TO THE MEMBERS OF
VASA RETAIL AND OVERSEAS LIMITED
Report on the Audit of Financial Statements
We have audited the standalone financial statements of VASA RETAIL AND OVERSEASLIMITED ("the Company") which comprise the Balance Sheet as at 31 March2019 and the Statement of Profit and Loss and Statement of Cash Flows for the year thenended and notes to the financial statements including a summary of significantaccounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2019 and profit and its cash flows for theyear ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder Section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the standalone financial statements under the provisions of the Act andthe Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Key Audit Matters
Key Audit Matters (KAM') are those matters that in our professional judgmentwere of most significance in our audit of the financial statements for the financial yearended March 31 2019. These matters were addressed in the context of our audit of thefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. For each matter below our description of how ouraudit 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 financial statements section of ourreport including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the AS financial statements. The results of audit procedures performed byus including those procedures performed to address the matters below provide the basisfor our audit opinion on the accompanying financial statements.
|Key audit matters ||How our audit addressed the key audit matter |
|1. Revenue Recognition || |
|Revenue is measured net of discounts rebates and incentives earned by customers on the Company's sales. ||Our audit procedures included: |
|Revenue is recognized when the control of the underlying products has been transferred to the customer. There is a risk of revenue being overstated due to fraud resulting from the pressure on management to achieve performance targets at the reporting period end. || Assessing the appropriateness of the revenue recognition accounting policies including those relating to exports discounts rebates and incentives by comparing with applicable accounting standards. |
|Revenue in respect of export sales may not be correctly reflected in the financials on account of different foreign exchange rates. || Performing substantive testing (including year- end cutoff testing) by selecting samples of revenue transactions recorded during the year by verifying the underlying documents which included sales invoices/contracts and shipping documents. |
| || Assessing manual journals posted to revenue to identify unusual items. |
| || Assessing the accuracy and consistency in respect of foreign exchange rates derived for recording export sales. |
| || Considered the adequacy of the Company's disclosures in respect of revenue. |
|2. Inventory Valuation || |
|Inventories are held at the lower of cost and net realizable value (NRV). ||Our audit procedures included: |
|Due to high volume and nature of products the company is dealing with and the absence of adequate records valuation of inventory may be misstated. || Assessing the appropriateness of the inventory valuation method followed by the management and by comparing with applicable accounting standards. |
|Also NRV is being based on the assumptions / judgement of the management. Inappropriate assumptions of NRV can impact the assessment of the carrying value of inventories. || Performing substantive testing (including year end cut off testing) by selecting samples of inward and outward movement of inventory during the year by verifying the underlying documents which included sales invoices / purchase invoice and bill of entry. |
| || Evaluating the design and implementation of the Company's internal controls over the Net Realizable Value (NRV) assessment. |
| || Considered the valuation certificate provided by the management and internal auditor. |
|3. Recoverability of Indirect Tax Receivables || |
|As at March 31 2019 other current assets in respect of balance with revenue authorities includes GST refund (incl. TRAN 1 credit) MVAT refund and duty drawback credit amounting to INR 34.60 Lakhs which are pending adjudication. ||We have involved our internal experts to review the nature of the amounts recoverable the sustainability and the likelihood of recoverability upon final resolution. |
|4. Litigations & Claims || |
|The Company operates in complex regulatory environment exposing it to a variety of different central and state laws regulations and interpretations thereof. In this regulatory environment there is an inherent risk of litigations and claims. ||Our procedures included: |
| || Reviewing the outstanding litigations against the Company for consistency with the previous years. Enquire and obtain explanations for movement during the year. |
|Consequently provisions and contingent liability disclosures may arise from direct and indirect tax proceedings legal proceedings including regulatory and other government / department proceedings as well as investigations by authorities and commercial claims. || Discussing the status of significantly known actual and potential litigations with the senior management personnel who have knowledge of these matters and assessing their responses. |
|Management applies significant judgment in estimating the likelihood of the future outcome in each case when considering whether and how much to provide or in determining the required disclosure for the potential exposure of each matter. || Reading the latest correspondence between the Company and the various tax / legal authorities and review of correspondence with / legal opinions obtained by the management from external legal advisors where applicable for significant matters and considering the same in evaluating the appropriateness of the Company's provisions or disclosures on such matters. |
|These estimates could change substantially over time as new facts emerge as each legal case progress. || Examining the Company's legal expenses and reading the minutes of the board meetings in order to ensure that all cases have been identified. |
|Given the inherent complexity and magnitude of potential exposures across the Company and the judgment necessary to estimate the amount of provisions required or to determine required disclosures this is a key audit matter. || With respect to tax matters involving our tax specialists and discussing with the Company's tax officers their views and strategies on significant cases as well as the related technical grounds relating to their conclusions based on applicable tax laws. |
| || Assessing the decisions and rationale for provisions held or for decisions not to record provisions or make disclosures. |
| || For those matters where management concluded that no provisions should be recorded considered the adequacy and completeness of the Company's disclosures. |
Information other than the financial statements and auditors' report thereon
The Company's management and Board of Directors are responsible for the preparation ofother information. The other information comprises the information included in theCompany's annual report but does not include the financial statements and our auditors'report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our 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 financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation; we are required to report that fact. We have nothing to report in thisregard.
