To the Members of
Kesoram Industries Limited
1. We have audited the attached Balance Sheet of Kesoram Industries Limited (the"Company") as at 31st March, 2012, and the related Statement ofProfit and Loss and Cash Flow Statement for the year ended on that date annexed thereto,which we have signed under reference to this report. These financial statements are theresponsibility of the Companys Management. Our responsibility is to express anopinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards generally acceptedin India. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by Management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.
3. As required by the Companies (Auditors Report) Order, 2003, as amended by theCompanies (Auditors Report) (Amendment) Order, 2004 (together the"Order"), issued by the Central Government of India in terms of sub section (4A)of Section 227 of The Companies Act, 1956 of India (the Act) andon the basis of such checks of the books and records of the Company as we consideredappropriate and according to the information and explanations given to us, we give in theAnnexure a statement on the matters specified in paragraphs 4 and 5 of the Order.
4. We draw your attention to
a) Note 31 to the financial statements, regarding legal proceedings initiated by theCompany in the month of July 2011 against an erstwhile Whole time Director and certainother persons (the "accused parties") in relation to certain transactions in oneof the units of the Company that were allegedly authorised and executed by/ in favour ofthe accused parties to the detriment of the Companys interests during the periodfrom May, 2008 to June, 2011, which are being investigated by the Management. Pendingcompletion of the Managements investigation, any adjustments and related disclosuresthat may be required to the financial statements could not be determined;
b) Note 24 to the financial statements, in relation to the recognition of Rs 18.14crore towards compensation from insurance company towards loss of certain items ofinventory and fixed assets due to flood during the year, in spite of the awaited approvalof the insurance claim and uncertainties as to the amount that may be approved by theinsurance company; which does not meet the requirement to consider prudence in selectionof accounting policies, as set out in Accounting Standard 1 "Disclosure of AccountingPolicies". Had the aforesaid insurance claim not been recognised, Other income wouldhave been Rs 77.08 crore instead of the reported amount of Rs 84.00 crore, Exceptionalitem would have been Rs Nil instead of the reported amount of Rs 11.22 crore, Loss for theyear would have been Rs 397.88 crore instead of the reported amount of Rs 379.74 crore.Earnings per share would have been Rs ( ) 86.98 instead of reported amount of Rs ( ) 83.02and net worth as at March 31, 2012 would have been Rs 896.87 crore instead of reportedamount of Rs 915.01 crore.
5. Further to our comments in the Annexure referred to in paragraph 3 above, we reportthat:
(a) Except for the effects of the matter referred to in paragraph 4(a) above , we haveobtained all the information and explanations which, to the best of our knowledge andbelief, were necessary for the purposes of our audit;
(b) In our opinion, except for the effects of the matters referred to in paragraph 4proper books of account as required by law have been kept by the Company so far as appearsfrom our examination of those books;
(c) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt withby this report are in agreement with the books of account;
(d) In our opinion, except for the effects of the matter referred to in paragraph 4(b)above, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt withby this report comply with the accounting standards referred to in sub section (3C) ofSection 211 of the Act;
(e) On the basis of written representations received from the directors, as on 31stMarch, 2012 and taken on record by the Board of Directors, none of the directors isdisqualified as on 31st March, 2012 from being appointed as a director in termsof clause (g) of sub section (1) of Section 274 of the Act;
(f) In our opinion and to the best of our information and according to the explanationsgiven to us, the said financial statements together with the notes thereon and attachedthereto give, in the prescribed manner, the information required by the Act, and exceptfor the effect of the matters referred to in paragraph 4 above, aggregating to
Rs 18.14 crore to the extent ascertainable give a true and fair view in conformity withthe accounting principles generally accepted in India:
(i) in the case of the Balance Sheet, of the state of affairs of the company as at 31stMarch, 2012
(ii) in the case of the Statement of Profit and Loss, of the loss for the year ended onthat date; and
(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended onthat date.
| ||For Price Waterhouse |
| ||Firm Registration No: 301112E |
| ||Chartered Accountants |
| ||Prabal Kr. Sarkar |
|Kolkata ||Partner |
|28th April, 2012 ||Membership Number 52340 |
Annexure to Auditors Report
Referred to in paragraph 3 of the Auditors Report of even date to the members ofKesoram Industries Limited on the financial statements for the year ended 31stMarch, 2012
1. (a) The Company is maintaining proper records showing full particulars (other thandetails regarding revaluations made during 1982 83) including quantitative details andsituation of its fixed assets.
(b) The fixed assets of the Company are physically verified by the Management accordingto phased programmes designed to cover all the items over a period of three years, whichin our opinion, is reasonable having regard to the size of the Company and the nature ofits assets. Pursuant to such programmes [without any coverage for items of CompanysSpun Pipes & Foundries Unit and Hindustan Heavy Chemicals units (which are undersuspension of work effective 2nd May, 2008 and 10th December, 2011 having yearend book value of Rs 3.54 crore and Rs 11.53 crore respectively)], a portion of the fixedassets has been physically verified by the Management during the year and no materialdiscrepancies between the book records and the physical inventory have been noticed.
