You are here » Home » Companies » Company Overview » Lakshmi Precision Screws Ltd

Lakshmi Precision Screws Ltd.

BSE: 506079 Sector: Engineering
NSE: LAKPRE ISIN Code: INE651C01018
BSE 00:00 | 15 Oct 7.60 0
(0.00%)
OPEN

7.60

HIGH

7.60

LOW

7.60

NSE 00:00 | 16 Oct 3.10 -0.15
(-4.62%)
OPEN

3.10

HIGH

3.10

LOW

3.10

OPEN 7.60
PREVIOUS CLOSE 7.60
VOLUME 1000
52-Week high 17.00
52-Week low 7.60
P/E
Mkt Cap.(Rs cr) 8
Buy Price 7.70
Buy Qty 54.00
Sell Price 7.60
Sell Qty 3236.00
OPEN 7.60
CLOSE 7.60
VOLUME 1000
52-Week high 17.00
52-Week low 7.60
P/E
Mkt Cap.(Rs cr) 8
Buy Price 7.70
Buy Qty 54.00
Sell Price 7.60
Sell Qty 3236.00

Lakshmi Precision Screws Ltd. (LAKPRE) - Auditors Report

Company auditors report

To

The Members of

M/s. Lakshmi Precision Screws Limited

46/1 Mile Stone Hisar RoadRohtak-124001

REPORT ON THE STANDALONE FINANCIAL STATEMENTS

We have audited the accompanying standalone financial statements of Lakshmi PrecisionScrews Limited ("the Company") which comprise the Balance Sheet as at March 312017 the Statement of Profit and Loss and the Cash Flow Statement for the year thenended and a summary of significant accounting policies and other explanatory 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 financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance withaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made thereunder. We conducted our audit inaccordance with the Standards on Auditing issued by the Institute of CharteredAccountants of India as 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 financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on theauditor’s judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of theaccounting estimates made by the Company’s Directors as well as evaluating theoverall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the standalone financial statements.

BASIS FOR QUALIFIED OPINION

1. We are unable to observe physical inventories of

Finished Goods Semi-Finished Goods Stock in Trade (Traded Goods) and ConsumableStores and Spares due to the size and nature of inventories and we are also unable tosatisfy ourselves by alternative means concerning the inventories held at 31st March2017.

However as explained by Management physical verification of Inventories has beenconducted at reasonable intervals internally on ‘A’ Category of Items and nomaterial discrepancies were observed.

2. The Company has capitalized the inventory of dies and tools having value ofRs.4995884/- during the current financial year. However no physical verification hasbeen conducted in respect of dies and tools so capitalized. Adjustments if any are notascertainable and will be provided after physical verification of dies and tools.

3. Certain advances of materials services and capital goods aggregating to Rs.122206531/- (previous year Rs. 146143791/-) were outstanding as on 31/03/2017. Theconfirmations from the parties to whom these advances are given has not been madeavailable. Out of such advances provision for doubtful advances should be recognized inrespect of advances outstanding for a period of three years or more where no movement hastaken place and no confirmations are available. Adjustments if any are not ascertainableand will be provided on identification of such parties.

4. Balance under Sundry Debtors and Sundry Creditors loans and advances givenby the Company and parties from whom unsecured loans have been taken are subject toconfirmations and adjustments if any required upon such confirmations are notascertainable and hence not provided for.

5. In respect of loans and advances of Rs. 5500000/- given to Hanumat WiresUdyog Private Limited the Company has not furnished any agreement and in absence of thesame the terms of repayment chargeability of interest and other terms are notverifiable.

6. The Company has capitalized Borrowing Costs amounting to Rs. 55436971/-for the year ended 31st March 2017 in respect of capital work in progress at IMT Rohtak.

However the same is not in compliance with Accounting

Standard-16 "Accounting for Borrowing Costs". Since no substantialdevelopment activity has been carried out at IMT Rohtak borrowing cost of Rs.55436971/- should be charged to Statement of Profit that extent loss for the year isunderstated.

7. A fraud of Rs. 16059342/- was reported during the Financial Year 2005- 06incurred by an ex-employee of the Company which is under litigation and pending before theHon’ble Delhi High Court. During the current financial year Rs.2000000/- wererecovered.

In our opinion provision for doubtful debt should be recognized for the remainingamount and to that extent the loss for the year is understated.

