Hanung Toys and Textiles Ltd Auditor Reports

TO,

THE MEMBERS OF,

HANUNG TOYS AND TEXTILES LIMITED

1) Report on the Financial Statements

We have audited the accompanying financial statements of HANUNG TOYS AND TEXTILES LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2017, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information.

2) Managements Responsibility for the Financial Statements

The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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 standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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 misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and the 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 presentation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and to the operating effectiveness of such control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management/Companys Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

4) Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements subject to matters referred in Emphasis of Matter paragraph herein below give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2017, and its loss and its cash flows for the year ended on that date.

5) Emphasis of Matter

Without qualifying our opinion, we draw attention to the following matters in the Notes to the financial statements:

1. Note no. 3.1 to the financial statement. We report that the Company has incurred a net loss of Rs. 11,023.88 Lacs during the year ended March 31, 2017 and the accumulated losses of the Company as at March 31, 2017 amount to Rs.268,260.58 Lacs leading to erosion of its entire net worth. The current liabilities of the Company as at the same date exceed its current assets by Rs. 280,607.93 Lacs . These conditions indicate the existence of a uncertainty and cast significant doubt about the Companys ability to continue as a going concern, in view of note no. 7.5 to the financial statements..

2. Note No. 4.1,7.2 and 7.6 to the financial statement. we report that lenders of the Company have recall the borrowings granted to the Company under Securitisation and Recovery of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) and also enforced the security in the form of assets of the Company. Accordingly, the Company has classified the outstanding long term borrowings from Banks as current liabilities. Further, the balance of loans from lenders Banks are subject to confirmation and reconciliation. Therefore, the exact liability of the Company towards its lenders banks are not confirmed at the Balance Sheet date.

3. Note No. 9.3 to the financial statement. We report that the Company has not provided depreciation on the assets situated at its units126, 127 and 129E, NSEZ, Noida and B-8,9,10, Hosiery Complex, Phase-II, Noida, the above units exclusively mortgage to ICICI Bank and the said Bank has taken physical possession of the properties under the Securitisation and Recovery of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), which has the effect of understatement of loss of the Company for the year ended March 31, 2017 by Rs. 95.18 Lacs.

4. Note No. 23.1 to the financial statement. We report that during the quarter ended March 31, 2017, the Company has not provided for interest on borrowings from Banks and Financial Institutions and also reversed the interest provided on adhoc basis on borrowings for last 3 quarters for the financial year 2016-17 as the lenders of the Company had taken possession of assets of the Company under section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), which has the effect of understatement of loss ofthe Company for the year ended March 31,2017 to the extent of interest on borrowings not provided for.

5. Note No. 29.1 to the financial statements which, describes the uncertainty related to the outcome of the lawsuit filed against the Company by certain creditors for recovery of their dues.

6) Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) ofthe Act, we give in the "Annexure A", a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) ofthe Act, 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.

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

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 ofthe Act, read with Rule 7 ofthe Companies (Accounts) Rules, 2014;

(e) On the basis of the written representations received from the directors as on March 31,2017, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2017, from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy ofthe internal financial controls over financial reporting ofthe Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B"; and

(g) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 ofthe Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

(i) The Company has, in accordance with the generally accepted accounting practice, disclosed the impact of pending litigations on its financial position in its financial statements- Refer Note 14 and 29.1 to the financial statements.

(ii) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses under the applicable law or accounting standard.

(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company .

(iv) The company had provided requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016, these are in accordance with the books of accounts maintained by the company.

Date: May 30, 2017	For RAVINDRA SHARMA & ASSOCIATES
Place : Noida	Chartered Accountants
	(CA Ravindra Sharma
	Partner
	Membership No.: 085271

ANNEXURE-A TO THE INDEPENDENT AUDITORS REPORT

(i) The Annexure referred to in Independent Auditors Report to the members of the Company on the financial statements for the year ended March 31,2017, we report that:

In respect of fixed assets:

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

b) The Company has a regular system of verification of fixed assets at the end of each year, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

c) According to information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

(ii) The inventory was physically verified during the year by the Management at reasonable interval during the year. In our opinion and according to the information and explanation provided to us, the procedure and frequency of verification of inventories carried out by the management is reasonable and adequate in relation to the size of the Company and nature of its business.As explained to us, the discrepancies noticed on physical verification as compared to book records have been properly dealt with in the books of account for the year ended March 31,2017.

(iii) According to the information and explanations given to us and on the basis of our examination of the books of account, 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 189 of the Companies Act, 2013 and accordingly, the provisions of clauses (iii) of paragraph 3 of the Order are not applicable to the Company.

(iv) In our opinion and according to information and explanations given to us, the Company has complied with the provision of section 185 and 186 of the Companies Act, 2013 with respect to the loans and investments made.

(v) According to the information & explanation given to us, the Company has not accepted any deposits and accordingly, the provision of clause (v) of paragraph 3 of the Order are not applicable to the Company.

