Agnite Education Ltd Auditor Reports

AGNITE EDUCATION LIMITED ANNUAL REPORT 2010-2011 AUDITORS REPORT TO THE MEMBERS OF AGNITE EDUCATION LIMITED We have audited the attached Balance Sheet of M/s. AGNITE EDUCATION LIMITED (formerly known as Teledata Informatics Ltd) as at September 30, 2011 and the Profit and Loss Account and the Cash Flow Statement of the Company for the period ended on that date annexed thereto, in which are incorporated the returns from the USA Branch and Dubai Branch audited by another firm of auditors. These financial statements are the responsibility of the management of the Company. Our responsibility is to express an opinion on these financial statements based on our audit and audit reports of overseas branches auditors. 1. We have conducted the 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 a 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 2. As required by the Companies Auditors Report Order, 2003, as amended, issued by the Central Government of India in terms of section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in the said order. 3. Financial Statements of overseas branches which reflect total assets of Rs. 0.03 crores as at September 30, 2011, total revenues of Rs. 33.31 crores and net profits of Rs. 0.20 crores for the period then ended, have been audited by branch auditors whose reports have been furnished to us and our opinion, in so far as it relates to the amounts included in respect of these overseas branches is based solely on their reports. 4. a. We draw attention to Note No.22 of Schedule Q on booking of revenue on sale of products to marketing agents and legal action against debtors, wherever necessary. b. We are unable to comment on the ultimate realisability of investments amounting to Rs. 110.33 crores in Rainforest Trading Limited and amount advanced to Baytech Inc BVI to the tune of Rs. 186.13 crores, in the absence of audited financial statements for the last five years of their ultimate subsidiary Esys Technologies Pte Limited which is the substance of the said investments/advances as referred to in Note No.19 of Schedule Q. We are unable to express an opinion on the ultimate realisability of the said amounts. 5. Further to our comments in the Annexure referred to above, we report that: i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; ii. In our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purpose of audit have been received from the branches not visited by us; iii. The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account; iv. In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt by with this report have been prepared in all material respects in compliance with the applicable Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 except for non- compliance in respect of the reinstatement of debtors, creditors and advances in accordance with Accounting Standard 11 - Effects of Changes in Foreign Exchange Rates (Revised); v. On the basis of written representations received from the directors as on September 30, 2011 and taken on record by the Board of Directors of the Company, none of the directors are disqualified as on September 30, 2011 from being appointed as a Director in terms of Section 274(1)(g) of the Companies Act, 1956. 6. Subject to the comments made in paragraph 4 and 5 above and the effect in respect of which on the profit and loss account of the Company for the period under consideration is not ascertainable, in our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the notes thereon give in the prescribed manner the information required by the Companies Act, 1956 of India and give a true and fair view in conformity with the accounting principles generally accepted in India: i. In the case of the Balance Sheet, of the state of affairs of the Company as at September 30, 2011 and ii. In the case of the Profit and Loss Account, of the loss for the period ended on that date. iii. In the case of the Cash Flow statement, of the cash flows for the period ended on that date. For N R KRISHNAMOORTHY & CO. Chartered Accountants Firm Registration Number : 001492S N R Krishnamoorthy Partner Membership Number : 20638 Place : Chennai Date : 16.03.2012 ANNEXURE referred to in paragraph 2 of our report of even date to the members of AGNITE EDUCATION LIMITED for the period ended 30th September 2011. 1. a. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. b. All the assets have not been physically verified by the management during the period but there is a regular programme of verification, which in our opinion, is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such verification. c. The Company has not disposed off substantial part of its fixed assets during the period. 2. In our opinion, the valuation and maintenance of records of inventories is not applicable to the present activities of the Company. Therefore, clause (ii) of paragraph 4 of the order is not applicable to the Company. 3. a.i. According to the information and explanations given to us, the Company has granted interest-free unsecured loans to Eight parties listed in the register maintained under section 301 of the Companies Act, 1956. The maximum balance outstanding during the period was Rs.197.04 crores and the period end balance of the loans was Rs.188.73 crores. ii. As explained to us by the management, the other terms and conditions of the above said loans are prima facie not prejudicial to the interest of the Company. iii. The principal amount has not fallen due in this period as the same is payable on demand. iv. There are no overdue amounts of more than rupees one lakh in respect of the loans granted and accordingly, paragraph 4 (iiii)(d) of the Order is not applicable to the Company. b.i. According to the information and explanations given to us, the Company has taken interest-free unsecured loans from three parties listed in the register maintained under section 301 of the Companies Act, 1956. The maximum balance outstanding during the period was Rs. 1841.60 crores and the period end balance of the loans was Rs. 165.63 crores. ii. As explained to us by the management, the other terms and conditions of the above said loans are prima facie not prejudicial to the interest of the Company. iii. The principal amount has not fallen due for repayment during the period. 