To the Members of Kitex Garments Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of Kitex GarmentsLimited ("the Company") which comprise the Balance Sheet as at March 31 2021and the Statement of Profit and Loss Statement of Changes in Equity and Statement of CashFlows for the year then ended and notes to the standalone financial statements includinga summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act') in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with Companies (Indian Accounting Standards)Rules 2015 as amended and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2021 and profit changes in equity andits cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing(SAs) specified under section 143(10) of the Act. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit ofthe Standalone Financial Statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the ethical requirements that are relevant toour audit of the standalone financial statements under the provisions of the Act and theRules thereunder and we have fulfilled our other ethical responsibilities in accordancewith these 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.
Emphasis of Matter
We draw attention to the following matters in the Notes forming part ofthe standalone financial statements for the year ended March 31 2021:
a) Note 2.43 which states that the management has made an assessment ofthe impact of COVID-19 on the Company's operations financial performance andposition as at and for the year ended March 31 2021 and has concluded that there is noimpact which is required to be recognised in the standalone financial statements.Accordingly no adjustments have been made to the standalone financial statements.
b) Note 2.44 which states that export incentives under Remission ofDuties and Taxes on Export Products (RoDTEP) Scheme applicable with effect from January 12021 amounting to Rs. 288.93 lakhs has been recognised on the basis of certain assumptionsincluding previous applicable rates as the rates are yet to be notified under the saidscheme.
Our opinion is not modified in respect of these matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.
Inventory: [Refer to Note 2.07 to Standalone financial statements]
The total value of inventory as of March 31 2021 amounted to Rs.13428.93 lakhs representing 16.24% of the total assets (March 31 2020: 13032.87 Lakhs15.01% of the total assets). Inventories are measured the lower of cost and net realisablevalue. The valuation of inventory is dependent on implementing appropriate controls w.r.tvaluation. Management applies judgement in identification and determination of obsoleteinventories and estimates the appropriateness of requisite provision. Allocation ofindirect production costs is also estimated which is manually loaded to inventory cost. Weconsidered this as a Key Audit Matter as these judgements are key elements in thevaluation of inventories.
We have performed the following principal audit procedures in relationto Inventory valuation:
Tested relevant internal controls that the Company uses toensure proper valuation of inventory including the procedures for write-down of obsoleteinventory and the indirect production costs manually capitalized as inventory.
Tested the adequacy of write-downs for excess and/or obsoleteinventory by verifying future demand data historical usage historical accuracy ofwrite-downs and management's plans to utilize the inventory.
Evaluated the significant judgements and estimates made byManagement in applying Company's accounting policy in relation to indirect productioncosts.
Assessed the Company's disclosures in the financialstatements in respect of inventory.
Information Other than the Standalone Financial Statements andAuditor's Report Thereon
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the Managementreport Chairman's statement Director's report etc but does not include thestandalone financial statements and our auditor's report thereon. Our opinion on thestandalone financial statements does not cover the other information and we do not expressany form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.
Responsibilities of Management and Those Charged with Governance forthe Standalone 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 standalonefinancial statements that give a true and fair view of the financial position financialperformance changes in equity 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. 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 standalone financial statement that give a true andfair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements the Board ofDirectors is responsible for assessing the Company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless the Board of Directors either intends to liquidate theCompany or to cease operations 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 StandaloneFinancial Statements
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.We give in "Annexure A" a detailed description of Auditor'sresponsibilities for Audit of the Standalone Financial Statements.
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 "Annexure B" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.
2. 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 havebeen kept by the Company so far as it appears from our examination of those books (c) TheBalance Sheet the Statement of Profit and Loss the Statement of Changes in Equity andthe Statement of Cash Flow dealt with by this Report are in agreement with the books ofaccount.
(d) In our opinion the aforesaid standalone financial statementscomply with the Accounting Standards specified under Section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014.
(e) On the basis of the written representations received from thedirectors as on March 31 2021 taken on record by the Board of Directors none of thedirectors are disqualified as on March 31 2021 from being appointed as a director interms of Section 164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controlswith reference to standalone financial statements of the Company and the operatingeffectiveness of such controls refer to our separate Report in "Annexure C".
