TO THE MEMBERS OF THE KALLAM TEXTILES LIMITED
Report on the Audit of the Financial Statements
We have audited the accompanying financial statements of KALLAMTEXTILES LIMITED ("the Company") which comprise the Balance Sheet as at March31 2020 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows for the year ended on thatdate and a summary of the significant accounting policies and other explanatoryinformation (hereinafter referred to as "the financial statements").
In our opinion and to the best of our information and according to theexplanations given to us the accompanying financial statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the Indian Accounting Standards prescribedunder section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended ("Ind AS") and other accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2020 the Loss and totalcomprehensive Loss changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the 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 Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India (ICAI) together with the ethical requirements that arerelevant to our audit of the financial statements under the provisions of the Act and theRules made thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the ICAI's Code of Ethics. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion on the financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. We have determined the matters described below to be the key audit mattersto be communicated in our report.
|Key Audit matter ||How the matter was addressed in our audit |
|1 Recognition and measurement of subsidies from government ||We evaluated the accounting treatment of government grants in terms of Ind AS- 20 in particular about its recognition based on its complying with the conditions attached to the grant and the possibility of the realisation of grant from the government. |
|The company has recognised government grants in the nature of power subsidy and Interest subsidy which involve significant judgment in assessing their recognition and realizability ||For this we obtained copies of relevant orders sanctioning the grants from the management and reconciled the amounts recognised with the eligibility criteria. We also verified the letter of communication by the management with the sanctioning authorities of the grant which were acknowledged and confirms that the government authorities endorsed and accepted the claims of the company. With regard to their realizability we verified the copies of the minutes of meeting held by the trade association with the government and noted the assurance made by the government for release of grants in due time. Considering all these we found that the judgment made by the management in recognising the grants are found to be appropriate. |
|. We considered this matter to be significant to our audit due to the quantum of the grants receivable from government their period of outstanding and its tax effects on recognition of said income. || |
|2 Recoverability of deferred tax asset related to unabsorbed losses under Income-tax ||We evaluated the reasonableness of key tax assumptions timing of reversal of temporary differences as well as evaluated the reasonableness of the forecasts of future taxable profits with reference to the historical forecasting accuracy considering the potential risk of management bias. These assumptions were based on the knowledge of the tax and operating environment in which the company operates. Considering the management estimates and forecasts of profitability the tax credits as recognised is considered to be appropriate. |
|The Company has significant deferred tax asset in respect of unabsorbed losses under Income-tax and there is inherent uncertainty involved in forecasting future taxable profits which determines the extent to which the deferred tax assets are or not recognised. || |
Emphasis of Matter
Attention is drawn to Note no. 33(e) wherein the Hon'ble SupremeCourt of India allowed the appeal filed by APTRANSCO which confirm the enhancement ofwheeling charges. Since the year 2004 the company has collected the wheeling charges atold rates and in the absence of demand from APTRANSCO the management is in the process ofevaluating the impact of judgement on financial results. The management is of opinion thatthe demand if any has arisen does not have any material impact on the financialinformation of the company for the year.
Our opinion is not modified in respect of the above matter.
Information Other than the Financial Statements and Auditor'sReport Thereon
The Company's Board of Directors is responsible for thepreparation of the other information. The other information comprises the informationincluded in the Management Discussion and Analysis Board's Report includingAnnexures to Board's Report Business Responsibility Report Corporate Governance andShareholder's Information but does not include the financial statements and ourauditor's report thereon.
Our opinion on the financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained during the course of our audit or otherwise appears to be materiallymisstated.
If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these financialstatements that give a true and fair view of the financial position financialperformance total comprehensive income changes in equity and cash flows of the Companyin accordance with the Ind AS and other accounting principles generally accepted in India.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing theCompany's financial reporting process.
Auditor's Responsibilities for the Audit of the FinancialStatements
Our objectives are to obtain reasonable assurance about whether thefinancial 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. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thefinancial 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 relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating 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 thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the 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 conditionsmay cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thefinancial 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 financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese 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 Section 143(3) of the Act based on our audit wereport that:
a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including OtherComprehensive Income Statement of Changes in Equity and the Statement of Cash Flow dealtwith by this Report are in agreement with the relevant books of account.
d) In our opinion the aforesaid financial statements comply with theInd AS specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.
e) On the basis of the written representations received from thedirectors as on March 31 2020 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2020 from being appointed as a director in termsof Section 164 (2) of the Act.
f) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B". Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internalfinancial controls over financial reporting.
g) With respect to the other matters to be included in theAuditor's Report in accordance with the requirements of section 197(16) of the Actas amended:
In our opinion and to the best of our information and according to theexplanations given to us the remuneration paid by the Company to its directors during theyear is in accordance with the provisions of section 197 of the Act.
h) With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 as amended in our opinion and to the best of our information and according tothe explanations given to us:
i. The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements.
ii. The Company has made provision as required under the applicablelaw or accounting standards for material foreseeable losses if any on long-termcontracts including derivative contracts.
iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government in terms of Section 143(11) ofthe Act we give in "Annexure-A" a statement on the matters specified inparagraphs 3 and 4 of the Order.