8. The Company is in violation of Section 73 of Companies Act 2013 readtogether with Companies (Acceptance of Deposits) Rules 2014 as it has taken advancesfrom customers amounting to Rs. 22150242/- having balance outstanding for more than 365days. In terms of Rule 2(1)(xii)(a) such advances are liable to be treated as depositsread together with section 73 of the Companies Act 2013 and hence the Company is inviolation of the same.

The company has also taken advances of Rs. 71400000/- prior to 01.04.2014. The samehas now been considered as acceptance of deposits which is in violation of Section 76 ofCompanies Act 2013 read together with Companies (Acceptance of Deposits) Rules 2014. Theoutstanding balance of deposits in violation of Section 76 of the Companies Act2013 as on31.03.2017 amounts to Rs. 48055000/-. This matter is under litigation in Punjab &Haryana High Court.

9. The Company has taken unsecured loans from Companies amounting toRs.10000000/- which are outstanding as at the end of the year and the same has beenshown under short term borrowings in the Balance Sheet. However loan agreements inrespect of these loans have not been furnished and in absence of the same the terms ofrepayment chargeability of interest and other terms are not verifiable.

10. As per the accounting policy of the Company the Company is valuing its inventoriesat lower of cost and net realizable value. As explained to us since exact cost is notascertainable the same is arrived at list price less 57% in case of finished goods and atlist price less 66% in case of semi-finished goods and special items have been valued at31% less in case of semi-finished goods and 22% less in the case of finished goods of theselling price. Since proper cost records are not maintained exact cost is notascertainable and therefore the impact if any on account of valuation of inventories onbasis of actual cost is not quantifiable and provided for.

Special items are intended for exports sale. As the Company is not having significantexport orders and hence such special items and Loss and to should be valued at lowerprices and provision should be made for impairment.

QUALIFIED OPINION

In our opinion and to the best of our information and according to the explanationsgiven to us subject to the possible effects of the matters described in the Basis forQualified Opinion paragraphs the standalone financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at March 31 2017 its losses and its cash flows for the year ended on thatdate.

EMPASIS OF MATTER

1. Attention is invited to note no. 34(27) of the financial statements wherein theCompany has changed its accounting policy of depreciation from written down value methodto straight line method with respect to Dies and Tools in Plant-I & IV in the currentfinancial year thereby writing back excess depreciation charged in earlier years amountingto ` 130855707/- and adjusting the same under the head "Other expenses" (noteno. 29).

2. Attention is invited to note no. 34(29) of the financial statements wherein theCompany has changed the price list used for valuation of cost of the finished goods andwork-in-progress considering the selling prices of finished goods mentioned in the revisedprice list as on 01.01.2015. The above change in price list has resulted in increase inclosing value of work-in-progress by ` 16105076/- and of finished goods by `7958996/- with total increase in cost of inventory by ` 24064072/-.

3. Attention is invited to note no. 34(30) of the financial statements wherein theCompany has changed the accounting policy with regard to research and developmentexpenses incurred during the year which have been amortized @ 20% per annum keeping inview future economic benefits to be generated in 5 financial years including thefinancial year in which expenditure is incurred.

Our opinion is not modified in respect of above matters.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditor’s report) Order 2016 (‘’theOrder’’) issued by the Central Government of India in terms of sub-section (11)of section 143 of the Act we give in the Annexure A a statement on 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 purpose of our audit;

(b) Except for the effects of the matter described in the "Basis for QualifiedOpinion paragraph" above in our opinion proper books of account as required by lawhave been kept by the Company so far as it appears from our examination of those books;

(c) The Balance Sheet the Statement of Profit and Loss and Cash Flow Statement dealtwith by this Report are in agreement with the books of account;

(d) Subject to the possible effects of the matter described in the "Basis forQualified Opinion paragraph" above in our opinion the Balance Sheet the Statementof Profit and Loss and the Cash Flow Statement comply with the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014;

(e) The matters described in clauses 1 2 and 8 of the Companies (Auditor’sreport) Order 2016 ("the Order’’) issued by the Central Government ofIndia in terms of sub-section (11) of section 143 of the Act (refer Annexure A) in ouropinion may have an adverse effect on the functioning of the Company.