(g) 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 standalone financial statements Refer Note 2.40.1 to thestandalone financial statements;
ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company
3. As required by The Companies (Amendment) Act 2017 in our opinionaccording to information explanations given to us the remuneration paid by the Companyto its directors is within the limits laid prescribed under Section 197 of the Act and therules thereunder.
TO THE INDEPENDENT AUDITOR'S REPORT ON EVEN DATE ON THE STANDALONEFINANCIAL STATEMENTS OF KITEX GARMENTS LIMITED
Auditor's Responsibilities for the Audit of the StandaloneFinancial 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 control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the company has internal financial controls with reference to standalone financialstatements in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the standalone financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the 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 financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
TO INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE STANDALONEFINANCIAL STATEMENTS OF KITEX GARMENTS LIMITED FOR THE YEAR ENDED MARCH 312021
[Referred to in paragraph 1 under Report on Other Legal andRegulatory Requirements' in the Independent Auditors' Report]
i. (a) The company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets (Property Plantand Equipment).
(b) Some of the fixed assets (Property Plant and Equipment) werephysically verified during the year by the Management in accordance with a programme ofverification which in our opinion provides for physical verification of all the fixedassets at reasonable intervals. According to the information and explanations given to usno material discrepancies were noticed on such verification.
(c) According to the information and explanation given to us and therecords examined by us and based on the examination of the registered sale deed providedto us we report that the title deeds comprising all the immovable properties of landand buildings which are freehold are held in the name of the Company as at the balancesheet date. Immovable properties of land and building whose title deeds have been pledgedwith banks as security for working capital loans are held in the name of the Companybased on the equitable mortgage deed executed between the bank and the Company for whichconfirmations have been obtained from respective bankers in year end.
ii. The inventory has been physically verified during the year by themanagement. In our opinion the frequency of verification is reasonable. No materialdiscrepancies were noticed on verification between the physical stock and the bookrecords. iii. The Company has granted unsecured loans to six Companies covered in theregister maintained under section 189 of the Act.
(a) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the rate of interest and otherterms and conditions on which the loans have been granted to the Companies listed in theregister maintained under Section 189 of the Act are not prima facie prejudicial to theinterest of the Company.
(b) In case of the loans granted to the Companies listed in theregister maintained under section 189 of the Act schedule of repayment of principal andpayment of interest have been stipulated and the borrowers have been regular in thepayment of the principal and interest.
(c) There are no amounts overdue remaining outstanding as at BalanceSheet date.
iv. In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of section 185 and 186 of theAct in respect of loans and investments. The company has not given any guarantees orsecurities.
v. In our opinion and according to the information and explanationsgiven to us the Company has not accepted any deposits from the public within the meaningof Sections 73 74 75 and 76 of the Act and the rules framed there under and hencereporting under clause (v) of the Order is not applicable.
vi. The provisions of sub-section (1) of section 148 of the Act are notapplicable to the Company as the Central Government of India has not specified themaintenance of cost records for any of the products of the Company. Accordingly theprovisions stated in paragraph 3 (vi) of the Order are not applicable to the Company.
vii. (a) According to the information and explanations given to us andthe records of the Company examined by us in our opinion the Company is regular indepositing with appropriate authorities undisputed statutory dues including providentfund employees' state insurance income-tax goods and service tax duty of customscess and any other statutory dues applicable to it.
(b) According to the information and explanations given to us noundisputed amounts payable in respect of provident fund employees' state insuranceincome-tax goods and service tax duty of custom cess and other statutory dues wereoutstanding at the year end for a period of more than six months from the date theybecame payable.
(c) According to the information and explanation given to us andexamination of records of the Company the outstanding dues of income-tax goods andservice tax customs duty cess and any other statutory dues on account of any disputeare as follows:
|Name of the statute ||Nature of dues ||Amount Rs. In Lakhs ||Period to which the amount relates ||Forum where dispute is pending |
|The Customs Act 1962 ||Customs Duty and interest ||220.26 ||1996-97 to 1997-98 ||Honourable Supreme Court of India |
|The Customs Act 1962 ||Customs Duty and interest ||3724.63 ||2010-11 to 2019-20 ||Honourable High Court of Kerala |
|Income Tax Act 1961 ||Income tax dues ||678.89 ||FY: 2015-16 FY: 2016-17 ||Commissioner of Income tax (Appeals) |
viii. In our opinion and according to the information and explanationsgiven to us the Company has not defaulted in repayment of dues to banks. The company doesnot have any loans or borrowings from financial Institutions and has not issued anydebentures.
