Sujana Universal Industries Ltd Auditors Report.
To the Members of
SUJANA UNIVERSAL INDUSTRIES LIMITED
Report on Audit of the Standalone Financial Statements
We have audited the accompanying Standalone Financial Statements of Sujana Universal Industries Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including other comprehensive income), the statement of Cash Flows and the statement of changes in equity for the year then ended and a summary of significant accounting policies and other explanatory information (hereinafter referred to as "Standalone Financial Statements").
In our opinion and to best of our information and according to explanations given to us, except for the effects of the matter described in the "Basis for Qualified Opinion" section of our report, the aforesaid standalone financials statements read together with significant accounting policies and accompanying notes thereon give the information required by the Companies Act, 2013 (the "Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2019, and its Loss (financials performance including other Comprehensive income), the changes in equity and its cash flow for the year ended on that date.
Basis of Qualified Opinion
a) The Company has defaulted in repayment of dues to Banks/Financial Institutions and all loans outstanding were classified as NPAs by the banks. Provision for interest (excluding penal interest) amounting to Rs. 55.67 Cr. and Rs.213.40 Cr for the quarter ended 31st March 2019 and Year ended on such date respectively on its Working Capital Loan and Term Loan has not been made in the books by the Company, as those Loan Accounts were classified as NPA by the Lending Banks and Financial Institutions. The loss of the Company has been understated by Rs.55.67 Cr for the quarter ended 31st March 2019 and Rs. 213.40 Cr for the year ended on such date in view of non-provision of Interest amount.
b) In absence of technical and costing evaluation of current and noncurrent assets, impact of impairments, if any, on their economic value, we cant comment on the realizable value of same.
c) The Trade receivables could not be verified as the confirmation of balances have not been received. The Company has made a provision for bad and doubtful debts for trade receivables amounting to Rs.409.18 Cr during the Year ended 31st March 2019. The realizability of remaining trade receivables amounting to Rs.579.63 Cr is in doubt and the company has not made any provision for Bad and Doubtful Debts in respect of this trade receivables.
d) Loans and advances of Rs. 44.16 Cr has been given to various sub-contractors, suppliers and other parties are old advances. Having regard to the age of this advances, in our opinion, this are doubtful of recovery. The company is yet to assess the change in risk of default and resultant expected credit allowance on such Loan and advances. Had the aforesaid Loans and advances has been provided for impairment, loss of the company for the quarter ended 31st March 2019 and year ended on such date would have been higher by Rs. 44.16 Cr .
e) The Companys Net worth has been eroded on account of losses incurred by the company during the year ended 31st March 2019 and previous financial year and the net worth of the company is negative. The Current Liabilities of the company exceeded the current assets of the company as at 31st March 2019 by Rs.754.64 Cr. It would cast doubt on the Companys ability to continue as a going concern basis
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Companies Act,2013. Our responsibility under those standards are further described in the Auditors Responsibilities for the Audit of the Financials Statements section of our report. We are independent of the entity in accordance with the Code of Ethics issued by ICAI together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act,2013, and the rules thereunder and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion on the standalone financial statements.
Emphasis of Matters:
a) Note No. 2.37(b) to the financial statements which describes the uncertainty related to the outcome of the lawsuit filed against the Company by the Mauritius Commercial Bank which has financed one of its subsidiaries Hestia Holdings Limited for which the Company has given a Corporate Guarantee.
b) Note No.2.37 (c) to the financial statements which describes the uncertainty related to the outcome of the Bank Debt recalled by the Standard Bank which has financed one of its step-down subsidiary Selene Holdings Limited for which the
Company has given a Corporate Guarantee
Our opinion is not modified in respect of the above matters
Key Audit Matters
Key Audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statement of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole , and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Evaluation of uncertain tax positions:
The company has material uncertain tax positions including matters under dispute as disclosed under Contingent Liabilities (Note no: 2.37), which involves significant judgement to determine the possible outcome of these disputes.
How our audit addressed the key audit matter
We have obtained from the management the details of the present status of completed/pending disputes, and taken into consideration the effect of these in respect of uncertain tax provisions to evaluate the uncertainties as at the year end.
Information Other Than the Financial Statements and Auditors Report Thereon
The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the Standalone financials statement and our auditors report thereon.
Our opinion on the Standalone financial statements does not cover the other information and we do not express any form of the assurance conclusion thereon
In connection with the audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financials statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we performed, we conclude that there is a material misstatement of this other information; we are required to report the fact. We have nothing to report in this regard.
Responsibility of Management for the Standalone 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 state financial position and financial performance 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 relevant rules issued there under.
