To the Members of SEL Manufacturing Company Limited
Report on the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of SELManufacturing Company Limited ("the Company") which comprise the BalanceSheet as at March 31 2017 and the Profit and Loss Statement the Cash Flow Statement andthe Statement of Changes in Equity for the year then ended and a summary of significantaccounting policies and other explanatory information (hereinafter referred to as "Standalone Ind AS financial statements") in which are incorporated the returns forthe year ended on that date audited by the branch auditors of the company's overseasbranch at Sharjah United Arab Emirates.
Management's Responsibility for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matter stated in Section 134(5)of the Companies Act 2013 ("the Act") with respect to preparation of thesestandalone Ind AS financial statements that give a true and fair view of the financialposition financial performance cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards(Ind AS) prescribed under Section 133 of the Act read with therelevant rules issued thereunder. 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 Standalone Ind AS financial statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these Standalone Ind AS financialstatements based on our audit. We have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made there under.
We conducted our audit of standalone Ind AS Financial Statements in accordance with theStandards on Auditing specified under Section 143(10) of the Act. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the Standalone Ind AS financial statements are freefrom material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Standalone Ind AS financial statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the Standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the Standalone Ind AS financial statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the Standalone Ind ASfinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Standalone Ind AS financial statements.
Basis for Qualified Opinion
Note No. 41 of the Standalone Ind AS financial statements regarding non provision ofinterest amounting Rs.35901 lakhs for the year ended 31st March 2017 on NPA classifiedbank borrowings which is not in compliance with the requirements of para 27 of the Ind AS1-Presentation of Financial Statements w.r.t. preparation of financial statements onaccrual basis. Consequently borrowings are not reflected at fair value in financialstatements as required by Ind AS 109 Financial Instruments.
We further report that had the impact of our observations made in para above beenconsidered the net loss and the borrowings for the year ended would have been increasedby Rs. 35901 lakhs and Equity would have been reduced by the same amount.
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 above para of"Basis for Qualified Opinion" of our report that aforesaid Standalone Ind ASfinancial statements give the information required by the Act in the manner so requiredand give a true and fair view in conformity with the accounting principles generallyaccepted in India of the state of affairs of the Company as at March 31 2017 and itsloss its cash flows and the changes in equity for the year ended on that date.
Emphasis of Matter
We draw attention to the following matters:
(a) Note No. 38 of the Standalone Ind AS financial statements regarding the balances ofTrade Receivables Loan and Advances & Trade Payables which are subject toconfirmation/reconciliation and subsequent adjustments if any. During the course ofpreparation of Standalone Ind AS financial statements e-mails/letters have been sent tovarious parties by the company with a request to confirm their balances as on 31st March2017 out of which few parties have confirmed their balances direct to us or to thecompany. Despite this the outstandings in the trade receivables of the company areoverdue and the company has not provided any impairment provision in respect of theirrealizations as the management claims that the said receivables are fully recoverable.
(b) Note No. 40 of the Standalone Ind AS financial statements regarding preparation ofthe Standalone financial statements on a going concern basis notwithstanding the factsthat the company has accumulated losses resulting in erosion of net worth. Keeping in viewthe above the company has recognized deferred tax asset and MAT Credit consideringvirtual certainty that sufficient taxable income will be available during specified periodagainst which such deferred tax asset/MAT Credit Entitlement can be adjusted.
(c) Note No. 40(c) of the Standalone Ind AS financial statements in respect ofContingency related to 'compensation payable in lieu of bank sacrifice' the outcome ofwhich is materially uncertain and cannot be determined currently.
(d) Note No. 42 of Standalone Ind As financial statements regarding the revision ofuseful life of machinery installed in Spinning /Terry Towel units based on the technicalreports effective from 1st April 2016.
Our opinion is not modified in respect of above matters.
