You are here » Home » Companies » Company Overview » Kitex Garments Ltd

Kitex Garments Ltd.

BSE: 521248 Sector: Industrials
NSE: KITEX ISIN Code: INE602G01020
BSE 00:00 | 18 Sep 106.30 -1.95
(-1.80%)
OPEN

109.00

HIGH

109.35

LOW

105.45

NSE 00:00 | 18 Sep 106.20 -2.10
(-1.94%)
OPEN

108.30

HIGH

109.80

LOW

105.25

OPEN 109.00
PREVIOUS CLOSE 108.25
VOLUME 4479
52-Week high 171.00
52-Week low 77.15
P/E 6.53
Mkt Cap.(Rs cr) 707
Buy Price 105.40
Buy Qty 10.00
Sell Price 107.45
Sell Qty 10.00
OPEN 109.00
CLOSE 108.25
VOLUME 4479
52-Week high 171.00
52-Week low 77.15
P/E 6.53
Mkt Cap.(Rs cr) 707
Buy Price 105.40
Buy Qty 10.00
Sell Price 107.45
Sell Qty 10.00

Kitex Garments Ltd. (KITEX) - Auditors Report

Company auditors report

TO THE MEMBERS OF KITEX GARMENTS LIMITED

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements ofKitex Garments Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2019 the Statement of Profit and Loss (including Other Comprehensive Income)Statement of Changes in Equity and Statement of Cash Flows for the year then ended andnotes to the standalone financial statements including a summary of significantaccounting 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 accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019its profit and other comprehensive income changes in equity and its cash flows for theyear 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.

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 the standalone financial statements does not cover theother information and we do not express any 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.

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.

Revenue:
Key Audit Matter How the Key Audit Matter was addressed in our audit
Refer to note 1.12 ‘Revenue recognition' to the standalone financial statements. We have performed the following principal audit procedures in relation to revenue recognized:
Revenue is recognised on satisfaction of performance obligation upon transfer of control of promised products to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products. Understood the revenue recognition process evaluated the design and implementation and operating effectiveness of internal controls including relevant information technology controls relating to revenue recognised;
identifying the nature of the revenues and identification of any unusual contract terms;
In terms of the application of the new revenue accounting standard Ind AS 115 (Revenue from Contracts with Customers) control is transferred either when the product is delivered to the customer's site or when the product is shipped depending on the applicable terms. The Management has exercised judgement in applying the revenue accounting policy while recognising revenue. We performed substantive procedures on a sample of transactions for revenue stream from source data through to general ledger to test that appropriate revenue recognition had been applied.
We have evaluated the delivery and shipping terms of the contracts for revenue recognised during the period. Our testing included tracing the information to agreements and payments;
We performed other substantive transactional testing and analytical procedures to validate the recognition of revenue throughout the year.
Tested sample transactions around the period end to ensure they were recorded in the correct period; and
Tested journal entries posted to revenue accounts focusing on unusual or irregular items if any
Inventory:
Key Audit Matter How the Key Audit Matter was addressed in our audit
Refer to note 1.6 ‘Inventories' to the standalone financial statements. We have performed the following principal audit procedures in relation to Inventory valuation:
The total value of inventory as of March 31 2019 amounted to र 12888 lakhs representing 16.40% of the total assets (2018: 8782 Lakhs 14.22% of the total assets). Inventories are measured the lower of cost and net realisable value. We tested relevant internal controls that the Company uses to ensure proper valuation of inventory including the procedures for write-down of obsolete inventory and the indirect production costs manually capitalised as inventory.
The valuation of inventory is dependent on establishing appropriate valuation controls. We focused on this area as Management judgement is applied to estimate the appropriate write-down for obsolete inventories and the indirect production costs manually capitalised as inventory. These judgements are key elements in the valuation of inventories. We tested the adequacy of write-downs for excess and/or obsolete inventory by verifying future demand data historical usage historical accuracy of write-downs and management's plans to utilise the inventory.
We evaluated the significant judgements and estimates made by Management in applying Company's accounting policy in relation to indirect production costs.
We assessed the Company's disclosures in the financial statements in respect of inventory.

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 implementation and maintenance ofaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

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

Auditors' 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 auditors' 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 Auditors'responsibilities for Audit of the Standalone Financial Statements.

Other Matter

The comparative financial information of the Company for the year endedMarch 31 2019 prepared in accordance with Ind AS included in the Statement have beenaudited by the predecessor statutory auditors who had audited the Standalone financialstatements for the relevant periods. The report of the predecessor statutory auditor datedMay 18 2018 on the comparative financial information for the year ended March 31 2018expressed an unmodified audit opinion on those standalone financial statements. Ouropinion is not modified in respect of this matter.

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 and the Cash Flow Statement dealt with bythis Report are in agreement with the books of account. (d) In our opinion the aforesaidstandalone financial statements comply with the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.

(e) On the basis of the written representations received from thedirectors as on March 31 2019 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2019 from being appointed as a director in termsof 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 theAuditors' 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 litigationson its financial position in its standalone financial statements – Refer Note 2.39.1to the standalone financial statements; ii. The Company did not have any long-termcontracts including derivative contracts for which there were any material foreseeablelosses; iii. There has been no delay in transferring amounts required to be transferredto 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.

