To the Members of
M/s. Madhucon Projects Limited
Report on the Standalone IND AS financial statements
We have audited the financial statements of M/s. Madhucon Projects Limited ( thecompany ) which comprise the balance sheet as at 31st March 2020 and the statement ofProfit and Loss for the year then ended and notes to the financial statements includinga summary of significant accounting policies and other explanatory information.In ouropinion and to the best of our information and according to the explanations given to usthe aforesaid financial statements give the information required by the Act in the mannerso required 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 2020and loss for the year ended on that date.
Basis for Qualified Opinion a. i) We refer to Note No. 01 to the Financial statementsthe Company has made a provision for impai ment of investments of Rs. 22727 lakhs held inSimhapuri Energy Limited (SEL) a stepdown subsidiary in case of which The Hon ble NationalCompany Law Tribunal (NCLT) by an order dated 26-06-2020 admit ted the Corporateinsolvency resolution process (CIRP) ii) Trade receivables of Rs. 8598.04 Lakhs is duefrom SEL for which no Provision for Expected Credit Losses is made. b. Note No.2 to thefinancial Statements relating to carrying value of investments held in and unsecuredloans and advances given by the company to its subsidiaries listed in that note whichhave been incurring losses and in case of some of these companies net worth was fully orsubstantially eroded. In the absence of fair valuation of these investments we are unableto comment upon the carrying value of investments and we are unable to comment whether anyprovision for impairment in the value of advances is required. c. Note No. 3 to thefinancial Statements relating to the Madhucon Mega Mall Private Limited (MMMPL) asubsidiary of the company incorporated for developing shopping mall cum multiplex onleased land taken from Andhra Pradesh housing Board ( Now known as Telangana housingBoard) ( The Board ) at Kukatpally in Hyderabad. The company is awaiting for governmentapproval to start the project and carrying values of Invest ments in and Loans Sanctionedto MMMPL amounting to Rs.3500 lakhs and Rs.135.21 Lakhs respectively are shown asrealizable at the Values Stated in the Books of Accounts. d. Note No. 4 to the FinancialStatements which indicate that the outstanding Loans and advances of Rs 4191.1 Lakhs andRs 512.49 Lakhs granted to Nama Investments Limited and NNR Infra Investments PrivateLimited respectively in which the Company s Directors have Interest. These Companies havebeen incurring Losses and accumulated losses exceeded the Net Worth. The management is yetto assess the risk of default and resultant expected credit loss allowance on such loansand advances.
````e. Note No. 5to the Financial Statements the Company has defaulted in repayment ofdues to Banks and financial institutions amounting to Rs. 68950.31 Lakhs and Rs.5339.92Lakhs respectively as per books of account. All the loans outstanding were classified asNPA by the Banks and Financial Institutions. Interest on these loans have not beenprovided for the financial years 2018-19 & 2019-20 in view of the company ap proachingfor one-time settlement (OTS). f. Note No. 6to the Financial Statements in the absence ofconfirmationsof Trade Payables and various advances/borrowings we are unable to commenton the extent to which such balances are payable/ recoverable.
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 Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese 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.
In connection with our audit of the Information Other than the Standalone FinancialStatements and Auditor s Report Thereon
The Company s Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board s Report including Annexure to Board s Report BusinessResponsibility Report Corporate Governance and Shareholder s Information but does notinclude the standalone financial statements and our auditor s report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon. standalone financialstatements our responsibility is to read the other information and in doing so considerwhether the other information is materially inconsistent with the standalone financialstatements or our knowledge obtained during the course of our audit or otherwise appearsto be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information; we are required to report that fact. We havenothing to report in this regard.
Management s Responsibility for the 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 of thesefinancial statements that give a true and fair view of the financial position financialperformance and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the accounting Standards specified under section133 of the Act. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statement that give a true and fair view and are free from materialmisstatement whether due to fraud orerror. In preparing the financial statementsmanagement is responsible for assessing the Company s ability to continue as a goingconcern disclosing as applicable matters relatedto going concern and using the goingconcern basis of accounting unless management either intends to liquidate the Company orto cease operations or has no realistic alternative but to doso.