We did not audit the financial statements of Overseas branch included in the StandaloneInd AS financial statements of the Company whose financial statements reflect total assetsof Rs. 17613.71 Lakhs as at 31st March 2017 and total revenues of Rs. 3879.36 Lakhs forthe year ended on that date as considered in the Standalone Ind AS financial statements.The financial statements of the branch has been audited by the branch auditors whosereports have been furnished to us and our opinion in so far as it relates to the amountsand disclosures included in respect of the branch is based solely on the report of suchbranch auditors.
Our opinion is not modified in respect of this matter.
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 the paragraph3 and 4 of the order.
2. As required by Section 143 (3) of the Act we report that:
a. We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;
b. 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 and proper returns adequatefor the purpose of our audit have been received from the company's overseas branch atUnited Arab Emirates not visited by us;
c. The reports on the accounts of the branch office of the Company audited underSection 143 (8) of the Act by branch auditors have been sent to us and have been properlydealt with by us in preparing this report.
d. The Balance Sheet the Profit and Loss Statement Cash Flow Statement and theStatement of Changes in Equity dealt with by this Report are in agreement with the booksof account and with the returns received from the company's overseas branch at United ArabEmirates audited by other auditors.
e. In our opinion the aforesaid standalone Ind AS financial statements comply with theIndian Accounting Standards specified under section 133 of the Companies Act 2013 readwith relevant rules except as reported in the para of "basis for qualifiedopinion" as above and non compliance of the provisions of Ind-AS 109 w.r.t.accounting of corporate guarantee given to lenders of one of its subsidiaries as reportedin para 35 (iii).
f. In our opinion the matters described in the "basis of Qualified Opinion"and " emphasis of matter " paragraphs above may have an adverse impact on thefunctioning of the company.
g. On the basis of written representations received from the directors as on March 312017 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2017 from being appointed as a director in terms of Section 164 (2) ofthe Companies Act 2013;
h. With respect to the adequacy of the internal financial controls
over financial reporting of the Company and the operating effectiveness of suchcontrols refer to our separate report in "Annexure B"; and
i. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements - Refer Note no. 35 to thestandalone Ind AS financial statements;
ii. The Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
iv. The Company has provided requisite disclosures in its standalone financialstatements as to holdings as well as dealings in Specified Bank Notes during the periodfrom 8 November 2016 to 30 December 2016 on the basis of information available with thecompany. Based on audit procedures and relying on management representation we reportthat disclosures are in accordance with the books of account maintained by the Company andas produced to us by the Management. Refer Note no.44 to the standalone Ind AS financialstatements.
FOR DASS KHANNA & CO. CHARTERED ACCOUNTANTS FRN. 000402N
|PLACE: LUDHIANA ||(CA. R.D. KHANNA) |
|DATED: 30.05.2017 ||PARTNER |
| ||M.No.: 12391 |
Annexure-A to the Independent Auditor's Report
The Annexure referred to in our Independent Auditors' Report to the members of SELManufacturing Co. Ltd. on the Standalone Ind AS financial statements for the year ended on31st March 2017. We report that:
(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets except for certain items of fixedassets the quantitative details of which are in the process of being compiled. Asexplained to us the same will be compiled by the management in due course of time.
(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. Inaccordance with this programme certain fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification. In our opinion this periodicityof physical verification is reasonable having regard to the size of the Company and thenature of its assets.
(c) According to the information and explanation 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.
(ii) According to the information and explanation given to us the physicalverification of inventories has been conducted at reasonable interval by the management.As explained to us no material discrepancies were noticed on physical verification ofinventories carried out by the management as compared to the book records.
(iii) In our opinion and according to the information and explanation given to us theCompany has not granted any loans secured or unsecured to Companies Firms and otherparties covered in the register maintained section 189 of the Companies Act 2013.
(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of loans investments guarantees and security.
(v) The Company has not accepted deposits from the public within the meaning ofprovisions of sections 73 to 76 or any other relevant provisions of the Companies Act2013 and the rules framed there under. No order has been passed by the Company Law Boardor National Company Law Tribunal or Reserve Bank of India or any court or any otherTribunal.
