Trend Electronics Ltd.
|BSE: 517228||Sector: Consumer|
|NSE: N.A.||ISIN Code: INE219F01017|
|BSE 00:00 | 16 Apr||Trend Electronics Ltd|
|NSE 05:30 | 01 Jan||Trend Electronics Ltd|
|BSE: 517228||Sector: Consumer|
|NSE: N.A.||ISIN Code: INE219F01017|
|BSE 00:00 | 16 Apr||Trend Electronics Ltd|
|NSE 05:30 | 01 Jan||Trend Electronics Ltd|
The Members of
Trend Electronics Limited
Report on the Audit of the Financial Statements Disclaimer of Opinion
We were engaged to audit the financial statements of Trend Electronics Limited("the Company") which comprise the Balance Sheet as at March 31 2020 theStatement of Profit and Loss the Statement of Changes in Equity and the Statement of CashFlows for the year ended on that date and notes to the financial statements including asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "the financial statements").
We do not express an opinion on the accompanying financial statements of the entity.Because of the significance of the matters described in the Basis for Disclaimer ofOpinion section of our report we have not been able to obtain sufficient appropriateaudit evidence to provide a basis for an audit opinion on these financial statements.
Basis for Disclaimer of Opinion
a) We are unable to comment on necessary adjustments / disclosures in these financialstatements in relation to following items in view of non-availability of necessaryinformation / documentations / satisfactory explanations relevant to the audit for thecurrent year :-
(i) As mentioned in Note No. 45 of the financial statements the Company has carryingvalue of investments of ' 52.68 million has given advances of '2659.70 million and hastrade receivables of ' 215.80 million aggregating to ' 2928.18 Million in group/affiliatecompanies which have been also admitted to Corporate Insolvency Resolution Process(CIRP).
In view of the referral of these group/affiliate companies to National Company LawTribunal and consequent admission thereof under the Insolvency and Bankruptcy Code 2016we are unable to obtain sufficient and appropriate evidence to express an opinion on theextent of realisability of aforesaid investments advances and trade receivables fromthese group / affiliate companies pending the completion of resolution process of theseentities. Further we are unable to determine the consequential effect of the above on theCompanys Statement of Profit and Loss for the year ended March 31 2020 and Equity.
(ii) As mentioned in Note No 46 to the financial statements the Company has notassessed impairment of fixed assets not ascertained net realisable value of inventoryand not ascertained the realisable value of investments; though as explained to usvaluers have been appointed for valuation of assets including inventory and investments.As inform to us the valuation reports are confidential as per Insolvency and BankruptcyCode 2016. In the absence of management evaluation we are unable to determine theconsequential impact of the same on the financial statements.
(iii) As mentioned in Note No. 47 to the financial statements the balanceconfirmations have not been received in respect of secured and unsecured loans balanceswith banks trade receivables trade and other payables and loans and advances. TheCompany continues the process of obtaining confirmations and reconciliation of thebalances of trade receivables trade and other payables and loans and advances. In theabsence of sufficient and appropriate evidence in relation to unconfirmed balances we areunable to determine whether any adjustments are required to the said balances as on March31 2020 and the consequential impact of the same on the financial statements.
(iv) As mentioned in Note No. 48 to the financial statements pursuant to commencementof Corporate Insolvency Resolution Process (CIRP) of the Company under Insolvency andBankruptcy Code 2016 there are various claims submitted by the financial creditorsoperational creditors and employees to the Resolution Professional (RP). Such claims canbe submitted to the RP till the approval of the resolution plan by Committee of Creditors(COC). The overall obligations and liabilities including interest on loans and theprincipal amount of loans shall be determined during the CIRP. Pending final outcome ofthe CIRP no accounting impact in the books of account has been made in respect of excessshort or non-receipts of claims for operational and financial creditors. Accordingly weare unable to obtain sufficient and appropriate evidence with respect to completeness ofthe amount of liabilities in the financial statements.
b) Material uncertainty relating to Going Concern:
As mentioned in Note No. 44 to the financial statements the Company has been referredto National Company Law Tribunal under the Insolvency and Bankruptcy Code 2016 and thereis considerable decline in level of operations of the Company and net worth of the Companyas on the reporting date is negative and it continues to incur losses. The Company is aco-obligor and has received demand notices in respect of borrowings of otherobligors/borrowers. Since Corporate Insolvency Resolution Process (CIRP) is currently inprogress as per the Code it is required that the Company be managed as going concernduring CIRP. Accordingly the financial statements are continued to be prepared on goingconcern basis. However there exists a material uncertainty about the ability of theCompany to continue as a "Going Concern. The same is dependent upon theresolution plan to be approved by NCLT. The appropriateness of the preparation offinancial statements on going concern basis is critically dependent upon CIRP as specifiedin the Code. Necessary adjustments required on the carrying amount of assets andliabilities are not ascertainable at this stage.
c) The Company has not recognised the impact and has not complied with the disclosurerequirements of Indian Accounting Standards (Ind-AS) including Ind AS 109- "FinancialInstruments" Ind AS 36 - Impairment of Assets Ind AS - 2 Inventories Ind AS - 16Property Plant and Equipment.
d) The Company has not charged the depreciation on Property Plant and Equipment (PPE)for the year due to non availability of information. we are unable to determine theimpact on the Loss of the Company for the year and the completeness of the disclosures inthe notes to the financial statements of the Company.
e) As mentioned in Note No 7 to the financial statements the Company has carriedforward the Deferred Tax Asset of ' 134.62 million even though there is no reasonablecertainty of its realisation.
f) As mentioned in Note No 49 to the financial statements the Company has notsubmitted its financial results for the quarter/period ended March 31 2018 andsubsequent periods till date as required under regulation 33 of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015.
