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Subex Ltd.

BSE: 532348 Sector: IT
NSE: SUBEX ISIN Code: INE754A01014
BSE 00:00 | 29 May 7.37 0.20
(2.79%)
OPEN

7.49

HIGH

7.52

LOW

7.17

NSE 00:00 | 29 May 7.00 0.30
(4.48%)
OPEN

7.00

HIGH

7.00

LOW

7.00

OPEN 7.49
PREVIOUS CLOSE 7.17
VOLUME 4656124
52-Week high 7.52
52-Week low 2.80
P/E 61.42
Mkt Cap.(Rs cr) 414
Buy Price 7.45
Buy Qty 478.00
Sell Price 7.51
Sell Qty 811.00
OPEN 7.49
CLOSE 7.17
VOLUME 4656124
52-Week high 7.52
52-Week low 2.80
P/E 61.42
Mkt Cap.(Rs cr) 414
Buy Price 7.45
Buy Qty 478.00
Sell Price 7.51
Sell Qty 811.00

Subex Ltd. (SUBEX) - Auditors Report

Company auditors report

To the Members of

Subex Limited

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statements of SubexLimited ("the Company") which comprise the standalone Balance sheet as at March31 2019 the standalone Statement of Profit and Loss including the statement of OtherComprehensive Income the standalone Cash Flow Statement and the standalone Statement ofChanges in Equity for the year then ended and notes to the standalone financialstatements including a summary of significant accounting policies and other explanatoryinformation (hereinafter referred to as "the standalone Ind AS FinancialStatements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019its loss including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the standalone Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the 'Code of Ethics'issued by the Institute of Chartered Accountants of India together with the ethicalrequirements 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 believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 31 2019. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements and in forming our opinion thereon and we do notprovide a separate opinion on these matters. For each matter below our description of howour audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying standalone Ind AS financialstatements.

Key audit matters How our audit addressed the key audit matter

Impairment assessment of Investments in Subsidiaries (as described in note 5 of the standalone Ind AS financial statements)

Our audit procedures included the following:
As at March 31 2019 the carrying value of investment in wholly owned subsidiaries in the standalone Ind AS balance sheet amounts to Rs. 64369 lakhs which is assessed for impairment. (i) We understood the Company's process for identification of indicators for impairment and evaluated the Company's nternal controls over its impairment assessment of investment in subsidiaries.
To assess if there is an impairment of the carrying value of the investment management conducted impairment tests annually or whenever changes in circumstances or events indicate that the carrying amount of such investment may not be recoverable. An impairment loss is recognized if the recoverable amount is lower than the carrying value. i We understood the key assumptions applied by the management such as revenue growth operating margins discount rates and terminal growth rates in determining impairment;
The recoverable amount is estimated by calculating the value in use basis valuation conducted by an external valuation specialist ('management's expert') factoring future business plans and such valuation report/future business plans are reviewed and approved by the Audit Committee/ Board of Directors of the Company. (ii) In respect of the external valuation specialist engaged by the management we obtained the valuation report from the management and assessed the independence objectivity and competence of the management expert;
This is a key audit matter as the testing of investment impairment is complex and involves significant judgement. (iii) We tested the key assumptions and considered the sensitivity scenarios performed by management's expert;
The key assumptions involved in impairment tests are projected revenue growth operating margins discount rates and terminal growth etc. (iv) We involved valuation specialists for evaluating and testing the key assumptions and methodologies used by the management's expert in their valuation reports; and
(v) We assessed the disclosures made in the financial statements.
Contingent liabilities in relation to tax litigations (as described in note 34(b) of the standalone Ind AS financial statements)
The Company has received certain demand orders and notices relating to Income Tax and Service Tax matters. The Company is contesting these demands. Our audit procedures included the following: (i) We obtained an understanding and tested the internal controls relating to the identification recognition and measurement of provisions for disputes and disclosures of contingent liabilities in relation to tax;
Significant judgements and estimates are required to assess impact of these litigations on the financial position results of operations and cash flows.
The evaluation of management's judgements supported by the assessments received from external tax and legal specialists ('management's expert') including those that involve estimations in assessing the likelihood that a pending claim will succeed or a liability will arise complexity of the cases time period for resolution have been a matter of significance during the audit and hence considered as a key audit matter. (ii) We obtained details of completed tax assessments demands issued by tax authorities orders/notices received with respect to other litigations from the management;
(iii) We obtained confirmation from management's expert on ongoing litigations along with risk assessment;
(iv) We held discussions with management to understand their assessment of the quantification and likelihood of significant exposures and the provision required for specific cases;
(v) We involved tax specialists to review the status of tax assessments and management's position in relation to ongoing disputes regarding likelihood assessment of exposure carried out by the management;
(vi) We assessed the independence objectivity and competence of the management expert; and
(vii) We assessed the disclosures in the financial statements.

