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Kernex Microsystems (India) Ltd.

BSE: 532686 Sector: Engineering
NSE: KERNEX ISIN Code: INE202H01019
BSE 00:00 | 19 Dec 21.85 1.00
(4.80%)
OPEN

21.75

HIGH

21.85

LOW

21.40

NSE 00:00 | 19 Dec 21.25 1.00
(4.94%)
OPEN

21.25

HIGH

21.25

LOW

21.25

OPEN 21.75
PREVIOUS CLOSE 20.85
VOLUME 6682
52-Week high 66.35
52-Week low 18.80
P/E
Mkt Cap.(Rs cr) 27
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 21.75
CLOSE 20.85
VOLUME 6682
52-Week high 66.35
52-Week low 18.80
P/E
Mkt Cap.(Rs cr) 27
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Kernex Microsystems (India) Ltd. (KERNEX) - Auditors Report

Company auditors report

To

The Members

Kernex Microsystems (India) Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of KERNEXMICROSYSTEMS (INDIA) LIMITED ("the Company") which comprise the Balance Sheetas at March 31 2018 the Statement of Profit and Loss including the Statement of OtherComprehensive Income the Statement of Cash flows and the Statement of Changes in Equityfor the year then ended and a summary of the significant accounting policies and otherexplanatory 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 Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with the Indian Accounting Standards(Ind AS) prescribed under section 133 of the Act read with the Companies (IndianAccounting Standards) Rules 2015 as amended and other accounting principles generallyaccepted in India.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing 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 Ind ASstandalone 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 Ind AS financialstatements based on our audit. In conducting our audit we have taken into account theprovisions of the Act the accounting and auditing standards and matters which arerequired to be included in the audit report under the provisions of the Act and the Rulesmade thereunder and the Order issued under section 143(11) of the Act.

We conducted our audit of the Ind AS standalone financial statements in accordance withthe Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the standalone financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the standalone financial statements. The procedures selected depend onthe auditor's judgment including the assessment of the risks of material misstatement ofthe Ind AS standalone financial statements whether due to fraud or error. In making thoserisk assessments the auditor considers internal financial control relevant to theCompany's preparation of the standalone financial statements that give a true and fairview in order to design audit procedures that are appropriate in the circumstances. Anaudit also includes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the Ind AS standalone financial statements.

We believe that the audit evidence obtained by us is sufficient and appropriate toprovide a basis for our audit opinion on the standalone Ind AS financial statements.

Basis for Qualified Opinion

• Out of the total trade receivables as per note no 9 dues outstanding for morethan 6 months as on March 31 2018 is of Rs. 32.85 crores which are subject toconfirmation and reconciliation. These trade receivable are slow moving as partlyreceived or non-moving.

• An amount of Rs. 15.08 crores receivable from Konkan Railway Corporation Limited(KRCL) is under arbitration. Further the Company has failed in the conciliationproceedings against KRCL for outstanding dues of Rs 5.18 crores and the Company is in theprocess of filing Arbitration petition. The company has not made any provision in thebooks of accounts.

• Other financial assets under non-current assets as per note no 5 amounting toRs. 6.00 is subject to confirmation from parties.

• No provision has been made for slow/non moving stocks lying as on March 312018.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matters described in the Basis forQualified Opinion the aforesaid Ind AS standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2018 its loss including other comprehensive lossits cash flows and the changes in equity for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act based on our audit we report that:

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

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

c) The Balance Sheet the Statement of Profit and Loss including of Other ComprehensiveIncome Statement of Cash Flow and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account.

d) In our opinion the aforesaid standalone Ind AS financial statements comply with theIndian Accounting Standards prescribed under section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended.

e) On the basis of the written representations received from the directors of theCompany as on March 31 2018 and taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2018 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 over financialreporting of the Company with reference to these standalone Ind AS financial statementsand the operating effectiveness of such controls refer to our separate Report in"Annexure A to this report".

g) 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 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements.

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.

iii. There has been no delay in transferring amounts required to be transferred tothe 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) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

For PRSV & Co. LLP

Chartered Accountants

Firm Registration No: S-200016

Y. Venkateswarlu

Partner

Membership No: 222068

PLACE : Hyderabad

DATE : 27th May 2018

ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THESTANDALONE IND AS FINANCIAL STATEMENTS

(Referred to in paragraph 1(f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Kernex Microsystems (I) Limited ofeven date)

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 KERNEXMICROSYSTEMS (INDIA) LIMITED ("the Company") as of March 31 2018 inconjunction with our audit of the standalone Ind AS financial statements of the Companyfor the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols 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 andexpenditures of the company are being made only in accordance with authorizations 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 financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2018 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

For PRSV & Co. LLP

Chartered Accountants

Firm Registration No: S-200016

Y. Venkateswarlu

Partner

Membership No: 222068

Place: Hyderabad

Date: 27th May 2018

ANNEXURE ‘B' TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 2 under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of Kernex Microsystems (I) Limited ofeven date)

I. In respect of the Company's fixed assets:

(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) All the fixed assets have not been physically verified by the management during theyear but there is regular program of verification which in our opinion is reasonablehaving regard to the size of the Company and the nature of its assets. According to theinformation and explanations given to us no material discrepancies were noticed on suchverification.