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 standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor s report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financialstatements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also: Identify and assess therisks of material misstatement of the standalone financial statements whether due tofraud or error design and perform audit procedures responsive to those risks and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. Therisk of not detecting a material misstatement resulting from fraud is higher than for oneresulting from error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances but not for the purpose ofexpressing an opinion on the effectiveness of the company s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosuresmade by the Board of Directors.
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 exists;we are required to draw attention in our auditor s report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor s report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
* 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.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor s Report) Order 2016 ( the Order ) issued bythe Central Government of India in terms of sub-section (11) of section 143 of the Act wegive in the Annexure A a statement on the matters Specified in paragraphs 3 and 4 of theOrder.
2. As required by section 143(3) of the Act we further report that: a) we have soughtand obtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purpose of our audit; b) Except for the possible effects ofthe matter described in the Basis for Qualified Opinion proper books of account asrequired by law have been kept by the Company so far as appears from our examination ofthose books; c) Except for the possible effects of the matter described in the Basis forQualified Opinion the Balance Sheet Statement of Profit and Loss including OtherComprehensive Income the Statement of Cash Flows and the statement of changes in equitydealt with by this Report are in agreement with the books of account; d) Except for thepossible effects of the matter described in the Basis for Qualified Opinion the aforesaidFinancial Statements comply with the applicable Accounting Standards specified underSection 133 of the Act read with relevant rules issued there under. e) On the basis ofwritten representations received from the directors as on March 31 2020 and taken onrecord by the Board of Directors none of the directors is disqualified as on March 312020 from being appointed as a director in terms of Section 164(2) of the Act. f) Withrespect to the adequacy of the internal financial controls over financial reporting of thecompany and the operating effectiveness of such controls refer to our separate report inAnnexure B . g) In view of losses incurred by the company and in the absence of priorapproval from the lender banks and financial Institutions managerial remuneration paid bythe company during the year is in excess of the limits specified under section 197 readwith schedule V of Companies Act2013. h) With respect to other matters to be included inthe Auditor s Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according to theexplanations given to us: i. The Company has disclosed the pending litigations which wouldimpact its financial position in its notes to financial statements. ii. The Company doesnot have any long-term contracts including derivative contracts for which there were anymaterial foreseeable losses. iii. The company is yet to transfer unpaid dividend ofFinancial Year 2008-09 amounting to Rs. 216049 and
Financial Year 2009-10 Rs. 245028/- from unpaid dividend account to InvestorEducation and Protection Fund (IEPF).
The accompanying notes are an integral part of the standalone financial statements Interms of our report attached For P.Murali & Co.
Chartered Accountants FRN : 007257S
Membership Number 020085
Place : Hyderabad Date : July 30 2020
Annexure A to the Auditors Report
Annexure referred to in Independent Auditors Report to the Members of M/s. MadhuconProjects Limited on the Financial Statements for the year ended 31st March2020 we report that:
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) As explained to us fixed assets have been physically verified by the management atregular intervals; as informed to us no material discrepancies were noticed on suchverification. In our opinion the frequency of verification is reasonable.
(c) According to the information and explanations given to us and on the basis of ourexamination of records of the Company the title deeds of immovable properties are held inthe name of the Company as at the Balance Sheet date.
ii. (a) The Inventory has been physically verified during the year by the Managementand in our opinion the frequency of verification is reasonable.
(b) In our opinion the procedures of the physical verification of inventory followedby the Management are a equate in relation to the size of the Company and the nature ofits business.
iii. According to the information and explanations given to us the Company has grantedloans unsecured to companies covered in the Register maintained under Section 189 of theCompanies Act 2013. In respect of such loans and having regard to the rolloverstipulations for loans to certain parties:
(a) The terms and conditions of the grant of such loans are in our opinion primafacie not prejudicial to the Company s interest.
