The Members of LN POLYESTERS LIMITED,
Hyderabad - 500 033.
We have audited the attached Balance Sheet of LN Polyesters Limited,
Hyderabad as on 31st March' 2009, and also the Profit and Loss Account for the
Year Ended on that date annexed thereto and Cash Flow Statement for the period ended on
that date. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our
We conducted our audit in accordance with auditing standards generally accepted in
India. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by the management, as well as evaluating the over all
financial statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
1. As required by the Companies (Auditor's Report) Order, 2003 issued by the Central
Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956
and on the basis of such checks of the books and records of the Company as we consider
appropriate and according to the information and explanations given to us, We give in the
annexure a statement on the matters specified in paragraph 4 and 5 of the said Order.
2. Our comments on the accounts are as under:
a) Reference is invited to Note No.4 under Notes on Accounts under Schedule P regarding
confirmation and / or reconciliation of balances.
b) According to the information and the explanations given to us, the Company does not
have any over - dues to SSI units and hence no provision for interest is made in accounts.
3. Subject to our observations in the annexure referred to in paragraph (1) and our
comments in paragraph (2) above, We report that:
a) We have obtained all the information and explanations, which to the best of our
knowledge and belief were necessary for the purpose of our audit.
b) In our opinion proper books of account as required by law have been kept by the
Company so far as it appears from our examination of such books.
c) The Balance Sheet and Profit and Loss Account referred to in this report are in
agreement with the Books of Account.
d) In our opinion the Balance sheet and Profit and Loss Account are in compliance with
the Accounting Standards referred to in Sec. 211 (3C) of the companies Act, 1956,
excepting in relation to Accounting Standard 22 on Accounting for Taxes on Income and
reference is invited to Note No.9 under Notes on Accounts under Schedule P.
e) In our opinion, and based on the information and explanations given to us, none of
the Directors of the Company are disqualified as on 31st March ' 2009, from
being appointed as a Director under clause (g) of sub - section (1) of Section 274 of the
Companies Act, 1956.
f) In our opinion and to the best of our information and according to the explanations
given to us, the said Balance Sheet and Profit and Loss Account read together with the
significant accounting polices and notes thereon, give the information required by the
Companies Act, 1956, in the manner so required and give a true and fair view:
i) In so far as it relates to the Balance sheet, of the state of affairs of the Company
as on 31st March' 2009 and
ii) In so far as it related to the Profit and Loss Account, of the Loss of the Company
for the Year ended on that date.
iii) In the case of Cash Flow Statement, of the Cash Flows for the year ended on that
||for M/s. KUMAR & G1RI
||J. BHADRA KUMAR
|Date: 30th June, 2009
ANNEXURE REFERRED TO IN PARAGRAPH (1) OF THE REPORT OF EVENT DATE:
(i) (a) The Company is compiling the Fixed Assets Register consequent to the relocation
and merging of the facilities at the new locations.
(b) As the Location of the Fixed Assets at Hyderabad has been changed to Silvassa
&Vapi, no physical verification of the Fixed Assets has been carried out during the
current financial year. However, the Company has chalked out a programme to verify the
physical verification of fixed assets in a phased manner.
(c) In our opinion, the Company has not disposed off substantial part of fixed assets
during the year and the going concern status of the Company is not affected.
(ii) (a) As the Location of the Manufacturing Facilities have been shifted to Silvassa
and Vapi, no Physical Verification of Inventories have been carried out during the year.
However, the Company has taken steps to carry out the Physical Verification of Inventories
at regular intervals.
(b) As the physical verification of Inventories have not been carried out during the
year, we are not in a position to comment on the reasonableness and adequacy of such
(c) The Company is maintaining proper records of inventory. As the physical
verification of inventories have not been carried out, we are unable to comment on the
material discrepancies in inventories.
(iii) In respect of loans, secured or unsecured, granted or taken by the Company
to/from companies, firms or other parties covered in the register maintained under Section
301 of the Companies Act, 1956:
(a) The Company has taken loans from three parties. The maximum amount outstanding
during the year in relation to the loans taken aggregate to Rs.972.92 Lakhs .
(b) In our opinion and according to the information and explanations given to us, no
rates of interests are specified for the loans taken. The other terms and conditions for
these loans are not prima facie prejudicial to the interest of the Company.
(c) In respect of loan taken from Directors (three parties) is interest free and
subordinate to the debts of the Financial Institutions so as to the repayment of
(d) There are no overdue amounts in respect of loans taken by the Company and also in
relation to the loans given by the Company.