Management's Responsibility for the 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 financialposition financial performance cash flows of the Company in accordance with theaccounting principles generally accepted in India prescribed under section 133 of theAct.
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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditors' Responsibility for the audit of financial statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
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 with reference to standalone financial statements inplace and the operating effectiveness 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 ourauditors' 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.
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 auditors' 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 (Auditors' Report) Order 2016 ("the Order")issued by the Central Government of India in terms of Section 143(11) of the Act we givein "Annexure A" a statement on the matters specified in paragraphs 3 and 4 ofthe Order to the extent applicable.
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 balance sheet the statement of profit and loss and the cash flow statementdealt with by this Report are in agreement with the books of account.
d) In our opinion the aforesaid financial statements comply with the accountingstandards specified under section 133 of the Act read with rule 7 of the Companies(Accounts) Rules 2014;
e) On the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164(2) of the Act.
f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B". Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internal financialcontrols over financial reporting;
g) 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 opinion and to the best ofour information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements Refer Note 28 of the financial statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor
Education and Protection Fund by the Company;
For M/s. Jain Chhajed & Associates
Firm Registration No. 127911W
CA. Suyash Chhajed
Membership No: 121597
Date: 30th May 2019
ANNEXURE A TO THE INDEPENDENT AUDITORS' REPORT 31 MARCH 2019
With reference to the Annexure A referred to in the Independent Auditors' Report to themembers of the Company on the standalone financial statements for the year ended 31 March2019 we report the following:
1. In respect of Property Plant and Equipments
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment and investmentproperties.
(b) The Company has a regular programme of physical verification of its property plantand equipment and investment properties by which the property plant and equipment andinvestment properties are verified by the management according to a phased programmedesigned to cover all the items over a period of three years. In our opinion thisperiodicity of physical verification is reasonable having regard to the size of theCompany and the nature of its assets. In accordance with the policy the Company hasphysically verified certain property plant and equipment and investment properties duringthe year and no discrepancies were noticed in respect of assets verified during the year.
(c) According to the information and explanations 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 erstwhile partnership firm "M/s. Vasa International"which was converted into the company in the financial year 2017-18. As informed by themanagement the change of name in the title deed is yet to be taken place.
2. In respect of Inventories
In our opinion the company does not maintain adequate inventory records; therefore weare unable to give our opinion on discrepancies between book records and physicalinventory. We have relied upon the certificate provided by the internal auditor andmanagement of the company for the quantity as well as the amount of inventory andaccordingly the same has been considered by us.
3. Compliance under section 189 of the Companies Act 2013
As informed by the company company has not granted any loans secured or unsecured tocompanies firms or other parties covered in the register maintained under section 189 ofthe Companies Act 2013.
(a) Company has not granted such loan during the period.
(b) As informed to us the Company has not granted any loans secured or unsecuredhence the question of repayment of loans does not arise. Consequently the said sub clauseof the Order is not applicable to the Company.
(c) As informed to us the Company has not granted any loans secured or unsecuredduring the year under audit hence the question of overdue amount of loans does not arise.Consequently the said sub clause of the Order is not applicable to the Company
4. Compliance under section 185 and 186 of the Companies Act 2013
In our opinion and according to the information and explanations given to us thecompany has not granted any loans or made investments or issued any guarantees orprovided any securities during the year to the parties covered under Sections 185 and 186of the Act. Accordingly compliance under Section 185 and 186 of the Act in respect ofgrant of loans making investments providing guarantees and securities is not applicableto the Company.
5. Compliance under section 73 to 76 of the Companies Act 2013 and Rules framedthere under while accepting deposits
In our opinion and according to the information and explanations given to us theCompany has not accepted deposits as per the directives issued by the Reserve Bank ofIndia and the provisions of Sections 73 to 76 or any other relevant provisions of the Actand the rules framed there under. Accordingly paragraph 3 (v) of the Order is notapplicable to the Company.
6. Maintenance of cost records
According to the information and explanations given to us and on the basis of ourexamination of books of account the Company is not required to maintain cost records asper the Companies (Cost Accounting Records) Rules 2011 prescribed by the CentralGovernment under Section 148(1) of the Act.
