Central Government the maintenance of CostRecords have been prescribed u/s. 148(1) of the Companies Act 2013. We are of the viewthat prima facie the prescribed accounts and records have been maintained. We have nothowever made a detailed examination of the records with a view to determine whether theyare accurate or complete.

7. According to the information and explanations given to us in respect of statutorydues:

(a) Undisputed statutory dues including provident fund employees' state insuranceduty of custom value added tax cess have generally been regularly deposited with theappropriate authorities except delay in depositing of Goods and Services Tax (GST).

There were no undisputed amounts outstanding in respect of provident fund employees'state insurance income-tax goods and services tax service tax duty of custom valueadded tax cess and other material statutory dues as at March 31 2019 for a period ofmore than six months from the date they became payable.

(b) According to the records of the Company the dues of Sales Tax/ VAT Income TaxExcise Duty Custom Duty and Service Tax which has not been deposited on account ofdisputes and the forum where the dispute is pending are as under :

Name of the statute Nature of dues Amount in ` Period to which the amount relates Forum where dispute is pending Remarks
Value Added Tax Act Sales Tax 23742719/- 1997-1998 & 1998-1999 Hon'ble High Court of Punjab & Haryana. Rs 5000000/- Paid
Delhi Value Added Tax Act Sales Tax 21076837/- 2009-2010 & 2010-2011 Addl. Commissioner Department of Trade & Taxes New Delhi Rs 1600000/- Paid
Custom Tariff Act Custom Duty 19754154/- 2001-2002 & 2003-2004 Supreme Court New Delhi Liability of ` 19754154/- already paid by Company under protest
Central Excise Tariff Act Excise Duty 8217348/- 2005-2006 Central Excise and Service Tax Appellate Tribunal Mumbai Provision already made amounting to ` 4725005/-
Maharashtra Value Added Tax Sales Tax 36996738/- 2014-15 Joint Commissioner of Sales Tax (Appeal) Mumbai -
Delhi Value Added Tax Act Sales Tax 1227714/- 2015-2016 Asst. VATO Department of Trade & Taxes New Delhi Application _led for adjustment with refund due
Maharashtra Value Added Tax Sales Tax 9824593/- 2013-14 Joint Commissioner of Sales Tax (Appeal) Mumbai Rs 2389741/- Paid
Finance Act 1994 Service Tax 38726339/- 2017-18 Asst. Commissioner (Circle-11) Audit-II New Delhi Rs 10000000/- Paid

8. According to the information and explanations given to us and records examined byus the Company has not defaulted in repayment of dues to banks or debenture holders as atthe Balance Sheet date. Company hasn't taken any loan/borrowing from Financial Institutionor Government.

9. Based on our examinations of the records and information and explanations given tous the term loans have been applied for the purpose for which these are raised. Howeverthe company has not raised any money by way of initial public offer (IPO) or furtherpublic offer (FPO) (including debt instruments).

10. To the best of our knowledge and belief and according to the information andexplanations given to us no fraud by the Company or on the Company by its officers oremployees has been noticed or reported during the year.

11. According to the information and explanation given to us and the books of accountsverified by us the Managerial remuneration has been paid or provided in accordance withthe requisite approvals mandated by the provisions of Section 197 read with the Schedule Vto the Companies Act 2013.

12. The Company is not a Nidhi company hence the provisions of clause 3(xii) are notapplicable to the Company.

13. 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 Companies Act 2013 where applicable and

details of such transactions have been disclosed in the Financial Statements asrequired by the applicable accounting standards.

14. According to information and explanations given to us the Company has madepreferential allotment of 3.50 crore Equity Shares on conversion of outstandingconvertible Warrants during the year. The requirement of Section 42 of Companies Act 2013have been complied with and the amount raised has been used for the purpose for which itwas raised.

15. According to the information and explanation given to us and the books of accountsverified by us the Company has not entered into any non-cash transaction with directorsor persons connected with him and hence the provision of clause 3(xv) are not applicableto the Company.

16. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934 and hence the provision of clause 3(xvi) are not applicable to theCompany

For S. Bhandari & Co. For Oswal Sunil & Company
Chartered Accountants Chartered Accountants
Firm Registration No. 000560C Firm Registration No. 016520N
(P. D. Baid) (Sunil Bhansali)
Partner Partner
Membership No: 072625 Membership No: 054645
Place: New Delhi
Date: 15th May 2019

ANNEXURE - B TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONEFINANCIAL STATEMENTS OF HIMACHAL FUTURISTIC COMMUNICATIONS LIMITED AS ON 31ST MARCH 2019.

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")

TO THE MEMBERS OF

HIMACHAL FUTURISTIC COMMUNICATIONS LIMITED

We have audited the internal financial controls over financial reporting of HIMACHALFUTURISTIC COMMUNICATIONS LIMITED ("the Company") as of March 31 2019 inconjunction with our audit of the Standalone financial statements of the Company for theyear 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 control over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired 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 on audit of Internal financial controls over financial reporting(the "Guidance Note") and the standards on auditing as specified under Section143 (10) of the companies act 2013 to the extent applicable to an audit of internalfinancial controls both applicable to an audit of internal financial controls and bothissued by Institute of Chartered Accountants of India. Those standards and the guidancenote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate Internal financial controls overfinancial reporting were 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 control 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 testing and evaluating the design andoperating 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 Standalone financial statements whether due to fraud orerror.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the 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 ofrecords 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 the generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the Company; (3) provide reasonable assurance regardingprevention or timely detection of unauthorized 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 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 controls 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 Institute of Chartered Accountants ofIndia.

For S. Bhandari & Co. For Oswal Sunil & Company
Chartered Accountants Chartered Accountants
Firm Registration No. 000560C Firm Registration No. 016520N
(P. D. Baid) (Sunil Bhansali)
Partner Partner
Membership No: 072625 Membership No: 054645
Place: New Delhi
Date: 15th May 2019