bcl forgings ltd share price Auditors report

BCL FORGINGS LIMITED ANNUAL REPORT 2010-2011 AUDITORS REPORT To the Members, BCL Forgings Limited 1. We have audited the attached Balance Sheet of BCL FORGINGS LIMITED as of 31st March, 2011, 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. 2. We have 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 a test basis, evidence supporting the amounts and disclosures in die 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 statement presentation. We believe that our audit provides a reasonable basis for our opinion. . 3. Attention of the members is drawn to Note C1 of Schedule is of the audited accounts regarding the reasons for preparing the accounts by applying the principal of going concern assumption, 4. In our opinion, after taking into consideration the effect of unprovided liability/losses/expenses referred to in Para 6(g) here below, the Company has become a Sick Industrial Company within the meaning of Section 3(l)(o) of the Sick Industrial Companies(Special Provisions) Act, 1985. 5. As required by the Companies (Auditors Report) Order, 2003 issued by the Company Law Board in terms of Section 227(4A) of the Companies Act, 1956 and on the basis of such checks as considered necessary and as per the information and explanations given to us, we * enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order: 6. Further to our comments in the Annexure referred to in paragraph 5 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 purposes 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 except that the Company has not provided for tire estimated gratuity liability of Rs.2,13,31,769/- and estimated leave salary of Rs.1,019,514/- as of 31st March 2007 as also the incremental liability of leave salary thereafter as the amount whereof is not ascertainable in view of the actuarial valuation of the liability of leave salary as of 31st March 2011 having not been done. (Refer Note No. 18.C 3(a)&(b)J; c) 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; d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow-Statement dealt with by this report comply with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956, except for non provision of retirement benefits in respect of gratuity and leave salary as also non-disclosure of information in respect thereof as required by Accounting Standard 15> (AS -15) Employee Benefits [Refer Note No. 18.C.2(a) & (b)J and computing Earnings Per Share without considering un-provided liabilities/losses/expenses though required by Accounting Standard 20 Earnings Per Share (AS -20) (Refer Note No. 18. C.23); e) We have not received any representation from the Directors of the Company confirmation that they are not disqualified from being appointed as directors of the Company under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. In view of the same, we are Unable to express our opinion in respect thereof. f) Attention of the Members of the Company is drawn to Note N0.I8.C 7 regarding non-payment of the Cumulative Dividend of Rs. 14,297,918 in respect of 6% Cumulative Convertible Preference Shares up to the date of their conversion into equity shares, as the management is of the view that the same is not payable as not declared. g) Attention of the Members is drawn to the following Notes as referred to in Part C of Schedule 18: (i) Note No. 2(g) regarding contingent liability for saving of custom duty of Rs. 1,07,65,944/- which can devolve on the Company in the event of non fulfillment of export obligation as we are unable to express our opinion on account in absence of export orders. (ii) Note No. 3(a) and 3(b) regarding non-provision of the estimated gratuity of Rs.2,13,31,769 as of 31st March 2011 and estimated leave salary of Rs. 10,19,514/- as of 31st March 2007 as also the incremental liability of leave salary there after, as the amount whereof is not ascertainable in the view of the actuarial valuation of the liability of leave salary as on 31st March 2011 having not been done; (Hi) Note No. 10 regarding pending ascertainment by the management of the Company whether there is any need to provide for obsolescence/ impairment in respect of unmoved inventory of stores, spare parts and dye blocks. (iv) Note No. 11 regarding non-provision of debts considered doubtful for recovery aggregating to Rs.2,36,49,749/- in view of the Companys efforts to recover them by taking appropriate legal steps and/or personal follow up actions; (v) Note No. 12 regarding the opinion expressed by the management of the Company as regards the recoverability of the amount of Rs.63,266,282/- due from Messers. Investwell in respect of Which we are unable to express our opinion in absence of confirmation from Hie said party and other documentary evidences; (vi) Note No. 13 regarding non-provision of fees payable by the Company to Prathamesh Investments & Trading Private Limited in connection with the services rendered by it in relation to the preferential issue of shares and warrants by the Company in earlier period(s) in view of the Managements decision to charge the fees as and when determined to the Share Premium Account in accordance with the provisions of Section 79 of the Companies Act, 1956. (vii) Note No. 14 regarding tire following transactions with Business Combine Limited (BCL) which are subject to reconciliation & confirmation. (a) Interest of Rs.1,86,57,778/- for tin: previous financial year covered by our report charged to B CI, in respect of the outstanding balances recoverable from it ; (b) Labour charges of Rs. 62,94,400/- credited by the Company to BCL towards products manufactured by them; and (c) Debit notes issued by the Company for rejection(s) as well as reimbursement of expenses for and up to years ended 31s March, 2011. Consequently, the above transactions on account of subject to being disputed are subject to adjustment, finalisation/settlement in the year in which, the same are concluded. Further, we are unable to express our opinion regarding the opinion expressed by the management of the Company as regards the recoverability of dues of Rs. 7,04,68,215/-from BCL. (viii) Note No. 15 regarding advances of Rs.1,07,87,214 paid to suppliers which are subject to reconciliation and necessary adjustment entries upon reconciliation. (ix) , Note No. 16 regarding reconciliation /confirmation of balances of Sundry Debtors, Loans and Advances and Sundry Creditors. . (x) Note No. 17 regarding rion disclosure of vendors status under the Micro, Small and Medium Enterprises Act, 2006 as also tire non-provision of interest payable ,if any, to tire said vendors in accordance with the provisions of the said Act; (xi) Note No.18 regarding non-provision of disputed income tax demand of earlier years Rs.64,96,611/-. (xii) Note No. 19 regarding audit committee constituted under section 292.A of the Companies Act,1956. (xiii) The consequential effects on loss for tire year and on the provision as well as on the balance in the Profit and Loss Account as stated in the accounts to the extent of Rs.2,88,47,894/- on account of Para Nos. (ii) and (xi). (xiv) The consequential effects on loss for tire year and on tire assets and liabilities as well as on tire balance in tire