To the Members of
M/s. Madhucon Projects Limited
Report on the Standalone IND AS financial statements
We have audited the Standalone IND AS financial statementsof M/s. Madhucon ProjectsLimited ("the company") which comprise the standalone balance sheet as at 31stMarch 2019 the standalone statement of Profit and Loss (including other comprehensiveincome)standalone statement of changes in equity and standalone statement of cash flowsfor the year then ended and notes to the standalone financial statements including asummary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion section of our report the aforesaid Standalone IND AS financialstatements give the information required by the Act in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at March 31 2019 loss and othercomprehensive income changes in equity and its cash flows for the year ended on thatdate.
Basis for Qualified Opinion
a. Note No. 2.2 (i) to the Standalone financial Statements in relation to carryingvalue of investments held in and unsecured loans and advances given by the company to itssubsidiaries listed in that note which have been incurring losses and in some of thesecompanies net worth was fully or substantially eroded. Taking into account the managementinternal assessment and initiatives to be implemented to improve the profitability in themedium to long term the management of the company is of the view that carrying value ofinvestments and loans and advances are realizable at the value stated in the books. In theabsence of fair valuation of these investments we are unable to comment upon the carryingvalue made thus we are unable to comment whether any provision for impairment in thevalue of advance is required.
b. Note No. 2.2(ii) to the Standalone financial Statements in relation to the MadhuconMega Mall Private Limited (MMMPL) a subsidiary of the company incorporated for developingshopping mall cum multiplex on leased land taken from Andhra Pradesh housing Board Nowknown as Telangana housing Board) ("The Board") at Kukatpally in Hyderabad. Theboard issued letter for revoking the power of attorney and resumption of land. The companygot a status Quo order from Court and the case is pending in the Court. Taking intoAccount the Constitution of and visit made by Cabinet Sub Committee of TelanganaGovernment Management Internal Assessment and Legal Opinion Obtained Management of theCompany is confident in Succeeding the case and Carrying values of Investments in andLoans Sanctioned to MMMPL and realizable at the Values Sta1ted in the Books of Accounts.
According to the Books of Accounts and Information and Explanations given to us theInvestment and Balance of Loan as at March 31st 2019 was Rs.3500 Lakhs and Rs134.81 Lakhsrespectively.
c. Note No. 2.4 (i) to the Standalone financial statements indicate that theoutstanding Loans and Advances which were granted to Nama Investments Limited and NNRInfra Investments Private Limited in which the Company's Directors have Interest arerealizable at the Carrying Values in the Books of Accounts though both these Companieshave been incurring Losses and Accumulated Losses exceeded the Net Worth of theseCompanies for the reasons stated in that Note.According to the Books of Accounts andInformation and Explanations given to us the Closing Balances as at March 31st 2019 withrespect to Nama Investments Limited and NNR Investments Limited are Rs 4109.97 Lakhs andRs 512.19 Lakhs respectively. The company has not recognized interest income for the sameduring current financial year.
d. Note No. 2.22 (i) to the Standalone financial statements the Company has defaultedin repayment of dues to Banks/Financial Institutions. Borrowings from banks and financialinstitutions have been classified as nonperforming assets by the lenders. Loansoutstanding were classified as NPA's by the banks and Financial Institutions.
e. Note No. 2.18 (i) to the Standalone financial statements in respect ofnon-availability of confirmations Trade Payables and various advances/ borrowings. In theabsence of alternative corroborative evidence we are unable to comment on the extent towhich such balances are recoverable.
f. The Company is not regular in payment of undisputed statutory dues towards TDSProvident Fund Professional Tax and Goods and Service Tax for the year ended 31stMarch2019.
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 theStandalone IND AS financial statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India together with the ethical requirements that are relevant to our auditof the Standalone IND AS financial statements under the provisions of the Companies Act2013 and the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.
Key Audit Matters
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon. The Company's annual report is expected to be made available to us after the dateof this auditor's report.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the financial statements or our knowledgeobtained in theaudit or otherwise appears to be materially misstated.
When we read the annual report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.
Management's Responsibility for the Standalone Ind AS 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 IND AS financial statements that give a true and fair view of thefinancial position financial performance and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the accounting Standardsspecified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statement that give a true and fair view andare free from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to 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 Standalone IND ASfinancial 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 financial statements. As part of an audit inaccordance with SAs we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit Procedures that is appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting 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 IND AS financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the Standalone IND ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
Materiality is the magnitude of misstatements in the Standalone IND AS financialstatements that individually or in aggregate makes it probable that the economicdecisions of a reasonably knowledgeable user of the Standalone IND AS financial statementsmay be influenced. We consider quantitative materiality and qualitative factors in (i)planning the scope of our audit work and in evaluating the results of our work; and (ii)to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding among othermatters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the Standalone IND ASfinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure A a statement on the matters Specified in paragraphs 3and 4 of the Order.
