TO THE MEMBERS OF LANCOR HOLDINGS LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of LANCOR HOLDINGSLIMITED ("the Company") which comprise of the Balance sheet as at 31st March2019 the statement of Profit and Loss(including Other Comprehensive Income)Statement ofChanges in Equity and Cash Flow Statements for the year then ended and notes to thefinancial statements including a summary of the significant accounting policies and otherexplanatory information (hereinafter referred to as "standalone financialstatements'').
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act2013("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in Indiaincluding Indian Accounting Standards("Ind AS") specified under Section 133 ofthe Act of the state of affairs(financial position) of the Company as at March 31 2019and it's profit (financial performance including other comprehensive income) its cashflowsand the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India("ICAI")together with the ethical requirements that are relevant to our audit of the financialstatements under the provisions of the Act and the rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion.
Emphasis of Matter
We draw your attention to
a) note no.4.12 (b)of notes to the audited standalonefinancial statement relating tocircumstances which have been considered for determining the period for capitalization ofborrowing cost.
b) note no.4.02 (a)regarding pending litigation to one of the Commercial Propertyaccounted as investment property having a carrying value of Rs. 3328.80 lakhs.
Our report is not quali ed in respect of the above matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the 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 key audit matters tobe communicated in our report.
|Matter ||Key Audit Matter ||How the matter was addressed in our audit |
|Revenue Recognition ||The Company has adopted Ind AS 115 "Revenue from Contracts with Customers" from April 1 2018. ||We have performed analytical reviews of the revenue and the margins reported and has also discussed the these matters with the management. |
| ||The company derives revenue primarily form real estate activity. ||We have discussed with the management the principles methods and assumptions based on which the budget estimates relating to the project are made. |
| ||Based on terms of the contracts with the customers revenue relating to the under construction real-estate projects is recognized over time i.e by applying the percentage of completion method. ||We have reviewed the project completion percentage and the project cost. Wealso reviewed revenue related transactions recorded based on the underlying contracts with the customers like sale deed construction contract and the handing over documents. |
| ||Under this method revenue and construction cost is recognized based on the assumptions and estimates relating to under development project. ||We reviewed the analysis made by the management relating to cost overrun and its impact on the project. Assessed the adequacy of disclosure in the financials statements as mentioned below. |
| ||Considering the element of assumptions and estimate and the amount involved in relation to the same it is considered as a key audit matter. || |
|Assessment of recoverability and disclosure of deferred tax assets. ||Deferred tax assets are considered as a key audit matter considering the involvement of estimation and judgement in relation to the recognition and measurement on a continuous basis. ||Our review included the following details Reviewing the reasonableness of the management's assumptions and forecasts of future taxable profits so that unused tax losses or unused tax credits can be adjusted Reviewed the computation in relation to the deferred tax assets. |
| || ||Assessed the adequacy of disclosure in the financial statement as per note 2.07 |
|Valuation of Inventory ||Valuation of Inventories includes work in progress and completed premises held for sale. ||The value of the inventory for the on going and completed projects amounting to Rs. 22935.04 lakhs and the same has been valued at cost or net realizable value whichever is lower. |
| ||The inventories are carried at the lower of the cost and net realizable value (NRV'). The determination of the NRV involves estimates based on prevailing market conditions current prices and expected date of commencement and completion of the project the estimated future selling price cost to complete projects. ||Our audit procedures/ testing included among others: |
| || ||We understood and reviewed the management's process and methodology of using key assumptions for determination of NRV of the inventories; |
| ||Considering significance of the amount of carrying value ofinventories in the financial statements and the involvementof significant estimation and judgement in such assessment of NRV the same has been considered as key audit matter ||We have tested the NRV of the inventories to it carrying value in books on sample basis. |
|Claims litigation and contingencies ||The Company is having various ongoing legal disputes in the nature of tax matters and other legal matters. ||We have adopted the following procedure in relation to the review of the legal matters. |
| ||Management estimates the possible outflow of economic resources based on the legal status of the proceedings. ||Review of the ongoing legal status and development in the proceedings in comparison to the comparative year where ever applicable. |
| || ||Reading the minutes of the board meeting in relation to such matters. |
| ||Considering that the above matter involves judgement and estimation it is considered as key audit matter. ||We have reviewed the provision made and its basis of deterimination |
| || ||We have also reviewed the sufficiency of the disclosure made by the management in the notes no. 4.02 in relation to contingent matter. |
Information other than the Financial Statements and Auditor's Report thereon
The Company's Board of Directors is responsible for theother information. The otherinformation comprises the information included in the Annual Report but does notincludethe financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of 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 the 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 StandaloneFinancial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the state of affairs(financial position)profit orloss(financial performance including Other Comprehensive Income) changes in equity andcash flows of the Company in accordance with the accounting principles generally acceptedin India including the Ind AS specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation 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 financial statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.
