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Kavveri Telecom Products Ltd.

BSE: 590041 Sector: Telecom
NSE: KAVVERITEL ISIN Code: INE641C01019
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Kavveri Telecom Products Ltd. (KAVVERITEL) - Auditors Report

Company auditors report

ON STANDALONE FINANCIAL STATEMENTS

To the Members of M/s. Kavveri Telecom Products Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

We have audited the accompanying standalone financial statements of M/s.Kavveri Telecom Products Limited (“the Company”) which comprise the BalanceSheet as at March 31 2020 the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Changes in Equity and the Statement of Cash Flowsfor the year ended on that date and a summary of the significant accounting policies andother explanatory information (hereinafter referred to as “the standalone financialstatements”).

In our opinion and to the best of our information and according to theexplanations given to us except for the possible effects of the matter described in theBasis for Qualified Opinion paragraph the aforesaid Ind AS standalone Financial Statementsgive the information required by the Act in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in Indiaincluding the Ind AS of the financial position of the Company as at 31st March 2020 andits financial performance including other comprehensive income its cash flows and changesin equity for the year ended on that date

Basis for Qualified Opinion

i. Material uncertainty related to Going Concern: During theyear the company has incurred a Net Loss of Rs. 1793.96 Lakhs (which includes Rs.132.68Lakhs provision for deferred tax liability) resulting into accumulated losses of Rs.8796.45 Lakhs (Retained earnings). The Company has obligations towards fund basedborrowings from banks aggregating to Rs. 18045.42 Lakhs Operational creditors statutorydues. There is significant decrease in revenue over the past few years. These conditionsindicate the existence of a material uncertainty that may cast significant doubt on theCompany's ability to continue as going concern and therefore may be unable to realizeits assets and discharge its liabilities in the normal course of business. The ultimateoutcome of these matters is at present not ascertainable. Accordingly we are unable tocomment on the consequential impact if any on the accompanying standalone financialstatements.

ii. In relation to carrying value of investments held in by the companyto its subsidiaries which have been incurring losses and in some of these companies networth was fully or substantially eroded. Taking into account the management internalassessment and initiatives to be implemented to improve the profitability in the medium tolong term the management of the company is of the view that carrying value of investmentsare realizable at the value stated in the books. In the absence of fair valuation of theseinvestments we are unable to comment upon the carrying value and thus we are unable tocomment whether any provision for impairment in the value of investments is required.

iii. The Company has defaulted in repayment of dues to Banks for theyear ended 31st March 2020. All the loans outstanding were classified as NPA by theBanks. The balance outstanding as at 31.03.2020 is Rs. 18045.42 Lakhs (Including Principaland Interest Provisions on the loans but excluding Penal Interest if any) as per books ofaccount. In the absence of confirmation of balances from banks we are unable to ascertainthe actual dues to Banks as at 31.03.2020.

iv. In the absence of proof of physical verification of inventoriesduring the year by the management we are unable to comment on the discrepancies if anybetween the book records and physical stocks of inventories (Value of inventories as perbooks of account as at 31.03.2020 is Rs.5748.15 Lakhs).

v. In the absence of proof of physical verification of Property Plantand Equipment during the year by the management we are unable to comment on thediscrepancies if any between the book records and physical stocks (Net Block of PPE ofRs.820.82 lakhs as per books of account as at 31.03.2020).

vi. The Company is not regular in payment of undisputed statutory duestowards ESI PF GST and TDS for the year ended 31st March 2020.

vii. The company has not appointed Whole-time Company Secretary whichis not in accordance with the Companies Act 2013.

viii. In the absence of confirmations of Trade Receivables and variousadvances we are unable to comment on the extent to which such balances are recoverable.

ix. In the absence of confirmations of Trade Payables and variousadvances/borrowings we are unable to comment on the extent to which such balances arepayable.

x. The company recognised deferred tax assets on account of carriedforward unused tax losses and other taxable temporary differences aggregating to Rs.1941.09 Lakhs as on 31.03.2020. The management of the company is confident thatsufficient future taxable income will be available against which such deferred tax assetswould get adjusted. However in our opinion in absence of convincing evidence thatsufficient future taxable income will be available against which such deferred tax assetswould get adjusted such recognition is not in accordance with Indian Accounting Standard12 “Income Taxes” (Ind AS 12).

