TO THE MEMBERS OF LAKSHMI FINANCE & INDUSTRIAL CORPORATION LIMITED HYDERABAD.
Report on the Financial Statements: Opinion
We have audited the financial statements of LAKSHMI FINANCE & INDUSTRIALCORPORATION LIMITED ("the Company") which comprise the balance sheet as at 31stMarch 2019 the statement of Profit and Loss statement of cash flows for the year thenended and notes to the 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 the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in Indiaincluding the Accounting Standards prescribed under section 133 of the Act read with theCompanies (Accounting Standards) Rules 2006 as amended (AS) of the state of affairs ofthe Company as at March 31 2019 its profit and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion on the financial statements.
Key Audit Matters
Key Audit Matters (KAM') are those matters that in our professional judgementwere of most significance in our audit of the financial statements of 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. We have determined the matters described below to be the key audit mattersto be communicated in our report
Deferred Tax Assets
The Company has not recognised deferred tax asset for deductible temporary differencesand unused tax losses. As the utilisation of deferred tax assets is dependent on theCompany's ability to generate future taxable profits sufficient to utilize deductibletemporary differences and tax losses before they expire. We determined this to be a keyaudit matter due to the inherent limitations in estimation and uncertainty in forecastingthe amount and timing of future taxable profits and the reversal of temporary differencesand utilization of tax losses.
Management has supported the non-utilisation of the deferred tax assets mainly withtaxable income projections which contain estimates of and tax strategies for futuretaxable income. Changes in the industrial scenario the business and its markets andchanges in regulations may impact these projections.
Our audit procedures included among others evaluating the future estimated businessprojections and projected tax computations prepared by the Company to assess therecognition and measurement of the current tax and deferred tax assets and liabilities andevaluate the compliance with the tax legislation. We paid attention to the long-termforecasts and critically assessed the assumptions and judgments underlying these forecastsby considering the historical accuracy of forecasts and the sensitivities of the profitforecasts. We assessed the adequacy and the level of estimation involved.
Unused MAT Credit KAM Description
At present the Company is paying income taxes only on book profits which are higherthan the normal taxable profits mainly due to the Dividend income which is exempt as perthe normal tax provisions and Rental Income which is taxable under the head Income fromHouse Property as per the normal tax provisions after claiming the standard deductionsavailable there in. The Company is not recognizing such MAT Credit Entitlement in respectof Tax paid on book profits in earlier years. As the utilisation of MAT CreditEntitlement is dependent on the company's ability to generate future normal taxableprofits sufficient to utilise the available MAT Credit before they expire which depends onthe country's fiscal policies to be announced in future years. We determined this to be akey audit matter due to the inherent limitations in estimation and uncertainty inforecasting the amount and timing of future taxable profits changes in fiscal policiesand utilization of MAT credit.
Management has supported the non-utilisation of the MAT Credit Entitlement mainly withtaxable income projections which contain estimates of and tax strategies for futuretaxable income. Changes in the industrial scenario the business and its markets andchanges in regulations may impact these projections.
Our audit procedures included among others evaluating the projected tax computationsprepared by the company to assess the recognition and measurement of the current tax andevaluate the compliance with the tax legislation. We paid attention to the long-termforecasts and critically assessed the assumptions and judgments underlying these forecastsby considering the historical accuracy of forecasts and the sensitivities of the profitforecasts. We assessed the adequacy and the level of estimation involved.
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Company's annual report but does notinclude the financial statements and our auditor's report thereon. Our opinion on thefinancial statements does not cover the other information and we do not express any formof assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether such other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
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 financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified undersection 133 of the Act. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding of theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 ofthe Companies Act 2013 we give in the Annexure A' a statement on the mattersspecified 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 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 and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under
Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the
Company and the operating effectiveness of such controls refer to our separate Reportin "Annexure B".
(g) With respect to the other matters to be included in the auditor's report inaccordance with the requirements of section 197(16) of the Act as amended In our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the company to its Managing Director during the year is in accordancewith the provisions of Section 197 of the Act.
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the
Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of ourinformation and according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigations on its financialposition in its financial statements Refer Note 24 to the financial statements
(ii) The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses. (iii) There has been no delay intransferring amounts required to be transferred to the Investor Education and ProtectionFund by the Company. for K.S. Rao & Co.
Firms' Registration Number: 003109S
(T. SUKESH KUMAR)
Partner Membership Number: 229963
Place : Hyderabad
Date : 27.05.2019
ANNEXURE - A TO THE AUDITOR'S REPORT
The Annexure referred to in Para 1 under the heading of "Report on Other Legal andRegulatory Requirements" of our report of even date to the Members of LAKSHMIFINANCE & INDUSTRIAL CORPORATION LIMITED HYDERABAD for the year ended March 312019.
