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Geodesic Ltd Auditor Reports

4.45
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Dec 9, 2013|12:00:00 AM

Geodesic Ltd Share Price Auditors Report

To

The Members of

Geodesic Ltd.

1. Report on the Financial Statements

We have audited the accompanying financial statements of Geodesic Limited ("the Company"), which comprises the Balance Sheet as at June 30, 2013, and the Statement of Profit and Loss, and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

2. Managements Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position and financial performance of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 "the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Companys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

4. Basis of Qualified Opinion

Management has been unable to provide us with proper supporting documentation for some material transactions selected for audit. We were unable to satisfy ourselves by alternative means concerning some of the items of Income/expenditures/assets/ liabilities as reported by The Company in the Financial Statements. As a result of this, we were unable to determine whether any adjustments might have been found necessary in respect of the Income/expenditures/assets/liabilities making up the Statement. With respect to the above comment we would like to bring to your kind attention the following points-

i. We are unable to verify the correctness of the write off of B15,924.48 lac reversed in respect of software licences sold to the customers as stated in Note no 33.

ii. We are unable to verify the correctness of the write back of B43,700.54 lac, reversed in respect of software licences returned to the suppliers, as stated in Note no 33. Consequently the loss for the year has been understated to that extent.

iii. During the year Company has not made the provision for Bad and Doubtful debts, as stated in Note No. 34, as per the policy against the amount shown as Trade Receivable amounting to B36,745.50 lac.

iv. In the absence confirmations from any of the third parties(including Companys foreign subsidiary) in respect of correctness of amount due from/to the Company, including debtors, creditors, trade advances, other liabilities etc. we are unable state correctness thereof.

v. During the year The Company has defaulted in repayment of Loans/dues to the financial institutions to the tune of B8,005.29 lac. Some of the financial Institutions have filed winding up petitions against the Company. The litigation is still pending and we are informed in a few cases the Company has made a counter claim against the same. However, the ultimate impact is presently unascertainable as stated in note no. 35 of notes to accounts.

vi. The Company has raised fund through FCCB during the year 2008, the same was due for repayment in the month of January,2013. Till date the Company has not been able to discharge this liability. The foreign currency convertible bond (FCCB) holders have, through their Trustees, filed a winding up petition against the Company for defaulting on the dues. The London branch of Cit Bank is a trustee in the case where it has approached the court to recover its dues from the Company on behalf of bondholders. We are unable to ascertain financial impact thereof.

vii. No provision has been made for depletion in the value of Companys investment to the extent of B6,161.32 lac in GTSL, due to losses incurred during the year as stated in note no.37.

viii. During the year all the independent directors have resigned from the post of directorship. As on the date of financials the company has not complied with the conditions as mentioned in clause 49.Non-compliance with the provisions of corporate governance in clause 49 would invite penalties such as fine, suspension of trading and delisting from the stock exchange.

5. Qualified Opinion

Because of the significance of the matters described in the Basis for Qualified Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the Statement.

In our opinion and to the best of our information and according to the explanations given to us, subject to our comments in paragraph 4 above impact of which on the financial statements cannot be fully ascertained, 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:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at June 31, 2013;

b) in the case of the Profit and Loss Account, of the profit/ loss for the year ended on that date; and

c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

6. Paucity of working capital on account of legal issues with financial institutions and winding up proceeding filed by a few of the FIs has created uncertainty of the continuity of operations. However, based on the counterclaims lodged by the Company on these FIs, based on the discussions with alternate lenders, and based on the orders for Companys products under finalisation, the management is confident of reviving fully and as such the financial statements have been made as a Going Concern.

7. As required by the Companies (Auditors Report) Order, 2003 ("theOrder") issued by the Central Government of India in terms of subsection (4A)of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

8. As required by section 227(3) of the Act, we report that:

a) we have been able to obtain all the information and explanations subject to our comments (qualifications) as mentioned above in Para 4 and 5,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 appears from our examination of those books.

c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection(3C) of section 211 of the Companies Act, 1956;

e) On the basis of written representations received from the directors as on June 30, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on June 30, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

f) Since the Central Government has not issued any notification as to the rateat which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

For Borkar & Muzumdar

Chartered Accountants

CA Rajesh Batham

Partner

Membership No: 035941

FRN: 101569W

Place: Mumbai

Date : 14th February, 2014

Annexure to Auditors Report

(Annexure referred to in paragraph 1 under the heading "Report on other legal and regulatory requirements" of our report of even date)

1. FIXED ASSETS :

a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b) The fixed assets were physically verified by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of the fixed assets at reasonable intervals during the period under audit. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

c) In our opinion and according to the information and explanation given to us, the Company has disposed of part of fixed assets during the said period which in our opinion do not constitute a substantial part of the fixed assets of the Company and the going concern status is not affected.

d) During the year Projects under development appearing as CWIP are at a standstill, due to the resources issues and other related problems. The viability of these projects after this has not been ascertained by the Company.

