To
The Board of Directors of Karuturi Global Limited
Report on the Financial Statements
We have audited the accompanying Standalone Ind AS financial statements of KARUTURI
GLOBAL LIMITED ("The Company") which comprise the Balance Sheet as at March
31, 2017, the Statement of Profit and Loss, Cash Flow Statement for the year then ended,
and a summary of significant accounting policies and other explanatory information.
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) Ind AS 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 Indian Accounting
Standards (Ind AS) 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.
Auditors Responsibility
Our responsibility is to express an opinion on these Ind AS 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 thereunder.
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 Ins AS financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
the disclosures in the Standalone Ind AS financial statements. The procedures selected
depend on the auditors judgment, including the assessment of the risks of material
misstatement of the Ind AS financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal financial control relevant to the
Companys preparation of the Standalone Ind AS 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 the operating
effectiveness of such controls. An audit also includes evaluating the appropriateness of
the accounting policies used and the reasonableness of the accounting estimates made by
the Companys Directors, as well as evaluating the overall presentation of the Standalone
Ind AS 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 Ind AS Standalone financial statements
Basis for Qualified Opinion
During the year, the Company has made sales amounting to Rs.1015.58 Lakhs and
Purchasing amounting to Rs.871.30 Lakhs , Wherein we observed that Existing Controls and
Documentary evidences are not Sufficient for us to Satisfy ourself that these figures are
free from Misstatement and also unable to comment its impact on Statement of Profit and
Loss for the year.
Attention is invited to Note No: 2.3(B) Unsecured Loans of the Financial Statements,
Company has made Repayment of FCCB (Foreign Currency Convertible Bonds) during the year by
allotting Shares to the Bondholders as per the agreed value. Attention is drawn on
crossing over the Deadline for Repayment as fixed by RBI, which company has not complied.
Opinion
In our opinion and to the best of our information and according to the explanations
given to us, the aforesaid Standalone Ind AS 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, of the state of affairs of the
Company as at March 31, 2017, and its Profit/Loss and its Cash Flow for the year ended on
that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order, 2016 ("the Order"),
as amended, issued by the Central Government of India in terms of sub-section (11) of
section 143 of the 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) of the Act, we report that:
a. we have sought and 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, the Statement of Profit and Loss (Including other comprehensive
income) 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 Ind AS financial statements comply with the
Accounting Standards specified under section 133 of the Act, read with Rule 7 of the
Companies (Accounts) Rules, 2014.
e. On the basis of 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 of the internal financial controls over financial
reporting of the Company and the operating effectiveness of such controls, refer to our
separate Report in "Annexure B".
g. With respect to the other matters to be included in the Auditors Report in
accordance with Rule 11 of the 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 disclosed the impact of pending litigations on its financial
position in its standalone Ind AS financial statements.
ii. The Company did not have any long-term contracts including derivative contracts for
which there were any material foreseeable losses.
iii. There has been no delay in transferring amounts, required to be transferred, to
the Investor Education and Protection Fund by the Company.
h. The Company has provided requisite disclosures in its Standalone Ind AS Financial
Statements with regard to Specified Bank notes held and transacted during the period
08.11.2016 to 30.12.2016 , and these are in Accordance with the Books of Accounts
Maintained by Company.
For and on behalf of
G G Patil & Co
Chartered Accountants
FRN: 008798S
Iranna C Sadashiv
Partner
Membership number:225513
Place: Bangalore
Date: 30.05.2017
Annexure to Independent Auditors Report
Referred to in paragraph 1 under the heading ‘Report on Other Legal &
Regulatory Requirement of our report of even date to the financial statements of the
Company for the year ended March 31, 2017:
1) (a) The Company has not maintained proper records showing full particulars,
including quantitative details and situation of fixed assets;
(b) As per the explanation given to us, The Fixed Assets have not been physically
verified by the management in a phased manner, designed to cover all the items over a
period of three years.In our opinion, the system of Fixed Asset Verification adopted is
reasonable having regard to the size of the company and nature of its business. Pursuant
to the program, a portion of the fixed asset has been physically verified by the
management during the year and no material discrepancies between the books records and the
physical fixed assets have been noticed.