Profit and Loss Account and tire Share Premium Account as stated in the accounts on account of Para Nos (i), (ii) to (x), the effects whereof are not possible to be determined. h) In our opinion and to the best of our information and according to the explanations given to us, the said accounts, subject to Para Nos (i) to (xii) of (g) and their consequential effects as stated in Para Nos (xiii) & (xiv) of (g), read alongwith Significant Accounting Policies and Other Notes thereon, give the information required by the 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 31st March, 2011; (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 M.A. Parikh & Co. Chartered Accountants Registration No. 107556W Partner Name: Ajit C Shah Membership No. 13097 Place: Mumbai Date : 24th Nov. 2011 Annexure to Auditors Report Referred to in Paragraph 1 of our report of even date 1. In respect of its fixed assets: a. The Company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets except for furniture, fixtures and equipments. b. The management had decided to carry out physical verification of certain fixed assets during the year in accordance with the phased programme of verification, so as to verify all the material fixed assets over a period of three years. However, during the year, no physical verification was carried out by the Management and hence, we are not able to comment on the discrepancies, if any. c. The Company has not disposed off substantial fixed assets during the year and therefore, the question of going concern assumption getting affected does not arise. 2. In respect of its inventories: a. As explained to us, the inventories have been physically verified by the management at the year end. In our opinion, the frequency of such verification is reasonable. b. In our opinion and according to the information and explanations given to us, 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, except that the instructions for physical verification of inventory were issued orally and not documented as well as the documentation of physical verification carried out is not properly maintained. c. The Company has maintained proper records of inventories. As explained to us, the discrepancies noticed on physical verification of inventories were not-material as compared to the book records and have been properly dealt with in the books of account. 3. The Company has not. granted/ taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the requirements of Clause 4(iii) of the Order are not applicable. 4. In our opinion and according to the information and explanations given to us, there is an , adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventories and fixed assets and for the sale . of goods and services. During the course of our audit, we have not observed any major weaknesses in the internal control system and hence, the question of continuing failure on the part of the Company to correct the major weaknesses in the internal control system does not arise. 5. During the year, there were no particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 that were needed to be entered into the register required to be maintained under that section. Therefore, the requirements of Clause 4(v) of the Order are not applicable. 6. During the year, the Company has not accepted any deposits from the public and consequently, the directives issued, by the Reserve Bank of India and the provisions of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under are not applicable. 7. The Company does not have an internal audit system. 8. The Central Government has not prescribed the maintenance of cost records under section 209(1) (d) of the Companies Act, 1956 in respect of the products dealt with by the Company. 9. In respect of statutory dues:- a. The Company is generally regular in depositing the undisputed statutory dues including Provident Fund, Employees State Insurance, Income-tax, Sales-tax, Wealth-lax, Service tax, Custom Duty, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities except for non payment of tax deducted at source of Rs. 7,54,844/- as on 31s March, 2009. b. According to the information and explanations given to us, except for the above Unpaid undisputed statutory dues,-there are no other undisputed amounts payable in respect of the aforesaid dues were in arrears as at 31st March, 2011 for a period of more than six months from the date they became payable. c. According to the information and explanations given to us and according to the records of the Company, the outstanding dues of Income-tax of Rs.9,39,397/-and Rs. 55,57,214/-, for the assessment years 2006-2007 and 2008-2009 respectively have not been deposited on account of disputes which are. pending before Commissioner of Income Tax (Appeals). Except for the same, there are no other disputed dues of Sales-tax, Wealth-tax, Custom Duty, Excise Duty and Cess. 10. The Companys accumulated losses are more than 50 % of its net worth. The Company has incurred cash losses during the financial year covered by our report as well as in the immediately preceding financial year. 11. In our opinion and according to the information and explanations given to us, the Company was generally regular in repayment of dues to its bank. The Company has not , borrowed from any financial institutions and has not issued any debentures. 12. 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 requirements of Clause 4(xii) of die Order are not applicable. 13. In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund / society. Therefore, the requirements of Clause 4(xiii) of the Order are not applicable. 14. During the year, the Company has not dealt in or traded in shares, securities, debentures and other investments. Therefore, the requirements of Clause 4(xiv) of the Order are not applicable. 15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. Therefore, the requirements of Clause 4(xv) of the Order are not applicable. 16. In our opinion and according to the information and explanations given to us and on the basis of examination of die books of account, no new term loans have been obtained during the year. 17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds have been raised on short term basis and hence, the question of using the same for long term investment does not arise. 18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the requirements of Clause 4(xviii) of the Order are not applicable. 19. The Company has not issued debentures and hence, the creation of security or charge in respect thereof as contemplated in Clause 4(xix) of the Order does not arise. 20. The Company has not raised any money by way of public issue during the financial year covered by our report and hence, the question of disclosure by the Management on the end use of money raised therefrom and the verification of the same by us does not arise. 21. Based upon the audit procedures performed by us and as per the information and explanations given by the Management, no fraud on or, by the Company has been noticed or reported during the course of our audit. For M.A. Parikh & Co. Chartered Accountants Registration No. 107556W Partner Name: Ajit C Shah Membership No. 13097 Place: Mumbai Date : 24th Nov. 2011