4. In our opinion and according to the information and explanations given to us and having regard to the explanation that purchases of certain items of contents and consumables for projects are for the Companys specialized requirements for which suitable alternate sources are not available to obtain comparable quotations, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of contents through approval by the technical committee, fixed assets and with regard to the provision of services. In our opinion and according to the information and explanations given to us , we have not observed any continuing failure to correct major weaknesses in internal controls except incase of the sale of goods and services wherein the Company does not keep the details of the end users of the software licenses sold through the agents. 5.i. In our opinion and according to the information and explanations given to us, we are of the opinion that the transactions that need to be entered in the register maintained under section 301 of the Companies Act, 1956, have been so entered. ii. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts 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 period have been made at prices which are reasonable having regard to prevailing market prices at the relevant time. This being a technical matter, we have relied on the management assessment. 6. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from public as per the provisions of section 58A and 58AA or any other relevant provisions of the Companies Act, 1956. Accordingly, paragraph 4(vi) of the Order is not applicable to the Company. 7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. 8. The Company has not been required by the Central Government to maintain cost records under section 209 (1) (d) of the Companies Act, 1956. Accordingly, paragraph 4(viii) of the Order is not applicable to the Company. 9. i. According to the information and explanations given to us, the Company is not regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income tax, sales tax, wealth tax, service tax and other statutory dues applicable to it. As explained to us, the Company did not have any dues on account of customs duty and excise duty. Further, since the Central Government has till date not prescribed the amount of Cess payable under section 441A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at September 30th, 2011 for a period of more than six months from the date of becoming payable other than : a. Provident fund previous year amounting Rs. 0.29 Crores ii. According to the information and explanations given to us, there are no dues of sales tax, wealth tax, service tax and Cess which have not been deposited on account of any dispute. However, according to the information and explanations given to us, the following dues of income tax under the Income Tax Act, 1961 have not been deposited by the Company on account of disputes: Assessment Year Disputed amount Appeal Pending Before (Rs. in crores) 1998-1999 0.41 The Commissioner of Income Tax, Appeals 1999-2000 1.20 The Commissioner of Income Tax, Appeals 2000-2001 3.02 The Commissioner of Income Tax, Appeals 2002-2003 0.02 The Commissioner of Income Tax, Appeals 2003-2004 0.93 Honorable High Court of Madras 2004-2005 0.47 The Income Tax Appellate Tribunal, Chennai 2006-2007 0.02 The Commissioner of Income Tax, Appeals 2007-2008 0.49 The Commissioner of Income Tax, Appeals 2008-2009 0.02 The Asst. Commissioner of Income Tax 10. The Company has no accumulated losses and has not incurred cash losses during the immediately preceding financial year and during the period of 18 months under audit. 11. Based on our audit procedures and according to the information and explanations given to us, the Company has continuously defaulted in repayment of dues to banks and the advances received by the Company from the State Bank of India to the tune of Rs. 314.99 crores and from other banks to the tune of Rs. 87.58 crores as on the Balance Sheet Date have been classified as Non-Performing Assets (NPAs) by the Banks. 12. In our opinion and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, paragraph 4(xii) of the Order is not applicable to the Company. 13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi/mutual benefit fund / society. Accordingly, paragraph 4(xiii) of the Order is not applicable to the Company. 14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. All securities and other investments have been held by the Company in its own name except in case of investments in certain foreign companies where shares are held by its directors/nominees as referred to in Note No.19(a) of Schedule Q of notes to accounts wherein the share certificate for the investments are not in possession of the Company. 15. According to the information and explanations given to us, the Company has given guarantees to banks and financial institutions for loans taken by its wholly owned subsidiary Baytech Inc BVI for investment in Esys Technologies Pte Limited, Singapore in respect of which, we are informed that the same is not prejudicial to the interests of the Company. The Company is of further opinion that the corporate guarantees given to the parties other than the subsidiaries are in the ordinary course of business and hence not prejudicial to the interests of the Company. 16. In our opinion and according to the information and explanations given to us, the Company did not have any Term Loans outstanding during the period. Accordingly, paragraph 4(xvi) of the Order is not applicable to the Company. 17. According to the information and explanations given to us and on overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment. 18. According to the information and explanations given to us, the Company has not made any preferential allotment of shares during the period, to parties and companies covered in the register maintained under section 301 of the Act. Accordingly, paragraph 4(xviii) of the Order is not applicable to the Company. 19. According to the information and explanations given to us, the Company has not issued any debentures during the period covered by our audit. Accordingly, paragraph 4(xix) of the Order is not applicable to the Company. 20. The Company has not raised any money by way of public issue during the period. Accordingly, paragraph 4 (xx) of the Order is not applicable to the Company. 21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit. For N R KRISHNAMOORTHY & CO. Chartered Accountants Firm Registration Number: 001492S N R Krishnamoorthy Partner Place : Chennai Membership Number: 20638 Date : 16.03.2012