ix. The Company did not raise any money by way of initial public offeror further public offer (including debt instruments) and term loans during the year.Accordingly the provisions stated in paragraph 3 (ix) of the Order are not applicable tothe Company.
x. During the course of our audit examination of the books and recordsof the Company carried out in accordance with the generally accepted auditing practicesin India and according to the information and explanations given to us we have neithercome across any instance of material fraud by the Company or on the Company by itsofficers or employees.
xi. According to the information and explanations given to us and basedon our examination of the records of the Company the Company has paid/ provided formanagerial remuneration in accordance with the requisite approvals mandated by theprovisions of section 197 read with Schedule V to the Act.
xii. In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi Company. Accordingly the provisions stated inparagraph 3(xii) of the Order are not applicable to the Company.
xiii. According to the information and explanations given to us andbased on our examination of the records of the Company transactions with the relatedparties are in compliance with sections 177 and 188 of the Act where applicable anddetails of such transactions have been disclosed in the standalone financial statements asrequired by the applicable accounting standards.
xiv. According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year. Accordingly the provisions stated in paragraph 3 (xiv) of theOrder are not applicable to the Company.
xv. According to the information and explanations given to us and basedon our examination of the records of the Company the Company has not entered intonon-cash transactions with directors or persons connected with him. Accordinglyprovisions stated in paragraph 3(xv) of the Order are not applicable to the Company. xvi.In our opinion the Company is not required to be registered under section 45 IA of theReserve Bank of India Act 1934 and accordingly the provisions stated in paragraph clause3 (xvi) of the Order are not applicable to the Company
TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE STANDALONEFINANCIAL STATEMENTS OF KITEX GARMENTS LIMITED
[Referred to in paragraph 2(f) under Report on Other Legal andRegulatory Requirements' in the Independent Auditors' Report]
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls with reference tostandalone financial statements of Kitex Garments Limited ("the Company") as ofMarch 31 2021 in conjunction with our audit of the standalone financial statements of theCompany for the 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 tostandalone financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (ICAI) (the "Guidance Note"). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to Company's policies the safeguarding of its assetsthe prevention 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'sinternal financial controls with reference to standalone financial statements based on ouraudit. We conducted our audit in accordance with the Guidance Note and the Standards onAuditing issued by ICAI and deemed to be prescribed under section 143(10) of the Act tothe extent applicable to an audit of internal financial controls. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether internal financial controls withreference to standalone financial statements was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe internal financial controls with reference to standalone financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tostandalone financial statements included obtaining an understanding of internal financialcontrols with reference to standalone financial statements assessing the risk that amaterial weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditors' judgement including the assessment of the risks of materialmisstatement of the standalone financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls with reference to standalone financial statements.
Meaning of Internal Financial Controls with Reference to StandaloneFinancial Statements
A Company's internal financial control with reference tostandalone financial statements is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of standalonefinancial statements for external purposes in accordance with generally acceptedaccounting principles. A Company's internal financial control with reference tostandalone financial statements includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of standalone financial statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directorsof the company; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the company's assetsthat could have a material effect on the standalone financial statements.
Inherent Limitations of Internal Financial Controls with Reference toStandalone Financial Statements
Because of the inherent limitations of internal financial controls withreference to standalone financial statements including the possibility of collusion orimproper management override of controls material misstatements due to error or fraud mayoccur and not be detected. Also projections of any evaluation of the internal financialcontrols with reference to standalone financial statements to future periods are subjectto the risk that the internal financial control with reference to standalone financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects internalfinancial controls with reference to standalone financial statements and such internalfinancial controls with reference to standalone financial statements were operatingeffectively as at March 31 2021 based on the internal control with reference tostandalone financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note.
| ||For MSKA & Associates |
| ||Chartered Accountants |
| ||ICAI Firm Registration No. 105047W |
| ||Geetha Jeyakumar |
| ||Partner |
|Place: Chennai ||Membership No. 029409 |
|Date: June 29 2021 ||UDIN: 21029409AAAAFT4361 |