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Sujana Universal Industries Ltd.

BSE: 517224 Sector: Consumer
NSE: SUJANAUNI ISIN Code: INE216G01011
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VOLUME 2209
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Sujana Universal Industries Ltd. (SUJANAUNI) - Auditors Report

Company auditors report

To the Members of

SUJANA UNIVERSAL INDUSTRIES LIMITED

Report on Audit of the Standalone Financial Statements

Qualified Opinion

We have audited the accompanying Standalone Financial Statements of Sujana UniversalIndustries Limited ("the Company") which comprise the Balance Sheet as at March31 2019 the Statement of Profit and Loss (including other comprehensive income) thestatement of Cash Flows and the statement of changes in equity for the year then ended anda summary of significant accounting policies and other explanatory information(hereinafter referred to as "Standalone Financial Statements").

In our opinion and to best of our information and according to explanations given tous except for the effects of the matter described in the "Basis for QualifiedOpinion" section of our report the aforesaid standalone financials statements readtogether with significant accounting policies and accompanying notes thereon give theinformation required by the Companies Act 2013 (the "Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31st March 2019and its Loss (financials performance including other Comprehensive income) the changes inequity and its cash flow for the year ended on that date.

Basis of Qualified Opinion

a) The Company has defaulted in repayment of dues to Banks/Financial Institutions andall loans outstanding were classified as NPA's by the banks. Provision for interest(excluding penal interest) amounting to Rs. 55.67 Cr. and Rs.213.40 Cr for the quarterended 31st March 2019 and Year ended on such date respectively on its Working Capital Loanand Term Loan has not been made in the books by the Company as those Loan Accounts wereclassified as NPA by the Lending Banks and Financial Institutions. The loss of the Companyhas been understated by Rs.55.67 Cr for the quarter ended 31st March 2019 and Rs. 213.40Cr for the year ended on such date in view of non-provision of Interest amount.

b) In absence of technical and costing evaluation of current and noncurrent assetsimpact of impairments if any on their economic value we can't comment on the realizablevalue of same.

c) The Trade receivables could not be verified as the confirmation of balances have notbeen received. The Company has made a provision for bad and doubtful debts for tradereceivables amounting to Rs.409.18 Cr during the Year ended 31st March 2019. Therealizability of remaining trade receivables amounting to Rs.579.63 Cr is in doubt and thecompany has not made any provision for Bad and Doubtful Debts in respect of this tradereceivables.

d) Loans and advances of Rs. 44.16 Cr has been given to various sub-contractorssuppliers and other parties are old advances. Having regard to the age of this advancesin our opinion this are doubtful of recovery. The company is yet to assess the change inrisk of default and resultant expected credit allowance on such Loan and advances. Had theaforesaid Loans and advances has been provided for impairment loss of the company for thequarter ended 31st March 2019 and year ended on such date would have been higher by Rs.44.16 Cr .

e) The Company's Net worth has been eroded on account of losses incurred by the companyduring the year ended 31st March 2019 and previous financial year and the net worth of thecompany is negative. The Current Liabilities of the company exceeded the current assets ofthe company as at 31st March 2019 by Rs.754.64 Cr. It would cast doubt on the Company'sability to continue as a going concern basis

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder Section 143(10) of the Companies Act2013. Our responsibility under those standardsare further described in the Auditors Responsibilities for the Audit of the FinancialsStatements section of our report. We are independent of the entity in accordance with theCode of Ethics issued by ICAI together with the ethical requirements that are relevant toour audit of the financial statements under the provisions of the Companies Act2013 andthe rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with the Code of Ethics. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our qualified opinion on the standalonefinancial statements.

Emphasis of Matters:

a) Note No. 2.37(b) to the financial statements which describes the uncertainty relatedto the outcome of the lawsuit filed against the Company by the Mauritius Commercial Bankwhich has financed one of its subsidiaries Hestia Holdings Limited for which the Companyhas given a Corporate Guarantee.

b) Note No.2.37 (c) to the financial statements which describes the uncertainty relatedto the outcome of the Bank Debt recalled by the Standard Bank which has financed one ofits step-down subsidiary Selene Holdings Limited for which the

Company has given a Corporate Guarantee

Our opinion is not modified in respect of the above matters

Key Audit Matters

Key Audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statement of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.

Evaluation of uncertain tax positions:

The company has material uncertain tax positions including matters under dispute asdisclosed under Contingent Liabilities (Note no: 2.37) which involves significantjudgement to determine the possible outcome of these disputes.

How our audit addressed the key audit matter

We have obtained from the management the details of the present status ofcompleted/pending disputes and taken into consideration the effect of these in respect ofuncertain tax provisions to evaluate the uncertainties as at the year end.

Information Other Than the Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the annual report but does not includethe Standalone financials statement and our auditor's report thereon.

Our opinion on the Standalone financial statements does not cover the other informationand we do not express any form of the assurance conclusion thereon

In connection with the audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financials statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we performed we conclude that there is a material misstatement of this otherinformation; we are required to report the fact. We have nothing to report in this regard.

Responsibility of Management 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 statefinancial position and financial performance of the company in accordance with theaccounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under Section 133 of the Act read with relevant rules issuedthere under.