2. INVENTORIES :

The nature of Companys operations is mainly dealing in the software development, which does not require it to hold inventories. The Company also deals in Hardware products. The Company maintains stock of Raw Material, Work in Process and Finished Goods at Roorkee and Bangalore. During the period under audit, clause 4 (ii) of the Companies (Auditors Report) Order, 2003 (the order) is applicable and has been given as a part of the Notes to Accounts.

a) The management has informed us that they have physically verified the inventory during the period ending on 31st March 2013 and that no material discrepancies were noticed on such physical verification. In our opinion, considering the nature of business and size of the Company, the frequency of verification is reasonable and adequate in relation to the size of the Company and its nature of business.

b) In our opinion and according to the information and explanation given to us, the Company has maintained proper records in tally software at Roorkee for its inventories and no material discrepancies were noticed on physical verification. The Company is under the process of developing new computer software (ERP) for recording and maintenance of inventory.

3. LOANS AND ADVANCES :

The Company is required to maintain the register under section 301 in respect of the loans, secured or unsecured, granted or taken by the Company to/from companies, firms or other parties covered under Section 301 of the Companies Act, 1956. The following transactions are covered under the said section the details of the same as are follows:-

a) The Company has granted loan to the parties covered under Section 301 of the Companies Act, 1956. In respect of the said loan the maximum amount outstanding at any time during the period is B7,711.47 lac and the outstanding balance for the period ended is B7,539 lac.

b) It was informed to us that the said loans are interest free loan, however as there are no specific terms and conditions for the said loans, we are not in a position to verify whether the terms and conditions of the said loans are prima facie prejudicial to the interest of the Company.

c) The Company has taken loan during the said period from an Associate Company covered under Section 301 of the Companies Act, 1956. The maximum amount outstanding at any time during the period is B811.19 lac and the outstanding balance for the period ended is RS. 811.19 lac.

d) It was informed to us that the said loan taken by the Company is interest free loan, however as there are no specific terms and conditions for repayment of the loan, and therefore we are not in a position to verify whether the terms and conditions of the loan are prima facie prejudicial to the interest of the Company.

4. INTERNAL CONTROL :

In our opinion and according to the information and explanations given to us, there are adequate internal control systems which commensurate with the size of the Company in relation of Fixed assets of the Company. However, in respect of Sale of services the internal control system is inadequate in respect of retention and approval of hard copy of sale invoices, billing to and collections from customer, confirmation of balances from customers and the reconciliation and accounting of service tax and VAT needs to strengthened to make it adequate and commensurate with the size of the Company and nature of its business.

5. TRANSACTIONS WITH RELATED PARTIES AS PER REGISTER OF CONTRACTS UNDER SECTION 301 OF THE COMPANIES ACT, 1956.

The register maintained under section 301 of the Companies Act, 1956 has not been provided for verification during the course of our audit. Therefore, we are unable to comment on the transactions entered in the same and whether the same are prejudicial to the interest of the Company.

6. DEPOSITS FROM PUBLIC :

The Company has not accepted any deposits from the public under the provisions of section 58A and section 58AA and any other relevant provision of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public.

7. INTERNAL AUDIT SYSTEM :

Internal audit was carried out by the External firm of Internal Auditors after the end of the financial year covering entire operations for the year. In our opinion the work coverage is commensurate with the size of the Company and the nature of its business. However during the year only two meetings of the audit committee of the Board were held and in no of which was the internal audit report was discussed.

8. COST RECORDS :

To the best of our knowledge and as per the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 in respect of operations carried out by the Company.

9. STATUTORY DUES :

According to the records of the Company made available to us, undisputed statutory dues including provident fund, Employees State Insurance, Income-Tax, Sales-Tax, Wealth-Tax, and Service-Tax have not been regularly deposited with the appropriate authorities and there have been serious delays in large number of cases.

