Hindoostan Spinning and Weaving Mills Ltd merged Auditor Reports

TO THE SHAREHOLDERS

Report on the Financial Statements

We have audited the accompanying financial statements of HINDOOSTAN MILLS LIMITED (the Company), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year ended on that date, and a summary of significant accounting policies and other explanatory information.

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, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in subsection (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.

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.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements 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:

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

(b) in the case of the Profit and Loss Account, of the profit 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.

Report on other Legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (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.

2. As required by section 227(3) of the 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 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 March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 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 rate at 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 M. A. Parikh & Co.

Chartered Accountants

Firm Reg. No. 107556W

MUKUL M. PATEL

Partner

Membership No. 32489

Place: Mumbai

Date : May 4, 2013

ANNEXURE TO THE AUDITORS REPORT

(Referred to in paragraph 1 of our report of even date)

i. In respect of its fixed assets:

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

(b) We are informed that the physical verification of fixed assets was carried out by the management at year end. According to the information and explanations given to us, discrepancies noticed on such verification were not material and have been dealt with appropriately in the books of accounts.

(c) There has not been any substantial disposal of fixed assets during the year and hence the question of the disposal of fixed assets affecting the going concern status of the Company does not arise.

ii. In respect of its inventories:

(a) As explained to us, inventories were physically verified during the year by the management at reasonable intervals except cloth lying with third party processors as on 31st March, 2013 aggregating to Rs 13.33 lakhs (previous year Rs. 9.12 lakhs) for which confirmations have been obtained.

(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 were reasonable and adequate in relation to size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

iii. (a) According to information and explanations given to us, Company has granted interest free unsecured loan repayable on demand to its Subsidiary which is covered in the register maintained under section 301 of the Companies Act, 1956 amounting to Rs.622.96 lakhs. The maximum amount involved during the year and the outstanding balance of such loan as at the year end are Rs. 991.24 lakhs and Rs. 991.24 lakhs respectively.

Since the loan is interest free and repayable on demand, in our opinion:

(b) the terms and conditions of the loan are not prima facie prejudicial to the interest of the company.

(c) The question of its regular payment of principal and interest does not arise.

(d) Since the loan is repayable on demand, the question of their overdue amounts being more than Rs. 1 lakh, does not arise and hence clause 4(iii)(d) of the Order is not applicable.

(e) According to information and explanations given to us, during the year, the Company has not received unsecured loan from a party covered in the register maintained under section 301 of the Companies Act, 1956. However, the Company has received an opening balance of Rs. 90 lakhs, being interest bearing unsecured loan repayable on demand during the previous year and which is since repaid in full during the year. The Maximum amount involved during the year and outstanding balance of such loan as at the year end are Rs. 90 lakhs and Rs. Nil respectively.

(f) The rate of interest and other terms and conditions of such unsecured loans, in our opinion, are not prima facie prejudicial to the interest of the Company.

(g) Since the loans are repaid/repayable on demand, the question of its regular payment of principal and interest does not arise and hence clause 4(iii)(g) of the Order is not applicable.

iv In our opinion and according to the information and explanations given to us, there is an internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. We have not noticed any major weaknesses in the internal control system during the course of audit.

v. In respect of contracts or arrangements entered in the register maintained in pursuance of section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

(a) The particulars of contracts or arrangements referred to in section 301 that needed to be entered in the register, maintained under the said section have been so entered.

(b) There is no such transaction (excluding loans reported under paragraph (iii) above), which is in excess of Rs. 5 lakhs in respect of any party.

vi. The Company has not accepted any deposits from the public and hence, the provisions of section 58A, 58AA and its rules, and also the directions of the Reserve Bank of India, or any other relevant provisions of the Act and the rules framed there under not are applicable. Hence clause 4 (vi) of the Order is not applicable.

vii. In our opinion, the internal audit function carried out during the year by a firm of Chartered Accountants appointed by the management are commensurate with the size of the Company and nature of its business.

viii. We have broadly reviewed the books of accounts and records maintained by the Company relating to the manufacture of textiles pursuant to the order made by the Central Government for the maintenance of Cost Records under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts have been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

ix. In respect of statutory dues:

(a) According to the information and explanations given to us, the Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Labour Welfare Fund, Income-tax, Wealth Tax, Central Sales-tax, Value Added Tax, Custom Duty, Excise Duty, Cess and any other statutory dues as applicable with the appropriate authorities during the year. Further, there are no disputed amounts payable in respect of statutory dues.

(b) According to the information and explanations given to us, Income tax, Excise duty and Property Tax dues which have not been deposited as on March 31, 2013 on account of disputes are given below:

Name Of Statute	Nature of dues	Amount (Rs. in lakhs) (Gross)	Period to which the dues relate	Forum Where dispute is pending
Income Tax Act,1961	Income Tax dues	3.12	A.Y 2007-08	Commissioner of Income Tax.
		132.34	A.Y. 2010-11	Commissioner of Income Tax.
Central Excise Act	Excise Duty	4.06	1977-2002	Asst./Dy. Commissioner of Central Excise.
		2.49		Joint Commissioner of Central Excise
		38.04		Commissioner (Appeals) of Central Excise
		102.10	1996-2003	CESTAT
		44.93	1994-1999	Supreme Court
Maharashtra Sales Tax and Central Sales Tax	Sales Tax & Central Sales Tax	86.57	2000-01 to 2004-05	Dy. Commissioner of sales-tax (Appeal)-I
Maharashtra Sales Tax on the transfer of property in goods involved in the execution of the work contract (Reenacted) Act, 1989	Work contract Tax	59.03	1990-91 to 2000-01	Dy. Commissioner of sales-tax (Appeal)-I

x. The Company does not have accumulated losses as at the end of the financial year and hence the question of accumulated losses being more than fifty per cent of its net worth does not arise. The Company has not incurred cash losses in the current financial year and the immediate preceding financial year.

xi. In our opinion and according to the information and explanations given to us, the Company is not indebted to any bank and hence the question of default in repayment does not arise.

xii. According to the information and explanations given to us, the Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities, and hence, the question of maintenance of adequate records for this purpose does not arise.

xiii. 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. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable to the Company.

xiv. In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. The investments in shares and units of mutual funds have been held by the Company in its name.

xv. According to information and explanations given to us, the Company has not given guarantees for loans taken by others from banks or financial institutions.

xvi. To the best of our knowledge and belief and according to the explanations given to us, in our opinion, no term loans have been availed by the Company. Therefore, the provisions of clause 4 (xvi) of the Order are not applicable to the Company.

xvii. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, it has not raised funds on short-term basis, which have been used for long-term investment.

xviii. The Company has not made preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Companies Act, 1956 and hence the question as to whether the price at which shares have been issued is prejudicial to the interest of the Company does not arise.

xix. According to the information and explanation given to us, the Company has not issued any debentures during the year and hence the question of creation of security or charge in respect of debentures issued, does not arise.

xx. According to the information and explanation given to us, the Company has not raised funds by way of public issue during the year. Therefore, the provision of clause 4 (xx) of the Order is not applicable to the Company.

xxi. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

For M. A. Parikh & Co.

Chartered Accountants

Firm Reg. No. 107556W

MUKUL M. PATEL

Partner

Membership No. 32489

Place: Mumbai

Date : May 4, 2013