(f) On the basis of written representations received from the directors as on 31stMarch 2017 and taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2017 from being appointed as a director in terms ofSection 164(2) of the Act;

(g) The matters described in the "Basis for Qualified Opinion Paragraph"above and clauses 1(a)1(b) 2 3(b) 3 (c)567 and 8 of the Companies (Auditor’sreport) Order 2016 ("the Order’’) issued by the Central Government ofIndia in terms of sub-section (11) of Section 143 of the Act(refer Annexure A) in ouropinion are related to the maintenance of accounts and other matters connected therewith;

(h) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B" to this report;

(i) 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 opinionand to the best of our information and according to the explanations given to us:

1. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements – Refer Note No. 33;

2. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long –term contracts includingderivatives contracts ;

3. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company; and

4. The company has provided requisite disclosures in its standalone financialstatements as to holdings as well as dealings in Specified Bank Notes during the periodfrom 8 November 2016 to 31 December 2016 and these are in accordance with the books ofaccounts maintained by the Company. Refer Note 35 to the standalone financial statements.

For B.M. Chatrath & Co LLP Chartered Accountants
Firm Registration Number: 301011E
SD/-
Bharat C. Swain
PLACE: NEW DELHI Partner
DATED: 20TH JUNE 2017 Membership No.: 501999

ANNEXURE A TO INDEPENDENT

AUDITOR’S REPORT

The Annexure A referred to in our report to the members of Lakshmi Precision ScrewsLimited for the year ended 31.03.2017. We report that:

1. a.The Company has maintained proper records showing full particulars includingquantitative details of fixed assets. However the same needs updation with regard toitem-wise identification and situation of fixed assets. The Company has capitalized diesand tools of Rs.4995884/- during the financial year 2016-17.

b.The Company has a phased periodical programme of physical verification of all fixedassets which in our opinion is reasonable having regard to the size of the Company andthe nature of its business. No material discrepancies have been noticed on suchverification. However no physical verification has been conducted in respect of dies andtools during the financial year 2016-17 and therefore cannot be commented upon.

c. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company all the title deeds of the immovable propertiesare held in the name of the company. As informed to us the original title deeds are inpossession of bankers and mortgagees from whom credit facilities have been taken.Therefore based on our audit procedures and the information and explanations given to uswe report that the title deeds of immovable properties of the Company held as fixed assetsare held in the name of the Company.

2. As per explanations and reports provided to us physical verification in respect ofinventories of Raw Material has been done by the management and in respect of inventory ofFinished Goods

Semi- Finished Goods (Work In Progress) and Consumable Stores and Spares have beenconducted by the management on random sample basis . However in absence of a completephysical verification of Inventories covering all items we are unable to comment whetherdiscrepancies between book records and physical verification are material.

3. a) In our opinion and according to the information and explanations given to us theCompany has not granted any loan during the year to parties covered in the registermaintained under section 189 of the Companies Act 2013. However the Company has anoutstanding balance of loan of Rs. 5500003/- due from M/s Hanumat Wires Udyog PrivateLimited which was granted in earlier years and outstanding as on 31.03.2017. Since noloan has been granted during the year para 3(iii)(a) of the Order is not applicable tothe Company and hence not commented upon.

b) According to the information and explanations received by us the schedule ofrepayment of principal and payment of interest has not been stipulated between the Companyand the related parties listed in the register maintained under section 189 of theCompanies Act 2013 and hence we are unable to comment upon the regularity of repaymentsor receipts.

c) The amount due from parties covered in the register maintained under section 189 ofthe Companies Act 2013 is more than three years old. And in absence of schedule ofrepayment and payment of interest we are unable to comment upon whether any amount isoverdue for more than ninety days and whether any steps for recovery have been taken bythe Company.

4. In our opinion and according to the information and explanations given to us thereare no loans investments guarantees and securities granted during the year in respect ofwhich provisions of section 185 and 186 of the Companies Act 2013 areapplicable.Thereforepara3(iv) of the Order is not applicable to the Company and hence notcommented upon.

5. The Company is in violation of Section 73 of Companies Act 2013 read together withCompanies (Acceptance of Deposits) Rules 2014 as it has taken advances from customersamounting to Rs. 22150242/- having balance outstanding for more than 365 days. In termsof Rule 2(1)(xii) (a) such advances are liable to be treated as deposits read togetherwith section 73 of the Companies Act 2013 and hence the Company is in violation of thesame.

The company has also taken advances of Rs. 71400000/- prior to 01.04.2014. The samehas now been considered as acceptance of deposits which is in violation of Section 76 ofCompanies Act 2013 read together with Companies (Acceptance of Deposits) Rules 2014. Theoutstanding balance of deposits in violation of Section 76 of the Companies Act2013 as on31.03.2017 amounts to Rs. 48055000/-. This matter is under litigation in Punjab &Haryana High Court.

6. The Company is in the business of manufacturing high tensile fasteners cost recordsin respect of which have been mandated u/s 148(1) of the Companies Act 2013 read togetherwith Companies (Cost Accounting Records) Rules 2014. In our opinion and according to theinformation and explanations given to us the necessary cost records have not beenmaintained by the Company.

