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Soma Textiles & Industries Ltd.

BSE: 521034 Sector: Industrials
NSE: SOMATEX ISIN Code: INE314C01013
BSE 00:00 | 13 Jul 9.22 0
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NSE 11:03 | 16 Jul 9.50 -0.25
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9.50

HIGH

9.50

LOW

9.50

OPEN 9.55
PREVIOUS CLOSE 9.22
VOLUME 2250
52-Week high 25.10
52-Week low 9.06
P/E
Mkt Cap.(Rs cr) 30
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 9.55
CLOSE 9.22
VOLUME 2250
52-Week high 25.10
52-Week low 9.06
P/E
Mkt Cap.(Rs cr) 30
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Soma Textiles & Industries Ltd. (SOMATEX) - Auditors Report

Company auditors report

TO

THE MEMBERS OF

SOMA TEXTILES & INDUSTRIES LIMITED

Report on the Standalone Financial Statements

We have audited the accompanying Standalone Financial Statements of SOMA TEXTILES& INDUSTRIES LIMITED ("the Company") which comprise the Balance Sheetas at 31st March 2017 the Statement of Profit and Loss the Cash FlowStatement for the year ended and a summary of the significant accounting policies andother explanatory information.

Management’s Responsibility for the Standalone 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 Financial Statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of the Companyand 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 Standalone Financial Statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these Standalone Financial Statementsbased on our audit.

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 and the Order under section 143(11) ofthe Act.

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 ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company’s Directors as well as evaluating theoverall 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 Standalone Financial Statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Financial Statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31st March 2017 and its loss and its cash flows for the year ended onthat date.

Emphasis of Matters

Without qualifying our opinion we draw attention to the following matters:

(a) With effect from 10th August 2016 the Company shut down the garmentunit/department at its Textiles Unit (at Ahmedabad) which had a Turnover of Rs 649.67Lakhs out of the total Turnover of Rs 12737.04 Lakhs in FY-2016-17 (PY turnover fromGarment Division was Rs 1900.34 Lakhs). The said shut down as per the management is onaccount of continuing losses due to high operative cost and other adverse factors.

(b) As per the provisions of Section 23 of SICA Act 1985 the Accumulated Losses of thecompany as at 31st March 2017 have resulted in erosion of more than 50% of itspeak net worth during the four financial years immediately preceding the financial yearended on 31st March 2017. Consequent upon the Company had become a"Potentially Sick Company" under the said provision since FY 2013-14.

Other Matters

(a) The Company had advanced a loan to the tune of Rs 10043.06 Lakhs (previous year Rs10444.46 Lakhs) to Soma Textiles FZC (UAE) out of GDR proceeds classified as long termloan out of which Rs 183.96 Lakhs( USD 277609) was received during FY 2016-17 as perFIRC advice. This loan has been advanced by the Company as quasi-equity in addition to thecapital contribution to Soma Textiles FZC. When the said loan was given the said companywas a wholly owned subsidiary however with effect from 31-03-2010 the Company’sholding in this company has diluted from 100% to 40%. In the financial statement of SomaTextiles FZC ended as at 31-03-2017 the accumulated loss reflects at AED 540936 asagainst total capital of AED 900000 (Including statutory reserve). Our opinion is notqualified in this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act and on the basis of such checks of the books and records of thecompany as we considered appropriate and according to the information & explanationsgiven to us we give in the Annexure ‘A’ a statement on the mattersspecified in the paragraph 3 and 4 of the Order to the extent applicable.

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 purposes of our audit.

(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.

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

(d) In our opinion the aforesaid Standalone Financial Statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (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 termsof Section 164 (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 refer to ourseparate report in Annexure ‘B’.