This responsibility 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; design, implementation and maintenance of adequate internal financial controls, that are operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the Companys ability to continue as a going concern , disclosing , as applicable , matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the companys financial reporting process.
Auditors Responsibility for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order, 2016 ("the Order") 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 further 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 appears from our examination of those books;
c) the Balance Sheet, Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and the statement of changes in equity 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 applicable Accounting Standards specified under Section 133 of the Act, read with relevant rule issued there under.
e) On the basis of written representations received from the directors as on March 31, 2019, and 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 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". Our report 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 the requirements of section 197(16) of the Act, as amended:
In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to two of its directors during the year is in excess of the remuneration payable as per provisions of section 197 of "the Act"- Refer to note 2.28 (IV) to the Standalone financial statements.
h) With respect to 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 not disclosed the impact of pending litigations which would impact its financial position in notes to financial statements.
ii. The Company does not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There are no amounts which were required to be transferred to the Investor Education and Protection Fund by the company.
|For J Singh & Associates.,|
|Date: 29th May 2019||M.No. 213326|
ANNEXURE A TO THE INDEPENDENT AUDITORS REPORT
Annexure referred to in Independent Auditors Report to the Members of Sujana Universal Industries Limited on the Standalone Financial Statements for the year ended 31st March 2019, we report that:
i. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
(b As explained to us, fixed assets have been physically verified by the management at regular intervals; as informed to us no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable.
(c) According to the information and explanations given to us and on the basis of our examination of records of the Company, the title deeds of immovable properties are held in the name of the Company.
ii. The physical verification of inventory has been conducted at reasonable intervals by the management during the year and no material discrepancies were noticed on such verification.
iii. The Company has not granted any loans, secured or unsecured, to companies, firms, and Limited Liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Therefore, the provisions of Clause 3(iii), (iii)(a), (iii)(b) and (iii)(c) of the said order are not applicable to the company.
iv. The Company has not granted any loans or made any Investments, or provided any guarantee or security to the parties, covered under section 185 and 186 of the Act. Therefore, the provisions of clause 3(iv) of the said order are not applicable to the company.
v. The Company has not accepted any deposits during the year from the public within the meaning of the provisions of section 73 of "the Act" and hence directives issued by the reserve bank of India and the provisions of section 73 to 76 or any other relevant provisions of "the Act" the Rules framed there under are not applicable to the Company at present
vi. We have broadly verified the books of accounts and records maintained by the company in respect of products where, pursuant to the rules made by the central government of India, the maintenance of cost records has been specified under the sub-section (1) of section 148 of the Companies Act 2013, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made detailed examinations of the records with a view to determine whether they are accurate or complete
vii. (a) According to the information and explanations given to us and based on the records of the company examined by us, the company is not regular in depositing the undisputed statutory dues, including Provident Fund, Employees State Insurance, Income Tax, Custom Duty, Excise Duty and other material statutory dues, as applicable, with the appropriate authorities in India ;
(b) There were undisputed amounts payable amounting Rs. 8.32 cr in respect of Income Tax , Corporate Dividend Tax , VAT, Provident Fund, ESI , Service Tax, TDS, and Professional Tax, in arrears as at 31st March 2019 for a period of more than 6 months from the date they became payable.
|Nature of Dues||Amount in Cr|
|Income Tax payable||6.80|
|Corporate Dividend Tax||0.15|
|Excise Duty & Service Tax||0.10|
(c) Details of dues of Income Tax, Sales Tax, Customs duty and excise duty and Value Added Tax which has not been deposited as at March 31, 2019 on account of dispute are given below.