This responsibility includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; design implementation and maintenance of adequate internal financial controlsthat are operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the StandaloneFinancial Statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the financial statements the Board of Directors is responsible forassessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless the Board of Directors either intends to liquidate the Company or tocease operations or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing the company's financialreporting process.

Auditor's Responsibility for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalonefinancial 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 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 standalonefinancial 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 financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act 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 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

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 financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits 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 A" a statement on the matters Specified inparagraphs 3 and 4 of the Order.

2. As required by section 143(3) of the Act we further 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;

c) the Balance Sheet Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Cash Flows and the statement of changes in equity dealt with bythis Report are in agreement with the books of account;

d) in our opinion the aforesaid Standalone Ind AS Financial Statements comply with theapplicable Accounting Standards specified under Section 133 of the Act read with relevantrule issued there under.

e) On the basis of written representations received from the directors as on March 312019 and 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 the requirements of section 197(16) of the Act as amended:

In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to two of its directors during the yearis in excess of the remuneration payable as per provisions of section 197 of "theAct"- Refer to note 2.28 (IV) to the Standalone financial statements.

h) With respect to other matters to be included in the Auditor's Report in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to thebest of our information and according to the explanations given to us:

i. The Company has not disclosed the impact of pending litigations which would impactits financial position in notes to financial statements.

ii. The Company does not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses.

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

For J Singh & Associates.
Chartered Accountants
(Firm's RegnNo.110266W)
Ritesh Tawry
Place: Hyderabad Partner
Date: 29th May 2019 M.No. 213326

ANNEXURE A TO THE INDEPENDENT AUDITORS REPORT

Annexure referred to in Independent Auditors Report to the Members of Sujana UniversalIndustries Limited on the Standalone Financial Statements for the year ended 31st March2019 we report that:

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

(b As explained to us fixed assets have been physically verified by the management atregular intervals; as informed to us no material discrepancies were noticed on suchverification. In our opinion the frequency of verification is reasonable.

(c) According to the information and explanations given to us and on the basis of ourexamination of records of the Company the title deeds of immovable properties are held inthe name of the Company.

ii. The physical verification of inventory has been conducted at reasonable intervalsby the management during the year and no material discrepancies were noticed on suchverification.

iii. The Company has not granted any loans secured or unsecured to companies firmsand Limited Liability partnerships or other parties covered in the register maintainedunder section 189 of the Companies Act 2013. Therefore the provisions of Clause 3(iii)(iii)(a) (iii)(b) and (iii)(c) of the said order are not applicable to the company.

iv. The Company has not granted any loans or made any Investments or provided anyguarantee or security to the parties covered under section 185 and 186 of the Act.Therefore the provisions of clause 3(iv) of the said order are not applicable to thecompany.

v. The Company has not accepted any deposits during the year from the public within themeaning of the provisions of section 73 of "the Act" and hence directives issuedby the reserve bank of India and the provisions of section 73 to 76 or any other relevantprovisions of "the Act" the Rules framed there under are not applicable to theCompany at present

vi. We have broadly verified the books of accounts and records maintained by thecompany in respect of products where pursuant to the rules made by the central governmentof India the maintenance of cost records has been specified under the sub-section (1) ofsection 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 not however madedetailed examinations of the records with a view to determine whether they are accurate orcomplete

vii. (a) According to the information and explanations given to us and based on therecords of the company examined by us the company is not regular in depositing theundisputed statutory dues including Provident Fund Employees State Insurance IncomeTax Custom Duty Excise Duty and other material statutory dues as applicable with theappropriate authorities in India ;

(b) There were undisputed amounts payable amounting Rs. 8.32 cr in respect of IncomeTax Corporate Dividend Tax VAT Provident Fund ESI Service Tax TDS andProfessional Tax in arrears as at 31st March 2019 for a period of more than 6 months fromthe date they became payable.

Nature of Dues Amount in Cr
Income Tax payable 6.80
Corporate Dividend Tax 0.15
VAT 0.80
Professional Tax 0.01
Provident Fund 0.33
ESI 0.01
TDS 0.12
Excise Duty & Service Tax 0.10

(c) Details of dues of Income Tax Sales Tax Customs duty and excise duty and ValueAdded Tax which has not been deposited as at March 31 2019 on account of dispute aregiven below.