1. a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. As explained to us the management has physically verified the fixed assets duringthe year and there is a regular programme of physical verification which in our opinionis reasonable having regard to the size of the Company and the nature of the assets. Nodiscrepancies were noticed on such verification. c. According to the information andexplanations given to us and on the basis of our examination of the records of theCompany the title deeds of immovable properties are held in the name of the Companyexcept the following
(i) Pattadar Pass books in respect of Land admeasuring 40.86 acres situated at AdoniKurnool Dist. (A.P.) are yet to obtained in the name of the company. (ii) Title inrespect of the Building costing ` 600000/- situated at A C Guards Hyderabad is yet tobe transferred in the name of the company.
2. The Company does not carry any inventory during the year. Therefore the provisionsof paragraph 3(ii) of the
Companies (Auditor's Report) Order 2016 are not applicable to the Company.
3. a. During the year the Company has not granted any loans secured or unsecured toCompanies firms limited liability partnerships or other parties covered in the registermaintained under Section 189 of the Companies
Act 2013. b. In view of our comment in para (a) above Clause (III) (a) (b) and (c)of paragraph 3 of the Companies
(Auditor's Report) Order 2016 are not applicable to the Company.
4. In our opinion and according to the information and explanations given to us theCompany has not advanced any loan to any Director and no investments were made during theyear as referred to in sections 185 and 186 of the Act. Therefore the provisions ofparagraph 3(iv) of the Companies (Auditor's Report) Order 2016 are not applicable to theCompany.
5. The Company has not accepted any deposits from the public. Hence the provisions ofSections 73 to 76 or any other relevant provisions of the Companies Act 2013 and therules framed there under do not apply to this Company.
6. The Central Government has not prescribed the maintenance of cost records undersub-section (1) of 148 section of the Companies Act 2013 for the activities of theCompany. 7. a. According to the records the company is regular in depositing undisputedstatutory dues including provident fund employees state insurance income-taxsales-tax service tax duty of customs duty of excise value added tax cess and allother material statutory dues with the appropriate authorities and there were no arrearsof statutory dues as at March 31 2019 for a period of more than six months from the datethey became payable. b. According to the records of the Company and the information andexplanations given to us there were no dues of income tax or sales tax or service tax orduty of customs or duty of excise or value added tax have not been deposited on account ofany dispute except as follows
|Name of the Statute ||Nature of Dues ||Amount ` * ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax ||708308 ||A.Y. 2016-17 ||CIT - (Appeals) -IV Hyderabad |
|* Net of payment made under protest || || || |
8. As the Company has no borrowings the provisions of paragraph 3(viii) of theCompanies (Auditor's Report) Order
2016 are not applicable.
9. The Company did not raise any money by way of initial public offer or further publicoffer (including debt instruments) and term loans during the year. Accordingly theprovisions of paragraph 3 (ix) of the Companies (Auditor's Report)
Order 2016 are not applicable.
10. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.
11. According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.
12. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi
Company. Accordingly the provisions of paragraph 3(xii) of the Companies (Auditor'sReport) Order 2016 are not applicable. 13. According to the information and explanationsgiven to us and based on our examination of the records of the
Company transactions with the related parties are in compliance with sections 177 and188 of the Act where applicable and details of such transactions have been disclosed inthe financial statements as required by the applicable accounting standards.
14. According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
15. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly the provisions ofparagraph 3(xv) of the Companies (Auditor's Report) Order 2016 are not applicable.
16. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company is required to be registered undersection 45-IA of the Reserve Bank of India Act 1934 and such registration has beenobtained. for K.S. Rao & Co.
Firms' Registration Number: 003109S
(T. SUKESH KUMAR)
Partner Membership Number: 229963 Place : Hyderabad Date : 27.05.2019
ANNEXURE B TO THE AUDITORS' REPORT
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of LAKSHMIFINANCE & INDUSTRIAL
CORPORATION LIMITED HYDERABAD ("the Company") as of 31 March 2019 inconjunction with our audit of the financial statements of the Company for the year endedon that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered
Accountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform 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 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 judgment 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.
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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
2. provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and3. provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial 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.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India. for K.S. Rao & Co.
Firms' Registration Number: 003109S
(T. SUKESH KUMAR)
Place : Hyderabad Partner Date : 27.05.2019 Membership Number: 229963