(iv) In our opinion and according to the information and explanations given to us,
there are adequate internal control procedures commensurate with the size of the Company
and the nature of its business with regard to purchases of inventory, fixed assets and
with regard to the sale of goods. During the course of our audit, we have not observed any
major weaknesses in internal controls.
(v) (a) According to the information and explanations given to us, we are of the
opinion that the transactions that need to be entered into the register maintained under
section 301 of the Companies Act, 1956 have been so entered.
(b) In our opinion and according to the information and explanations given to us, the
transaction made in pursuance of contract or arrangements entered in the register
maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees
five lakhs in respect of any party during the year have been made at prices which are
reasonable having regard to prevailing market prices at the relevant time.
(vi) In our opinion and according to the information and explanations given to us, the
Company has complied with the provision of sections 58A and 58AA of the Companies Act,
1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits
accepted form the public excepting loans taken from others.
(vii) The Company has an internal audit system commensurate with the size and nature of
(viii) We have broadly reviewed the books of account relating to materials, labour and
other items of cost maintained by the Company pursuant to the Rules made by the Central
Government for the maintenance of cost records under section 209 (1) (d) of the Companies
Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records
have been made and maintained.
(ix) (a) The Company is generally regular in depositing with appropriate authorities
undisputed statutory dues including provident fund, investor education protection fund,
employees' state insurance, sales tax, wealth tax, custom duty, excise duty, cess and
other material statutory dues applicable to it.
(b) According to the information and explanations given to us no undisputed amounts
payable in respect of wealth tax, sales tax, customs duty, excise duty and cess were in
arrears, as at 31st March ' 2009, for a period of more than six months from the
date they became payable, excepting the Sales Tax deffered amount which stand payable for
Rs.293,46 Lacs, which has become due on account of the Unit being shifted from Andhra
(c ) According to the information and explanation given to us, there are no dues of
sale tax, income tax, customs duty, wealth tax, excise duty and cess which have not been
deposited on account of any dispute.
(x) In our opinion, the accumulated losses of the Company are more than fifty percent
of its net worth. There is a cash loss during the current financial year amounting to
Rs.3.09 Crores and the cash loss during the immediate preceding financial year was Rs.2.21
(xi) The Company was sanctioned a Restructuring Proposal by one of the Term Lender IDBI
Bank Limited (IDBI) vide Ltr No.lDBI(H)/1564/Recovery (LNPL), Dt.25th November'
2008, wherein the Interest and Principal Dues of Financial Year 2008 - 2009 are deferred
for payment till October' 2009. Hence the Company has not paid any Interest and Principal
dues to IDBI Bank Limited. In the case of the dues by the Company to Industrial Investment
Bank of India Limited (IIBI), the Company was granted One Time Settlement (OTS), of the
loans dues. No provision for Interest is made-in the Book of Accounts of the Company on
Principal amount due to IIBI.
(xii) In our opinion and according to the information and explanation given to us, no
loans and advances have been granted by the Company on the basis of security by way of
pledge of shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit
fund/society. Therefore clause 4(xiii) of the Companies (Auditor's Report) Order' 2003 is
not applicable to the Company.
(xiv) In our opinion and according to the information and explanation given to us the
Company is not dealing in shares and securities. In the case of investments held by the
Company in shares the same are in the name of the Company.
(xv) In our opinion and according to the information and explanations given to us the
Company has not given guarantees for the loans taken by others from Banks or Financial
(xvi) The Company has not raised any new term loans during the year.
(xvii) According to the information and explanation given to us and on an overall
examination of the balance sheet of the Company, we are of the opinion that the Company
has not utilized any amount out of short terms sources for long term uses and vice versa.
(xviii) The Company has made during the year preferential allotment of equity shares to
parties covered in the Register maintained under Section 301 of the Companies Act' 1956
during the year, totaling to 22,00,000 Nos. Equity Shares of Rs.10/- each at a premium of
Rs.10/- Per Share out of the total preferential allotment of Shares of 43,00,000 Nos,
Equity Shares of Rs.10/- each at a premium of Rs.10/- Per Share.
(xix) The Clause 4(xix) of the Companies (Audit Report) Order 2003 relating to the
creation of security for the Debentures is not applicable to the Company as no debentures
are raised by the Company.
(xx) The Company has not raised any money by way of public issue during the year.
(xxi) According to the information and explanations given to us, no fraud on or by the
Company has been noticed or reported during the year that caused the financial statements
to be materially misstated.
||for M/s. KUMAR & G1RI
||J. BHADRA KUMAR
|Date: 30th June, 2009