To the Members of
Kamadgiri Fashion Limited
Report on the Audit of the Ind AS Financial Statements
We have audited the accompanying Ind AS financial statements ofKamadgiri Fashion Limited ("the Company") which comprise the Balance Sheet asat March 31 2020 the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows for the yearthen ended and notes to the Ind AS financial statements including a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas "Ind AS financial statements"). In our opinion and to the best of ourinformation and according to the explanations given to us the aforesaid Ind AS financialstatements give the information required by the Companies Act 2013 ("the Act")in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India including the Indian Accounting Standards("Ind AS") prescribed under section 133 of the Act of the state of affairs ofthe Company as at March 31 2020 its loss (including other comprehensive income) changesin equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with Standards on Auditing (SAs)specified under section 143(10) of the Act. Our responsibilities under those Standards arefurther described in the Auditor's Responsibilities for the Audit of the Ind ASFinancial 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 ("ICAI") together with the ethical requirements that are relevant to ouraudit of the Ind AS financial statements under the provisions of the Act and 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 on the Ind ASfinancial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the Ind AS financial statements of the currentyear. These matters were addressed in the context of our audit of the Ind AS financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matter described below to be thekey audit matter to be communicated in our report.
|Key Audit Matter ||How our audit addressed the key audit matter |
|Valuation of Inventory || |
|(refer note 7 to the Ind AS financial statements) Inventory is carried in the Ind AS financial statements at the lower of cost and net realizable value (NRV'). Inventory valuation in the readymade garment and textile industry remains very volatile on account of significant change in customer preference on account of frequent change in trend. ||Our audit procedures included but were not limited to the following |
|Considering the materiality of the amount involved and significant management judgment involved in inventory valuation we have identified valuation of inventory as a key audit matter. || We understood the inventory process and tested the design and operating effectiveness of controls as established by the management for valuation of inventory and in determination of NRV of inventory as on balance sheet date. |
| || We tested on a sample basis the cost of inventory by tracing the purchase cost of raw materials to purchase invoices and actual production costs arrived and measured by the management. |
| || We performed NRV testing by comparing subsequent sale/order value. |
| || We also evaluated the reasonableness of management's judgment involved in consideration of various factors including the actual selling price prevailing prior and subsequent to the year end initiatives taken by the Government with respect to textile industry as a whole; for the purpose of determining the NRV of the inventory. |
Emphasis of Matter
We draw attention to Note 47 to the accompanying Ind AS financialstatements which describes the uncertainties and the management's assessment of thefinancial impact on the Company due to COVID-19 pandemic situation for which a definitiveassessment of the impact is highly dependent upon the circumstances as they evolve in thesubsequent period.
Our opinion is not modified in respect of this matter.
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in theDirector's Report Management Discussion & Analysis and Corporate GovernanceReport but does not include the Ind AS financial statements and our auditor's reportthereon.
Our opinion on the Ind AS 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 Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the Ind AS financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated.
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.
Responsibilities of Management and Those Charged with Governance forthe Ind AS 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
Ind AS financial statements that give a true and fair view of thefinancial position financial performance (including other comprehensive income) changesin equity and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including Ind AS prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 Ind AS financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud or error.
In preparing the Ind AS financial statements management is responsiblefor assessing 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.
Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Auditor's Responsibilities for the Audit of the Ind AS FinancialStatements
Our objectives are to obtain reasonable assurance about whether the IndAS financial statements as a whole are free from material misstatement whether due tofraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of this Ind AS financial statements. Aspart of an audit in accordance with SAs we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Ind ASfinancial 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 inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls with reference to financial statements 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 the goingconcern basis 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 Ind AS 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 the Ind ASfinancial statements including the disclosures and whether the Ind AS financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
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 Ind ASfinancial statements of the current year and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.