Other Information

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard's report including annexures and report on Corporate Governance but does notinclude the standalone Ind AS financial statements and our auditor's report thereon.

Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.

Responsibilities of Management for the Standalone Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of 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 the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone Ind AS financial statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.

In preparing the standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibilities for the Audit of the Standalone Ind AS 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 Ind AS 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 standalone Ind ASfinancial 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch 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 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 as agoing concern.

• Evaluate the overall presentation structure and content of the standalone IndAS financial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves 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 with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS financialstatements for the financial year ended March 31 2019 and are therefore the key auditmatters. 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

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 1" a statement on the matters specified inparagraphs 3 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 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 standalone Balance Sheet the standalone Statement of Profit and Loss includingthe Statement of Other Comprehensive Income the standalone Cash Flow Statement andstandalone Statement of Changes in Equity dealt with by this Report are in agreement withthe books of account;

(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;

(e) On the basis of the written representations received from the directors as on March312019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312019 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 with reference to these standalone Ind AS financial statementsand the operating effectiveness of such controls refer to our separate Report in"Annexure 2" to this report;

(g) In our opinion the managerial remuneration for the year ended March 31 2019 hasbeen paid/provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act; and

(h) 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 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in standalone Ind AS financial statements - Refer Note 34(b) to the standaloneInd AS financial statements;

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

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Rajeev Kumar

Partner

Membership Number: 213803

Place of Signature: Bengaluru

Date: May 13 2019

annexure1

TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE IND AS FINANCIALSTATEMENTS OF SUBEX LIMITED

Statement on the matters specified in paragraph 3 and 4 of the Companies (Auditor'sReport) Order 2016 ("the Order")

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment and intangible assets.

(b) Property plant and equipment have been physically verified by the managementduring the year and no material discrepancies were identified on such verification.

(c) According to the information and explanations given by the management there are noimmovable properties included in property plant and equipment of the Company andaccordingly the requirements under paragraph 3(i) (c) of the Order are not applicable tothe Company.

(ii) The Company's business does not involve inventories and accordingly therequirements under paragraph 3(ii) of the Order are not applicable to the Company.

(iii) According to the information and explanations given by the management theCompany has not granted any loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under section189 of the Companies Act 2013 ("the Act").

Accordingly the provisions of clause 3(iii) (a) (b) and (c) of the Order are notapplicable to the Company.

(iv) In our opinion and according to the information and explanations given by themanagement the Company has complied with the provisions of section 185 and 186 of the Actin respect of grant of loans to directors including entities in which they are interestedand in respect of loans and advances given making investments and providing guaranteesand securities as applicable. In this regard we also draw attention to note 34(b)(iii)to the Standalone Ind AS Financial Statements relating to amounts recoverable fromerstwhile directors of the Company towards excess managerial remuneration pertaining tothe financial year 2012-13 which is under litigation.

(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.

(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under Section 148(1) of the Act for theproducts/ services of the Company.

(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 goodsand services tax cess and other material statutory dues applicable to it.

(b) According to the information and explanations given by the management noundisputed amounts payable in respect of provident fund employees' state insuranceincome-tax sales- tax service tax duty of customs duty of excise value added taxgoods and services tax cess and other material statutory dues were outstanding at theyear end for a period of more than six months from the date they became payable.

