Winsome Yarns Ltd.
|BSE: 514348||Sector: Industrials|
|NSE: WINSOME||ISIN Code: INE784B01035|
|BSE 00:00 | 22 Jun||Winsome Yarns Ltd|
|NSE 05:30 | 01 Jan||Winsome Yarns Ltd|
|BSE: 514348||Sector: Industrials|
|NSE: WINSOME||ISIN Code: INE784B01035|
|BSE 00:00 | 22 Jun||Winsome Yarns Ltd|
|NSE 05:30 | 01 Jan||Winsome Yarns Ltd|
To the Members of Winsome Yarn Limited
Report on the Audit of the Standalone Financial Statement
1. Qualified Opinion.
We have audited the accompanying Standalone Ind AS financial statements of WinsomeYarns Limited ("the Company") which comprise the Balance Sheet as at March 312021 the Statement of Profit and Loss (including Other Comprehensive Income) the CashFlow Statement and the Statement of Changes in equity for the year then ended and asummary of the significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects/ possible effects of the matters described inparagraph under 'Basis of Qualified Opinion' the aforesaid Ind AS financialstatements give the information required by the Act in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia including the Ind AS of the financial position of the Company as at March 31 2021and profit/loss including other comprehensive income its cash flows and the changes inequity for the year ended on that date.
2. Basis for Qualified Opinion.
a) In view of accumulated losses of the Company as at the end of March 31 2021 thenet worth of the Company as at that date being negative continuous losses negative cashflows and due to financial constraints resignation of KMP and non-deposit of statutorydues on time material uncertainty exists about the company ability to continue as goingconcern. The decision of management of the Company to prepare the accounts of the Companyon going concern basis for reasons that (refer to note no. 6 of standalone financialresult) The Management expects that its cash flows of the Company in the near future willbe sufficient to meet the resulting payment and repayment obligations as may arise as aresult of restructuring agreement and the accounts of the Company have therefore beenprepared on 'Going Concern' basis there would arise a need to adjust the realizable valueof assets and liabilities in the event of failure of assumptions as to going concern andin the absence of impact of aforesaid assumptions having been unascertained we are unableto comment thereon.
b) The Financial results for the year ended on March 31 2021 are understated due to:
i. Non provisioning of interest expenses on borrowings of Rs. 14852.97 Lakhs for theyear ended on March 31 2021 (Rs. 12890.29 lakhs for the year ended on March 31 2020)and Rs. 67556.26 Lakhs being aggregate amount of interest unprovided till the year endedMarch 31 2021 (Rs 52703.29 Lakhs till the year ended March 31 2020) and further amounttowards penal interest penalty interest to EARC payable etc. as may be charged by thelenders. (In the absence of statement of account the above amount has been arrived at asper estimates of the Company and the aggregate unprovided amount in books of account ofthe Company is not ascertainable with accuracy).
ii. Non provisioning against long outstanding receivables of Rs.602.50 Lakhs (Rs.521.57 Lakhs as at March 31 2020) including of overseas overdue trade receivables.Further Re-instatement of few debtors advance from customers creditors for export etcon exchange fluctuation is not recognized in line with Ind AS - 21 "The Effects ofchanges in Foreign Exchange Rates" the effect of which we are unable to comment.
c) As stated in note no. 7 of standalone financial statement investment in USD4819980 in Arise Money Market Fund. As per information given to us the balance above isas per rate of exchange prevailing at the time of investment and is subject to adjustmentin rate of foreign exchange and accruals on money market investments. The non-accountingof investment at fair value and non recognition of exchange fluctuation in respect theretois not in line with Ind AS 109 "Financial Instruments" and Ind AS-21 "TheEffects of Changes in Foreign Exchange Rates". In the absence of any confirmation andworking the effect of over/under valuation of investment and over/under statement we areunable to comment.
d) Regarding provisions in case of investments in subsidiaries written off/writtenback and adjustment/ set off of payment of receivables/payables from/to overseasparties/suppliers which is pending necessary approval of the competent authority.
e) The Internal Control Systems need to be further strengthened in order that they arecommensurate with the size of the Company and the nature of its business moreparticularly in areas of purchases and consumption of materials allocation of overheadscharging of expenses set-off of balances and invoicing of sale of goods and services.
f) Confirmation of balances and reconciliation thereof with respective parties arepending which include balances pertaining to accounts receivable and accounts payablebank balances (including FDR) other current assets advance for leasing security depositwith government loans and advances recoverable secured loans other liabilitiesprovisions and contingent liabilities. All balances have been certified by the managementof the Company. In the absence of the Company having aforementioned details andconfirmations the impact thereof is unascertainable and therefore not being commented.
Further strengthening of internal controls by the Company will provide greaterreliability.
g) In earlier year management noticed and found fraud in the nature ofshortage/misappropriation of goods stored at its Ludhiana Branch during the financial year2017-18 by its employee/s against which the management took action by lodging F.I.R. withthe concerned Police Station and investigation in the matter is pending. Themisappropriation of goods has been valued at Rs. 70 Lakhs against which some of theparties to whom goods were sold by the concerned employees have confirmed having receivedthe goods and also confirmed to the Company as having made payment against the same. TheCompany also filed its claim to insurance company under Employee Fidelity Insuranceeffect whereof has been accounted in the books of account of the Company considering theongoing recovery process of its claims and as per information given to us by managementthe matter is still pending and same as it is previous financial year.