7. a) The Company is not regular in depositing undisputed statutory dues includingprovident fund employees’ state insurance income-tax sales-tax service tax dutyof customs duty of excise value added tax cess and any other statutory dues to theappropriate authorities. Arrears of outstanding statutory dues as on the last day of thefinancial year concerned for a period of more than six months from the date they becamepayable are as under:-

SR. NATURE OF NO. STATUTORY DUES AMOUNT OF ARREAR OUTSTANDING FOR MORE THAN SIX MONTHS FROM THE THE DATE THEY BECAME PAYABLE. (Rs.)
1. Contribution towards PF 9274998/-
2. Contribution towards ESI 315383/-
3. TDS and TCS 63171843/-
4. Work Contract Tax 774580/-
5. R.D. Cess 522897/-
6. Excise Duty 40291680/-
7. Service Tax 15001935/-
8. CST / VAT 22502419/-
9. Income Tax 25000000/-
10. Wealth Tax 398091/-
11. Interest on Statutory Dues 41762687/-
12. LWF 65930/-
13. Welfare Commission Fund 236930/-
Total 219319373/-

b) According to the information and explanation given to us the dues outstanding ofincome tax and other taxes which have not been deposited on account of any dispute are asfollows:-

NAME OF THE STATUTE NATURE OF THE DUES AMOUNT (Rs..) PERIOD TO WHICH THE AMOUNT RELATES FORUM WHERE DISPUTE IS PENDING
Deduction/Claim in respect for export business u/s 80HHC and charging of interest u/s 234B whether on returned/assessed income 290376 /- A.Y. 1991-92
Income Tax Act 1961 Determination of book profit before or after depreciation 5426222 /- A.Y. 1990-91 High Court Chandigarh
Expenses allowable under various heads viz bonus and insurance 2000075 /- A.Y. 1990-91
TOTAL 7716673/-

8. In our opinion and according to the information and explanations given to us theCompany has defaulted in repayments of dues to banks financial institutions andGovernment as under:-

LENDER CONCERNED PERIOD OF DEFAULT (NO. OF DAYS-RANGE) TOTAL AMOUNT INVOLVED (INCLUDING INTEREST)
Canara Bank (term Loan no. - 1171773002272) 2 days to 92 days 5986277/-
Intec Capital Limited (term loan no.- 2111) 30 days to 486 days 12398301/-
Intec Capital Limited (term loan no.- 1846) 30 days to 424 days 7250728/-
Intec Capital Limited (term loan no.- 4078) 15 days to 258 days 2406562/-
Haryana State Industrial and Infrastructure Development Corporation Limited (HSIIDC) 59 days to 1066 days 200483703/-
Haryana State Industrial and Infrastructure Development Corporation Limited (HSIIDC)- Deferred Payment Liability 882 days to 1517 days 21992111/-
Hero Fincorp Limited 3 day to 82 days 15133438/-
Karvy Financial Services Limited (term Loan-1) 26 days 16204016/-
Karvy Financial Services Limited (term Loan-2&3) 26 days to 177 days 11553685/-
Canara Bank (Working Capital Loan) The balance is in excess of sanctioned limits for the period of 4 days since last irregularity The balance exceeded the sanctioned limits by 36673147/-
State Bank of India (Working Capital Loan) The balance is in excess of sanctioned limits for the period of 36 days since last irregularity. The balance exceeded the sanctioned limit by 11498887/-

9. According to the information and explanations given to us the Company has notraised any moneys by way of initial public offer or further public offer and has not takenany term loans therefore para 3(ix) is not applicable to the Company.

10. In our opinion and according to the information and explanations given to usneither fraud on the Company by its officers or employees nor any fraud by the Company hasbeen noticed or reported during the year.

11. The Company has paid/provided for managerial remuneration in accordance with theapproval of Central Government vide letters dated 17th October 2016 valid upto 31/12/2017which is in compliance with the provisions of Section 197 read with Schedule V of theCompanies Act 2013.

12. In our opinion the Company is not Nidhi Company. Therefore the provisions of para3(xii) of the Order are not applicable to the Company and hence not commented upon.

13. In our opinion the transactions with the related parties are in compliance withsections 177 and 188 of Companies Act 2013 where applicable and the details have beendisclosed in the notes to the financial statements as required by the applicableaccounting standards.

14. According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under para 3(xiv) are not applicable tothe Company and therefore not commented upon.

