The Members of
TREND ELECTRONICS LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of TREND ELECTRONICS LIMITED ("theCompany") which comprise the Balance Sheet as at March 31 2018 the Statement ofProfit and Loss (including Other Comprehensive Income) the Statement of Cash Flow and theStatement of Changes in Equity for the year then ended and a summary of significantaccounting policies and other explanatory information.
Management's Responsibility for the Ind AS 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 financial statements that give a true and fair view of the state of affairs(financial position) profit or loss (financial performance including other comprehensiveincome) cash flows and changes in equity of the Company in accordance with the IndianAccounting Standards (Ind AS) prescribed under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended and the accountingprinciples generally accepted in India.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. In conducting our audit we have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made there under.
We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under Section 143(10) of the Act. Those Standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the Ind AS financial statements are free from materialmisstatement.
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 of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof 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 financial statements.
Basis for Qualified Opinion
As mentioned in Note No. 46 to the financial statements during the year the Companyhas incurred a net loss of Rs. 3028.23 Million and as of that date the Company'saccumulated losses amounts to Rs. 4119.58 Million and it has negative net worth of Rs.2611.11 Million. Further the Company has been referred to National Company Law Tribunalunder the Insolvency and Bankruptcy Code 2016 as amended and there are persistent severestrains on the working capital and there is considerable decline in level of operations ofthe Company. These factors raise significant doubts on the ability of the Company tocontinue as a "Going Concern". The management has assumed that the going concernconcept stands vitiated and is in the process of ascertaining the liquidation value of theassets. The necessary adjustments required on the carrying amount of assets andliabilities have not been ascertained and the impact thereof on the financial statementsis not ascertainable at this stage.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matters described in the Basis forQualified Opinion paragraph the aforesaid financial statements read with the notesthereon give the information required by the Act in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in Indiaincluding the Ind AS of the state of affairs of the Company as at March 312018 and itsloss total comprehensive loss its cash flows and the changes in equity for the yearended on that date.
Emphasis of Matter
As mentioned in Note No. 45 to the financial statements the balance confirmations andreconciliation have not been received in respect of certain secured and unsecured loansbalances with banks trade receivables trade and other payables and loans and advances.In the opinion of the management there will not be any material impact on the financialstatements.
Our opinion is not modified in respect of above matters.
The comparative financial information of the Company for the year ended March 312017and the transition date opening balance sheet as at April 12016 included in these Ind ASfinancial statements are based on the previously issued statutory financial statementsprepared in accordance with the Companies (Accounting Standards) Rules 2006 audited bythe predecessor auditors whose report for the year ended March 312017 and period endedMarch 312016 dated May 30 2017 and May 30 2016 respectively expressed unmodifiedopinion on those financial statements as adjusted for the differences in the accountingprinciples adopted by the Company on transition to the Ind AS which have been audited byus.
Report on Other Legal and Regulatory Requirements
1) As required by Section 143(3) of the Act based on our 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 including Other ComprehensiveIncome the Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the relevant books of account;
d) In our opinion the aforesaid Ind AS financial statements comply with the IndianAccounting Standards prescribed under section 133 of the Act read with relevant rulesissued there under;
e) The matter relating to the management assumption that the going concern conceptstands vitiated described in Basis for Qualified Opinion paragraph above in our opinionmay have an adverse effect on the functioning of the Company.
f) On the basis of the written representations received from the directors as on March31 2018 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2018 from being appointed as a director in terms of Section 164(2) of theAct;
g) 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 A;
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 its financial statements. Refer Note 37 and 39 to the financial statements.
ii) The Company did not have any long term contracts including derivatives contractsfor which there were any material foreseeable losses; and
iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
2) As required by the Companies (Auditor's Report) Order 2016 (the Order) issued bythe Central Government in terms of Section 143(11) of the Act we give in Annexure B astatement on the matters specified in paragraphs 3 and 4 of the Order.
For S Z DESHMUKH & CO.
(Firm Registration No. 102380W)
D. U. KADAM
Membership No. 125886
Place: Mumbai Date: July 3 2018
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1 (g) under Report on Other Legal and RegulatoryRequirements' of our report of even date)
Report on the Internal Financial Controls 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 TRENDELECTRONICS LIMITED (the Company) as of March 312018 in conjunction with our audit of thefinancial 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 Reporting (theGuidance Note) 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 Company's policies the safeguarding ofits 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 Companies Act 2013.
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 and the Standards on Auditing prescribed under Section 143(10) ofthe Companies Act 2013 to the extent applicable to an audit of internal financialcontrols. 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 andmaintained 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 controls systemover financial reporting.