(c) According to the records of the Company there are no dues of income-taxsales-tax service tax duty of customs duty of excise value added tax goods andservices tax and cess which have not been deposited on account of any dispute except thefollowing:

Name of the Statute Nature of the dues Disputed amount * (Rs. in Lakhs) Amount paid/ refund adjusted under protest (Rs. in Lakhs) Period to which the amount relates (Financial Year) Forum where dispute is pending
Income Tax Act 1961 Adjustment for transfer pricing disallowances under section 10A and other disallowances 1397 1397 2013-14 Income Tax Appellate Tribunal ('ITAT') Bangalore
3382 924 2012-13 Transfer Pricing Officer Bangalore
379 30 2010-11 Hon'ble High Court of Karnataka
10 - 2009-10 Commissioner of Income Tax (Appeals) Bangalore
346 - 2006-07 Commissioner of Income Tax (Appeals) Bangalore
4 4 2005-06 Hon'ble High Court of Karnataka
80 141 2004-05 Hon'ble High Court of Karnataka
211 212 2001-02 2002-03 and 2003-04 Hon'ble Supreme Court of India
Finance Act 1994 Service tax 1004 924 April 2006 to October 2007 Central Excise and Service Tax Appellate Tribunal Bangalore
3608 - April 2006 to July 2009 Commissioner of Service Tax Bangalore

*Excludinq penalty and interest from the date of Order to March 312019.

(viii) The Company did not have any outstanding loans or borrowing dues in respect of afinancial institution or bank or to government or dues to debenture holders during theyear.

(ix) According to the information and explanations given by the management the Companyhas not raised any money by the way of initial public offer/further public offer(including debt instruments) and term loans during the year. Hence reporting underparagraph 3(ix) of the Order is not applicable to the Company.

(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the Standalone Ind AS Financial Statements and according to the informationand explanations given by the management we report that no fraud by the Company or nofraud on the Company by its officers or employees has been noticed or reported during theyear.

(xi) According to the information and explanations given by the management themanagerial remuneration for the year ended March 31 2019 has been paid/provided by theCompany to its directors in accordance with the provisions of section 197 read withSchedule V to the Act. In this regard we also draw attention to note 34(b)(iii) to theStandalone Ind AS Financial Statements relating to amounts recoverable from erstwhiledirectors of the Company towards excess managerial remuneration pertaining to thefinancial year 2012-13 which is under litigation.

(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the Company.

(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 of theAct where applicable and the details have been disclosed in the notes to the StandaloneInd AS Financial Statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe Company.

(xv) According to the information and explanations given by the management the Companyhas not entered into any noncash transactions with directors or persons connected with himas referred to in section 192 of the Act.

(xvi) According to the information and explanations given by the management theprovisions of section 45-IA of the Reserve Bank of India Act 1934 are not applicable tothe Company.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Rajeev Kumar

Partner

Membership Number: 213803

Place of Signature: Bengaluru

Date: May 13 2019

ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE IND ASFINANCIAL STATEMENTS OF SUBEX LIMITED

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 controls over financial reporting of SubexLimited ("the Company") as of March 31 2019 in conjunction with our audit ofthe standalone Ind AS financial statements of the Company for the year ended on 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements based on our audit. We conducted our audit in accordance with the Guidance Noteon Audit of Internal Financial Controls Over Financial Reporting (the "GuidanceNote") and the Standards on Auditing as specified under section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements was established and maintained and if such controls operated effectively in allmaterial respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to thesestandalone Ind AS financial statements and their operating effectiveness. Our audit ofinternal financial controls over financial reporting included obtaining an understandingof internal financial controls over financial reporting with reference to these standaloneInd AS financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the financial statements whetherdue 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 internal financial controls over financialreporting with reference to these standalone Ind AS financial statements.

Meaning of Internal Financial Controls Over Financial Reporting With Reference to theseFinancial Statements A Company's internal financial control over financial reporting withreference to these standalone Ind AS financial statements is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generally acceptedaccounting principles. A Company's internal financial control over financial reportingwith reference to these standalone Ind AS financial statements includes those policies andprocedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of theCompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the Company are being madeonly in accordance with authorisations of management and directors of the Company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the Company's assets that could have a material effecton the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting WithReference to these Standalone Ind AS Financial Statements

Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone Ind AS financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these standalone Ind AS financial statements to future periods are subject to the riskthat the internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements and such internal financial controls over financial reporting with reference tothese standalone Ind AS financial statements were operating effectively as at March 312019 based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Rajeev Kumar

Partner

Membership Number: 213803

Place of Signature: Bengaluru

Date: May 13 2019.