To the Members of Spectra Industries Limited Report on the audit of the financialstatements Opinion
We have audited the accompanying financial statements of Spectra Industries Limited("the Company") which comprise the balance sheet as at March 31 2019 and theStatement of Profit and Loss and statement of cash flows for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 (Act') in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2019 its Loss and cash flows for the year ended onMarch 31 2019.
Basis for opinion
We conducted our audit in accordance with the standards on auditing specified undersection 143 (10) of the Companies Act 2013. Our responsibilities under those Standardsare further described in the auditor's responsibilities for the audit of the financialstatements section of our report. We are independent of the Company in accordance with thecode of ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the financial statements under theprovisions of the Act and the rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the code of ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Material Uncertainty Related to Going Concern
The Company's net worth is negative and the borrowings from banks and financialinstitutions have been classified by the lenders as non-performing assets during the year.We were informed that the Company is also in the process of identifying alternativebusiness plans to improve the performance of the Company and to initiate a One TimeSettlement (OTS) with the banks. Pending submission of the OTS/ other alternativeresolution plans a decision is yet to be taken by the lenders regarding restructuring ofthe Company's borrowings. During the 12 months period ended on Mar 31 2019 businessactivities was closed The above factors cast a significant uncertainty on the Company'sability to continue as a going concern. Pending the resolution of the above uncertaintiesthe Company has prepared the aforesaid statement on a going concern basis.
Key audit matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.Reporting of key audit matters as per SA 701 -
1. The company has defaulted in payment of its loans and the credit facilities withBanks amounting to Rs 27.87 crores which have been classified by Banks as NPA. Bank ofIndia has given notice under Sec 13(2) of the Securitization and Reconstruction ofFinancial Assets and Enforcement of Securities Interest Act 2002
2. The company has defaulted in payment of Statutory Dues. Total amount overdue was Rs7169715 as on Mar 31 2019
3. During the 12 months period ended on Mar 31 2019 business activities was closed.
4. The company has written off their inventories valuing Rs 13.94 crs as the companybelieves due to old and obsolete stock being held for over 2 years there was no value thatthese stock could fetch. The company has removed these obsolete stocks from their premisesduring the year.
5. The company has increased provision for doubtful debts to Rs 19.07 crs amounting to84.26% of total receivables.
6. Net worth of the company has become negative and Capital is eroded due to losses.
7. The company has made re-payment of Rs 1.33 crs to G3 Motors Ltd which is a groupcompany and Rs 12.75 lacs to one of their Director.
Information other than the financial statements and auditors' 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 Board'sReport including Annexures to Board's Report Business Responsibility Report but does notinclude the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider the other information is consistent withthe standalone financial statements. We have nothing to report in this regard.
Management's responsibility for the financial statements
The Company's board of directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these financial statements that give atrue and fair view of the financial position financial performance and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the accounting standards specified under section 133 of the Act. 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 statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern.
The 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 financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations 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. Under section 143(3)(i) of theCompanies Act 2013 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 reasonableness ofaccounting estimates and related disclosures made by management.
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 existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
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. From the matters communicated withthose charged with governance we determine those matters that were of most significancein the audit of the financial statements of the current period and are therefore the keyaudit matters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Report on other legal and regulatory requirements
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 Companies Act 2013 we give in the Annexure "A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
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 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 March31 2019 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". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting;
(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;
a. The Company does not have any pending litigations which would impact its financialposition;
b. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and c. There has been no delay intransferring amounts required to be transferred to the Investor Education and ProtectionFund by the Company
| ||For Choudhary Choudhary & Co. |
| ||Chartered Accountants |
| ||Firm Registration Number: 02910C |
| ||(Alok Kumar Mishra) |
|Place: Mumbai ||Partner |
|Date: May 30 2019 ||Membership Number: 124184 |
ANNEXURE-A TO INDEPENDENT AUDITOR'S REPORT
1. In respect of the Company's fixed assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a program of verification to cover all the items of fixed assets ina phased manner over a period of three years which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. However no physicalverification has been carried on by the management during the year. Accordingly we wereunable to comment on whether any material discrepancies were noticed on such verificationand whether they are properly dealt with in the financial statements.
(c) According to the information and explanations given to us the records examined byus and based on the examination of the conveyance deeds provided to us we report thatthe title deeds comprising all the immovable properties of land and buildings which arefreehold are held in the name of the Company as at the balance sheet date. Theseproperties are mortgaged to Lenders and hence original copies were not available. Inrespect of immovable properties of land and building that have been taken on lease anddisclosed as fixed assets in the financial statements the lease agreements are in thename of the Company.