(b) The schedule of repayment of principal and payment of interest has not beenstipulated and hence we are unable to comment as to whether repayment/receipts of theprincipal amount and the interest are regular.
(c) In the absence of stipulated schedule of repayment of principal and payment ofinterest we are unable to comment as to whether there is any amount which is overdue formore than 90 days and whether reasonablesteps have been taken by the Company for recoveryof principal amount and interest.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provision of sections 185 and 186 of the Act to the extentapplicable in respect of loans investments guarantees and security.
v. The Company has not accepted any deposits from the public covered under Section 73to 76 of the Compa nies Act 2013 and rules framed there under to the extent notified.
vi. Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products. We have broadly reviewed the same and are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We have nothowever made a detailed examination of the records with a view to determine whether theyare accurate or complete.
vii. According to the information and explanations given to us and based on the recordsof the company examined by us in respect of the Statutory dues:
a) There are some delays in depositing undisputed statutory dues including ProvidentFund Employees State Insurance Income-tax Sales Tax Service Tax Customs Duty ExciseDuty Value Added Tax (VAT) Cess and other statutory dues applicable to it. Undisputedamounts payable in respect thereof which were out standing for more than six months fromthe date they became payable are as follows:
|S.No. ||Name of the Status ||Nature of Due ||Period ||Rs. in Lacs |
|1 ||The Income Tax Act 1961 ||Dividend Distribution ||2011-12 to 2015-16 ||78.79 |
|3 ||Professional Tax ||Tax & Interest on it P T PAYABLE ||2011-12 to 2019-20 ||63.63 |
|4 ||The Employees Provident funds and Miscellaneous provision act 1952 ||provident fund ||2013-14 to 2019-20 ||93.88 |
|5 ||Sales Tax ||Sale Tax payable ||2013-14 to 2019-20 ||85.58 |
|6 ||Works Contract Tax ||Works Contract Tax ||2014-15 to 2019-20 ||601.48 |
|7 ||The Finance Act 1994 ||Service Tax ||2014-15 to 2017-18 ||251.66 |
| ||Goods and Service Tax ||Goods and Service Tax ||2017-18 to 2019-20 ||147.93 |
|8 ||The Income Tax Act 1961 ||Tax Deducted at Source & Interest on it ||2019-20 ||531.58 |
b) Details of dues of Income-tax Sales Tax Service Tax Customs Duty Excise DutyValue Added Tax and CESS which have not been deposited as on March 31 2020 on account ofdisputes are given below:
|Name of the Statute ||Forum where dispute is pending ||Period to which the amount relates ||Amount involved |
| || || ||(Rs.in lakhs) |
|The Income Tax Act 1961 ||CIT (Appeals) Hyderabad ||2015-16 to 2017-18 ||11450.48 |
|Sales Tax ||Hon ble High Court ||2001 to 2005 & 2009-10 ||687.42 |
|Entry Tax ||Hon ble Supreme Court ||2006-07 2007-08 2009-10 & 2010-11 ||25.81 |
|Service Tax ||Settlement Commission ||2010-12 ||1655.75 |
viii. Based on the examination of books of accounts and related records and accordingto the information and explanations given by the management the company has defaulted inrepayment of dues to financial institutions and banks during the year( Refer Point (e) ofBasis for Qualified Opinion) as follows:
Delay in Interest payments: Amount in Rs. Lakhs
|Name of the Bank ||0 to 30 days ||31 to 60 days ||61 to 90 days ||91 to 180 days ||181 and above days |
|Axis Bank ||0 ||0 ||0 ||0 ||107.54 |
|ICICI Bank ||0 ||0 ||0 ||0 ||4315.96 |
|IDBI Bank ||0 ||0 ||0 ||0 ||348.19 |
|Canara Bank ||0 ||0 ||0 ||0 ||193.00 |
|Oriental Bank of Commerce ||0 ||0 ||0 ||0 ||249.40 |
|Name of the Financial Institution || || || || || |
|Mahindra & Mahindra Finance ||0.77 ||1.10 ||1.57 ||7.54 ||84.15 |
|SREI Equipment Finance Ltd. ||23.47 ||24.24 ||25.00 ||79.55 ||290.72 |
Delay in Principal re payments:
Amount in Rs. Lakhs
|Name of the Bank ||0 to 30 days ||31 to 60 days ||61 to 90 days ||91 to 180 days ||181 and above days |
|Bank of India ||0 ||0 ||0 ||0 ||1767.95 |
|Canara Bank ||0 ||0 ||0 ||0 ||5768.00 |
|Axis Bank ||0 ||0 ||0 ||0 ||8116.29 |
|ICICI Bank ||0 ||0 ||0 ||0 ||5571.75 |
|Name of the Financial Institution || || || || || |