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 ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that 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 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 312018 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 S Z DESHMUKH & CO.
(Firm Registration No. 102380W)
Membership No. 125886
Date: July 3 2018
ANNEXURE "B" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements' of our report of even date)
(i) In respect of fixed assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) As per the information and explanations given to us physical verification of fixedassets has been carried out in terms of the phased programme of verification adopted bythe Company and no material discrepancies were noticed on such verification. In ouropinion the frequency of verification is reasonable having regard to the size of theCompany and nature of its business.
(c) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
(ii) (a) As per the information and explanation given to us the inventories have beenphysically verified during the year by the management at reasonable intervals.
In our opinion having regard to the nature and location of stocks the frequency ofthe physical verification is reasonable.
(b) As per information and explanation given to us no material discrepancies werenoticed.
(iii) As per the information and explanation given to us the Company has not grantedany loans secured or unsecured to companies firms limited liability partnerships orother parties covered in the register maintained under Section 189 of the Act.
(iv) In our opinion and according to the information and explanation given to us theCompany has complied with the provisions of Section 185 and 186 of the Act in respect ofloans investments guarantees and security.
(v) According to the information and explanations given to us the Company has notaccepted any deposit during the period. Therefore the provisions of clause (v) of theOrder is not applicable.
(vi) According to the information and explanations given to us in our opinion theCompany has prima facie made and maintained the prescribed cost records pursuant to theCompanies (Cost Records and Audit) Rules 2014 as amended and prescribed by the CentralGovernment under section 148(1) of the Companies Act 2013. We have however not made adetailed examination of the cost records with a view to determine whether they areaccurate or complete.
(vii) (a) According to the information and explanations given to us and the recordsexamined by us the Company is regular in depositing undisputed statutory dues includingprovident fund employees' state insurance income tax sales tax service tax goods andservice tax duty of customs duty of excise value added tax cess and other statutorydues with appropriate authorities wherever applicable. According to the information andexplanations given to us undisputed arrears of statutory dues which were outstanding ason March 31 2018 for a period of more than six months from the date they became payableand not paid till date are given below:
|Nature of Dues ||Rs. in Million |
|1. Central Sales Tax ||0.03 |
|2. Value Added Tax ||35.45 |
|3. Entry Tax ||2.14 |
(b) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company details of dues of income tax sales tax dutyof customs and duty of excise which have not been deposited as on March 312018 onaccount of disputes are given below:
|Name of Statute ||Nature of the Dues ||Amount ( Rs. Million) ||Forum where dispute is pending |
|1. Customs Act 1962 ||Custom Duty (including penalty) ||0.75 ||Commissioner |
|2. Central Excise Act 1944 ||Excise Duty (including penalty) ||0.28 ||High Court |
| || ||4.03 ||CESTAT |
| || ||15.25 ||Commissioner (Appeals) |
| || ||0.74 ||Deputy Commissioner |
| || ||0.92 ||Assistant Commissioner |
|3. Sales Tax Act of various States ||Sales Tax ||0.02 ||Appellate Tribunal |
| || ||0.28 ||Additional Commissioner |
|4. Income Tax Act 1961 ||Income Tax ||1.95 ||DCIT Appeals |
(viii) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company we observed that the Company has defaulted inrepayment of interest and principal amount of loans taken from financial institutions andbanks. The default runs into more than 365 days. The Company has also defaulted inredemption instalment of preference shares.
The Company has not borrowed from government and has not issued any debentures.
(ix) According to the information and explanations given to us the Company has notraised money by way of initial public offer or further public offer (including debtinstruments) or term loans during the year.
(x) According to the information and explanations given to us no material fraud by theCompany or any fraud on the Company by its officers or employees has been noticed orreported during the period.
(xi) The Company has not paid or provided the managerial remuneration to any of itsDirector.
(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of theOrder is not applicable.
(xiii) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company we observed that transactions with the relatedparties are in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable and the details have been disclosed in the financial statements etc. asrequired by the applicable accounting standards.
(xiv) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company we observed that the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the period.
(xv) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company we observed that the Company has not enteredinto any non-cash transactions with its directors or persons connected with him and henceprovisions of section 192 of the Companies Act 2013 are not applicable.
(xvi) In our opinion the Company is not required to be registered under Section 45-IAof the Reserve Bank of India Act 1934. Therefore the Clause (xvi) of paragraph 3 of theOrder is not applicable to the Company.
For S Z DESHMUKH & CO.
(Firm Registration No. 102380W)
Membership No. 125886
Date: July 3 2018.