(c) The title deeds of immovable properties are held in the name of the company, except
Land and Car are not held in the name of company
2) (a) The Management has conducted the physical verification of inventory at
reasonable intervals. Further we were told not make physical verification of stock due to
non-existence.
b) The discrepancies noticed on physical verification of the inventory as compared to
books records which has been properly dealt with in the books of account were not
material. The company is maintaining certain records of inventory. In our opinion such
records need improvements to ensure controls.
3) As per the explanation given to us Company has not granted any loans, secured or
unsecured to companies, firms, Limited Liability partnerships or other parties covered in
the Register maintained under section 189 of the Act. Accordingly, the provisions of
clause 3 (iii) (a) to (C) of the Order are not applicable to the Company and hence not
commented upon.
4) In our opinion and according to the information and explanations given to us, the
company has complied with the provisions of section 185 and I86 of the Companies Act, 2013
In respect of loans, investments, guarantees, and security.
5) The Company has not accepted any deposits from the public and hence the directives
issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other
relevant provisions of the Act and the Companies (Acceptance of Deposit) Rules, 2015 with
regard to the deposits accepted from the public are not applicable.
- During the year company has allotted shares to the Share warrants which were issued
during 2015, which are in compliance of 18 months duration.
6) As informed to us, the maintenance of Cost Records has not been specified by the
Central Government under subsection (1) of Section 148 of the Act, in respect of
theactivities carried on by the company.
7) a- According to information and explanations given to us, the undisputed dues
towards TDS, Sales Tax, Wealth Tax, Provident Fund, ESI and service tax have not been
regularly deposited.
b- According to the information and explanations given to us, the undisputed dues
towards TDS, Sales Tax, Wealth Tax Provident Fund, ESI and service tax which are
outstanding for more than 6 months from the date they have become due are as follows:
| Name of the statute |
Nature of the dues |
Amount |
Period to which the amount relates |
|
|
(in Lakhs) |
|
| Income Tax Act 1961 |
Tax Deducted at Source |
240.13 |
AY 2015-16 and prior to that |
| Karnataka VAT Act 2003 |
Value Added Tax |
2.49 |
AY 2013-14 |
| Karnataka VAT Act 2003 |
Service Tax |
1.71 |
AY 2014-15 |
| Finance Act, 1994 |
Service Tax |
0.21 |
AY 2010-11 |
| Finance Act, 1994 |
Service Tax |
2.27 |
AY 2010-11 |
| Finance Act, 1994 |
Service Tax |
37.42 |
AY 2011-12 |
| Finance Act, 1994 |
Service Tax |
0.09 |
AY 2011-12 |
| Finance Act, 1994 |
Tax Deducted at Source |
2.27 |
AY 2012-13 |
| Finance Act, 1994 |
Service Tax |
1.05 |
AY 2014-15 |
| Income Tax Act 1961 |
Tax Deducted at Source |
15.06 |
AY 2016-17 |
| Finance Act, 1994 |
Service Tax |
0.69 |
AY 2015-16 |
| Karnataka VAT Act, 2003 |
Value Added Tax |
0.63 |
AY 2015-16 |
| Finance Act,1994 |
Service Tax |
0.50 |
AY 2016-17 |
c According to the information and explanations given to us, the company has defaulted
in payment of Tax Deducted at Source on the provision of interest on FCCB during the
assessment years 2013-14 to 2014-15 amounts to Rs. 656.62Lakhs. Company has not provided
for interest during the year.