ANNEXURE-A TO THE INDEPENDENT AUDITORS' REPORT
The Annexure referred to in paragraph 2 under "Report on otherlegal and regulatory requirements" section of our report to the members of KALLAMTEXTILES LIMITED for the year ended March 31 2020
We report that:
1. In respect of its fixed assets:
a) The Company has maintained proper records showing full particularsincluding quantitative details and situation of fixed assets
b) According to the information and explanations furnished to us theCompany has not physically verified its fixed assets during the yean However the Companyhas adopted a phased programme of verification which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets
c) According to the information and explanations given to us and on thebasis of our examination of the records of the company the title deeds of immovableproperties are held in the name of the company
2. In respect of its inventories:
a) According to the information and explanations furnished to us theCompany has physically verified its inventories during the year and no materialdiscrepancies were noticed on such verification. In our opinion the frequency ofverification is reasonable.
3. The Company has not granted any loans secured or unsecured tocompanies firms or other parties covered in the register maintained under section 189 ofthe Act. Consequently clauses (iii)(a) (b) and (c) of paragraph 3 of the Order are notapplicable.
4. The company has not advanced any loans or made any investments orprovided any guarantees during the year. Hence the reporting requirements in terms ofclause (iv) of paragraph 3 of the Order regarding reporting on compliance with theprovisions of section 185 and 186 of the Act with respect to the loans investments andguarantees does not arise.
5. The company has borrowed interest free loans from directors andtheir relatives in pursuance of the stipulation imposed by Banks at the time of lendingand the amount outstanding against such borrowings on 31st March 2020 was Rs.320 lakhs.Apart from the said amounts the company has not accepted any deposits from the public ormembers. Hence the question of compliance with the directives issued by Reserve Bank ofIndia and the provisions of sections 73 to 76 or any other relevant provisions of the Actand the rules framed there under does not apply. According to the information furnished tous no order has been passed on the Company by the Company Law Board or National CompanyLaw Tribunal or Reserve Bank of India or any Court or any other Tribunal for non-compliance with the provisions of sections 73 to 76 of the Act.
6. We have broadly reviewed the books of account and records maintainedby the Company pursuant to the rules made by the Central Government for the maintenance ofcost records under section 148(1) of the Act and we are of the opinion that prima faciethe prescribed accounts and records have been made and maintained. However we have notcarried out a detailed audit of the same.
7. a) According to the information furnished to us the Company isregular in depositing with appropriate authorities the undisputed statutory duesincluding Provident Fund Employees' State Insurance income-tax GST and any otherstatutory dues applicable to it. There were no undisputed statutory dues in arrears as atthe date of the Balance Sheet under report for a period of more than six months from thedate they became payable.
b) According to the information furnished to us and records of thecompany examined by us at the date of the Balance Sheet there were no amounts of VATGST Customs Duty Excise Duty Cess Income Tax and Service Tax that were disputed by thecompany and hence were not remitted to the concerned authorities.
8. In our opinion and according to the information and explanationsfurnished to us by the Company considering the moratorium of instalments allowed by theRBI due to disruption of business on account of COVID-19 there were no defaults inrepayment of dues to banks. However the company has not borrowed any loans from financialinstitutions or raised any funds by way of issue of debentures.
9. The company has not raised monies by way of initial public offer orfurther public offer (including debt instruments) during the year. In respect of termloans borrowed during the year from banks the proceeds were applied for the purpose forwhich the said loans were raised.
10. To the best of our knowledge and according to the information andexplanations given to us no fraud by the company or any fraud on the company by itsofficers or employees has been noticed or reported during the year.
11. According to the information and explanation given to us and basedon examination of the records of the company the company has paid/provided remunerationfor managerial personnel in accordance with the requisite approvals mandated by theprovisions of section 197 read with schedule V of the Act.
12. The company is not a nidhi company. Accordingly reporting underprovisions of para 3(xii) of the Order is not applicable to the company.
13. According to the information and explanations given to us and basedon examination of records of the company transactions with the related parties are incompliance with the provisions of section 177 and 188 of the Act where applicable anddetails of such transactions have been disclosed in the financial statements as requiredby the applicable accounting standards.
14. During the year the company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures andhence reporting under clause 3(xiv) of the Order is not applicable to the company.
15. According to the information and explanations given to us and basedon our examination of the records of the company the company has not entered intonon-cash transactions with directors or persons connected with them and hence provisionsof section 192 of the Companies Act 2013 are not applicable to the company.
16. The company is not required to be registered under section 45-IA ofthe Reserve Bank of India Act 1934.
Annexure "B" to the Independent Auditors' Report
Report on the Internal Financial Controls over Financial Reportingunder Clause (I) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls over financialreporting of KALLAM TEXTILES LIMITED ("the Company ) as of 31st March 2020 inconjunction with our audit of the financial statements of the Company for the year endedon that date
Management's Responsibility for Internal Financial Controls
The Board of directors of the company is responsible for establishingand maintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India('ICAI'). These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the internal financialcontrols over financial reporting of the company based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") issued by ICAI and the Standards onAuditing prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls. 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 was established and maintained and if such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting isa process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Ind AS financial statements for external purposes inaccordance with generally accepted accounting principles. A company's internalfinancial control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of Ind AS financial statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directorsof the company; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the company's assetsthat could have a material effect on the financial statements.
Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate
In our opinion to the best of our information and according to theexplanations given to us 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 31 March 2020 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 Chevuturi Associates |
| ||Chartered Accountants |
|Place:Camp: Guntur ||Firm Registration No.000632S |
|Date : 31-07-2020 ||(Raghunadha Rao Balineni) |
| ||Partner |
|UDIN : 20028105AAAABI7501 ||(Membership No: 028105) |