|Disputed Statutory Liability as on 31.03.2019|
|Name of the Statute||Amount in Crores||Period to which the amount relates||Forum where dispute is pending|
|Income Tax Act 1961||14.30||2010-11||CIT ( Appeals)|
|TNGST Act , 1959||3.39||2000-01||Honble High Court of Tamilnadu|
|TNGST Act , 1959||23.46||2004-05||Honble High Court of Tamilnadu|
|TNGST Act , 1959||46.30||2005-06||Honble High Court of Tamilnadu|
|TNGST Act , 1959||27.33||2006-07||Honble High Court of Tamilnadu|
|TNGST Act , 1959||32.35||2007-08||Honble High Court of Tamilnadu|
|TNGST Act , 1959||3.85||2008-09||Honble High Court of Tamilnadu|
|TNGST Act , 1959||11.11||2009-10||Honble High Court of Tamilnadu|
|TNGST Act , 1959||28.49||2010-11||Honble High Court of Tamilnadu|
|TNGST Act , 1959||186.18||2011-12||Honble High Court of Tamilnadu|
|TNGST Act , 1959||218.78||2012-13||Honble High Court of Tamilnadu|
|TNGST Act , 1959||48.76||2013-14||Honble High Court of Tamilnadu|
|Customs & Excise||3.17||2000-01||CESTAT, Bangalore and Chennai|
|Customs & Excise||2.64||1995-96||CESTAT, Chennai|
|Customs & Excise||1.52||2007-08, 2008-09||CESTAT, Bangalore|
|Customs & Excise||0.37||2008-09||Add. Commissioner of Customs & Excise, Hyderabad I|
|Workmen Compensation||0.05||2007-08||Interim Stay granted by Honble High Court as against the order passed by the Honble Labour Commissioner|
viii. The company has defaulted in the repayment of loans taken from banks and financial institutions during the current financial year and no interest provision was made by the company on working capital loan amounting to Rs. 200.85 Cr and term loan amounting to Rs. 12.55 Cr., Details of defaults are given below
|Details of over dues to Banks / Financial Institutions as on 31.03.2019||Rs. in Lakhs|
|Name of the Bank||Nature of default||Amount of Default||Period of Default|
|IDBI Bank Ltd||Principle||5,153||January 2015 to March 2018|
|Interest||2,052||March 2015 to March 2018|
|Redemption of Preference Share Capital|
|IDBI Bank Ltd||CRP Shares||2,180||January 2015 to March 2018|
|Dividend||201||January 2015 to March 2018|
|Working Capital Loans|
|A) Cash Credits|
|Bank of Baroda||Monthly Interest||5,515||February 2015 to March 2018|
|Bank of India||Monthly Interest||19,397||October 2015 to March 2018|
|Central Bank of India||Monthly Interest||8,037||September 2015 to March 2018|
|IDBI Bank Ltd||Monthly Interest||3,601||April 2015 to March 2018|
|Indian Overseas Bank||Monthly Interest||13,669||September 2015 to March 2018|
|Oriental Bank of Commerce||Monthly Interest||12,231||May 2015 to March 2018|
|UCO Bank||Monthly Interest||6,415||April 2015 to March 2018|
|B) Letter of Credits|
|Bank of India||LC devolvement||6,250||October 2015 to March 2018|
|Central Bank of India||LC devolvement||10,000||October 2015 to March 2018|
|Indian Overseas Bank||LC devolvement||12,000||May 2015 to March 2018|
|UCO Bank||LC devolvement||8,000||June 2015 to March 2018|
|Export-Import Bank of India, Mumbai||SBLC devolvement||11099||March 16 to May 18|
ix. The Company has not raised any moneys by way of initial public offer, further public offer (including debt instruments) and term loans during the year. Accordingly, the provisions of this clause are not applicable to the Company.
x. According to the information and explanations given to us, no material fraud by the company or on the company by its officers or employees has been noticed or reported during the course of our Audit.
xi. In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to two of its directors during the year is in excess of the remuneration payable as per provisions of section 197 of "the Act"-refer note 2.28 ( IV) to Standalone financial statements
xii. As the Company is not a Nidhi Company and the Nidhi Rules, 2014 are not applicable to it; the Provisions of clause 3(xii) of the order are not applicable to the company.
xiii. The Company has entered into transactions with related parties in compliance with the provisions of section 188 of the Act. The details of such related party transactions have been disclosed in the Ind AS Financial Statements as required under Indian Accounting standard (Ind AS) 24, related party disclosures specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014.
xiv. The Company has not made any preferential allotment of private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, the provisions of clause 3(xiv) of the Order are not applicable to the Company.
xv. The Company has not entered into non-cash transactions with its directors or persons connected with him. Accordingly, the provisions of clause 3(xv) of the Order are not applicable to the Company.
xvi. The Company is not required to be registered under section 45-IA of The Reserve Bank of India Act 1934. Accordingly, the provisions of clause 3(xvi) of the order are not applicable to the Company.
|For J Singh & Associates.,|
|Date: 29th May 2019||M.No. 213326|
ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT
Report on the Internal Financial Controls over Financial Reporting under clause (i) of the Sub-section 3 of the Section 143 of the Companies Act, 2013 (The Act)
We have audited the internal financial controls over financial reporting of Sujana Universal Industries Limited (the company) as of 31st march 2019 in conjunction with our audit of standalone financial statements of the company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Board of Directors of the Company 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 respective 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.
Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company 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 Section143(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 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting of the Company
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 e 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.
Limitation of Internal Financial Controls over Financial Reporting
Because of the inherent limitation 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.
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 March 31, 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 J Singh & Associates.,|
|Date: 29th May 2019||M.No. 213326|