TO THE MEMBERS OF PENTAMEDIA GRAPHICS LIMITED
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of Pentamedia Graphics Limited
(the Company), which comprise the Balance Sheet as at March 31, 2019, the statement of
Profit and Loss the Statement of Changes in Equity and 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 Management is responsible for the matters stated in Section 134(5) of the
Companies Act, 2013 (the Act) with respect to 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 notified under
Section 133 of Companies Act, 2013 read with rule 7 of the Companies (Accounts) Rules,
2014 and in accordance with the accounting principles generally accepted in India.
This responsibility includes the 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
control, that were operating effectively 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 financial statements based on our
audit. We have taken into account the provisions of the Act, the accounting and auditing
standards and the matters which are required to be included in the audit report under the
provisions of the Act and the Rules made thereunder and the Order under section 143(11) of
the Act.
We conducted our audit of the financial statements 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 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 financial 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, but not for the purpose of expressing an opinion on the
effectiveness of the internal control. 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.
Basis for Qualified Opinion Attention is invited to:
1. Product Rights to an extent of Rs.39.12 crores continued for the last 3 years.
Whereas in the current year, as per the Management certification and as per an Independent
Auditor certification, as the present market value is not ascertainable the Estimated Life
of the said Asset is taken as 10 years and leaving a residual value of 20% equivalent to
Rs. 7.82 crores, the balance of Rs. 31.28 crores is depreciated @10% over a period of 10
years. How ever since the realizable value is not known, if there is a difference in the
realizable value, the same would have impact on the Profit/Loss Statement and hence
qualified.
2. Under Intangible assets, Capital Work in Progress to an extent of Rs, 5.05 Crore
continued for the last 3 years. As per the Management certification and as per technical
report, the present market/realizable value is not ascertainable and hence if there is
difference in realizable value, the same would have impact on the Profit/Loss statement
and hence qualified.
3. Depreciation on Digital contents is provided @Rs.1,83 crores as decided by the
Management in FY 2017-18 and continued in the same manner.
4. Inventories comprising of Work in progress of Rs. Rs2.06 crores and Distribution
rights of Rs. 8.07 cores are valued at cost and Market Value not ascertainable as per the
Management certification and as per technical report given.
5. Deferred Tax Asset of Rs. 1.15 lacs arises due to change in the rate of Depreciation
as per Income Tax Act resulting in impact in the Profit/Loss statement and Balance Sheet,
Qualified Opinion
In our opinion and to the best of our information and according to the explanations
given to us, except for the effects of the matter described in the Basis for Qualified
Opinion para, the financial statements: (a) Is presented in accordance with the
requirement of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015 in this regard; gives a true view of the net profit ND OTHER Financial
Information for the year to date results for the period from April 1, 2018 to March 31,
2019.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by Section 143(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, the Statement of Profit and Loss, the statement of changes in
equity 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 Statement of Profit and Loss, and the Cash
Flow Statement comply with Accounting Standards prescribed under section 133 of the Act,
as applicable.
e. On the basis of the written representations received from the directors as on March
31, 2019, taken on record by the Board of Directors, none of the directors is disqualified
as on March 31, 2019, from being appointed as a director in terms of Section 164(2) of the
Act.
f. With respect to adequacy of the internal financial controls over the financial
reporting of the Company and the operating effectiveness of such controls, refer to our
separate report in "annexure A". Our respect expresses an unmodified opinion on
the adequacy and operating effectiveness of the Companys internal financial controls over
financial reporting.
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) Rule,2014, in our opinion
and to the best of our information and according to the explanation given to us:
a) The Company has disclosed the impact of profit in Profit and Loss Account as
referred to Note to the financial statements.
2. As required by the Companies (Auditors Report) Order, 2016 (the Order) issued by
the Central Government in terms of Section 143(11) of the Act, we give in Annexure B, a
statement on the matters specified in the paragraphs 3 and 4 of the Order.
| For Babu Peram and Associates. Chartered Accountants |
| CA. Babu Peram |
| Proprietor |
| (Firm Registration No. 012721S) |
| Membership No.200803 |
| Chennai |
| Date: 27/05/2019 |
ANNEXURE "A"
TO THE INDEPENDENT AUDITORS REPORT
(Referred to in paragraph 1(f) under ‘Report on Other Legal and Regulatory
Requirements of our report of even date) Report on the Internal Financial Controls Over
Financial Reporting 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 Pentamedia Graphics Limited ("the Company") as of 31st March, 2018
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. 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") issued by the Institute of Chartered Accountants of India
and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013,
to the extent applicable to an audit of internal financial controls. 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
judgment, 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 authorizations of
management and directors of the company; and (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 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.
OPINION
In our opinion, to the best of our information and according to the explanations given
to us, 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 31st March, 2019, 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 Babu Peram and Associates |
| Chartered Accountants |
| CA. Babu Peram |
| Proprietor |
| (Firm Registration No. 012721S) |
| Membership No.200803 |
| Place: Chennai |
| Date: 27/05/2019 |
ANNEXURE "B"
TO THE INDEPENDENT AUDITORS REPORT
(Referred to in paragraph 2 under ‘Report on Other Legal and Regulator)
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 are physically verified during the year by the management at
reasonable intervals. According to the information and explanation given to us, no
material discrepancies were noticed on such verification,
As per our verification we opine that, there are no immovable properties held in the
name of the company. The company sold the land and building during the year.
The inventories were physically verified during the year by the management at
reasonable intervals and according to the information and explanation given by the
management, no material discrepancies were noticed on physical verification.