Disputed Statutory Liability as on 31.03.2019
Name of the Statute Amount in Crores Period to which the amount relates Forum where dispute is pending
Income Tax Act 1961 14.30 2010-11 CIT ( Appeals)
TNGST Act 1959 3.39 2000-01 Hon'ble High Court of Tamilnadu
TNGST Act 1959 23.46 2004-05 Hon'ble High Court of Tamilnadu
TNGST Act 1959 46.30 2005-06 Hon'ble High Court of Tamilnadu
TNGST Act 1959 27.33 2006-07 Hon'ble High Court of Tamilnadu
TNGST Act 1959 32.35 2007-08 Hon'ble High Court of Tamilnadu
TNGST Act 1959 3.85 2008-09 Hon'ble High Court of Tamilnadu
TNGST Act 1959 11.11 2009-10 Hon'ble High Court of Tamilnadu
TNGST Act 1959 28.49 2010-11 Hon'ble High Court of Tamilnadu
TNGST Act 1959 186.18 2011-12 Hon'ble High Court of Tamilnadu
TNGST Act 1959 218.78 2012-13 Hon'ble High Court of Tamilnadu
TNGST Act 1959 48.76 2013-14 Hon'ble High Court of Tamilnadu
Customs & Excise 3.17 2000-01 CESTAT Bangalore and Chennai
Customs & Excise 2.64 1995-96 CESTAT Chennai
Customs & Excise 1.52 2007-08 2008-09 CESTAT Bangalore
Customs & Excise 0.37 2008-09 Add. Commissioner of Customs & Excise Hyderabad –I
Workmen Compensation 0.05 2007-08 Interim Stay granted by Hon'ble High Court as against the order passed by the Hon'ble Labour Commissioner

viii. The company has defaulted in the repayment of loans taken from banks andfinancial institutions during the current financial year and no interest provision wasmade by the company on working capital loan amounting to Rs. 200.85 Cr and term loanamounting to Rs. 12.55 Cr. Details of defaults are given below

Details of over dues to Banks / Financial Institutions as on 31.03.2019 Rs. in Lakhs
Name of the Bank Nature of default Amount of Default Period of Default
Term Loans
IDBI Bank Ltd Principle 5153 January 2015 to March 2018
Interest 2052 March 2015 to March 2018
Redemption of Preference Share Capital
IDBI Bank Ltd CRP Shares 2180 January 2015 to March 2018
Dividend 201 January 2015 to March 2018
Working Capital Loans
A) Cash Credits
Bank of Baroda Monthly Interest 5515 February 2015 to March 2018
Bank of India Monthly Interest 19397 October 2015 to March 2018
Central Bank of India Monthly Interest 8037 September 2015 to March 2018
IDBI Bank Ltd Monthly Interest 3601 April 2015 to March 2018
Indian Overseas Bank Monthly Interest 13669 September 2015 to March 2018
Oriental Bank of Commerce Monthly Interest 12231 May 2015 to March 2018
UCO Bank Monthly Interest 6415 April 2015 to March 2018
68865
B) Letter of Credits
Bank of India LC devolvement 6250 October 2015 to March 2018
Central Bank of India LC devolvement 10000 October 2015 to March 2018
Indian Overseas Bank LC devolvement 12000 May 2015 to March 2018
UCO Bank LC devolvement 8000 June 2015 to March 2018
Export-Import Bank of India Mumbai SBLC devolvement 11099 March 16 to May 18
47349
Grand Total 116214

ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans during the year. Accordingly theprovisions of this clause are not applicable to the Company.

x. According to the information and explanations given to us no material fraud by thecompany or on the company by its officers or employees has been noticed or reported duringthe course of our Audit.

xi. In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to two of its directors during the yearis in excess of the remuneration payable as per provisions of section 197 of "theAct"-refer note 2.28 ( IV) to Standalone financial statements

xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it; the Provisions of clause 3(xii) of the order are not applicable to the company.

xiii. The Company has entered into transactions with related parties in compliance withthe provisions of section 188 of the Act. The details of such related party transactionshave been disclosed in the Ind AS Financial Statements as required under Indian Accountingstandard (Ind AS) 24 related party disclosures specified under section 133 of the Actread with rule 7 of the Companies (Accounts) Rules 2014.

xiv. The Company has not made any preferential allotment of private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of clause 3(xiv) of the Order are not applicable to the Company.

xv. The Company has not entered into non-cash transactions with its directors orpersons connected with him. Accordingly the provisions of clause 3(xv) of the Order arenot applicable to the Company.

xvi. The Company is not required to be registered under section 45-IA of The ReserveBank of India Act 1934. Accordingly the provisions of clause 3(xvi) of the order are notapplicable to the Company.

For J Singh & Associates.
Chartered Accountants
(Firm's RegnNo.110266W)
Ritesh Tawry
Place: Hyderabad Partner
Date: 29th May 2019 M.No. 213326

ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT

Report on the Internal Financial Controls over Financial Reporting under clause (i) ofthe Sub-section 3 of the Section 143 of the Companies Act 2013 (‘The Act')

We have audited the internal financial controls over financial reporting of SujanaUniversal Industries Limited (‘the company') as of 31st march 2019 in conjunctionwith our audit of standalone financial statements of the company for the year ended onthat 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 including adherence to respective company's policies thesafeguarding 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 Companies Act2013.

Auditor's Responsibility

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 Section143(10)of the CompaniesAct2013to 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 was 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 We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the internal financial controlssystem over financial reporting of the Company

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control 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 control over financialreporting includes those policies and procedures that (1) pertain to the maintenance e 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.

Limitation of Internal Financial Controls over Financial Reporting

Because of the inherent limitation 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 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.

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2019 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

For J Singh & Associates.
Chartered Accountants
(Firm's RegnNo.110266W)
Ritesh Tawry
Place: Hyderabad Partner
Date: 29th May 2019 M.No. 213326