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 theCompany's financial reporting 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 withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
As part of an audit in accordance with Standards on Auditing we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
a) Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
b) Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for explaining our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
c) Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
d) Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going-concern.
e) Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of the misstatement in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in; (i) planning the scope ofour audit work and evaluating the results of our work; and (ii) to evaluate the effects ofany identified misstatements in the standalone financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such-communication.
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 section 143(11)of the Act we givein the "Annexure A"a statement on the matters specified in paragraphs 3 and 4of the Order.
2. Further to our comments in Annexure A as required by Section 143(3) of the Act wereport that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) The Balance Sheet the statement of profit and loss (including other comprehensiveincome) the statement of changes in equity dealt with by this report are in agreementwith the books of account;
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under Section 133 of the Act read with relevant rules issued there under andrelevant provisions of the Act;
e) On the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on March 312019 from being appointed as a director in terms of Section 164 (2) of the Act;
f) With respect to adequacy of internal financial controls with reference to financialstatements of the Company and operat- ing effectiveness of such control we give ourseparate report in "Annexure B";
g) With respect to other matters to be included in the Auditor's report in accordancewith the requirements of section 197(16) of the Act as amended:
In our opinion and to the best of our information and according to the explanation asprovided to us the Company has not paid/provided any managerial remuneration to itsdirectors and accordingly the question of compliance of in accord- ance with theprovisions of section 197 read with Schedule V to the Act does not arise;
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 (as amended) Inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in the standalone financial state- ments Refer Note 4.02to the financialstatements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended March 312019.
| ||For Nayan Parikh & Co. |
| ||Chartered Accountants |
| ||Firm Registration No. 107023W |
|Chennai ||Arwa Sharma |
|Dated: June 05 2019 ||Partner |
| ||Membership No. 135504 |
ANNEXURE A' TO THE AUDITOR'S REPORT
Referred to in paragraph 1 under "Report on other legal and regulatoryrequirements" of our report of even date to the members of the Company on stand alonefinancial statements for the year ended March 31 2019.
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment and investmentproperty.
(b) As per the plan and programme of the management property plant & equipmentinvestment property has been physically verified. The programme of physical verificationof property plant & equipment investment property in our opinion is consideredreasonable having regard to the size of the Company and nature of its assets. No materialdiscrepancies were noticed on such verification.
(c) The title deeds of all the Immovable Properties classified under the head propertyplant and equipment and investment property are held in the name of the Company. Howeverin one case with respect to a commercial property which is classified under investmentproperty having gross block value Rs. 3626.02 lakhs & net block value Rs. 3328.80lakhs as on March 31 2019 the dispute with the landowner relating to the land on whichthe property is situated the division bench has passed an order contrary to the order ofthe single bench of the Hon'ble High Court of Madras who had earlier set aside theinvalidation of the sale deed. Subsequently the Company has filed a special leave pettionbefore the Hon'ble Supreme Court of India and the matter is pending. We refer to the noteno. 4.02 (a) regarding this matter.
ii. The Inventories have been physically verified during the year by the management. Inour opinion the frequency of verification is reasonable and adequate in relation to thesize of the Company and to nature of its business. We have been informed that no materialdiscrepanices were noticed on verification between the physical stocks and the books ofaccounts.
iii. The Company has granted unsecured loans to one firm covered in the registermaintained under Section 189 of the Act.
a) In our opinion and according to the information and explanation provided to us theterms and conditions on which the loan has been grantedare not prima facie prejudicial tothe interest of the Comapany;
b) In the case of the firm as per the information and explanation given to us norepayment schedule has been specified and accordingly the regularity in repayment ofprincipal and interest amount wherever applicable does not arise.
c) As stated in sub clause (b) as no repayment schedule has been specified thequestion of total amount over due for more than 90 days and reasonable step taken forrecovery in this regard does not arise.
iv. In our opinion and according to the information and explanation given to us inrespect to loans investments guaran- tees and securities provision of section 185 and186 of the Companies Act 2013 has been complied with.
v In our opinion and according to the information and explanation given to us theCompany has not accepted any deposits within the meaning of Sections 73 to 76 of the Actand the Companies (Acceptance of Deposits) Rules 2014 (as amended). Accordingly theprovisions of clause 3(v) of the Order are not applicable. We have been informed that noorder has been passed by Company Law Board or National Company Law Tribunal or ReserveBank of India or any Court or any other Tribunal.
vi. We have broadly reviewed the books of account maintained by the Company relating toconstruction and development activity pursuant to the Companies (Cost Record andAudit)Rules 2014 made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Act and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. However we have not made adetailed examination of the cost records with a view to determine whether they areaccurate or complete.
vii. (a) The Company is regular in depositing undisputed statutory dues includingprovident fund employees' state insurance income-tax sales-tax goods and services taxservice tax duty of customs cess and other material statutory dues as applicable withthe appropriate authorities. Further no undisputed amounts payable in respect thereofwere outstanding at the year-end for a period of more than six months from the date theybecame payable.
