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Regency Ceramics Ltd.

BSE: 515018 Sector: Consumer
NSE: REGENCERAM ISIN Code: INE277C01012
BSE 00:00 | 22 May 2.70 0.08
(3.05%)
OPEN

2.49

HIGH

2.75

LOW

2.49

NSE 00:00 | 22 May 2.45 0.10
(4.26%)
OPEN

2.40

HIGH

2.45

LOW

2.40

OPEN 2.49
PREVIOUS CLOSE 2.62
VOLUME 837
52-Week high 4.74
52-Week low 2.25
P/E
Mkt Cap.(Rs cr) 7
Buy Price 2.49
Buy Qty 167.00
Sell Price 2.70
Sell Qty 150.00
OPEN 2.49
CLOSE 2.62
VOLUME 837
52-Week high 4.74
52-Week low 2.25
P/E
Mkt Cap.(Rs cr) 7
Buy Price 2.49
Buy Qty 167.00
Sell Price 2.70
Sell Qty 150.00

Regency Ceramics Ltd. (REGENCERAM) - Auditors Report

Company auditors report

To the Members of

REGENCY CERAMICS LIMITED HYDERABAD.

Report on the Financial Statements:

We have audited the accompanying financial statements of REGENCY CERAMICS LIMITED("the Company") which comprise the Balance Sheet as at 31st March 2017 theStatement of Profit and Loss the Cash Flow Statement for the year then ended and asummary of the significant accounting policies and other explanatory information.

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 ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

Auditor's Responsibility:

Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances.

An audit also includes evaluating the appropriateness of the accounting policies usedand the reasonableness of the accounting estimates made by the Company's Directors aswell as evaluating the overall presentation of the financial statements.

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

Basis for qualified opinion:

1. Manufacturing operations of the company were stopped due to riots strike andmalicious damage at factory since 27.01.2012. The company declared lock out of the planton 31.01.2012 and the condition of the fixed assets and its realizable value could not beestimated. The machinery and building were not insured during the year and disclosed atbook value after providing depreciation on account of efflux of time.

2. The condition of the raw materials stores and spares and its realizable valuecould not be estimated by the company. The stocks were not insured during the year anddisclosed at book value.

3. During the year the company has not provided the provisional liability towardssalary wages and other benefits to its factory employees pending orders/judgment of theindustrial Tribunal. Further the company has not provided for its liability towardsGratuity and leave encashment in accordance to AS-15 "Employee Benefits". Sincethe company could not compute the liability in the absence of complete records we areunable to comment upon the impact of non-provision of additional loss of the company forthe year and on the current liabilities as at 31.03.2017.

4. Confirmation of balances was not obtained from Debtors Creditors loan andadvances and other current assets.

5. The company requested the lenders for sanction of revised OTS and paid Rs.12.43Crores against the sanctions received till date. State Bank of Bikaner & Jaipurassigned and transferred the facilities sanctioned by them together with all underlyingsecurities and interests thereto to Phoenix ARC Private Limited (Trustee of PhoenixTrust-FY15-5). The lenders initiated recovery action against the company and took symbolicPossession under Rule 8(1) of Security Interest (Enforcement) Rules 2002 in exercise ofpowers conferred on them under section 13(4) of the SARFAESI Act. The lenders also filedan application under section 19 of the Recovery of Debts due to Banks and FinancialInstitutions Act 1993 in the Debts Recovery Tribunal Hyderabad for recovery of theirdues. In view of the above the Long Term Borrowings are considered as current maturitiesof long term borrowings and shown under Other Current Liabilities. Hypothecation / Hirepurchase loans are repayable within one year and shown under Other Current Liabilities.

5. The company did not provide the interest on secured loans amounting to Rs.1026.61Lakhs for the year and Rs.5274.77 Lakhs up to 31st March 2017 which is subjectto confirmation from the banks.

6. The company has not provided the liability towards interest and penalties payableon account of statutory dues. The Company is of opinion that the statutory authoritiesshall waive the same in view of the unprecedented incident.

7. The reference filed by the company under section 15(1) of Sick IndustrialCompanies (Special Provisions) Act 1985 with the Board for Industrial and FinancialReconstruction (BIFR) has been abated and the company preferred an appeal before AAIFR.The company lost the case in AAIFR also due to lack of support from the lenders.

Consequent to the above the Net loss would increase and Shareholders funds wouldreduce to this extent.

Qualified opinion:

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the basis for QualifiedOpinion Paragraph the financial statements give the information required by the Act inthe manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the company as at March31 2017;of the loss and of the cash flows for the year ended on that date.

Emphasis of Matter:

We draw attention to the following matters in the Notes to the financial statements:

a. Note No. 1 to the financial statements regarding the preparation of thefinancial statements on a going concern basis despite erosion of the net worth no cashinflows from the existing business activities and Continuous default in payment of dues tobanks / financial institutions and the legal proceedings initiated by the Bankers of theCompany for the recovery of the debts.

Our opinion is not qualified in respect of these matters.

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 statement on the matters specified in paragraphs 3 and4 of the Order.

2. As required by Section 143 (3) of the Act we report that:

(a) We have sought and except for the matters described in the Basis for qualifiedopinion paragraph obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit.

(b) Except for the effects of the matters described in the Basis for qualified opinionparagraph above in our opinion proper books of account as required by law have been keptby the Company so far as it appears from our examination of those books

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

(d) Except for the effects of the matters described in the basis for qualified opinionparagraph in our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014. ‘

(e) On the basis of the written representations received from the directors as on 31stMarch 2017 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 of Section164 (2) of the Act.