Consequently we are unable to comment on the monetary impact if any of thesenon-compliances on the financial statements in additional to the fact that the equityshares of the Company are suspended from trading on the BSE Limited.
In view of our observations at para (a) to (f) above we are unable to determine theadjustments that are necessary in respect of Companys assets liabilities as onBalance sheet date income and expenses for the year the elements making up the statementof changes in equity cash flow statement and related presentation and disclosures infinancial statements.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
The Company has been under the Corporate Insolvency Resolution Process CCIRP') underthe provisions of the Insolvency and Bankruptcy Code 2016 (the Code') vide orderdated 25th September 2018 passed by the National Company Law Tribunal (NCLT).The powers of the Board of Directors stand suspended as per Section 17 of the Code andsuch powers are being exercised by the Resolution Professional (RP) appointed by the NCLTby the said order under the provisions of the Code. As per Section 20 of the Code themanagement and operations of the Company were being managed by Resolution Professional Mr.Dushyant C. Dave.
Subsequently NCLT Principal Bench on October 24 2018 directed to transfer allinsolvency petitions related to certain Videocon group/ affiliate entities to one bench atNCLT Mumbai and left open the matter of substantive consolidation to be decided by NCLTMumbai bench. Further State Bank of India had filed a petition at NCLT Mumbai bench forsubstantive consolidation of CIRP of group/ affiliate entities.
The NCLT Mumbai Bench has passed an Order on August 8 2019 approving Consolidation ofCIRP of 13 Videocon Group/ affiliate entities ("Consolidation Order"). TrendElectronics Limited ("Trend") is kept out of consolidation considering thatTrend business of manufacturing set top boxes is independent of other Videocongroup/affiliate entities businesses. The Honble Bench appointed Mr. Divyesh DesaiInterim Resolution Professional (IRP) of Trend effective from the date of ConsolidationOrder. NCLT Mumbai has granted a time of 180 days from Order dated August 8 2019 tothe IRP to complete CIRP of Trend.
Committee of Creditors (CoC) in its meeting held on September 6 2019 approvedappointment of IRP as Resolution Professional ("RP") of Trend. Therefore themanagement and operations of the Company are being managed by Resolution Professional Mr.Divyesh Desai.
The Companys management / RP is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the state of affairs profit and other comprehensive incomechanges in equity and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)specified under Section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompanys ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
The management / RP is also responsible for overseeing the Companys financialreporting process.
Auditors Responsibilities for the Audit of the Financial Statements
Our responsibility is to conduct an audit of the entitys financial statements inaccordance with Standards on Auditing and to issue an auditors report. Howeverbecause of the matters described in the Basis for Disclaimer of Opinion section of ourreport we were not able to obtain sufficient appropriate audit evidence to provide abasis for an audit opinion on these financial statements.
We are independent of the entity in accordance with the ethical requirements inaccordance with the requirements of the Code of Ethics issued by ICAI and the ethicalrequirements as prescribed under the laws and regulations applicable to the entity.
Report on Other Legal and Regulatory Requirements
A. As required by the Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure A a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
B. As required by Section 143(3) of the Act we report that:
a) As described in the Basis for Disclaimer of Opinion paragraph we sought but wereunable to obtain all the information and explanations which to the best of our knowledgeand belief were necessary for the purpose of our audit.
b) Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether proper books of account as required bylaw have been kept by the Company so far as appears from our examination of those books.
c) Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the Balance Sheet Statement of Profitand Loss Statement of Changes in Equity and Cash Flow Statement dealt with by this Reportare in agreement with the books of account.
d) Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the aforesaid financial statementscomply with the Indian Accounting Standards specified under Section 133 of the Act.
e) The matter described in the Basis for Disclaimer of Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company.
f) We have not received any written representations from the directors as on March312020 with regard to disqualification from being appointed as a director in terms ofSection 164(2) of the Act. Accordingly we are unable to comment as to whether any of thedirectors is disqualified as on 31st March 2020 from being appointed as a director interms of Section 164 (2) of the Act.;
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 B and
h) With respect to the other matters to be included in the Auditors Report inaccordance with the requirements of Section 197(16) of the Act as amended:
In our opinion and according to the information and explanations given to us theCompany has not paid any remuneration to its directors during the year. The remunerationpaid to any director is not in excess of the limit laid down under Section 197 of the Act.
i) With respect to the other matters to be included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. Due to the possible effects of the matter described in the Basis for Disclaimer ofOpinion paragraph we are unable to state whether the Company has disclosed the completeimpact of pending litigations on its financial position in the financial statements;
ii. As per the information and explanation given to us the Company did not have anylong term contracts including derivatives contracts for which there were any materialforeseeable losses. (refer note no.50)
iii. As mentioned in note no 51 the company has defaulted in transferring amounts of '0.43 Million required to be transferred to the Investor Education and Protection Fundduring the year ended March 312020.