2. The company has written off their inventories valuing Rs 13.94 crs as the companybelieves due to old and obsolete stock being held for over 2 years there was no value thatthese stock could fetch. The company has removed these obsolete stocks from their premisesduring the year.
3. According to information and explanation given to us the company has not grantedany loan secured or unsecured to companies firms limited liability partnerships orother parties covered in the register required under section 189 of the Companies Act2013. Accordingly paragraph 3 (iii) of the order is not applicable.
4. In our opinion and according to information and explanation given to us the companyhas not granted any loans or provided any guarantees or given any security or made anyinvestments to which the provision of section 185 and 186 of the Companies Act 2013.Accordingly paragraph 3 (iv) of the order is not applicable.
5. In our opinion and according to the information and explanations given to us thecompany has not accepted any deposits and accordingly paragraph 3 (v) of the order is notapplicable.
6. The Central Government of India has not prescribed the maintenance of cost recordsunder sub-section (1) of section 148 of the Act for any of the activities of the companyand accordingly paragraph 3 (vi) of the order is not applicable.
7. In respect of statutory dues:
(a) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax sales- taxservice tax goods and service tax duty of customs duty of excise value added tax cessand other material statutory dues were in arrears as at March 31 2019 for a period ofmore than six months from the date they became payable except as per details below:
(b) According to the information and explanations given to us and the records of thecompany examined by us there are no dues of income-tax sales- tax service tax goodsand service tax duty of customs duty of excise and value added tax which have not beendeposited on account of any dispute.8According to the information and explanation given tous and records examined by us the Company has defaulted in repayment of dues to banksfinancial institutions and government as detailed in Appendix I to this report. TheCompany does not have any dues to debenture holders during the year.9.The Company has notraised any money by way of initial public offer or further public offer (including debtinstruments) and has not taken any term loans during the year. Accordingly paragraph 3(ix) of the order is not applicable.
10. To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company or no material fraud on the Company by its officersor employees has been noticed or reported during the year.
11. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid / provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V of the Act.
12. The Company is not a Nidhi Company and accordingly paragraph 3 (xii) of the orderis not applicable to the Company.
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 section 177 and 188 of the Act. Where applicable the details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
14 According to the information and explanations given 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. Accordingly paragraph 3(xiv) of the order is not applicable.
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 them. Accordingly paragraph 3(xv)of the order is not applicable.
16 According to the information and explanations given to us and based on ourexamination of the records of the company the company is not required to be registeredunder section 45-IA of the Reserve Bank of India Act 1934.
Details of default in payment of dues to Banks and Financial Institutions
|Name of the bank / Financial Institution ||Nature of default ||Amount of default (Rs) ||Period of default ||Present status |
|HDFC Bank Limited ||Account Overdue ||18819635 ||14 months ||NPA |
|ICICI Bank Limited ||Account Overdue ||8089311 ||14 months ||NPA |
|Bank of India ||Account Overdue ||247685245 ||14 months ||NPA |
|Total || ||274594191 || || |
Details of default in payment to Government is provided at point 7 (a) above.
Annexure "B" to the Independent Auditor's Report
(Referred to in paragraph 2 (f) under Report on other legal and regulatoryrequirements' section of our report to the Members of Spectra Industries Limited of evendate)
Report on the internal financial controls over financial reporting under clause (i) ofsub section 3 of section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of SpectraIndustries Limited ("the Company") as at March 31 2019 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.
Management's responsibility for internal financial controls
The board of directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the standards on auditing prescribed under Section 143 (10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. 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 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 judgement including the assessment of the risks ofmaterial misstatement in 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 control systemover financial reporting.
Meaning of internal financial controls over financial reporting A company's internalfinancial control over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles. A company's internal financial control over financial reportingincludes those policies and procedures that (i) pertain to the maintenance of recordsthat in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (ii) 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 authorisations ofmanagement and directors of the company; and (iii) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
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 of 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 and according to the information and explanations given to us theCompany has in all material respects an adequate internal financial control system overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as at March 31 2019 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India.
| ||For Choudhary Choudhary & Co. |
| ||Chartered Accountants |
| ||Firm Registration Number: 02910C |
| ||(Alok Kumar Mishra) |
|Place: Mumbai ||Partner |
|Date: May 30 2019 ||Membership Number: 124184 |