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Kamat Hotels (India) Ltd.

BSE: 526668 Sector: Services
NSE: KAMATHOTEL ISIN Code: INE967C01018
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VOLUME 3256
52-Week high 158.85
52-Week low 48.95
P/E 6.85
Mkt Cap.(Rs cr) 170
Buy Price 71.85
Buy Qty 100.00
Sell Price 72.20
Sell Qty 83.00
OPEN 71.50
CLOSE 72.65
VOLUME 3256
52-Week high 158.85
52-Week low 48.95
P/E 6.85
Mkt Cap.(Rs cr) 170
Buy Price 71.85
Buy Qty 100.00
Sell Price 72.20
Sell Qty 83.00

Kamat Hotels (India) Ltd. (KAMATHOTEL) - Auditors Report

Company auditors report

TO

THE MEMBERS OF

KAMAT HOTELS (INDIA) LIMITED

Report on the Financial Statements

We have audited the accompanying standalone financial statements of KAMAT HOTELS(INDIA) LIMITED ("the Company") which comprise of the Balance Sheet as at 31stMarch 2017 the Statement of Profit and Loss the Cash Flow Statement for the year thenended and a summary of significant accounting policies and other explanatory information.

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 and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding 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 financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with the ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's directors as well as evaluating the overall presentationof the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the standalone financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at 31stMarch 2017 and its profit and its cash flows for the year on that date.

Emphasis of Matter

Attention is invited to:

1. Note 26.3 to the financial statements with regard to payment of managerialremuneration to Executive Chairman and Managing Director for the period from 1stOctober 2016 to 31st March 2017 of ' 48.00 lakhs in accordance the specialresolution passed by the shareholders of the Company in the annual general meeting held on24th September 2016 for which an application has been made to the Central Government forapproval which is pending.

2. Note 37 to the financial statement with regard to default in repayment of part ofthe secured loans dues and failure of CDR mechanism in the earlier year and its impact.

3. Note 38 to the financial statements which indicate that the Company's accumulatedlosses are in excess of its paid up capital and reserves & surplus. These conditionsalong with other matters set forth in Note 37 to the financial statements indicate theexistence of a material uncertainty which may cast significant doubt about the Company'sability to continue as a going concern.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of subsection (11) of section 143 ofthe Act we give in the Annexure - "A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

2. As required by section 143(3) of the Act we report that:

(i) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit.

(ii) In our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books.

(iii) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this report are in agreement with the books of account.

(iv) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 and the Companies (Accounting Standards) Amendment Rules2016.

(v) On the basis of written representations received from the directors as on 31stMarch 2017 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2017 from being appointed as a director in termsof Sub-Section (2) of Section 164 of the Act.

(vi) Our report on adequacy of internal financial controls system over financialreporting of the Company and the operating effectiveness of such controls is given inAnnexure "B".

(vii) 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:

(a) The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note 30 and 37 to the financial statements.

(b) The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.

(c) There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.

(d) The Company has provided requisite disclosures in the financial statements as toholdings as well as dealings in Specified Bank Notes during the period from 8thNovember 2016 to 30th December 2016. Based on audit procedures and relying onthe management representation we report that the disclosures are in accordance with booksof account maintained by the Company and produced to us by the Management - Refer Note20.1 to the financial statements.

For J.G.VERMA & CO.

Chartered Accountants

(Registration No111381W)

J.G.VERMA

Partner

Membership No. 5005

Mumbai: 26th May 2017

ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT

The Annexure referred to in paragraph 1 under ‘Report on Other Legal andRegulatory Requirements' in our report of even date to the members of Kamat Hotels (India)Limited for the year ended 31st March 2017. We report that:

1. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets installed at its various units.

(b) According to the information and explanations given to us some of the fixed assetshave been physically verified during the year by the management in accordance with aphased programme of verification which in our opinion provides for physical verificationof all the fixed assets at reasonable intervals. No material discrepancies were noticed onsuch verification.

(c) According to the records of the Company examined by us and the information andexplanations given to us the title deeds of immovable properties are held in the name ofthe company.

2. In our opinion physical verification of inventories has been conducted by themanagement at reasonable intervals. The discrepancies noticed on such verification by themanagement were not material and have been properly dealt with in the books of account.

3. (a) In respect of the loans secured or unsecured granted to companies firmslimited liability partnerships or other parties covered in the

Register maintained under Section 189 of the Companies Act 2013 (the Act) :

(A) Unsecured loan of ' 19646.40 lakhs to Orchid Hotels Pune Private Limited (OHPPL awholly owned subsidiary. Due to adverse factors which have affected the financialposition of OHPPL there were defaults in repayment of loan and interest to its lendersand accordingly the lenders of OHPPL declared it a non-productive asset in earlier year.In view of these developments the aforesaid loan and outstanding interest thereon havebeen classified by the Company as doubtful of recovery and a provision has been made inthe accounts for earlier year. In our opinion in view of the above the terms andconditions of the above loan are prejudicial to the interest of the Company.