(vi) We have broadly reviewed the books of accounts maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of Cost records undersection 148 of the Companies Act 2013 and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have however not made adetailed examination of such records with a view to determine whether they are accurate orcomplete.
(vii)(a)According to the information and explanations given to us and the books andrecords examined by us we state that the company is regular in depositing undisputedstatutory dues including income tax provident fund employees state insurance customduty excise duty service tax value added tax cess and other statutory dues to theappropriate authorities. According to the information and explanations given to us therewere no undisputed amounts payable in respect of income tax provident fund employeesstate insurance custom duty excise duty service tax value added tax cess and othermaterial statutory dues in arrears as at 31st March 2017 for a period of more than sixmonths from the date they became payable.
(b) According to the information and explanations given to us there are no dues ofincome tax provident fund employees state insurance custom duty excise duty servicetax value added tax cess and other statutory dues which have not been deposited onaccount of any dispute except disclosed as under:
|Name of the statute ||Nature of dues ||Amount ||Accounting year to which the amount relates ||Forum where the dispute is pending |
| || ||(In Lakhs) || || |
|Income Tax Act 1961 ||Tax deducted at source ||0.36 ||2013-14 ||DCIT Centralized Processing Cell (TDS) |
|Income Tax Act 1961 ||Tax deducted at source ||2.51 ||2014-15 ||DCIT Centralized Processing Cell (TDS) |
|Income Tax Act 1961 ||Tax deducted at source ||0.23 ||2015-16 ||DCIT Centralized Processing Cell (TDS) |
|Income Tax Act 1961 ||Tax and Interest* ||28144.39 ||2010-11 2011-12& 2013-14 ||commissionerate (Appeals) |
*Interest calculated upto 31.01.2017 and subject to further interest & penaltyproceedings.
(viii) In our opinion and according to the information and explanations given to usthe company has defaulted in repayment of loans/borrowings and interest thereon to banksas given below:
|Bank Name ||Nature of Amount ||Amount ||Overdue Since |
|State Bank of ||Interest ||41822281 ||31.07.2016 |
|Bikaner & Jaipur ||Principle ||91926825 ||30.06.2016 |
|State Bank of Patiala ||Interest ||130920308 ||30.04.2016 |
| ||Principle ||183124549 ||30.04.2016 |
|State Bank of India ||Interest ||113462759 ||31.05.2015 |
| ||Principle ||218308069 ||31.08.2015 |
|State Bank of Hyderabad ||Interest ||56837004 ||31.08.2015 |
| ||Principle ||152919581 ||31.10.2015 |
|State Bank of Travancore ||Interest ||103900552 ||31.01.2016 |
| ||Principle ||209501097 ||31.01.2016 |
|Punjab & Sind Bank ||Interest ||212664434 ||30.11.2015 |
| ||Principle ||39629937 ||31.12.2015 |
|Bank of Maharashtra ||Interest ||28125478 ||30.11.2015 |
| ||Principle ||116218200 ||31.08.2015 |
|Punjab National Bank ||Interest ||73043690 ||28.02.2016 |
| ||Principle ||182231523 ||31.01.2016 |
|State Bank of Mysore ||Interest ||1698746 ||30.04.2016 |
| ||Principle ||2934479 ||30.04.2016 |
|Indian Bank ||Interest ||41297264 ||30.06.2015 |
| ||Principle ||98052757 ||31.07.2015 |
|United Bank ||Interest ||15983838 ||30.06.2015 |
| ||Principle ||204028280 ||31.07.2015 |
|Union Bank of India ||Interest ||67077448 ||30.04.2015 |
| ||Principle ||100975916 ||30.04.2015 |
|UCO Bank ||Interest ||80771969 ||30.09.2015 |
| ||Principle ||160026919 ||31.08.2015 |
|Corporation Bank ||Interest ||23633612 ||31.01.2016 |
| ||Principle ||143177880 ||28.02.2016 |
|Allahabad Bank ||Interest ||177174630 ||31.10.2015 |
| ||Principle ||472283971 ||30.11.2015 |
|Dena Bank ||Interest ||29406317 ||30.09.2015 |
| ||Principle ||141797852 ||31.10.2015 |
|Indian Overseas Bank ||Interest ||61783610 ||31.01.2016 |
| ||Principle ||34116190 ||31.03.2016 |
|Vijaya Bank ||Interest ||5008848 ||31.03.2016 |
| ||Principle ||6472076 ||31.03.2016 |
|Andhra Bank ||Interest ||48709830 ||28.02.2016 |
| ||Principle ||25110703 ||31.03.2016 |
|EXIM Bank ||Interest ||3687731 ||31.12.2015 |
| ||Principle ||3114271 ||31.12.2015 |
(ix) In our opinion and according to the information and explanations given to us outof the term loans raised during FY 2015-16 Rs. 20.30 Crores were lying with Banks in theform of fixed deposits and TRA Account as on 31.03.2016 pending utilization thereof. Thesaid amount was adjusted by the banks towards payment of overdue interest and principal inthe reporting year. Further no money was raised by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year.