(c) In our opinion and according to the information and explanations given to us, asubstantial part of fixed assets has not been disposed off by the Company during the year.
2. (a) The inventories [excluding stocks with third parties and pertaining to theaforesaid Spun Pipes & Foundries Unit and Hindustan Heavy Chemicals (year end bookvalue Rs 0.98 crore and Rs 1.24 crore respectively)] have been physically verified by theManagement during the year. In respect of inventory lying with third parties, these havesubstantially been confirmed by them. In our opinion, the frequency of physicalverification is reasonable.
(b) In our opinion, the procedures of physical verification of inventories followed bythe Management are reasonable and adequate in relation to the size of the Company andnature of its business.
(c) On the basis of our examination of the inventory records, in our opinion, theCompany is maintaining proper records of inventories other than work in progress. As inearlier years, work in progress has been determined by the Management on the basis ofphysical verification as mentioned in paragraph 2(a) above. The discrepancies noticed onphysical verification of inventory as compared to book records were not material.
3. (a) The Company has granted unsecured loan to a company covered in the registermaintained under Section 301 of the Act. The maximum amount involved during the year andthe year end balance of such loan aggregated to Rs 6.44 crore.
(b) In our opinion, the rate of interest and other terms and conditions of such loansare not prima facie prejudicial to the interest of the Company (c) In respect of theaforesaid loans, the parties are repaying the principal amounts, as stipulated, and arealso regular in payment of interest, as applicable (d) In respect of the aforesaid loans,there is no overdue amount more than Rupees One Lakh.
(e) The Company has not taken any loans, secured or unsecured, from companies, firms orother parties covered in the register maintained under Section 301 of the Act.
4. In our opinion and according to the information and explanations given to us, exceptfor an instance of management override of internal control by erstwhile whole timedirector reported to us, by the Management (also refer clause 21), there is an adequateinternal control system commensurate with the size of the Company and the nature of itsbusiness for the purchase of inventory, fixed assets. The Company needs to improve itsinternal control system for sale of its tyres necessitated from certain deficiencies inrelation to Information Technology General Control. The Company has not provided anyservice during the year. Further, on the basis of our examination of the books and recordsof the Company and according to the information and explanations given to us, we haveneither come across nor have we been informed of any continuing failure to correct majorweaknesses in the aforesaid internal control system.
5. (a) In our opinion and according to the information and explanations given to us,the particulars of contracts or arrangements referred to in Section 301 of the Act havebeen entered in the register required to be maintained under that Section.
(b) In our opinion and according to the information and explanations given to us, thetransactions made in pursuance of such contracts or arrangements and exceeding the valueof rupees five lakhs in respect of any party during the year, have been made at priceswhich are reasonable having regard to the prevailing market prices at the relevant timeother than transactions of special nature for which competitive quotations are notavailable.
6. In our opinion and according to the information and explanations given to us, theCompany has complied with the provisions of Sections 58A and 58AA or any other relevantprovisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975 with regardto the deposits accepted from the public. According to the information and explanationsgiven to us, no order has been passed by the Company Law Board or National Company LawTribunal or Reserve Bank of India or any Court or any other Tribunal on the Company inrespect of the aforesaid deposits.
7. In our opinion, the Company has an internal audit system commensurate with its sizeand nature of business.
8. We have broadly reviewed the books of account maintained by the Company in respectof products at its Cement, Tyre, Rayon and Chemicals Units where, pursuant to the Rulesmade by the Central Government of India, the maintenance of cost records has beenprescribed under Section 209(1)(d) of the Act and are of the opinion that prima facie, theprescribed accounts and records have been made and maintained. We have not, however, madea detailed examination of the records with a view to determine whether they are accurateor complete.
9. (a) According to the information and explanations given to us and the records of theCompany examined by us, in our opinion, the Company is generally regular in depositing theundisputed statutory dues including provident fund, investor education and protectionfund, employees state insurance, income tax, sales tax (other than arrears of Rs0.38 crore outstanding for a period of more than six months as on 31st March, 2012),wealth tax, service tax, custom duty, excise duty, cess and other material statutory duesas applicable with the appropriate authorities.