We conducted our audit in accordance with the Standards on Auditing(SAs) specified under section 143(10) of the Companies Act 2013 (the Act). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial Statements under the provisions of theCompanies Act 2013 and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.

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

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Companies Act 2013 (“the Act”) with respect tothe preparation of these financial statements that give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the accounting Standardsspecified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statement that give a true and fair view andare free from material misstatement whether due 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.

Those Board of Directors is also responsible for overseeing theCompany's financial reporting process

Auditor's Responsibilities for the Audit of the Standalone FinancialStatements

Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud 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 these standalone 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 thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal financial controls relevantto the audit in order to design audit Procedures that is appropriate in the circumstances.Under section 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 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 standalone financial statements or

if such disclosures are inadequate to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.

• Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions 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 Statements of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.

• We communicate with those charged with governance regardingamong other matters the planned scope and timing of the audit and significant auditfindings including any significant deficiencies in internal control that we identifyduring our audit.

• We also provide those charged with governance with a statementthat we have 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 standalonefinancial statements of the current period 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.

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 sub-section(11) of section 143 of the Act we give in the Annexure A a statement on the mattersSpecified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act based on our audit wereport that:

viii) We have sought and obtained except for the possible effectsof the matters described in the Basis for Qualified Opinion paragraph above allthe information and explanations which to the best of our knowledge and belief werenecessary for the purposes of our audit.

ix) Except for the possible effects of the matters described in theBasis for Qualified Opinion paragraph above In our opinion proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books.

x) The Balance Sheet the Statement of Profit and Loss includingOther

Comprehensive Income Statement of Changes in Equity and the Statementof Cash Flow dealt with by this Report are in agreement with the relevant books ofaccount.

xi) Except for the possible effects of the matters described in theBasis for Qualified Opinion paragraph above In our opinion the aforesaidstandalone financial statements comply with the Ind AS specified under Section 133 of theAct read with Rule 7 of the Companies (Accounts) Rules 2014.

xii) 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.

xiii) With respect to the adequacy of the internal financialcontrols over financial reporting of the Company and the operating effectiveness of suchcontrols refer to our separate Report in “Annexure B”. Our report expresses amodified opinion on the adequacy and operating effectiveness of the Company'sinternal financial controls over financial reporting.

xiv) 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 company has not paid/provided any managerial remunerationduring the year under Audit.

xv) 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:

• The Company has disclosed the impact of pending litigations onits financial position in its standalone financial statements.

• The Company has not made provision as required under theapplicable law or accounting standards for material foreseeable losses if any onlong-term contracts including derivative contracts.

• There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.

For P. Murali &Co.
Chartered Accountants
Firm Registration No: 007257S
Sd/-
P. Murali Mohana Rao
Partner
M.No. 023412
UDIN: 20023412AAAAJY9383
Place: Hyderabad
Date: 31.07.2020.

Annexure A to the Auditors Report

Annexure referred to in Independent Auditors Report to the Members ofKavveri Telecom Products Limited on the Standalone Ind AS Financial Statements for theyear ended 31st March 2020 we report that:

i. (a)The Company has not produced Fixed Assets Register. Hence we areunable to ascertain the details of quantity and situation of Property Plant andEquipment.