(g) With respect to the other matters to be included in the Auditors’ 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 litigation on its financial positionin its financial statement (Refer note 29 to the financial statement);

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 the Standalone FinancialStatements as to holding as well as dealings in Specified Bank Notes during the periodfrom 8th November 2016 to 30th December 2016 on the basis ofinformation available with the Company. Based on audit procedures and relying onmanagement representation we report that disclosures are in accordance with the books ofaccounts maintained by the company and as provided to us by the Management. (Refer note 31to the financial statement)

For PIPARA & CO LLP
Chartered Accountants
Firm Regn. No. : 107929W
NAMAN PIPARA
PLACE: Ahmedabad (Partner)
DATE : 30th May 2017 Membership No.140234

ANNEXURE ‘A’ TO THE INDEPENDENT AUDITOR’S REPORT

Referred to in paragraph 1 of ‘Report on Other Legal and RegulatoryRequirements’ of the Independent Auditors’ Report of even date to the members ofSOMA TEXTILES & INDUSTRIES LIMITED on the Standalone Financial Statements for the yearended March 31 2017.

I. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assts.

(b) As explained to us the fixed assets have been physically verified by themanagement during the year in accordance with a phased programme of verification which inour opinion provides for physical verification of all the fixed assets at reasonableintervals. We are informed that no material discrepancies were noticed on suchverification.

(c) The title deeds of immovable properties other than self-constructed immovableproperty (buildings) as disclosed in fixed assets to the financial statements are heldin the name of the Company.

II. As explained to us physical verification of inventory has been conducted atreasonable intervals by the management and the discrepancies noticed on verificationbetween the physical stocks and the book records were not material having regard to thesize of the Company and the same have been properly dealt with in the books of account.

III. The Company has granted an unsecured interest free loan to its Associate SOMATEXTILE FZC. Such Associate is covered in the register maintained under section 189 of theAct. Total amount outstanding on 31st March 2017 was Rs. 10043.06 Lakhs.

(a) There are no terms and conditions set out by the company as on date for the loangiven to Soma Textile FZC therefore we are unable to report on regularity of receipt ofprincipal amount.

(b) As there is no stipulation of repayment of loan by the Associate we are unable toreport on regularity of repayment of principal.

(c) As there is no set terms and conditions for the repayment there are no overdueamounts in respect of the loan granted to the Associate.

In our opinion and according to the information and explanations given to us theCompany has not advanced any loan or given any guarantee or provided any security or madeany investment covered under section 185 of the Act in the current year (FY 2016-17). TheCompany has not advanced any loan or given guarantees or provided security or madeinvestments covered under section 186 of the Act in the current year (FY 2016-17).

V. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the meaning of Sections 73 to76 or any other relevant provisions of the Act and rules framed thereunder.

VI. We have broadly reviewed the cost records maintained by the Company as specified bythe Central Government under sub-section (1) of Section 148 of the Companies Act 2013and are of the opinion that prima facie the prescribed cost records have beenmade and maintained. We have however not made a detailed examination of the cost recordswith a view to determine whether they are accurate or complete.

VII. (a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including Provident Fund Employees’ State InsuranceIncome Tax Sales Tax Service Tax Duty of Custom Duty of Excise Value added tax Cessand other material statutory dues applicable to it. According to the information andexplanations given to us no undisputed amounts payable in respect of outstandingstatutory dues were in arrears as at March 31 2017 for a period of more than six monthsform the date they became payable.

(b) Following amounts have not been deposited as on March 31 2017 on account ofdispute are given below:

Nature of Statue Nature of the dues Rs. in Lakhs Period to which the amount relates Forum where matter is pending
Central Excise Act 1944 Recovery of CENVAT 1.59 2004-05 The Dy. Commissioner of C. Excise Div-I Ahmedabad.
Recovery of additional TTA duty of yarn captively consume 24.85 2002-03 The Dy. Commissioner of C. Excise Div-III Ahmedabad

 