(b) According to the information and explanations given to us and the records of theCompany examined by us, the particulars of dues of income tax, sales tax, wealth tax,service tax, custom duty, excise duty and cess as at 31st March, 2012 which have not beendeposited on account of a dispute (there being no such cases with regard to wealth tax,custom duty and cess), are as follows
|Name of Statute ||Nature of Dues ||Period to which the Amount relates ||Amount ||Forum where dispute is pending |
| || || ||Rs / crore || |
|Andhra Pradesh General Sales Tax Act, 1957 ||Sales Tax ||2001 02, 2006 07 to 2009 10 ||0.80 ||Andhra Pradesh High Court |
|Bombay Sales Tax Act, 1959 ||Sales Tax ||2002 03 to 2004 05 ||0.71 ||Deputy Commissioner (Appeal) |
|Central Excise Act, 1944 ||Excise Duty ||1999 2003, 2004 09 ||29.07 ||Central Excise Service Tax Appellate Tribunal |
| || ||2005 06 ||0.76 ||Tribunal |
| || ||1995 96, 2004 05, 2001 03, 2006 07 & 2010 12 ||1.40 ||Commissioner (Appeals) |
| || ||1999 00, 2002 03 ||0.60 ||Additional Commissioner |
| || ||1985 1990, 1995 96, 2000 2008 & 2009 10 ||28.58 ||Commissioner |
| || ||1979 81, 1982 93, 1995 96, 2002 05 ||0.19 ||Assistant Commissioner |
|Central Sales Tax Act, 1956 ||Sales Tax ||2000 2003 ||16.99 ||Supreme Court |
| || ||2003 04 ||4.65 ||Karnataka High Court |
| || ||2003 05, 2006 07 & 2008 09 ||8.73 ||Odisha High Court |
| || ||2001 03 ||0.18 ||Tribunal |
| || ||1995 97, 2003 07 & 2006 07 ||6.26 ||West Bengal Commercial Taxes Appellate and Revision Board |
| || ||2001 02,2004 05 & ||0.06 ||Sr. Jt. Commissioner |
| || ||2007 08 || ||(Appellate Authority) |
| || ||2008 09 ||0.05 ||Sr. Joint Commissioner |
| || ||1997 98, 1999 00, ||0.37 ||Additional |
| || ||2007 09 || ||Commissioner |
| || ||2005 06 ||0.05 ||Commissioner |
| || ||2007 10 ||0.11 ||Deputy Commissioner |
| || ||1996 97,1998 99, 2003 05 ||0.57 ||Assistant Commissioner |
|Delhi Sales Tax Act,1975 ||Sales Tax ||1999 2000 ||0.42 ||Additional Commissioner |
|Jammu & Kashmir Sales Tax Act,1962 ||Sales Tax ||1995 96, 1999 2000 ||0.10 ||Deputy Commissioner |
|Tamil Nadu General Sales Tax Act, 1959 ||Sales Tax ||1999 2000 ||0.18 ||Chennai High Court |
|UP Trade Tax Act, 1948 ||Sales Tax ||2005 07 ||0.09 ||Additional Commissioner |
|West Bengal Sales Tax Act, 1994 ||Sales Tax ||1987 88, 1998 99, 1995 97, 2003 04, 2004 05 ||3.90 ||West Bengal Commercial Taxes Appellate and Revision Board |
| || ||2001 02, 2004 05 ||0.38 ||Sr. Jt. Commissioner (Appellate Authority) |
| || ||1999 2000, 2008 09 ||0.07 ||Additional Commissioner |
| || ||1995 96, 1997 98 ||0.21 ||Deputy Commissioner |
|Finance Act, 1944 ||Service Tax ||March 2008 to April 2009 ||0.46 ||Commissioner |
|Finance Act,1994 ||Service Tax ||2008 11 ||0.35 ||Commissioner (Appeal) |
|Income Tax Act, 1961 ||Income Tax ||2003 04, 2005 06, 2008 09 ||16.44 ||CIT (Appeal) |
10. The Company has no accumulated losses as at 31st March, 2012 and it has notincurred any cash losses in the financial year ended on that date and in the immediatelypreceding financial year.
11. According to the records of the Company examined by us and the information andexplanations given to us, the Company has not defaulted in repayment of dues to anyfinancial institution or bank or debenture holders as at the Balance Sheet date.
12. The Company has not granted any loans and advances on the basis of security by wayof pledge of shares, debentures and other securities.
13. The provisions of any special statute applicable to chit fund/ nidhi/ mutualbenefit fund/ societies are not applicable to the Company.
14. In our opinion, the Company is not a dealer or trader in shares, securities,debentures and other investments. 15. In our opinion, and according to the information andexplanations given to us, the Company has not given any guarantee for loans taken byothers from banks or financial institutions during the year.
16. In our opinion, and according to the information and explanations given to us, onan overall basis, the term loans have been applied for the purposes for which they wereobtained.
17. On the basis of an overall examination of the Balance Sheet of the Company, in ouropinion and according to the information and explanations given to us, there are no fundsraised on a short term basis which have been used for long term investment.
18. The Company has not made any preferential allotment of shares during the year.
19. The Company has created security or charge in respect of debentures issued andoutstanding at the year end. 20. The Company has not raised any money by public issuesduring the year.
21. During the course of our examination of the books and records of the Company,carried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us, except in respect of a legalproceeding initiated by the Company in the month of July 2011 against an erstwhile Wholetime Director and certain other persons (the "accused parties") in relation tocertain transactions in one of the units of the Company that were allegedly authorised andexecuted by/ in favour of the accused parties to the detriment of the Companysinterests during the period from May, 2008 to June, 2011, which are being investigated bythe Management. Pending completion of the Managements investigation, resultantimpact, if any, is currently not ascertainable; we have not come across any instance offraud on or by the Company. [Also refer paragraph 4(a) of the audit report]
| ||For Price Waterhouse |
| ||Firm Registration Number: 301112E |
| ||Chartered Accountants |
| ||Prabal Kr. Sarkar |
|Kolkata ||Partner |
|28th April, 2012 ||Membership Number 52340 |