3. The company has not granted or taken any loans, secured or unsecured to or from
companies, firms, Limited Liability Partnerships and other parties except from Mayajaal
Entertainment Ltd covered in the register maintained under Sec 189 of Companies Act 2013.
4. The company has not provided any loans, investments, guarantees or securities which
fall under the purview of Section 185 and Section 186 of the Companies Act, 2013.
5. In our opinion and according to the information given to us, the company has not
accepted any deposits from the public during the year. Therefore, Clause 5 of this order
is not applicable.
6. As per the information and explanations given to us, maintenance of cost records has
not been prescribed by the Central Government under Sub-section (1) of Section 148 of the
companies Act 2013.
7. According to the information and explanations given to us there are no dues of
Income Tax, Sales Tax, Customs duty, Excise Duty, Service Tax, Provident Fund and Cess
which have not been deposited on account of any dispute except the following cases:
INCOME TAX
Claims against the company which has not been acknowledged as debt for the year ended
31st March 2019 includes demands from the Income Tax Authorities for payment of Tax
including interest for the issues mentioned hereinafter. Rs.3.68 crores pertaining to the
assessment years 1996-97,1997-98 and 1998-99. These demands for the years due to
disallowance of Training income STP/EHTP. These matters are pending to these years in
Supreme court of India. Moreover, company has given a petition for the year 1996-97 during
August 2018 indicating that certain payments amounting to Rs. 5.01 crores have been left
or wrongly adjusted by the department. The effect has not been given till date. So also
demand and interest of Rs.13.53 crores pertaining to the assessment year 2000-01 is due to
the treatment of goodwill which is now pending in the High Court of Madras. For the
assessment year 2001-02,2002-03and 2003-04 the demand include interest of Rs.48.53 due to
treatment of unrealized sales and opening cases u/s 263. Here also the company has given
petition to the AO during August 2018 for the year 2001-02 indicating the certain mistakes
in the computation. The department has not taken up the same till now. For the Assessment
years 2004-05,2005-06 and 2006-07 the demands inclusive of interest are Rs.82.89 crores
which arose due to reopening of the files u/s147 in the matters pertaining to TDS and rate
of depreciation. The Company has gone appeal in the High of Madras and has obtained stay
for the three years. For the assessment years 2007-08, 2008-09, 2009-10, 2010-11, 2011-12,
2012-13. 2013-14 and 2014-15 there is total demand of Rs. 6.72 crores including interest
because of dispute in the rate of depreciation, deduction of TDS in some matters. The
company has given a petition to the AO to indicating the same during Aug 2018 and have
gone on appeal to CIT (Appeals) There is also matter pending for Pentasoft Technologies
(now merged with Pentamedia Graphics) where demand inclusive of interest is Rs. 6.30
crores for issues pertaining unrealized sales.
The company has contested all the demands and the Management including the advisors are
very confident that they will all be upheld in the process.
CASES FILED BY THE COMPANY AGAINST INCOME TAX THE DEPARTMENT
1. The Company has filed a WP 2357/2010 and got a stay order dated 15.07.2010 and to
dispose of all the issues /appeals from 1996 to 2000 -07 within 8 weeks from the date of
the order.
2. Revised returns has been filed by the company for the AYs 2001-02 to 2004-05 on
31.03.2008 writing off Rs.690 Crores of impaired assets is still pending with the
department . The Madras High Court vide order/ direction dated 11.01.2010 has asked the
departments to consider the revised returns.
3. The company has filed a WP 25120/2010 for Pentasoft Technologies and got a stay
order dated 18.12.2009 till such time all the issues /appeals from 1996 to 2000 -07 are
disposed off.
CASES FILED BY THE INCOME TAX THE DEPARTMENT AGAINST THE COMPANY
1. Department has filed in the Supreme Court of India against Pentasoft Technologies
(now merged with Pentamedia Graphics) for Assessment Years 2001-02 and 2002-03 challenging
the Depreciation on Non Compete Fees upheld by the Madras High Court. The Management
believes that the ultimate outcome of the proceedings will not have any adverse to the
company.
8. The company has not obtained any loans or borrowings from financial institutions,
banks, Government and debenture holders, hence this Clause is not applicable.
9. In our opinion and according to the information given to us, the company has not
raised any money by way of initial public offer or further public offer and hence this
clause is not applicable.
10. As per our verification and explanation given to us, by the company, no fraud on or
by the company has been noticed or reported during the year.
11. The managerial remuneration paid by the company is as per Section 197 read with
schedule V to the Companies Act, 2013.
12. The company is not a Nidhi company and hence this clause is not applicable.
13. As per our verification, it is opined that all the transactions with the related
parties are in compliance with Sections 177 and 188 of the Companies Act, 2013 where
applicable and the details have been disclosed in the financial statements.
14. The company has not made any preferential allotment or private placement of shares
or fully or partly convertible debentures during the year, hence this clause is not
applicable.
15. According to the information and explanations given to us, the company has not
entered into any non - cash transactions with the directors or persons connected with
them. Hence provisions of Section 192 of the Companies Act, 2013 are not applicable to the
company.
16. The company is not required to be registered under Section 45-IA of the Reserve
Bank of India Act, 1934.
| For Babu Peram and Associates |
| Chartered Accountants |
| CA. Babu Peram |
| Proprietor |
| (Firm Registration No. 012721S) |
| Membership No.200803 |
| Place: Chennai |
| Date: 27/05/2019 |
+91-9892691696