|SREI Equipment Finance Ltd. ||93.43 ||92.66 ||91.89 ||271.16 ||728.30 |
|Mahindra & Mahindra Finance ||21.15 ||33.32 ||46.55 ||143.41 ||488.56 |
ix. The Company has not raised any moneys by way of initial public officer furtherpublic offer (including debt instruments) and term loans. Accordingly the provisions ofthis clause are not applicable to the Company.
x. 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.
xi. In view of losses incurred by the company and in the absence of prior approval fromthe lender banks and financial Institutions managerial remunerationpaid by the companyduring the year is in excess of the limits specified under section 197 read with scheduleV of Companies Act2013.
xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it; the Provisions of clause 3(xii) of the order are not applicable to the company.
xiii. The Company has entered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required under IndianAccounting Standard (Ind AS) 24 Related Party Disclosures specified in the Companies(Indian Accounting Standards) Rules 2015 (as amended) under Section 133 of the Act.
xiv. The Company has not made any preferential allotment of private placement of sharesor fully or partly convertible debentures during the year under review
xv. The Company has not entered into non-cash transactions with its directors orpersons connected with him.
xvi. The Company is not required to be registered under section 45-IA of The ReserveBank of India Act 1934.
The accompanying notes are an integral part of the standalone financial statements Interms of our report attached
For P.Murali & Co.
Chartered Accountants FRN : 007257S
Membership Number 020085
Place : Hyderabad Date : July 30 2020
Annexure B to the Independent Auditor s Report
Report on the Internal Financial Controls over Financial Reporting under clause (i) ofthe Sub-section 3 of the Section 143 of the Companies Act 2013 ( The Act )
We have audited the internal financial controls over financial reporting of M/s.Madhucon Projects Limited ( the company ) as of 31st March 2020 in conjunctionwith our audit of Financial Statements of the company for the year ended on 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). 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 assets theprevention 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.
Auditor s 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 deemed to be prescribed under section143(10) of the Act to the extent applicable to an Audit of Internal Financial Controlsboth applicable to an audit of Internal Financial Controls and both issued by the ICAI.These standards and guidance note require that we comply with ethical requirements andplan and performed the audit to obtain reasonable assurance about whether adequateinternal financial controls over financial reporting was established and maintained and ifsuch 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 existsand 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 risk 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 and the company s internal financial control systemover financial reporting.
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 these policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detailed 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 Financial Statements inaccordance with generally accepted principles and that receipts and expenditures arebeing made only in accordance with authorization of management and directors of theCompany; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the Company s assets that could have amaterial effect on the Financial Statements.
Inherent Limitation of Internal Financial Controls over Financial Reporting
Because of the inherent limitation 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 except for the possible effects of the matter described in the basis forqualified 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 March 31st 2020based on the internal control over financial reporting criteria established by the companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute OfChartered Accountants of India.
For P. Murali & Co. Chartered Accountants Firm Registration No: 007257S
A Krishna Rao Partner
Membership No: 020085 UDIN: 20020085AAAAIE3593
Place: Hyderabad Date: 30-07-2020