(B) Unsecured loan of ' 698.74 lakhs to Mahodadhi Palace Private Limited (MPPL) awholly owned subsidiary (formerly Fort Mahodadhinivas Palace Private Limited). Due toadverse factors which have affected the financial position of MPPL the aforesaid loanhas been classified by the Company as doubtful of recovery and a provision has been madein the accounts for the year. In our opinion in view of the above the terms andconditions of the grant of such loan are prejudicial to the interest of the Company.

(b) The above loans were not due for refund during the year and accordingly ourcomments on the regularity of receipt of the principal amount of these loans are notgiven. Interest has not been charged on the OHPPL loan for the year as the same wasconsidered doubtful of recovery as mentioned above. Interest on the MPPL loan has beencharged upto 21st February 2017 being the date when the said loan wasclassified as doubtful loan and recovered partly and no interest charged thereafter.

(c) There was no overdue amount in respect of the principal amount of the OHPPL loangiven by the Company. In respect of MPPL loan there was no overdue amount in respect ofprincipal amount. The outstanding interest receivable on MPPL Loan as at 31st March 2017was ' 3.62 lakhs.

4. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 186 of the Act in respect of loansgiven investments made guarantees given and securities provided. Section 185 of the Actis not applicable for the Company during the year.

5 According to the information and explanations given to us the Company has notaccepted any deposit during the year and accordingly the question of complying withsection 73 and 76 of the Act does not arise. We are informed that the Company Law Board orNational Company Law Tribunal or Reserve Bank of India or any court has not passed anyOrder.

6 The maintenance of cost records has not been prescribed for any of theproducts/services of the Company under sub-section (1) of section 148 of the Act.7.

(a) According to the records of the Company the Company is generally regular indepositing with appropriate authorities undisputed statutory dues including providentfund employees' state insurance income-tax sales-tax service tax customs duty exciseduty value added tax cess and other material statutory dues applicable to it thoughthere has been a slight delay in a few cases. According to the information andexplanations given to us there were no arrears of undisputed amounts payable in respectof above statutory dues which were outstanding as at the last day of the financial yearfor a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us there is no non-depositwith appropriate authorities of disputed dues of sales-tax service tax customs dutyexcise duty or cess except in a few cases. Details of such disputed income-tax valueadded tax and luxury tax which are not deposited are as under:

Name of the Stature / Nature of the dues and period Amount involved ( Rs. in lakhs) Forum where dispute is pending
Income-tax on regular assessment under Income Tax Act 1961 - Assessment year 2006-07 15.31(a) Income Tax Appellate Tribunal
Income-tax on regular assessment under Income Tax Act 1961 - Assessment year 2008-09 126.19 (b) Income Tax Appellate Tribunal
Income-tax on regular assessment under Income Tax Act 1961 - Assessment year 2008-09

(pertaining to an erstwhile Company merged with the Company in the previous year)

10.02 (c) Income Tax Appellate Tribunal
Income-tax on regular assessment under Income Tax Act 1961 - Assessment year 2010-11 10.69 (b) Commissioner of Income-tax (Appeals)
Income-tax on regular assessment under Income Tax Act 1961 - Assessment year 2010-11

(pertaining to an erstwhile Company merged with the Company in the previous year)

6.56 Commissioner of Income-tax (Appeals)
Income-tax on regular assessment under Income Tax Act 1961 - Assessment year 2011-12 8.94 (d) Commissioner of Income-tax (Appeals)
Income-tax on regular assessment under Income Tax Act 1961 - Assessment year 2012-13 105.53 Commissioner of Income-tax (Appeals)
Income-tax on regular assessment under Income Tax Act 1961 - Assessment year 2013-14 214.74 Commissioner of Income-tax (Appeals)
Income-tax on regular assessment under Income Tax Act 1961 - Assessment year 2014-15 (e)

558.04

Commissioner of Income-tax (Appeals)
Name of the Stature / Nature of the dues and period Amount involved ( Rs. in lakhs) Forum where dispute is pending
VAT on regular assessment under Maharashtra Value Added Tax Act 2002 - Year 2006-07 18.64 (f) Joint Commissioner of Sales-tax (Appeals)
VAT on regular assessment under Maharashtra Value Added Tax Act 2002 - Year 2007-08 15.42 (f) Joint Commissioner of Sales-tax (Appeals)
VAT on regular assessment under Maharashtra Value Added Tax Act 2002 - Year 2008-09 15.95 (f) Joint Commissioner of Sales-tax (Appeals)
VAT on regular assessment under Maharashtra Value Added Tax Act 2002 - Year 2009-10 61.71 (f) Joint Commissioner of Sales-tax (Appeals)
VAT on regular assessment under Maharashtra Value Added Tax Act 2002 - Year 2010-11 8.91 (f) Joint Commissioner of Sales-tax (Appeals)
VAT on regular assessment under Maharashtra Value Added Tax Act 2002 - Year 2011-12 279.97 (f) Joint Commissioner of Sales-tax (Appeals)
VAT on regular assessment under Maharashtra Value Added Tax Act 2002 - Year 2012-13 40.09 Joint Commissioner of Sales-tax (Appeals) (appeal being filed)
Luxury Tax on regular assessment under Maharashtra Tax on Luxury Act 1987 - Year 2011-12 1.11 Joint Commissioner of Sales-tax (Appeals)
Luxury Tax on regular assessment under Maharashtra Tax on Luxury Act 1987 - Year 2012-13 15.90 Joint Commissioner of Sales-tax (Appeals) (appeal being filed)
Luxury Tax on regular assessment under Maharashtra Tax on Luxury Act 1987 - Year 2013-14 16.58 Joint Commissioner of Sales-tax (Appeals) (appeal being filed)
Finance Act 1994 (Service tax) - Year 2014-15 195.84 Commissioner of Service tax (Appeals) (appeal being filed)