(b) The dues outstanding in respect of income-tax salestax duty of customs duty ofexcise and value added tax on account of any dispute are as follows:
|S. No. Name of the Statue ||Nature of Dues ||Period to which the amount relates ||Forum where dispute is pending ||Amount (Rs.) |
|1. Finance Act 1994 ||Service Tax ||October 2007 to August 2009 ||Customs Excise and Service Tax Appellate Tribunal ||15610334 (Note -1) |
Note 1:The amount is excluding interest and penalty
viii. According to the information and explanation given to us and on the basis of ourexamination of the books of accounts the Company has not defaulted in repayment of duesto any financial institution or a bank. The Company has not received any loan fromGovernment and also has not issued any debenture. Accordingly reporting relating todefault in repayment of dues to Government and debenture holders does not arise.
ix. In our opinion and according to the information and explanations given to us theCompany has not raisedany money by way of initial public offer or further public offer(including debt instruments). The term loans obtained have been applied for the purposesfor which the loans were obtained.
x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanation given to us no fraud by the Company or anyfraud on the Company by its officers or employees has been noticed or reported during theyear nor have we been informed of such case by the management.
xi. According to the information and explanations given to us and on the basis of ourexamination of the books of account the Company has not paid any managerial remuneration.Accordingly the reporting regarding compliance with the provi- sion of section 197 readwith schedule V of the Companies Act 2013 does not arise.
xii. The Company is not a Nidhi Company. Therefore the provisions of paragraph 3(xii)of the Order are not applicable to the Company.
xiii. According to the information and explanation provided to us and in our opinionthe related party transactions are entered in to by the Company are in compliance withSections 177 and 188 of Act and the same has been disclosed in the financial statementsas required by the applicable accounting standard.
xiv. According to the information and explanations given to us and on the basis of ourexamination of the records of the Companythe Company has not made any preferentialallotment or private placement of shares or fully or partly convert- ible debenturesduring the year. Accordingly the paragraph 3(xiv) of the Order are not applicable to theCompany.
xv. According to the information and explanations given to us and based on theexamination of the books of accounts the Company has not entered into any non-cashtransactions with the directors or persons connected with them. According- ly theparagraph 3(xv) of the Order is not applicable to the Company.
xvi. As per the information and explanation provided to us the Company is not requiredto register under Section 45-IA of the Reserve Bank of India Act 1934.
| ||For Nayan Parikh & Co. |
| ||Chartered Accountants |
| ||Firm Registration No. 107023W |
| ||Arwa Sharma |
|Chennai ||Partner |
|Dated: June 05 2019 ||Membership No. 135504 |
Annexure B' to the Independent Auditor's Report
Referred to paragraph 2(f) under the heading Report on other Legal and RegulatoryRequirements' of our report on even date to the financial statements of the Company forthe year ended March 31 2019 Report on the Internal Financial Controls under Clause (i)of sub-section 3 of Section 143 of the Companies Act 2013 (the "Act")
We have audited the internal financial controls with reference to financial statementsof Lancor Holdings Limited (the "Company") as of March 31 2019 in conjunctionwith our audit of the standalone financial statements of the company for the year ended onthat date.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls withreference to financial statements were operating effectively as at 31 March 2019 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Noteissued by the ICAI.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India (ICAI). These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to Company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the Guidance note) and the Standards on auditing issued by ICAI anddeemed to be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial control. Those standards and the guidancenote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls withreference to financial statements were established and maintained and if such controlsoperated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.
We believe that the audit evidence we obtained is sufficient and appropriate to providea basis for our audit opinion on the Company's internal financial controls system withreference to financial statements.
Meaning of Internal Financial Controls with reference to Financial Statements.
A Company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial controlswith reference to financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the Company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the Company are being made only in accordance withauthorisations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of un authorised acquisition use ordisposition of the Company's assets that could have a material effect on the financialstatements.
Inherent Limitations of Internal Financial Controls with reference to FinacialStatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the to future periods are subject to therisk that internal financial controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.
| ||For Nayan Parikh & Co. |
| ||Chartered Accountants |
| ||Firm Registration No. 107023W |
| ||Arwa Sharma |
|Chennai ||Partner |
|Dated: June 05 2019 ||Membership No. 135504 |