7. Deposit of Statutory Dues
(a) According to the information and explanations given to us and on the basis of ourexamination of records of the Company amounts deducted / accrued in the books of accountin respect of undisputed statutory dues including provident fund employees' stateinsurance goods and service tax custom duty labour cess property tax cess and othermaterial statutory dues except professional tax applicable to it have beenregularly deposited during the year by the Company with the appropriate authorities.
Amounts deducted / accrued in the books of account in respect of undisputed statutorydues of Income tax have generally been regularly deposited during the year by the Companywith the appropriate authorities though there have been nominal delays on occasions. Asexplained to us the Company did not have any dues on account of wealth tax. According tothe information and explanations given to us no undisputed amounts payable in respect ofprovident fund employees' state insurance goods and service tax custom duty labourcess property tax cess and other material statutory dues except professional tax ofINR 65800/- which was in arrears as on 31st March 2019 for a period ofmore than six months from the date they became payable.
(b) According to the information and explanations given to us there are no dues ofincome-tax sales tax service tax value added tax custom duty and goods and service taxas at 31 March 2019 which have not been deposited with the appropriate authorities onaccount of any dispute.
8. Repayment of Loans and Borrowings
In our opinion and according to the information and explanations given to us theCompany has not defaulted during the year in repayment of loans or borrowings to banks orfinancial institutions or dues to debenture holders. The Company does not have any loansor borrowings from government during the year.
9. Utilization of money raised by public offers and term loan for which theyraised
The Company has not raised any money by way of initial public offer or further publicoffer (including debt instruments). In our opinion and according to the information andexplanations given to us the proceeds of term loans have been applied by the Company forthe purposes for which they were raised other than temporary deployment pendingapplication of proceeds.
10. Reporting of fraud during the period
During the course of our examination of the books and records of the Company carriedout in accordance with the generally accepted auditing practices in India and accordingto the information and explanations given to us we have neither come across any instanceof material fraud by the Company or on the Company by its officers or employees noticedor reported during the year nor have we been informed of any such case by the management.
11. Managerial Remuneration
In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
12. Compliance by Nidhi Company regarding Net Owned Fund to Deposits Ratio
In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company and the Nidhi Rules 2014 are not applicable to it.Accordingly paragraph 3 (xii) of the Order is not applicable to the Company.
13. Related party compliance with Section 177 and 188 of Companies Act 2013
In our opinion and according to the information and explanations given to us theCompany has entered into transactions with related parties in compliance with theprovisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required by AccountingStandard (AS) 18 Related Party Disclosures specified under Section 133 of the Act.
14. Compliance under section 42 of the Companies Act 2013 regarding private placementof shares or debentures
According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year and hence reporting under clause (xiv) of paragraph 3 of the Order is notapplicable to the Company.
15. Compliance under section 192 of Companies Act 2013
According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with directors or persons connected with them. Accordingly paragraph 3 (xv)of the Order is not applicable to the Company.
16. Requirement of Registration under 45-IA of Reserve Bank of India Act 1934
In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934. Accordingly paragraph 3 (xvi) of the Order is not applicable to the Company.
For M/s. Jain Chhajed & Associates
Firm Registration No. 127911W
CA. Suyash Chhajed
Membership No: 121597
Date: 30th May 2019
ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT 31 MARCH 2019
Report on the Internal Financial Controls with reference to the aforesaid standalonefinancial statements under Clause (i) of Sub-section 3 of Section 143 of the CompaniesAct 2013 ("the Act")
(Referred to in paragraph (A) (f) under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
We have audited the internal financial controls over financial reporting of VASARETAIL AND OVERSEAS LIMITED ("the Company") as of 31st March2019 in conjunction with our audit of the standalone Ind AS financial statements of theCompany for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal controls with referenceto standalone financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. 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 the Company's 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 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 on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") issued by the Institute of
Chartered Accountants of India and the Standards on Auditing prescribed under Section143(10) of the Act to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and 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 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 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 company's assets that could have amaterial 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.
According to the information and explanation given to us and based on our audit thefollowing material weakness has been identified as at March 31 2019:
(a) The company has designed and implemented internal financial controls in theorganization and the same are operating effectively. However as informed documentationof such control framework is in progress at the year end.
A material weakness is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting; such that there is reasonable possibility thata material misstatement of the company's annual financial statements will not be preventedor detected on a timely basis.
In our opinion except for the effects / possible effects of the material weaknessdescribed above on the achievement of the objectives of the control criteria the companyhas maintained an adequate and effective internal financial controls system over financialreporting and such internal financial controls over financial reporting were operatingeffectively as at 31 March 2019 based on "the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial
Reporting issued by the Institute of Chartered Accountants of India".
For M/s. Jain Chhajed & Associates
Firm Registration No. 127911W
CA. Suyash Chhajed
Membership No: 121597
Date: 30th May 2019