2. As required by section 143(3) of the Act we further 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) In our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books;
c) the Balance Sheet Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Cash Flows and the statement of changes in equity dealt with bythis Report are in agreement with the books of account;
d) In our opinion the aforesaid Ind AS Standalone IND AS financial statements complywith the applicable Accounting Standards specified under Section 133 of the Act read withrelevant rules issued there under.
e) On the basis of written representations received from the directors as on March 312019 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164(2) of theAct.
f) 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'; and
g) With respect to other matters to be included in the Auditor's Report in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to thebest of our information and according to the explanations given to us:
i. The Company has disclosed the pending litigations which would impact its financialposition in its notes to financial statements.
ii. The Company does not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses.
iii. The company has not complied with the provisions of section 124(5) of theCompanies Act 2013 regarding the remittance of unpaid dividend of FY 2008-09 amounting toRs. 216049/- and FY 2009-10 Rs. 245028/- to Investor Education and Protection Fund(IEPF) within the stipulated period.
For P. Murali&Co.
Firm Registration No : 007257S
A. Krishna Rao
Annexure A to the Auditors Report
Annexure referred to in Independent Auditors Report to the Members of M/s. MadhuconProjects Limited on the Standalone IND AS financial statements for the year ended 31stMarch 2019 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 adequate 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 reasonable steps 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 Companies 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 outstanding 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 Tax & Interest on it ||2011-12 to 2018-19 ||78.79 |
|2 Professional Tax ||P T PAYABLE provident fund ||2011-12 to 2018-19 ||58.36 |
|3 The Employees Provident funds and Miscellaneous provision act 1952 || ||2012-13 to 2018-19 ||138.22 |
|4 Sales Tax ||Sale Tax payable ||2013-14 to 2018-19 ||176.80 |
|5 Works Contract Tax ||Works Contract Tax ||2014-15 to 2018-19 ||640.49 |
|6 The Finance Act 1994 ||Service Tax ||2014-15 to 2018-19 ||332.08 |
|7 Goods and Service Tax ||Goods and Service Tax ||2017-18 to 2018-19 ||631.64 |
|8 The Income Tax Act 1961 ||Tax Deducted at Source & Interest on it ||2018-19 ||388.42 |
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 2019 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 ||2009-10 to 2013-14 ||6979.78 |
|Sales Tax ||Hon'ble High Court ||2001 to 2005 & 2009-10 ||7000.89 |
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 (d) ofBasis for Qualified Opinion) as follows:
Delay in Interest payments: (Amount in Rs. in 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 ||0.00 ||0.00 ||0.00 ||0.00 ||72.30 |
|Bank of India ||0.00 ||0.00 ||0.00 ||0.00 ||146.67 |
|ICICI Bnak ||0.00 ||0.00 ||0.00 ||0.00 ||3652.51 |
|IDBI Bank ||0.00 ||0.00 ||0.00 ||0.00 ||348.19 |
|Canara Bank ||0.00 ||96.82 ||0.00 ||0.00 || |
|Kotak Mahindra Bank Limited ||0.00 ||0.00 ||0.00 ||0.00 ||44.30 |
|Oriental Bank of Commerce ||0.00 ||0.00 ||0.00 ||0.00 ||249.40 |
|Name of the Financial Institution || || || || || |
|Mahindra & Mahindra || || || || || |
|Financial Services ||7.15 ||7.83 ||8.63 ||19.72 ||0.00 |
|SREI Equipment Finance Ltd. ||32.32 ||33.02 ||33.72 ||34.40 ||0.00 |
Delay in Principal Re Payments: (Amount in Rs. in 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 ||0.00 ||0.00 ||0.00 ||0.00 ||1767.95 |
|Canara Bank ||0.00 ||5961.00 ||0.00 ||0.00 ||0.00 |
|ICICI Bank ||0.00 ||0.00 ||0.00 ||0.00 ||5596.37 |
|Axis Bank ||0.00 ||0.00 ||0.00 ||0.00 ||4702.51 |
|Name of the Financial Institution || || || || || |
|SREI Equipment Finance Ltd. ||84.58 ||83.68 ||83.18 ||82.50 ||0.00 |
|Manindra& Mahindra || || || || || |
|Financial Services ||69.04 ||68.36 ||79.75 ||163.21 ||0.00 |
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. As per the information and explanations given to us managerial remunerationprovided are in accordance with approvals mandated by the provisions of section 197 of theAct.
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 Standalone IND AS financial statements as requiredunder Indian Accounting Standard (Ind AS) 24 Related Party Disclosures specified in theCompanies (Indian Accounting Standards) Rules 2015 (as amended) under Section 133 of theAct.
xiv. The Company has not made any preferential allotment of private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of clause 3(xiv) of the Order are not applicable to the Company.
xv. The Company has not entered into non-cash transactions with its directors orpersons connected with him. Accordingly the provisions of clause 3(xv) of the Order arenot applicable to the Company.
xvi. The Company is not required to be registered under section 45-IA of The ReserveBank of India Act 1934. Accordingly the provisions of clause 3(xvi) of the order are notapplicable to the Company.
For P. Murali& Co
FRN No: 007257S
A Krishna Rao