15. In our opinion and according to the information and explanation given to us thecompany has not entered into any non-cash transactions with directors or persons connectedwith him.

16. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934 therefore para 3(xvi) is not applicable to the Company.

For B.M. Chatrath & Co LLP
Chartered Accountants
PLACE: Firm Registration No. 301011E
SD/-
AUDITOR: NEW DELHI Bharat C. Swain
BOARD: ROHTAK Partner
DATED: 20TH JUNE 2017 Membership No.: 501999

ANNEXURE - B TO

THE AUDITOR’S REPORT

REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER CLAUSE (I) OF SUBSECTION 3 OF SECTION143 OF THE COMPANIES ACT 2013 ("THE ACT")

We have audited the internal financial controls over financial reporting of LakshmiPrecision Screws Limited ("the Company") as of 31 March 2017 in conjunction withour audit of the standalone financial statements of the Company for the year ended on thatdate.

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 safeguardingof its 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.

AUDITORS’ RESPONSIBILITY

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 issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate 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 qualified audit opinion on the Company’s internal financialcontrols system over financial reporting.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting 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 to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and

3. provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company’s assets that could havea 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.

QUALIFIED OPINION

According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified as at March 31 2017:

a) The procedures of physical verification of inventory of Finished GoodsSemi-Finished Goods Stock in Trade (Traded goods) and Consumables Stores followed by themanagement are not reasonable and adequate in relation to the size of the Company and thenature of its business.

b) The Company did not have an appropriate internal control system over Debtors andCreditors confirmation and reconciliation of balances with the parties. These couldpotentially result in material misstatements in the Company’s trade payables andtrade receivables balances.

c) The Management does not review the provision for doubtful trade receivablesmethodology assumptions and underlying calculation for appropriateness on a periodicbasis therefore these could result in risk of material misstated net receivables and baddebts expenses.

d) The Company’s financial control over repayment of long term borrowings andshort term borrowings is highly ineffective with regard to repayment of principal andinterest. The Company has defaulted in repayment of loan taken from Banks FinancialInstitutions and others on many occasions and further there is general lack of financialplanning and management on part of the Company.

e) The Company does not have adequate system of segregation of duties to effectivelymonitor and operate the control of depositing undisputed statutory dues includingProvident Fund Income Tax TDS Sales-Tax Wealth tax VAT duty of customs Service taxCess and other material undisputed statutory dues with the appropriate authorities. Thiscould potentially result in levy of interest and other penal provisions of statutes andhave a significant impact on functioning of the Company.

f) There is a material weakness with regard to control over advances given to suppliersfor goods and services. The controls with regard to subsequent settlement of advances areineffective and as a result many parties to whom advances have been given are very old andremain unsettled. Further there is no control system over confirmation and reconciliationof balance with parties. These could potentially result in write off of advances and havean impact on financial statements of the Company.

g) The Company did not have an adequate internal control system for physicalverification of dies and tools capitalized as fixed assets further the internal controlsystem needs updation with regard to item-wise identification and situation of fixedassets. This may have material impact on stated value of fixed assets and depreciation.

h) The Company has inadequate design of information technology (IT) general andapplication controls that prevent the information system from providing complete andaccurate information consistent with financial reporting objectives and current needs.

i) There are significant deficiencies in Controls over the selection and application ofaccounting principles that are in conformity with generally accepted accountingprinciples. There is Ineffective internal control over legal compliance by the Company.

j) The Company did not have an appropriate internal financial control system overfinancial reporting since the internal controls adopted by the Company did not adequatelyconsider risk assessment which is one of the essential components of internal controlwith regard to the potential for fraud when performing risk assessment.

A ‘material weakness’ is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company’s annual or interim financialstatements will not be prevented or detected on a timely basis.

In our opinion because of the effects/possible effects of the material weaknessesdescribed above on the achievement of the objectives of the control criteria the Companyhas not maintained adequate and effective internal financial controls over financialreporting as of March 31 2017 based on "the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India"

We have considered the material weaknesses identified and reported above indetermining the nature timing and extent of audit tests applied in our audit of theMarch 31 2017 standalone financial statements of the Company and these materialweaknesses have affected our opinion on the standalone financial statements of the Companyand we have issued a qualified opinion on the standalone financial statements.

For B.M. Chatrath & Co LLP
Chartered Accountants
Firm Regsitration No. 301011E
PLACE: SD/-
AUDITOR: NEW DELHI Bharat C. Swain
BOARD: ROHTAK Partner
DATED: 20TH JUNE 2017 Membership No.501999