We conducted our audit in accordance with the standard on auditing ("SA")specified under section 143(10) of the Act. Our responsibilities under those standards arefurther describes in the Auditor's Responsibilities for the audit of the statement sectionof our report. We are independent of the company in accordance with the code of ethicsissued by the Institute of Chartered Accountants of India ("the ICAI") togetherwith the ethical requirements that are relevant to our audit of the financial statementsunder the provisions of the act and the rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the code of ethics. Webelieve that the audit evidence obtained by us is sufficient and appropriate to provide abasis for our qualified opinion.
3. Emphasis of Matter
We would like to draw attention to the following matters as stated in the notes to thefinancial statement:
i. As per information given to us the company has made advance payment of Rs. 2268.50Lakhs to Edelweiss Assets Reconstruction Company for advance against restructuring ofloan. Loan outstanding from Edelweiss Assets Reconstruction Company amounting of Rs.47071.08 Lakhs.
ii. The company has not made provision for the demand raised by various authorities asthe matters are pending before various appellate forum. We are unable to comment uponpossible impact in the standalone financial statements for the year 31st March 2021.
iii. We draw attention to the users of the financial statement of the company ended on31st March 2021 that the lender Edelweiss Assets Reconstruction Company Limited andIndian Overseas Bank has filed an application against company under section 7 of theInsolvency & Bankruptcy Code 2016 before National Company Law Tribunal ChandigarhBranch. The Company Petition filed by Edelweiss Asset Reconstruction Company Limitedagainst the Company for initiation of Corporate Insolvency Resolution Process (CIRP) underInsolvency and Bankruptcy Code (IBC) 2016 has been rejected by National Company LawTribunal Chandigarh Bench vide its Order dated 17.03.2020 and the matter is pendingbefore the National Company Law Appellate Tribunal.
Our opinion is not modified in respect of these matters.
4. Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. There matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Inaddition the matters described in the basis for qualified opinion and emphasis of matterparagraph are by their nature are key audit matters.
5. Responsibilities of Management and Those Charged with Governance for the standaloneFinancial Statements.
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with the Indian Accounting Standards(Ind AS) prescribed under section 133 of the Act read with the Companies (IndianAccounting Standards) Rules 2015 as amended and other accounting principles generallyaccepted in India. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate implementation and maintenance of 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 Ind AS financial statements that give a true and fairview and are free from material misstatement whether due to fraud or error.
In preparing the financial statement management is responsible for assessing thecompany's ability to continue as a going concern disclosing as application 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.
Those board of directors are also responsible for overseeing the company's financialreporting process.
6. Auditor's Responsibilities 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.
7. Report on Other Legal and Regulatory Requirement
i. As required by the Companies (Auditor's Report) Order 2016 (the Order) issued bythe Central Government of India in terms of section 143(11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
ii. 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 purpose of our audit except as statedin para under the head "Basis of Qualified Opinion".
b) Except for the effects/possible effects of the matters described in the "Basisof Qualified Opinion" paragraph above in our opinion proper books of account asrequired by law have been kept by the Company in so far as it appears from our examinationof those books.
c) The Balance Sheet the Statement of Profit and Loss the Cash Flow Statement andStatement of Changes in Equity dealt with by this Report are in agreement with the booksof account.
d) Except for the matter described in para under the "Basis for QualifiedOpinion" in our opinion the aforesaid Ind AS financial statements comply with theIndian Accounting Standards prescribed under Section 133 of the Act.
e) The matters described in the "Basis of Qualified Opinion" paragraph abovein our opinion may have an adverse effect on the functioning of the Company.
f) On the basis of written representations received from the directors as on March 312021 taken on record by the Board of Directors none of the directors is disqualified ason March 31 2021 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 B'.
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) Rules2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements- Refer Note no. 3.1 to the standalonefinancial statement.
ii. Except as matter described under paragraph of "basis for qualifiedopinion" as required under the applicable law or Accounting Standards The Companyhas made provision for material foreseeable losses if any on long term contractsincluding derivative contracts;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
"ANNEXURE A" TO INDEPENDENT AUDITOR'S REPORT
(Annexure referred to in paragraph 6 on Report on Other Legal and RegulatoryRequirements)
i. a. As per information and explanation given to us the Company is maintaining properrecords showing full particulars including quantitative details and situation of fixedassets.
b. As per information and explanation given to us the fixed assets have beenphysically verified by the management at reasonable intervals. However we have not beenprovided complete physical verification report.