On account of the COVID-19 related lockdown restrictions imposed by thegovernment management was able to perform year end physical verification of inventoriesat all their plants and warehouse subsequent to the year end. However due to lockdownconditions we were unable to physically observe the inventory verification carried out bythe management. Consequently we have performed alternate audit procedures to obtaincomfort over the existence and condition of inventory at year end as per the guidanceprovided in
SA-501 "Audit Evidence Specific considerations for selecteditems" and have obtained sufficient appropriate audit evidence to issue ourunmodified opinion on this Ind AS financial statements.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government of India in terms of section143(11) of the Act we give in "Annexure 1" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
As required by section 143(3) of the Act we report 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) the Statement of Changes in Equity and the Statement of Cash Flowsdealt with by this report are in agreement with the books of account;
d. In our opinion the aforesaid Ind AS financial statements complywith the Ind AS prescribed under section 133 of the Act read with the Companies (IndianAccounting Standards) Rules 2015 as amended;
e. On the basis of the written representations received from thedirectors as on March 31 2020 and taken on record by the Board of
Directors none of the directors is disqualified as on March 31 2020from being appointed as a director in terms of section 164(2) of the Act;
f. With respect to the adequacy of the internal financial controls withreference to financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate report in "Annexure 2";
g. With respect to the other matter to be included in theAuditor's Report in accordance with the requirements of section 197(16) of the Act:In our opinion and to the best of our information and according to the explanations givento us the remuneration paid/ provided by the Company to its directors during the year isin 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 in our opinion and to the best of our information and according to theexplanations given to us:
(i) The Company has disclosed the impact of pending litigations on itsfinancial position in its Ind AS financial statements Refer Note 38 on ContingentLiabilities to the Ind AS financial statements;
(ii) The Company did not have any long-term contracts includingderivative contracts. Hence the question of any material foreseeable losses does notarise; (iii) There has been no delay in transferring amounts required to be transferredto the Investor Education and Protection Fund by the Company.
ANNEXURE 1 TO THE INDEPENDENT AUDITOR'S REPORT
[Referred to in paragraph 1 under Report on Other Legal andRegulatory Requirements' section in the Independent Auditor's Report of evendate to the members of Kamadgiri Fashion Limited on the Ind AS financial statementsfor the year ended March 31 2020] Based on the audit procedures performed for the purposeof reporting a true and fair view on the Ind AS financial statements of the Company andtaking into consideration the information and explanations given to us and the books ofaccount and other records examined by us in the normal course of audit we report that:
(i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) During the year the fixed assets of the Company have beenphysically verified by the management and no material discrepancies were noticed on suchverification. In our opinion the frequency of verification is reasonable having regard tothe size of the Company and the nature of its assets.
(c) The title deeds of immovable properties recorded as fixed assets inthe books of account of the Company are held in the name of the Company.
(ii) The inventory has been physically verified by the managementsubsequent to the year end due to lockdown restrictions imposed by the Government of Indiafor which roll back procedures have been performed to determine the existence andcondition of the inventory as at the year-end. No material discrepancies were noticed onphysical verification carried out by the management.
(iii) 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 Act. Accordingly clause 3(iii) of the Order is notapplicable to the Company.
(iv) There are no loans investment guarantees and security whereprovisions of sections 185 and 186 of the Act are required to be complied with.Accordingly clause 3(iv) of the Order is not applicable to the Company.
(v) In our opinion the Company has not accepted any deposits from thepublic within the provisions of sections 73 to 76 of the Act and the rules framed thereunder. Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) The maintenance of cost records has been specified by the CentralGovernment under sub-section (1) of section 148 of the Act and rules thereunder. We havebroadly reviewed such records and are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. We have not however made a detailedexamination of the records with a view to determine whether they are accurate or complete.
(vii) (a) The Company is regular in depositing with appropriateauthorities undisputed statutory dues including provident fund employees' stateinsurance income tax goods and services tax (GST) customs duty cess and any othermaterial statutory dues applicable to it except that there have been slight delay in fewcases.
No undisputed amounts payable in respect of provident fundemployees' state insurance income tax GST customs duty cess and any othermaterial statutory dues applicable to it were outstanding at the year end for a periodof more than six months from the date they became payable.
