Balaji Distilleries Ltd merged Auditor Reports

BALAJI DISTILLERIES LIMITED ANNUAL REPORT 2009-2010 AUDITORS REPORT TO THE MEMBERS OF BALAJI DISTILLERIES LIMITED We have audited the attached Balance Sheet of Balaji Distilleries Ltd as at March 31, 2010, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 1) We conducted our audit in accordance with auditing standards generally accepted in India. These standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 the management, as well as evaluating the overall financial statements presentation.We believe that our audit provides a reasonable basis for our opinion. 2) As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government in terms of section 227(4A) of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5o f the said Order. 3) Though the Company has been declared as a Sick Industrial Undertaking, referred to BIFR and has negative networth, in view of settlement of most of the term liabilities successfully through One Time Settlement (OTS) and after considering improved operations and Companys business plans, the companys accounts are prepared as a going concern. 4) Without qualifying our opinion, we draw your attention to Para number 13 of Schedule U to the Balance Sheet. In distillery division, company has changed to weighted average method for valuing raw materials, packing materials and stores and spares as against FIFO method followed last year. Given the magnitude of the transactions, Management is unable to quantify the impact dueto change in accounting policy. 5) Further to our comments in paragraphs 2 to 4 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 those books; c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this Report are in compliance with the accounting standards referred to in Section 211(3C) of the Companies Act, 1956. e) On the basis of written representations received from the Directors of the Company as at 31st March 2010 and taken on record by the Board of Directors, in terms of clause (g) of subsection (1) of section 274 of the Companies Act, 1956, we report that none of the Directors is disqualified as on 31st March 2010 from being so appointed as Director of the Company; f) The particulars required to be disclosed under clause 32 of the listing agreement have not been disclosed; 6) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the schedules and notes thereon, give the information required bythe Companies Act, 1956, in the manner so required 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 March 31, 2010; ii. In the case of the Profit and Loss Account, of the loss for the year ended on that date; and iii. In the case of the Cash Flow Statement,of the Cash Flows for the year ended on that date. For PKF SRIDHAR & SANTHANAM For P.A. REDDY & CO Chartered Accountants Chartered Accountants Firm Registration No. 003990S Firm Registration No. 007368S V. KOTHANDARAMAN P.ASHOK REDDY Partner Partner Membership No: 25973 Membership No: 23202 Place: Chennai Date : July 31, 2010 ANNEXURE TO THE AUDITORS REPORT OF BALAJI DISTILLERIES LIMITED [referred to in Paragraph 3 of our report of even date]. Based on the information and explanation furnished to us and the books and records examined by us in the normal course of our audit, we report that to the best of our knowledge and belief: i) In respect of Fixed Assets: a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. b) During the year, the Fixed assets have been physically verified by the management. No major discrepancies were noticed as a result of such verification. c) The fixed assets disposed off during the year are not substantial and therefore do not affect the going concern status of the company. ii. In respect of Inventories of finished goods, work in process, raw materials and stores and spares: a) The inventories have been physically verified by the management during the year and the frequency of such verification is reasonable. b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. c) The Company is maintaining proper records of inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and the same have been properly dealt within the books of account. 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) During the year, the company has not granted or taken any loans to/from any parties referred above. iv. In respect of internal control procedures: a) There are adequate Internal Control Systems commensurate with the size of the Company and the nature of its business for the purchase of inventories, fixed assets and sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system. v. In respect of transactions that need to be entered into a register in pursuance of section 301 of the Companies Act. a) During the year, there are no contracts and / or arrangements that need to be entered in to the register maintained under Section 301 of the Act. vi. In respect of public deposits: a) The Company has not accepted any deposits from the public within the meaning of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of deposits) Rules, 1975 and therefore the provisions of paragraph 4(vi) of the Order are not applicable to the Company. vii. In respect of internal audit system: a) In our opinion, the company has an internal audit system commensurate with its size and nature of its business. viii. In respect of cost records: a) According to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, for any of the products of the Company and therefore the provisions of paragraph 4(viii) of the Order are not applicable to the company. ix. In respect of statutory dues, a) The Company has been generally regular in depositing undisputed dues of provident fund, Investor Education and protection fund, employees state Insurance, Income Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other applicable Statutory dues with the appropriate authorities during the year except undisputed sales tax of Rs. 4548.91 lakhs and interest thereon of Rs. 6710.13 lakhs relating to the financial year 2003- 04 and interest on Sales Tax / VAT of Rs 1231.83 lakhs relating to other financial years. In some cases, Sales Tax and Income Tax remittances of the year have been made after small delays. b) In respect of Income Tax, Sales Tax, Wealth Tax, Service tax, Customs duty, Excise duty and Cess, there are no undisputed amounts outstanding as at March 31, 2010 for a period of more than six months from the date they became payable except for undisputed sales tax and Value Added Tax of Rs.4548.91 lakhs and interest thereon of Rs.7941.96 lakhs and short deduction of Tax deducted at source of Rs. 6,76,239/-. c) Dues relating to sales tax / excise duty / cess / Income tax / service tax, which have not been deposited on account of disputes with the related authorities, are stated in the table below: Name of the Statute Period Amount Forum where the [Rs. In dispute is pending crores] Sales Tax F.Y. 1996-97 4.38 High Court, Madras Interest on Sales Tax F.Y. 1985-86 & 1986-87 12.52 High Court, Madras (net of the amount deposited on protest) Income Tax A.Y. 2002-03 & 2004-05 3.02 Commissioner of Income Tax (Appeals) State Excise Duty F.Y. 2000-01 to 1.63 High Court, Madras 2008-09 x) In respect of losses: a) The accumulated losses of the company as at March 31, 2010 are in excess of 50% of the networth. The company has not incurred cash loss during the year ended on that date and in the immediately preceding year. xi) In respect of repayment of dues to financial institutions, banks and/or debenture holders: a) The Company has no outstanding dues to the financial institutions and has repaid the dues with regard to debentures in accordance with one time settlement. There is no default as at the balance sheet date as regards repayment of dues to banks. xii) In respect of loans on the basis of security by way of pledge of shares, debentures and other securities: a) The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of paragraph 4 (xii) of the Order are not applicable to the company. xiii) In respect of applicability of any special statutes: a) The company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable to the Company. xiv) In respect of dealing inshares, securities, debentures and other investments: a) The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4[xiv] of the Order are not applicable to the Company. xv) In respect of guarantees by the Company for the loan taken by others from banks or financial institutions: a) The Company has not given any guarantee during the year and there are no guarantees outstanding at the end of the year. xvi) In respect of utilization of term loans: a) The Company has not taken any fresh term loan during the year. xvii) In respect of utilization of short term funds: a) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that the Company has used funds raised on short term basis for long term investment. xviii) In respect of preferential allotment of shares: a) According to the information and explanations given to us, during the period covered by our audit report, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301of the Companies Act, 1956. xix) In respect of issue of debentures: a) According to the information and explanations given to us, the Company has not issued any debentures during the year nor are any debentures outstanding at the end of the accounting year. xx) In respect of public issues: a) During the period covered by our audit report, the Company has not raised any money by public issues. Hence the matters to be reported as per paragraph 4(xx) of the Order are not applicable to the Company. xxi) In respect of frauds: a) In our opinion and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit. For PKF SRIDHAR & SANTHANAM For P.A. REDDY & CO Chartered Accountants Chartered Accountants Firm Registration No. 003990S Firm Registration No. 007368S V. KOTHANDARAMAN P.ASHOK REDDY Partner Partner Membership No: 25973 Membership No: 23202 Place: Chennai Date : July 31, 2010