(c) According to the information and explanations given to us the title deeds ofimmovable properties included in property plant and equipment are held in the name of theCompany.

ii. As explained to us the management has conducted physical verification of inventoryat reasonable intervals during the year and no material discrepancies were observed in theinventories.

iii. According to the information and explanations given to us the Company has notgranted any unsecured loans to companies firms limited liability partnerships or otherparties covered in the register maintained under section 189 of the Companies Act 2013Accordingly the provisions of clause 3 (iii) (b) (c) and (d) are not applicable to theCompany.

iv. In our opinion and according to the information and explanations given to us theCompany has not advanced loans to director/ to a Company in which the Director isinterested to which provisions of section 185 of the Companies Act 2013 apply. In ouropinion and according to the information and explanations given to us the Company hasmade investments and given guarantees/provided security which is in compliance with theprovisions of Sections 186 of the Companies Act 2013.

v. The Company has not accepted deposits during the year within the meaning of Sections73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Therefore the provisions of the clause 3 (v) of the Order are not applicable to theCompany.

vi. The maintenance of cost records has not been specified by the Central Governmentunder section 148(1) of the Companies Act 2013 for the business activities carried out bythe Company. Thus reporting under clause 3(vi) of the order is not applicable to theCompany.

vii. (a) According to the books and records as produced and examined by us and alsobased on management representations undisputed statutory dues in respect of Providentfund Employees' State Insurance Income Tax Sales Tax Service Tax Value Added TaxGoods and Service Tax Customs Duty Excise Duty Cess and other material statutory dueshave not been regularly deposited by the Company during the year with appropriateauthorities and the outstanding statutory dues outstanding for more than 6 months as atthe end of the financial year are as follows.

Nature of Statutory Dues Amount (Rs. In Lakhs)
Service Tax 69.72
CST against 'C' Forms 22.07
Total 91.79

(b) According to information and explanations given to us disputed amounts payable inrespect of Income Tax Sales Tax Provident fund were outstanding as at March 31 2018 areas follows:

Name of the Statute Period to which the amount relates Amount ? in Lakhs
The Income Tax Act 1961 Income Tax High Court of judicature at Hyderabad for the state of Telangana and state of Andhra Pradesh A.Y. 1998-99 8.00
APGST Act 1957 Sales Tax and Interest Sales Tax Appellate Tribunal F.Y. 2002-03 4.13
The Employee Provident Act 1952 Provident Fund PF Department F.Y 2017-18 51.64

viii. In our Opinion and according to the information and explanations given by themanagement the company has not defaulted in repayment of loans or borrowings to banks orgovernment. There are no dues which are payable to financial institutions. The Company didnot have any debenture holders during the year.

ix. According the information and explanations given by the management the Company hasnot raised any moneys by way of initial public offer/further public offer/ debtinstruments and term loans and hence reporting under clause 3 (ix) of the Order is notapplicable to the Company.

x. Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or no material fraud onthe Company by its officers or employees has been noticed or reported during the year.

xi. In our opinion and according to the information and explanations given to us theCompany has paid/provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of theOrder is not applicable to the Company.

xiii. In our opinion and according to the information and explanations given to us bythe management the Company is in compliance with Section 177 and 188 of the CompaniesAct 2013 where applicable for all transactions with the related parties and the detailsof related party transactions have been disclosed in the notes to the financial statementsas required by the applicable accounting standards.

xiv. According the information and explanations given to us the Company has not madeany preferential allotment or private placement of shares or fully or partly paidconvertible debentures during the year under review and hence reporting under clause 3(xiv) of the Order is not applicable to the Company.

xv. According to the information and explanations given to us the Company has notentered into any non-cash transactions with its Directors or persons connected to itsdirectors as referred to in section 192 of the Companies Act 2013 during the year underreview and hence provisions of section 192 of the Companies Act 2013 are not applicableto the Company.

xvi. 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 PRSV & Co. LLP

Chartered Accountants

Firm Registration No: S-200016

Y. Venkateswarlu

Partner

Membership No: 222068

Place: Hyderabad

Date: 27th May 2018