(b) As per the information and explanations given by the managementthe Property Plant and Equipment have been physically verified by the management in aphased periodical manner. But due to lack of corroborative evidence we are unable toascertain the extent of physical verification of Property Plant and Equipment conductedby the management

(c) According to the information and explanations given to us and onthe basis of our examination of records of the Company the title deeds of immovableproperties are held in the name of the Company as at the Balance Sheet date.

ii. The Inventory has been physically verified during the year by theManagement but due to the lack of corroborative evidence in regard to the same we areunable to ascertain the extent of physical verification of inventory by the management.

iii. The Company has not granted any loans secured or unsecured tocompanies firms and Limited Liability partnerships or other parties covered in theregister maintained under section 189 of the Companies Act 2013

iv. In our opinion and according to the information and explanationsgiven to us the company in respect of loans investments guarantees and securityprovisions of section 185 and 186 of companies act 2013 have been complied with.

v. The Company has not accepted any deposits from the public coveredunder Section 73 to 76 of the Companies Act 2013 and rules framed there under to theextent notified.

vi. The maintenance of Cost records as specified under sub section (1)of section 148 of the Companies Act2013 is not applicable to the company for the FY2019-20 as the turnover is less than threshold limit as specified in Companies(costrecords and audit)rules2014.

vii. (a) According to the information and explanations given to us andbased on the records of the company examined by us the company is not regular indepositing the disputed statutory dues including Provident Fund TDS ESI and GST asapplicable with the appropriate authorities;

(b) There were disputed amounts payable in respect of Provident FundProfessional Tax TDS and ESI dues in arrears as at 31st March 2020 for a period of morethan 6 months from the date they became payable:

Nature of Due Amount in Rs.
Provident Fund Payable 299360
ESIC Payable 2110
Professional Tax Payable 30550
TDS Payable 15766952

(c) Details of dues of Income-tax Sales Tax Service Tax CustomsDuty Excise Duty Value Added Tax and CESS which have not been deposited as on March 312020 on account of disputes are given below:

Direct Tax:

Name of the Statue Nature of Dues Amount in Rs. (Lakhs) Period to which amount Forum where dispute pending
Income Tax Act 1961 Income Tax 19.09 A.Y 2005-06 CIT (A) Bangalore
Income Tax Act 1961 Income Tax 133.37 A.Y 2006-07 CIT (A) Bangalore
Income Tax Act 1961 Income Tax 826.14 A.Y 2008-09 CIT (A) Bangalore
Income Tax Act 1961 Income Tax 430.80 A.Y 2009-10 CIT (A) Bangalore
Income Tax Act 1961 Income Tax 346.85 A.Y 2010-11 CIT (A) Bangalore
Income Tax Act 1961 Income Tax 5474.02 A.Y 2011-12 CIT (A) Bangalore
Income Tax Act 1961 Income Tax 4677.90 A.Y 2012-13 CIT (A) Bangalore
Income Tax Act 1961 Income Tax NIL A.Y 2013-14 CIT (A) Bangalore
Income Tax Act 1961 Income Tax 607.58 A.Y 2014-15 CIT (A) Bangalore
Income Tax Act 1961 Income Tax 584.85 A.Y 2015-16 CIT (A) Bangalore
Income Tax Act 1961 Income Tax 8624.55 A.Y 2017-18 CIT (A) Bangalore

Indirect Tax:

Name of the Statute Nature of dues Amount in Rs. (In Lakhs) Period to which the amount relates Forum where dispute is pending
Central Excise Availment of Cenvat Credit (Including Penalty) 5424.26 February 2007 to 2009 CESTAT Bangalore
Central Excise Irregular availiment of Cenvat Credit( Including penalty) 33.2 2010-2011 Commissioner of customs and central excise (Appeals) Bangalore
Central Excise Irregular availment of Cenvat Credit(Including penalty) 1.27 2012-2013 CESTAT Bangalore
Central Excise Irregular availment of Cenvat Credit(Including penalty) 2.58 2007-2008 Commissioner of customs and central excise (Appeals) Bangalore
Central Excise Irregular availment of Cenvat Credit(Including penalty) 10.36 2007- 2008 & 2008- 2009 CESTAT Bangalore
Sales Tax Sales Tax Penalty and Interest 4.56 2006-2007 Joint Commissioner of Commercial Tax (Appeal)
Sales Tax Sales tax Penalty and Interest 13.29 2007-2008 Joint Commissioner of Commercial Tax (Appeal)

viii. The Company has taken term loans from Banks and Financialinstitutions. The company has defaulted in payment of dues of interest and principal.(Refer “Basis for Qualified Opinion Paragraph” in Audit Report).