(a) A sum of ' 13.78 lakhs has been recovered by the Department against this demand.

(b) These demands have been fully recovered by the Department.

(c) A sum of ' 8.77 lakhs has been recovered by the Department against this demand.

(d) A sum of ' 8.69 lakhs has been recovered by the Department against this demand.

(e) A sum of ' 163.74 lakhs has been recovered by the Department against this demand.

(f) A sum of ' 15.00 lakhs has been deposited by the company against this demandpending disposal of appeal.

8 In our opinion and according to the information and explanations given to us theCompany has defaulted in payment of interest and payment of principal to financialinstitution and banks during the year under report as under:

Name of the lender Amount of default - ' in lakhs Period of delay Remarks
1 Canara Bank 5839.31 945 days Principal
3572.80 1 to 1097 days Interest
2 Andhra Bank (*) 4934.02 847 days Principal
2044.52 1 to 1002 days Interest
3 Central Bank of India 1278.45 780 days Principal
676.73 1 to 1036 days Interest
4 Bank of India (*) 1085.67 716 days Principal
457.07 1 to 946 days Interest
5 Corporation Bank (*) 639.70 780 days Principal
303.36 1 to 1028 days Interest
6 Syndicate Bank (*) 868.92 710 days Principal
365.72 1 to 896 days Interest
7 IL&FS Financial Services Limited (*) 1598.78 619 days Principal

(*) Note: These loans have been assigned by the respective lenders to asset managementcompanies or settled during the year and accordingly at the end of the year there were nodelays.

The Company has not borrowed any money from the Government or by way of debentures.

9 According to the information and explanations given to us the Company has not raisedmoneys by way of initial public offer or further public offer (including debt instruments)and term loans during the year.

10 During the course of our examination of the books of account and records of theCompany carried out in accordance with the generally accepted auditing practices in Indiaand according to the information and explanations given to us we have neither come acrossany instances of fraud by the Company or any fraud on the Company by its officers andemployees was noticed or reported during the year nor have we been informed of any suchinstance by the management.

11 According to the records of the Company examined by us and the information andexplanations given to us managerial remuneration has been paid / provided by the Companyin accordance with the requisite approvals mandated by the provisions of section197 readwith Schedule V to the Act except that application for approval of the remuneration of '48.00 lakhs paid to the Executive Chairman and Managing Director during the year for theperiod from 1st October 2016 to 31st March 2017 is pending before the Central Governmentand approval is awaited. Refer Note 26.3 of the financial statements.

12 The Company is not a Nidhi Company hence our comments as required under clause 3(xii) of the Order is not applicable to the Company.

13 In our opinion and according to the records of the Company examined by us and theinformation and explanations given to us the transactions entered into by the Companyduring the year with related parties are in compliance with the provisions of Section 177and 188 of the Act where applicable and the details thereof have been disclosed in theFinancial Statements etc. as required by the applicable accounting standards.

14 According to the information and explanations given to us the Company has not madeany preferential allotment or private placement of shares or fully or partly convertibledebentures during the year.

15 According to the records of the Company examined by us and the information andexplanations given to us the Company has not entered into any non-cash transactionsreferred to in section 192 of the Act with directors of the Company or persons connectedwith them during the year.

16 According to the information and explanations given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.

For J.G.VERMA & CO.

Chartered Accountants

(Registration No111381W)

J.G.VERMA

Partner

Membership No. 5005

Mumbai: 26th May 2017

ANNEXURE "B" TO THE INDEPENDENT AUDITORS' REPORT

The Annexure referred to in paragraph 2 (vi) under ‘Report on Other Legal andRegulatory Requirements' in our report of even date to the members of KAMAT HOTELS (INDIA)LIMITED for the year ended 31s March 2017. We report that:

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")

We have audited the internal financial controls over financial reporting of KamatHotels (India) Limited ("the Company") as of 31st March 2017 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 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. 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 company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditors' 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 issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such 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 judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of 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 that 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 generally accepted accounting principles and that receipts andexpenditure of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised 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 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 31st March 2017based on the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.

For J.G.VERMA & CO.

Chartered Accountants

(Registration No111381W)

J.G.VERMA

Partner

Membership No. 5005

Mumbai: 26th May 2017