d According to the information and explanation given to us, and based on the records of
the company, the dues outstanding in respect of income tax, sales tax, wealth tax, service
tax and other statutory duties on account of any dispute are as follows:
| Name of the Statute |
Nature of the dues |
Amount |
Period to which the amount relates |
Pending before the Authority |
| Finance Act, 1994 |
Service Tax |
172.62 |
A.Y 2006-07 |
Commissioner/CESTAT(Appeals) |
| Income Tax Act 1961 |
Income Tax |
863.44 |
A.Y 2005-06 |
Commissioner (Appeals) Bangalore |
| Income Tax Act 1961 |
Income Tax |
792.72 |
A.Y 2006-07 |
Income Tax Appellate Tribunal, Bangalore |
| Income Tax Act 1961 |
Income Tax |
1,850.91 |
A.Y 2007-08 |
Commissioner (Appeals) Bangalore |
| Income Tax Act 1961 |
Income Tax |
19,303.07 |
A.Y 2008-09 |
Income Tax Appellate Tribunal, Bangalore and Commissioner (Appeals) Bangalore |
| Income Tax Act 1961 |
Income Tax |
3,254.27 |
A.Y 2009-10 |
Commissioner (Appeals) Bangalore |
| Income Tax Act 1961 |
Income Tax |
4,830.70 |
A.Y 2010-11 |
Commissioner (Appeals) Bangalore |
| Income Tax Act 1961 |
Income Tax |
3,610.04 |
A.Y 2011-12 |
Dispute Resolution Panel |
| Karnataka Tax on entry of goods act, 1979 |
Entry tax |
0.97 |
A.Y 2005-06 |
Joint Commissioner of Commercial Taxes, Audit-13, VAT DVO -1 |
| Karnataka Tax on entry of goods act, 1979 |
Entry tax |
3.87 |
A.Y 2007-08 |
Joint Commissioner of Commercial Taxes, Audit-13, VAT DVO -1 |
| Karnataka Tax on entry of goods act, 1979 |
Entry tax |
1.57 |
A.Y 2008-09 |
Joint Commissioner of Commercial Taxes, Audit-13, VAT DVO -1 |
8) In our opinion and according to the information and explanations given to us, the
Company has not defaulted in the repayment of dues to banks. The Company has not taken any
loan either from financial institutions or from the government and has not issued any
debentures.
9) Based upon the audit procedures performed and the information and explanations given
by the management, the company has not raised moneys by way of initial public offer or
further public offer including debt instruments and term Loans. Accordingly, the
provisions of clause 3 (ix) of the Order are not applicable to the Company and hence not
commented upon.
10) Based upon the audit procedures performed and the information and explanations
given by the management, we report that no fraud by the Company or on the company by its
officers or employees has been noticed or reported during the year.
11) Based upon the audit procedures performed and the information and explanations
given by the management, the managerial remuneration has been paid or provided in
accordance with the requisite approvals mandated by the provisions of section 197 read
with Schedule V to the Companies Act;
12) In our opinion, the Company is not a Nidhi Company. Therefore, the provisions of
clause 4 (xii) of the Order are not applicable to the Company.
13) In our opinion, all transactions with the related parties are in compliance with
section 177 and 188 of Companies Act, 2013 and the details have been disclosed in the
standalone Ind AS Financial Statements as required by the applicable accounting standards.
14) Based upon the audit procedures performed and the information and explanations
given by the management, the company has made preferential allotment or private placement
of shares. The requirement of Section 42 of Companies Act, 2013 have been complied with
and the amount raised has been used for the purpose for which the funds were raised
15) Based upon the audit procedures performed and the information and explanations
given by the management, the company has not entered into any non-cash transactions with
directors or persons connected with him. Accordingly, the provisions of clause 3 (xv) of
the Order are not applicable to the Company and hence not commented upon.
16) In our opinion, the company is not required to be registered under section 45 IA of
the Reserve Bank of India Act, 1934 and accordingly, the provisions of clause 3 (xvi) of
the Order are not applicable to the Company and hence not commented upon.
For and on behalf of
G G Patil & Co
Chartered Accountants
FRN: 008798s
Iranna C Sadashiv
Partner
Membership number:225513
Place: Bangalore
Date: 30.05.2017
"Annexure B" to the Independent Auditors Report of even date on the
Standalone Ind Financial Statements of KARUTURI GLOBAL LIMITED
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 KARUTURI
GLOBAL LIMITED ("the Company") as of March 31, 2017 in conjunction with our
audit of the standalone Ind AS 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".] These responsibilities
include the design, implementation and maintenance of adequate internal financial controls
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 the 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 Standards and the 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 the adequacy of
the internal financial controls system 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 judgement, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or 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 a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the
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 that receipts and
expenditures of the company are being made only in accordance with authorisations of
management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorised 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 be detected.
Also, projections of any evaluation of the 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 changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Basis for Qualified Opinion
The standard operating procedures and internal controls procedures are not established
in the area of Sales, Purchases and related party transactions as evidenced in the basis
of qualified opinion paragraph in audit report and in the annexure A. The lack of
documents and controls over Sales and Purchases were significant and deviations were
observed,
Opinion
In our opinion, the Company has, in all material respects, except to the matters
mentioned in the Basis for Qualified Opinion Paragraph, 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 and on behalf of
G G Patil & Co
Chartered Accountants
FRN: 008798s
Iranna C Sadashiv
Partner
Membership number:225513
Place: Bangalore
Date: 30.05.2017
+91-9892691696