(vi) We have broadly reviewed the cost records maintained by the Company pursuant to Rule made by the Central Government for the maintenance of cost records under Section 148 of the Companies Act, 2013 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) According to the information & explanation given to us and on the basis of our examination of the records ofthe Company, in respect of statutory dues;

a) The Company has not been generally regular in depositing undisputed statutory dues including provident fund, employees state insurance, income tax, sales tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues applicable to it with appropriate authorities during the year. Details of the outstanding statutory dues as at March 31, 2017 have been given in the note no. 7.1 of the financial statements. According to the information and explanation given by the Company, there are some undisputed amounts payable in respect of Employees state insurance, Employees provident fund, Tax deducted at source, Sales Tax, Service Tax of Rs. 115.61 lacs, Rs. 35.16 lacs, Rs. 50.35 lacs, Rs. 142.30 lacs and Rs. 2.98 lacs respectively, which were outstanding, as at March 31, 2017, for a period of more than six months from the date they became payable.

b) According to information and explanation given to us and the records of the Company examined by us, there are no dues of service tax, sales tax, duty of custom, duty of excise, value added tax, cess and any other statutory dues which have not been deposited on account of any dispute. The particular of dues of income tax as at March 31, 2017 which has not been deposited on account of any dispute, are as follow-

Name of the statute	Nature of dues	Amount Rs. in lacs	Period to which the amount relates	Forum where the dispute is pending
Income Tax Act, 1961	Income tax including interest, as applicable	196.23	Assessment Year 2010-11	Income-tax Appellate Tribunal
Income Tax A ct, 1961	Income tax including interest, as applicable	435.03	Assessment Year 2011-12	Commissioner of Income Tax (Appeal)
Income Tax Act, 1961	Income tax including interest, as applicable	2404.63	Assessment Year 2012-13	Commissioner of Income Tax (Appeal)
Income Tax Act, 1961	Income tax including interest, as applicable	2823.66	Assessment Year 2013-14	Commissioner of Income Tax (Appeal)

(viii) According to information and explanations given to us and based on our examination of the records of the Company, we are of the opinion that, the Company had defaulted in repayment of dues to financial institution and banks, particulars of which are as follow:

Name of Bank	Nature	Amount of defaults (Rs. In lacs)
		More than 365 days	Less than 365 days
Allahabad Bank	Interest	5,946.58	-
Andhra Bank	Interest	970.23	-
Bank of Baroda	Interest	4,235.01	-
Bank of India	Interest	3,700.02	-
Bank of Maharastra	Interest	1,264.42	-
Central Bank of India	Interest	6,694.26	-
Exim Bank	Interest	1,956.99	-
ICICI Bank	Interest	7,560.47	-
Karnataka Bank	Interest	753.64	-
Karur Vysa Bank	Interest	877.67	-
Oriental Bank of Commerce	Interest	3,492.14	-
Punjab National Bank	Interest	15,122.33	-
State Bank of India	Interest	4,526.20	-
Syndicate Bank	Interest	3,090.59	-
Union Bank Of India	Interest	3,056.41	-
UCO Bank	Interest	2,733.53	-

We further report that during the financial year covered by our audit all the banks have classified the accounts of the Company as NPA and accordingly, the banks recalled the facilities granted to the Company. Therefore, the balances as on March 31, 2017as per books of account of the Company of Rs. 214,819.75 Lacs forming part of notes no. 5 and 7 to the financial statements became payable to which the Company has defaulted..

(ix) The Company did not raise any money by way of initial public offer or further public offer (including debt instrument) and term loan during the year. Accordingly, the provision of clause (ix) of paragraph 3 of the Order is not applicable to the Company.

(x) To the best of our knowledge and according to the information and explanations given to us, and considering the size and nature of the Companys operations, no fraud of material significance by the Company or on the Company by its officers or employee has been noticed or reported during the course of our audit.

(xi) According to information and explanations given to us and based on our examination of the records of the Company, the Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provision of section 197 read with Schedule V of the Companies Act, 2013.

(xii) In our opinion and according to information and explanations given to us, the Company is not a nidhi company. Accordingly, the provision of clause (xii) of paragraph 3 of the Order is not applicable to the Company.

(xiii) According to information and explanations given to us and based on our examination of the records of the Company, transactions with related parties are in compliance with sections 177 and 188 of the Companies Act, 2013 where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debenture during the year.

(xv) According to information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non cash transactions with directors or persons connected with him. Accordingly, the provision of clause (xv) of paragraph 3 of the Order is not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IA ofReserve Bank ofIndia Act, 1934.

	For RAVINDRA SHARMA & ASSOCIATES
Date: May 30, 2017	Chartered Accountants
Place : Noida
	(CA Ravindra Sharma
	Partner
	Membership No.: 085271

ANNEXURE- B TO THE INDEPENDENT AUDITORS REPORT

Report on the Internal Financial Controls under clause (i) of sub-section 3 of section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Hanung Toys and Textiles Limited ("the Company") as at March 31, 2017 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Companys management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibility include the design, implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standard and Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about adequacy of the internal financial controls systems over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. 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 and error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Companys internal financial control over financial reporting is process designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Companys internal financial control over financial reporting includes those policies and procedures that

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and their receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not to be detected. Also, projections of any evaluation of internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of change in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

	For RAVINDRA SHARMA & ASSOCIATES
	Chartered Accountants
Date: May 30, 2017
Place : Noida
	(CA Ravindra Sharma
	Partner
	Membership No.: 085271