ANNEXURE 'A' TO THE INDEPENDENT AUDITORS REPORT
The Annexure A referred to in Independent Auditor's Report to the Membersof the Trend Electronics Limited ('the Company') on the financial statements for the yearended March 312020 we report the following:
(i) In respect of fixed assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets except that as mentioned in the Basisfor Disclaimer of Opinion paragraph in the main report the Company has not provided fordepreciation for the year ended 31st March 2020 as required under the Act and to thatextent the details were not maintained.
(b) We have been informed that the physical verification and valuation of fixed assetshas been carried out by external agencies. However we have not been given any suchreport. Hence we are unable to comment as to whether there is any material discrepancieson physical verification. In our opinion the frequency of verification is notsatisfactory having regard to the size of the Company 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) We have not been given the details of physical verification of the inventoriescarried out during the period by the management and hence we are unable to comment as towhether the frequency of the physical verification is reasonable.
(b) As per information and explanation given to us the Company has appointed Valuersfor verification of inventory and its valuation. However no report of valuer has beenmade available to us due to confidentiality. Hence we are unable to comment as towhether there is any material discrepancy noticed on physical verification and the samehas been adjusted in the books of accounts.
(iii) As per the information and explanation given to us the Company during the yearhas not granted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under Section 189 of theAct.
(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 not made and maintained the prescribed cost records pursuant to the Companies(Cost Records and Audit) Rules 2014 as amended and prescribed by the Central Governmentunder section 148(1) of the Companies Act 2013.
(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 goods and service tax salestax service tax duty of customs duty of excise value added tax cess and otherstatutory dues with appropriate authorities except that undisputed arrears of followingstatutory dues were outstanding as on March 312020 for a period of more than six monthsfrom the date they became payable and not paid till date (including dues in respect ofpre-CIRP period):
(b) Except for the effects of the matters described in the basis for disclaimer ofopinion paragraph in main report and according to the information and explanation given tous and on the basis of our examination of the records of the Company details of dues ofincome tax goods and service tax sales tax service tax custom duty excise duty valueadded tax cess which have not been deposited as on March 31 2020 on account of disputesare given below:
(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 all loans to financial institutions andbanks. The default runs into more than 365 days.
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) Except for the effects of the matters described in the basis for disclaimer ofopinion paragraph in main report and according to the information and explanation given tous and on the basis of our examination of the records of the Company we observed thattransactions with the related parties are in compliance with Section 177 and 188 of theCompanies Act 2013 where applicable and the details have been disclosed in the financialstatements etc. as required 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) Except for the effects of the matters described in the basis for disclaimer ofopinion paragraph in main report and according to the information and explanation given tous and on the basis of our examination of the records of the Company we observed thatthe Company has not entered into any non-cash transactions with its directors or personsconnected with him and hence provisions of section 192 of the Companies Act 2013 are notapplicable.
(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)
D. U. KADAM
Membership No. 125886
UDIN : 21125886AAAABJ6572
Date: 14th January 2021
ANNEXURE 'B' TO THE INDEPENDENT AUDITORS REPORT
Report on the Internal Financial Controls Over under Clause (i) of Sub-section 3 ofSection 143 of the Companies Act 2013 ("the Act")
We were engaged to audit the internal financial controls over financial reporting ofTrend Electronics Limited (the Company') as of March 31 2020 in conjunction withour audit of the financial statements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys 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 (ICAI). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Companys policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.
Our responsibility is to express an opinion on the Companys 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 Act to the extent applicable to an audit of internal financial controls bothapplicable to an audit of Internal Financial Controls and both issued by the ICAI. 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 effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors 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 Companys internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companys internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. A companysinternal financial control over financial reporting includes those policies and proceduresthat
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the companys assets that could havea 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.
Disclaimer of Opinion
Because of the matters described in the basis of Disclaimer of Opinion paragraph in ourmain report and in view of possible effects of the material weaknesses described above onthe achievement of the objectives of the control criteria we are unable to obtainsufficient appropriate audit evidence to provide a basis for our opinion on whether theCompany had maintained adequate internal financial controls over financial reporting withreference to these financial statements and whether such internal financial controls overfinancial reporting were operating effectively as of March 31 2020. Accordingly we donot express an opinion on internal controls over financial reporting with reference tothese financial statements considering the essential components of internal controlstated in the Guidance Note.
We have considered the disclaimer of opinion and the material weaknesses identified andreported above in determining the nature timing and extent of audit tests applied in ouraudit of the March 31 2020 financial statements of the Company and these materialweaknesses have inter-alia affected our opinion on the financial statements of the Companyand we have issued a disclaimer of opinion on the financial statements.