Nature of Statue Nature of the dues Rs. in Lakhs Period to which the amount relates Forum where matter is pending
Central Excise Act 1944 Refund claim for amount short received against refund claim of yarn duty after adjusting the old recovery 0.98 2005-06 The Commissioner of C. Excise (Appeals) Ahmedabad
Demand for old duty 0.5 2008-09 CESTAT West Zone Ahmedabad
Recovery of transitional 5.81 2012-13 CESTAT West Zone Ahmedabad (Appeal)
CENVAT
Gujarat Sales Tax Act 1969 Additional Sales Tax 6.17 1997-98 Gujarat Value Added Tax Tribunal
1998-99
2000-01
Gujarat Sales Tax Act 1969 Demand of Sales Tax 21.66 2005-06 Gujarat Value Added Tax Tribunal

VIII. Based on our audit procedures and on the basis of information and explanationgiven to us by the management the company has defaulted in repayment of loans orborrowings to a bank of which details are as follows:

(Rs in Lakhs)

Particulars Amount of Default as at the Balance Sheet date Period of Default
a) Axis Bank Rs 94.25 Upto 30 days (since repaid)

IX. To the best of our knowledge and belief and according to the information andexplanations given to us the Company did not raise any money by way of initial publicoffer or further public offer (including debt instruments) and term loans during the year.Accordingly paragraph 3 (ix) of the Order is not applicable.

X. To the best of our knowledge and belief and according to the information andexplanations given to us no fraud by the Company or on the Company by its officers oremployees has been noticed or reported during the year.

XI. To the best of our knowledge and belief and according to the information andexplanations given to us managerial remuneration has been paid/provided in accordancewith the requisite approvals mandated by the provisions of section 197 read with ScheduleV to the Act.

XII. The Company is not a Nidhi Company. Consequently requirements of clause (xii) ofparagraph 3 of the order are not applicable.

XIII. To the best of our knowledge and belief and according to the information andexplanations given to us all transactions with the related parties are in compliance withsection 177 and 188 of the Act where applicable and the details have been disclosed in theFinancial Statements as required by the applicable accounting standards.

XIV. To the best of our knowledge and belief and according to the information andexplanations given to us the Company has not made any preferential allotment or privateplacement of share or fully or partly convertible debentures during the year under review.Consequently requirements of clause (xiv) of paragraph 3 of the order are not applicable.

XV. To the best of our knowledge and belief and according to the information andexplanations given to us the Company has not entered into any non-cash transactions withdirectors or persons connected with him. Accordingly provisions of clause 3(XV) of theorder are not applicable to the Company.

XVI. According to the nature of the business the Company is not required to beregistered under section 45-IA of the Reserve Bank of India Act 1934. Accordinglyprovisions of clause 3(XVI) of the order are not applicable to the Company.

For PIPARA & CO LLP
Chartered Accountants
Firm Regn. No. : 107929W
NAMAN PIPARA
PLACE: Ahmedabad (Partner)
DATE : 30th May 2017 Membership No.140234

ANNEXURE ‘B’ TO THE INDEPENDENT AUDITORS’ REPORT

OF EVEN DATE ON THE FINANCIAL STATEMENTS OF SOMA TEXTILES & INDUSTRIES LIMITED

The Annexure referred to in paragraph 2(f) under the heading "Report on OtherLegal and Regulatory Requirements" in respect to the Internal Financial Controlunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct") for the year ended 31st March 2017 we report that :

We have audited the internal financial controls over financial reporting of SOMATEXTILES & INDUSTRIES LIMITED ("the Company") as of March 31 2017 inconjunction with our audit of the financial statements of the Company for the year endedon 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)". Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company’s policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required 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 issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controlls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established anmaintained and if such 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 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 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 on the Company’s internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements of external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of dispositions of the assets of the company; (2) provide reasonable assurancethat transactions 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 Control 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 misstatement due to error or fraud may occur and not be detected. Alsoprojections of any evaluation of the internal financial controls over financial reportingto future periods are subject to the risk that the 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.

Opinion

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 March 31 2017 based 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 PIPARA & CO LLP
Chartered Accountants
Firm Regn. No. : 107929W
NAMAN PIPARA
PLACE: Ahmedabad (Partner)
DATE : 30th May 2017 Membership No.140234