(x) To the best of our knowledge and belief and according to the information andexplanations given to us no material fraud on or by the Company by its officers oremployees has been noticed or reported during the year.
(xi) In our opinion the managerial remuneration has been paid or provided inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V to the Companies Act 2013.
(xii) In our opinion the Company is not a Nidhi Company. Therefore the provisions ofclause 3 (xii) of the Companies (Auditor's Report) Order 2016 are not applicable to theCompany.
(xiii) In our opinion all transactions with the related parties are in compliance withSection 177 and 188 of Companies Act 2013 where applicable and the details have beendisclosed in the Ind AS financial statements etc. as required by the applicableaccounting standards.
(xiv) According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year under review and therefore the provisions ofclause 3 (xiv) of the Companies (Auditor's Report) Order 2016 are not applicable to theCompany.
(xv) In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transactions with directors or persons connectedwith the directors and therefore the provisions of clause 3 (xv) of the Companies(Auditor's Report) Order 2016 are not applicable to the Company
(xvi) In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934.
FOR DASS KHANNA & CO.
Firm Registration No. 000402N
|PLACE: LUDHIANA ||(CA. R.D. KHANNA) |
|DATED: 30.05.2017 ||PARTNER |
| ||M.No. 12391 |
ANNEXURE- B TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1(g) under "Report on other legal and regulatoryrequirements" of our report of even date)
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the Internal Financial Control over financial reporting of SELManufacturing Company Limited ("the Company") as of 31st March 2017 inconjunction with our audit of the Ind AS financial statements of the Company for the yearthen ended.
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 Reporting('theGuidance Note') issued by the Institute of Chartered Accountants of India('the ICAI').These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of the company's 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 over financial reporting based on our audit. We conducted our audit in accordancewith the Standards on Auditing issued by the ICAI and deemed to be prescribed undersection 143(10) of the Act to the extent applicable to an audit of Internal financialcontrols over financial reporting and the Guidance Note issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate Internalfinancial controls over financial reporting were established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls systems on financial reporting and their operatingeffectiveness. Our audit of Internal financial controls over financial reporting includedobtaining an understanding of Internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the Ind AS financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified opinion on the Company's internal financial controlsover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial controls 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 controls over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail 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 accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and(3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of Internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that internal financial controls overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
In our 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 31st March 2017 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India.
Emphasis of Matter
We would draw attention to matters disclosed in paragraph under 'Emphasis of matters'in our main Independent Auditor's Report which could indicate possible lapses in internalfinancial controls systems at various points in time.
Our opinion is not modified in respect of these matters.
| ||FOR DASS KHANNA & CO. |
| ||CHARTERED ACCOUNTANTS |
| ||Firm Registration No. 000402N |
| ||(CA. R.D. KHANNA) |
| ||PARTNER |
|PLACE: LUDHIANA ||M.No.: 12391 |
|DATED: 30.05.2017 || |