(b) The dues outstanding with respect to income tax sales taxservice tax value added tax GST customs duty excise duty on account of any disputeare as follows :
|Name of the statute ||Nature of dues ||Amount in (Rs. in Lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax ||96.41 ||2010-2011* 2011-2012*. ||CIT (Appeals) |
|Gujarat Sales Tax Act 1969 ||Sales Tax ||31.02 ||2001-2002 2002-2003. ||Commissioner(Appeals) |
|Maharashtra Value Added Tax Act 2002 ||VAT ||803.64 ||2014-2015 ||Joint Commissioner (Appeals) |
|Central Sales Tax Act 1956 ||CST ||32.15 ||2014-2015 ||Joint Commissioner (Appeals) |
(viii) During the year the Company has not defaulted in repayment ofloans or borrowings to banks. Further there are no borrowings from financial institutiongovernment or dues to debenture holder.
(xi) The Company did not raise moneys by way of initial public offer orfurther public offer (including debt instruments). In our opinion the term loans wereapplied for the purposes for which the loans were obtained.
(x) During the course of our examination of the books and records ofthe Company carried out in accordance with the generally accepted auditing practices inIndia and according to the information and explanations given to us we have neither comeacross any instance of fraud by the Company or any fraud on the Company by its officers oremployees noticed or reported during the year nor have we been informed of any suchinstance by the management.
(xi) Managerial remuneration has been paid / provided in accordancewith the requisite approvals mandated by the provisions of section 197 read with ScheduleV to the Act.
(xii) In our opinion the Company is not a Nidhi Company. Thereforeclause 3(xii) of the Order is not applicable to the Company.
(xiii) All transactions entered into by the Company with the relatedparties are in compliance with sections 177 and 188 of Act where applicable and thedetails have been disclosed in the Ind AS financial statements as required by theapplicable accounting stan -dards.
(xiv) The Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year. Thereforeclause 3(xiv) of the Order is not applicable to the Company.
(xv) The Company has not entered into any non-cash transactions withdirectors or persons connected with them during the year and hence provisions of section192 of the Act are not applicable.
(xvi) The Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934.
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT
[Referred to in paragraph 2(f) under Report on Other Legal andRegulatory Requirements' section in our Independent
Auditor's Report of even date to the members of KamadgiriFashion Limited on the Ind AS financial year ended March 31 2020]
Report on the Internal Financial Controls with reference to FinancialStatements under clause (i) of sub-section 3 of section 143 of the Companies Act 2013("the Act")
We have audited the internal financialcontrolswithreferencetoKamadgiriFashion Limited ("the Company") as of March 31 2020 in conjunction with ouraudit of the Ind AS financial statements year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control with reference tofinancial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (the "Guidance Note") issued by the Instituteof Chartered Accountants of India ("ICAI"). These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to 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 Act.
Our responsibility is to express an opinion on the Company's internalfinancial controls with reference to financial statements based on our audit. We conductedour audit in accordance with the Guidance Note and the Standards on Auditing specifiedunder section 143(10) of the Act to the extent applicable to financial controlsboth issued by the ICAI. audit of internal
Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls with reference to financial statements andtheir operating effectiveness.
Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of internal financial controls withreference to financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal controls basedon the assessed risk. The procedures selected depend on the auditor's judgementincluding the assessment of the risks of material misstatement of the financialstatements 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 with reference to financial statements.
Meaning of Internal Financial Controls with reference to FinancialStatements
A company's internal financial control with reference to financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial control with reference to financial statements includes those policies andprocedures 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 financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference toFinancial Statements
Because of the inherent limitations of internal financial controls withreference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.
In our opinion the Company has in all material respects adequateinternal financial controls with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as atMarch 31 2020 based on the internal control with reference to financial statementscriteria established by the Company considering the essential components of internalcontrols stated in the Guidance Note issued by the ICAI.
| ||For Haribhakti & Co. LLP |
| ||Chartered Accountants |
| ||ICAI Firm Registration No. 103523W/W100048 |
| ||Sumant Sakhardande |
| ||Partner |
|Place: Mumbai ||Membership No. 034828 |
|Date: July 27 2020 ||UDIN: 20034828AAAAEC5080 |