(f) with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls we couldn'tevaluate as Company didn't have any manufacturing and business operations during the yearunder review.

(g) 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:

i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements – Refer Note 25 (2)(3)(8)(9)(10) to thefinancial statements

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.

iii. According to the information and explanations given to us there were no amountswhich were required to be transferred to the Investor Education and Protection Fund by theCompany.

iv The Company has provided requisite disclosures in the financial statements as toholdings as well as dealings in Specified Bank Notes during the period.

From 8th November 2016 to 30th December2016. Based on auditprocedures and relying on the management representation we report that the disclosures arein accordance with the books of account maintained by the Company and as produced to us bythe Management – Refer Note 15 to the Financial Statements.

For BRAHMAYYA & CO.
Chartered Accountants.
Firm Registration No. 000513S
(K. Shravan)
Place : Hyderabad Partner
Date : 30.05.2017 Membership No.215798

ANNEXURE TO THE AUDITOR'S REPORT

The Annexure referred to in Para 1 under the heading of "Report on Other Legal andRegulatory Requirements" of our report of even date to the members of REGENCYCERAMICS LIMITED HYDERABAD for the year ended March 312017.

1. a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

b. As explained to us the management could not verify physically the fixed assetssituated at Yanam due to riots strike and malicious damage.

c. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.

2. No Physical verification of inventory has been conducted during the year.

3. a. During the year the Company has not granted any loans secured or unsecured toCompanies firms limited liability partnerships or other parties covered in the registermaintained under Section 189 of the Companies Act 2013.

b. In view of our comment in para (a) above Clause (III) (a) (b) and (c) of paragraph3 of the Companies (Auditor's Report) Order 2016 are not applicable to the Company.

4. In our opinion and according to the information and explanations given to us theCompany has not advanced any loan to any Director and no investments were made during theyear as referred to in sections 185 and 186 of the Act. Therefore the provisions ofParagraph 3(iv)of the of the Companies (Auditor's Report) Order 2016 are not applicable tothe Company.

5. The Company has not accepted any deposits from the public. Hence the provisions ofSections 73 to 76 or any other relevant provisions of the Companies Act 2013 and therules framed there under do not apply to this Company.

6. During the year there is no production and its related activity in the factory andas such cost records pursuant to sub-section (1) of section 148 of the Companies Act2013 have not been maintained.

7. a. According to the records the company is not regular in depositing undisputedstatutory dues including provident fund employees' state insurance income-taxsales-tax service tax duty of customs duty of excise value added tax cess and allother material statutory dues with the appropriate authorities. However the extent of thearrears of outstanding statutory dues as at March 31 2017 for a period of more than sixmonths from the date they became payable are as follows.

Name of the Statute Nature of the dues Amount (Rs. in Lakhs) Period to which the amount relates Due Date Date of Payment
CST Act 1956 Central Sales Tax 33.27 2011-12 Nov-2011 Not yet paid
VAT Act 2005 VAT 359.27 2011-13 Sept-2011 Not yet paid
Central Excise & Service Tax Act 1994 Service Tax 44.75 2011-13 Oct-2011 Not yet paid
Employees Provident Funds Act 1952 Provident Fund 2.27 2015-17 Sept-2015 Not yet paid
ESI Act 1948 Employee State Insurance 3.28 2011-13 Oct-2011 Not yet paid
Income Tax Act 1961 Income Tax 58.19 2003-04 Sept-2004 Not yet paid

b. According to the records of the Company and the information and explanations givento us there were no dues of income tax or sales tax or service tax or duty of customs orduty of excise or value added tax have not been deposited on account of any dispute exceptthe following.

Name of the Statute Nature of the dues Amount (Rs. in lakhs) Period to which the amount is related Forum where dispute pending
Central Excise & Service Tax Act 1994 Service Tax 35.04 2006-2007 CESTAT Bangalore
Income Tax Act 1961 Income Tax 90.98 2004-2005 Income Tax Appellate Tribunal
The Pondicherry Municipality Act 1973 Municipal Tax 32.35 1998-2007 Yanam Municipality

8. In our opinion and according to the information and explanations given to us theCompany has defaulted in repayment of loans to financial institutions and Banks.

Below are the details of defaults as on Balance Sheet date :

Name of Lenders Amount of default as at the Balance Sheet date (Rs in Lakhs) Period of default
SBI 2894.37 From June 2012
SBBJ 1331.40 From June 2012
CORPORATION BANK 1486.49 From June 2012
SB TRAVANCORE 1134.33 From June 2012
SOUTH INDIAN BANK 776.98 From June 2012
L & T FINANCE LTD. 6.78 From Mar 2012
TOTAL 7630.35

9. The Company did not raise any money by way of initial public offer or further publicoffer (including debt instruments) and term loans during the year. Accordingly paragraph3 (ix) of the Companies (Auditor's Report) Order 2016 is not applicable.

10. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit.

11. No managerial remuneration has been paid or provided during the year under reportHence paragraph 3(xi) of the Companies (Auditor's Report) Order 2016 is not applicable.

12. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Companies (Auditor'sReport) Order 2016 is not applicable

13. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

14. According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

15. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Companies (Auditor's Report) Order 2016 is not applicable.

16. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934

For BRAHMAYYA & CO.
Chartered Accountants.
Firm Registration No. 000513S
(K. Shravan)
Place : Hyderabad Partner
Date : 30.05.2017 Membership No.215798