According to the information and explanations given to us, undisputed statutory dues payable in respect of Income-Tax, Sales-Tax, Service-Tax, Custom Duty, Excise Duty, Cess and other applicable statutory dues were in arrears as at 31st March, 2013 for a period of more than six months from the date they became payable are as follows.

Name of Statute Nature of Payment Amount (in lac) Due date of payment Date of Payment
1 Profession Tax Act Profession Tax 5.29 Year ended 30th June 2013 Not Paid
2 Employee Provident Fund Act Provident Fund 46.70 15 Months ended 30th June 2012 Not Paid
198.74 Year ended 30th June 2013 Not Paid
3 Employee State Insurance Corporation Act ESIC 1.06 Year ended 30th June 2013 Not Paid
4 Income Tax Act TDS 56.60 15 Months ended 30th June 2012 Not Paid
253.88 Year ended 30th June 2013 Not Paid
5 Finance Act, 1994 Service Tax 5.14 15 Months ended 30th June 2012 Not Paid
10.71 Year ended 30th June 2013 Not Paid
6 Maharashtra VAT Act VAT 28.27 15 Months ended 30th June 2012 Not Paid
16.80 Year ended 30th June 2013 Not Paid
7 Uttarakhand VAT Act VAT 0.87 Year ended 30th June 2013 Not Paid
8 Central Sales Tax CST 45.11 Year ended 30th June 2013 Not Paid

a) According to the information and explanations given to us and based on the records produced to us, there are no dues outstanding in respect of Income-Tax, Sales-Tax, Wealth-Tax, Service-Tax, Custom Duty, Excise Duty, Cess and other statutory dues as on 31st March, 2013 which have not been deposited on account of any dispute except the one stated below:-

Name of Statute Nature of Dispute Amount (in lac)
1 Income Tax Act Appeal To the CIT (A) for the Financial year 2008-09 4.72

b) There were no dues on account of cess under section 441A of the Companies Act, 1956 since the aforesaid section has not been made effective by Central Government of India.

10. SICK INDUSTRY :

The Company has no accumulated losses at the end of the financial period ending on 30th June 2013 and it has incurred any cash losses during the said period covered by audit RS. 2533.97 lac.

11. DUES TO FINANCIAL INSTITUTIONS :

Based on our audit procedures and according to the information and explanations given to us, during the period under audit the Company has defaulted in repayment of dues to financial institutions amounting to RS. 7,000 lac in principal and also 100529 lac in interest which has not been made good by the Company till date. Subtext to note in para4(ii) of the audit report. The Company has not obtained any borrowings by way of debentures.

12. SECURED LOANS AND ADVANCES GRANTED :

In our opinion and according to the explanation given to us and based on our examination of documents and records, no loans or advances have been granted on the basis of security by way of pledge of shares, debentures and other securities.

13. CHIT FUND, NIDHI OR MUTUAL BENEFIT COMPANY :

The Company is not a chit fund or a nidhi / mutual benefit fund/ society. Therefore, the provisions of clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

14. INVESTMENT COMPANY :

In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

15. GUARANTEES GIVEN BY COMPANY :

In our opinion and according to the information and explanations given to us, the Company has given guarantee for loans/against work order taken by 100% Subsidiaries Geodesic Technologies Solutions Ltd and Geodesic Gridpoint Energy Pvt Ltd respectively from banks or financial institutions. The amount of guarantees are of USD 35 million and B415 lac respectively. Both the above guarantees have been invoked by the respective Banks.

16. TERM LOANS :

In our opinion and according to the information and explanations given to us, the Term Loans have been applied for the purposes for which they were raised.

17. SOURCES OF FUND AND ITS APPLICATION :

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 raised on short-term basis have been used for long-term investment nor have any long- term funds been used to finance short-term assets except as permanent working capital.

18. PREFERENTIAL ISSUE :

According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under section 301 of the Act.

19. DEBENTURES :

The Company has not issued any debentures. Therefore, the provisions of clause 4 (xix) of Companies (Auditors Report) Order, 2003 are not applicable to the Company.

20. PUBLIC ISSUE :

The Company has not raised any money through a public issue during the period ended on 31st March 2013. Therefore the provisions of clause 4 (xx) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

21. FRAUD :

Based on our audit procedures performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the period covered by the audit.

For Borkar & Muzumdar

Chartered Accountants

CA Rajesh Batham

Partner

Membership No: 035941

FRN: 101569W

Place: Mumbai

Date: 14th February 2014

 

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