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 freeholdproperties are held in the name of the Company. However we have not been providedcomplete title deed of immovable property situated at Derabassi (Punjab) location.
ii. According to the information explanation and representation provided by themanagement physical verification of inventory has been conducted at reasonable intervalsby the management. However we did not provide any occasion to overview the physical stocktaking. Further according to information and explanation given to us no materialdiscrepancy was noticed in such verification by management.
iii. As informed to us the Company has not granted any loans secured or unsecured tocompanies firms limited liability partnerships or other parties covered in the registermaintained under section 189 of the Act. Accordingly provisions of clause 3 (iii) of theOrder is not applicable.
iv. According to the information explanation and representation provided by themanagement and based upon audit procedures performed the Company has not given any loansprovided any guarantee or security in connection with any loan and/ or acquiringsecurities of any other body corporate.
v. As explanation given to us and on the basis of our examination of the records theCompany has accepted deposits from public in violation of provisions of section 73 to 76of companies act 2013 read with rule 3 of companies (acceptance of deposits) Rules 2014.
The nature of the amount is trade advance from customers which are of more than 365days.
vi. We have broadly reviewed the books of account maintained by the Company pursuant tothe Rules made by the Central Government for the maintenance of cost records undersub-section (1) of section 148 of the Act in respect of the Company's products to whichthe said Rules apply and are of the opinion that prima facie the prescribed records havebeen made and maintained. However; we have not made a detailed examination of the saidrecords with a view to determine whether they are accurate or complete.
vii. a. According to the information and explanations given to us the company is notregular in depositing undisputed statutory dues including provident fund employees' stateinsurance income-tax sales- tax service tax goods and service tax duty of customsduty of excise value added tax cess and any other statutory dues to the appropriateauthority. However we were not provided with the full information by the management ofthe company. The figures inserted in the table are as per the financial balance sheet yearending March 31 2021. The arrear of outstanding statutory dues as on the last day of thefinancial year concerned for a period of more than six months from the date they becamepayable are not provided.
b. According to the information and explanations given to us the following dues ofincome tax sales tax service tax duty of excise and Value added tax have not beendeposited by the company on account of disputes:
*This para to be read with note no. 3.1(A) and 3.1(B) to the financial statements.viii) In our opinion based on audit procedures performed and according the information andexplanation given to us the Company has defaulted in repayment of loans and borrowings tobank. However the Company has not taken loans from any bank financial institution andGovernment or debenture holders during the year. The lender wise details of default is asunder:
EARC = Edelweiss Asset Reconstruction Company Ltd
*Total default amount excludes the interest that is not provided in the books.
ix) According to the information and explanation given to us the Company did not raiseany money by way of initial public offer or further public offer (including debtinstruments) and term loans during the year.
x) To the best of our knowledge and according to the information and explanations givento us we have neither come across any instances of fraud by the Company or any fraud onthe Company by its officers or employees noticed or reported during the year.
xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not paid managerialremuneration during the year under review for which requisite approval is required by theprovisions of section 197 read with schedule V of the companies' act 2013.
xii) The Company is not a Nidhi company.
xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the Ind AS standalone financial statements as requiredby the applicable accounting standards.
xiv) The Company has not made any preferential allotment or private placement of sharesof fully or partly convertible debentures during the year under review. Accordingly weare not offering any comment with respect to compliance of requirement of section 42 ofthe Act and utilization of the money.
xv) On the basis of records made available to us and according to the information andexplanation given to us the Company has not entered into any non-cash transactions withdirectors or persons connected with him.
xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
ANNEXURE 'B' TO INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIALSTATEMENTS OF WINSOME YARNS LTD.
Report on the Internal Financial Controls under Clause (i) of sub-section 3 of thesection 143 of the Act.
We have audited the internal financial controls over financial reporting of WinsomeYarns Limited ("the Company") as of March 31 2021 in conjunction with ouraudit of the Ind AS financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for laying down 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(Guidance Note) issued by the Institute 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 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 (the Act).
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 accordance with the Standards of Auditing to the extentapplicable to an audit of internal financial controls and the Guidance Note both issuedby the ICAI. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain the reasonable assurance aboutwhether adequate 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 Ind AS 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 internal financial control system overfinancial 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
(i) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of Ind AS financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the Company are being madeonly in accordance with authorizations of management and directors of the Company; and
(iii) 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 Ind AS financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of its 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 to 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.
Basis of Qualified Opinion
We draw attention to the paragraph 2 "Basis for Qualified Opinion" of ourmain report and the same to be read with our comments as stated below:
According to the information and explanation given to us and based on our audit thefollowing material weaknesses have been identified as at March 31 2021:
1. The Company did not have appropriate internal control system for-a) Adjustment/Setoff and written off/write back payment of receivables/payables. b) Credit control policyand procedure. c) No policy or procedure for receipt of balance confirmation ofreceivables particularly overseas overdue receivables bank balances payables (includingof an associate company) secured loans and other liabilities and loans and advances.
2. The company did not have any extensive internal control system for followup/recovery/adjustment of old outstanding receivables and payables including balanceconfirmation and reconciliation.
Material weakness is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the Company's annual financial statements will not beprevented or deleted on a timely basis.
In our opinion except for the effects/possible effects of the material weaknessesdescribed above and on the achievement of the objectives of control criteria the Companyhas in all material respects an adequate internal financial controls system overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as at March 31 2021 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 ICAI.
We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 31 2021standalone financial statements of the Company and these material weaknesses does notaffect our opinion on the standalone financial statements of the Company.