ix. The Company has not raised any moneys by way of initial publicoffer further public offer (including debt instruments) and term loans are utilized forthe purpose for which they are obtained.

x. According to the information and explanations given to us nomaterial fraud by the company or on the company by its officers or employees has beennoticed or reported during the course of our Audit.

xi. Based upon the audit procedures performed and the information andexplanations given by the management the company has not paid/provided any managerialremuneration during the year under Audit

xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014are not applicable.

xiii. As per Note no. 34 the Company has entered into transactionswith related parties in compliance with the provisions of section 188 of the Act. Thedetails of such related party transactions have been disclosed in the Ind AS FinancialStatements as required under Indian Accounting standard (Ind AS) 24 related partydisclosures specified under section 133 of the Act read with relevant rules issued thereunder.

xiv. The Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview.

xv. The Company has not entered into non-cash transactions with itsdirectors or persons connected with him.

xvi. The Company is not required to be registered under section 45-IAof The Reserve Bank of India Act 1934.

For P. Murali & Co.
Chartered Accountants
Firm Registration No: 007257S
Sd/-
P. Murali Mohana Rao
Partner
Membership No. 023412
UDIN: 20023412AAAAJY9383
Place: Hyderabad
Date: 31.07.2020.

Annexure B to the Independent Auditor's Report

Report on the Internal Financial Controls over Financial Reportingunder clause (i) of the Sub-section 3 of the Section 143 of the Companies Act 2013 ('TheAct')

We have audited the internal financial controls over financialreporting of M/s. Kavveri Telecom Products Limited('the company') as of 31stmarch 2020 in conjunction with our audit of IND AS Financial Statements of the company forthe 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 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 maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the company'sinternal financial controls over financial reporting based on our Audit. We conducted ouraudit in accordance with the Guidance note on Audit of Internal Financial Controls OverFinancial Reporting (the “Guidance Note”) and the standards on Auditing deemedto be prescribed under section 143(10) of the Act to the extent applicable to an Audit ofInternal Financial Controls both applicable to an audit of Internal Financial Controlsand both issued by the ICAI. These standards and guidance note require that we comply withethical requirements and plan and performed the audit to obtain reasonable assurance aboutwhether adequate 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 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 therisk of material misstatement of the IND AS Financial Statements whether due to fraud orerror

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion and the company's internalfinancial control 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 these policies and procedures that (1)pertain to the

maintenance of records that in reasonable detailed accurately andfairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation ofInd AS Financial Statements in accordance with generally accepted principles and thatreceipts and expenditures are being made only in accordance with authorization ofmanagement and directors of the Company; and (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 Ind AS FinancialStatements.

Inherent Limitation of Internal Financial Controls over FinancialReporting

Because of the inherent limitation 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.

Basis for Qualified Opinion:

3. The company did not have appropriate internal controls forconfirmation and reconciliation of trade receivables trade payables other current assetsand current liabilities.

4. The company did not have fixed asset register as on 31.03.2020.

As a result of above matters we have not been able to obtainsufficient and appropriate audit evidence in relation to Internal Financial Controls overFinancial Reporting and consequently we are unable to determine whether the company hasestablished adequate internal financial controls over Financial Reporting and also whethersuch internal financial controls were operating effectively as at March 31st 2020.

Qualified Opinion

In our opinion as a result of the matters given in the Basis ofQualified opinion paragraph in the Audit report of the company we have not obtainedsufficient appropriate audit evidence in respect of those matters specified in the Basisof Qualified opinion paragraph.We are unable to determine whether the company hasestablished adequate internal financial controls over Financial Reporting and also whethersuch internal financial controls were operating effectively as at March 31st 2020 basedon 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 P. Murali& Co.
Chartered Accountants
Firm Registration No: 007257S
Sd/-
P. Murali Mohana Rao
Partner
Membership No. 023412
UDIN: 20023412AAAAJY9383
Place: Hyderabad
Date: 31.07.2020.

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