For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Geetha Jeyakumar
Partner
Membership No.: 29409
Place: Kochi
Date: May 20 2019

ANNEXURE – A

TO THE INDEPENDENT AUDITORS' 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 the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether thecompany has internal financial controls with reference to standalone financial statementsin 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 the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditionsmay cause the Company to cease to continue as a going concern.

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

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 standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditors' 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.

For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Geetha Jeyakumar
Partner
Membership No.: 29409
Place: Kochi
Date: May 20 2019

ANNEXURE – B

TO INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE STANDALONEFINANCIAL STATEMENTS OF KITEX GARMENTS LIMITED FOR THE YEAR ENDED MARCH 312019

[Referred to in paragraph 1 under ‘Report on Other Legal andRegulatory Requirements' in the Independent Auditors' Report] i.(a) The companyhas maintained proper records showing full particulars including quantitative details andsituation of fixed assets (Property Plant and 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 / transferdeed provided to us we report that the title deeds comprising all the immovableproperties of land and buildings which are freehold are held in the name of the Companyas at the balance sheet date. Immovable properties of land and buildings whose title deedshave been pledged with banks as security for term loans are held in the name of theCompany based on the Mortgage deed executed between the bank and the Company for whichconfirmations have been obtained from respective bankers. ii. The inventory has beenphysically verified during the year by the management. In our opinion the frequency ofverification is reasonable. No material discrepancies were noticed on verification betweenthe physical stock and the book records. iii. The Company has not granted any loanssecured or unsecured to Companies Firms Limited Liability Partnerships (LLP) or otherparties covered in the register maintained under section 189 of the Companies Act 2013(‘the Act'). Accordingly the provisions stated in paragraph 3 (iii) (a) to (c)of the Order are not applicable to the Company. iv. In our opinion and according to theinformation and explanations given to us the Company has complied with the provisions ofsection 185 and 186 of the Act in respect of investments. The company has not given anyloans guarantees or securities. v. In our opinion and according to the information andexplanations given to us the Company has not accepted any deposits falling under theprovisions of Section 73 to 76 or any other relevant provisions of the Companies Act 2013and the rules made thereunder and hence reporting under clause (v) of the Order is notapplicable. 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 and the records of theCompany examined by us in our opinion the Company is regular in depositing withappropriate authorities undisputed statutory dues including provident fund employees'state insurance income-tax goods and service tax duty of customs cess and any otherstatutory dues applicable to it. There were no undisputed statutory dues in arrears as atMarch 312019 for a period of more than six months from the date they became payable. (b)According to the information and explanation given to us and examination of records of theCompany the outstanding dues of income-tax goods and service tax customs duty cess andany other statutory dues on account of any dispute are as follows:

Name of the statute Nature of dues Amount ( 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
The Customs Act 1962 Customs Duty and interest 2937.04 2010-11 to 2017-18 Honourable High Court of Kerala
Income Tax Act 1961 Penalty 33.91 2010-11 Commissioner of Income tax (Appeals)
Income Tax Act 1961 Income tax dues 116.94 2015-16 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. In our opinion according to the information explanation providedto us money raised by way of term loans during the year have been applied for the purposefor which they were raised. The Company has not raised any money by way of initial publicoffer or further public offer (including debt instruments) during the year. x. During thecourse of our audit examination of the books and records of the Company carried out inaccordance with the generally accepted auditing practices in India and according to theinformation and explanations given to us we have neither come across any instance ofmaterial fraud by the Company or on the Company by its officers or employees. xi.According to the information and explanations given to us and based on our examination ofthe records of the Company the Company has paid/ provided for managerial remuneration inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Act. xii. In our opinion and according to the information andexplanations given to us the Company is not a Nidhi Company. Accordingly the provisionsstated in paragraph 3(xii) of the Order are not applicable to the Company. xiii. Accordingto the information and explanations given to us and based on our examination of therecords of the Company transactions with the related parties are in compliance withsections 177 and 188 of the Act where applicable and details of such transactions havebeen disclosed in the standalone financial statements as required by the applicableaccounting 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 explanationsgiven to us and based on our examination of the records of the Company the Company hasnot entered into non-cash transactions with directors or persons connected with him.Accordingly provisions stated in paragraph 3(xv) of the Order are not applicable to theCompany. xvi. In our opinion the Company is not required to be registered under section45 IA of the Reserve Bank of India Act 1934 and accordingly the provisions stated inparagraph clause 3 (xvi) of the Order are not applicable to the Company.

For MSKA & Associates
Chartered Accountants
ICAI Firm Registration No. 105047W
Geetha Jeyakumar
Partner
Membership No.: 29409
Place: Kochi
Date: May 20 2019

ANNEXURE – C

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 2019 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.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls with reference to standalone financial statements based on our audit.We conducted our audit in accordance with the Guidance Note and the Standards on Auditingissued by ICAI and deemed to be prescribed under section 143(10) of the Act to the extentapplicable to an audit of internal financial controls. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether internal financial controls with reference tostandalone financial statements was established and maintained and if such controlsoperated 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 to standalonefinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of standalone financial statementsfor external purposes in accordance with generally accepted accounting principles. ACompany's internal financial control with reference to standalone financial statementsincludes those policies and procedures that (1) pertain to the maintenance of recordsthat 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 standalone financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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 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.

Opinion

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 2019 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
Membership No.: 29409
Place: Kochi
Date: May 20 2019