Videocon Industries Ltd Auditors Report.
The Members of Videocon Industries Limited
Report on the Audit of the Standalone Financial Statements Qualified Opinion
We have audited the accompanying standalone financial statements of Videocon 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 Changes in Equity and the Statement of Cash Flows for the year ended on that date, and notes to the financial statements, including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "the standalone financial statements").
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph of our report, the aforesaid standalone financial statements 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 March 31,2019, and its loss, total comprehensive loss, changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
a) As mentioned in Note No. 49 of the standalone financial statements, the Company has made investments, given advances and has trade receivables aggregating to Rs. 181,386.43 Million in subsidiary/group/affiliate companies, which have been also admitted to Corporate Insolvency Resolution Process (CIRP).
In view of the referral of these group/affiliate companies to National Company Law Tribunal and consequent admission thereof under the Insolvency and Bankruptcy Code, 2016, we are unable to express an opinion on the extent of realisability of aforesaid investments, advances and trade receivables from these subsidiary/group/affiliate companies. The consequential effect of the above, on the standalone financial statements for the year ended March 31, 2019 is not ascertainable.
The auditors report for the preceding financial year was also qualified in respect of this matter.
b) As mentioned in Note No. 50 to the standalone financial statements, the manufacturing activity of Glass Shell division which manufactured panels and funnels used in Colour Picture Tube of Colour Television, has been suspended from July, 2017 due to poor demand. According to management, there are indication of impairment loss. However, the Company has not assessed or reviewed the plant and machinery and other fixed assets related to the Glass Shell division for impairment. In respect of other fixed assets, management has not carried out any assessment of impairment, and the impairment loss, if any, has not been ascertained. The consequent effect of the same is not ascertainable. (Also refer para (i) of Annexure A to the report).
c) As mentioned in Note No. 51 to the standalone financial statements, the balance confirmations have not been received in respect of certain secured and unsecured loans, balances with banks, trade receivables, trade and other payables and loans and advances. The Company continues the process of obtaining confirmations and reconciliation of the balances of trade receivables, trade and other payables and loans and advances. The impact of the same is not ascertainable at present.
d) As mentioned in Note No. 52 to the standalone financial statements, no confirmation is available in respect of equity shares valued at 32.69 Million shown in Non-Current Investments, which were given as security for the loans and advances taken by the Company. The outstanding balance of loans and advances as on March 31, 2019 of Rs. 15.00 Million, is also subject to confirmation from that party.
e) As mentioned in Note No. 53 to the standalone financial statements, pursuant to commencement of CIRP of the Company under Insolvency and Bankruptcy Code, 2016, there are various claims submitted by the financial creditors, operational creditors, employees and other creditors to the RP Such claims can be submitted to the RP till the approval of the resolution plan by CoC. The overall obligations and liabilities including interest on loans and the principal amount of loans shall be determined during the CIRP. Pending final outcome of the CIRP, no accounting impact in the books of accounts has been made in respect of excess, short, or non-receipts of claims for operational and financial creditors. Hence, consequential impact, if any, is currently not ascertainable and we are unable to comment on possible financial impacts of the same.
f) As mentioned in Note No. 54 to the standalone Ind AS financial statements, the Company has entered into agreement in April, 2018 with Mr. Said Salehal Hinai, for sale of Middle East Appliances LLC, a subsidiary company for RO 50,000 (equivalent to Rs. 8.60 Million). Out of which RO 25,000 (equivalent to Rs. 4.30 Million) had been received and balance RO 25,000 (equivalent to Rs. 4.30 Million) are not yet received. Further, as per the Foreign Exchange Management Act, 1999, the said balance of RO 25,000 (equivalent to Rs. 4.30 Million) should have been received within 90 days. This is non compliance of the provisions of Foreign Exchange Management Act.
g) Material uncertainty relating to Going Concern:
As mentioned in Note No. 48 to the standalone financial statements, the Company has been referred to National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, and there are persistent severe strains on the working capital and there is considerable decline in level of operations of the Company and net worth of the Company as on the reporting date is negative and it continues to incur losses. The Company has received invocation notices of corporate guarantees given by it and also the personal guarantees of promoter directors have been invoked. Since Corporate Insolvency Resolution Process (CIRP) is currently in progress, as per the Code, it is required that the Company be managed as going concern during CIRP. Accordingly, the standalone financial statements are continued to be prepared on going concern basis. However, there exists a material uncertainty about the ability of the Company to continue as a "Going Concern". The same is dependent upon the resolution plan to be approved by NCLT. The appropriateness of the preparation of standalone financial statements on going concern basis is critically dependent upon CIRP as specified in the Code. necessary adjustments required on the carrying amount of assets and liabilities are not ascertainable at this stage.
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 statements 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. Apart from the matters described in the Basis for Qualified Opinion paragraph and Material uncertainty related to Going Concern section, we have also determined the matters described below to be the key other audit matters to be communicated in our report.
|Key Audit Matter (Other than those given in Basis for Qualified Opinion)||How our audit addressed key audit matter|
|The principal products of the Group comprise consumer electronics products that are mainly sold through distributors, modern trade and direct sale channels amongst others. Revenue is recognised when the customer obtains control of the goods.||In view of the significance of the matter we applied the following audit procedures in this area, among others to obtain sufficient appropriate audit evidence:|
|We assessed the appropriateness of the revenue recognition accounting policies by comparing with applicable accounting standards.|
|We identified revenue recognition as a key audit matter because the Company and its external stakeholders focus on revenue as a key performance indicator. This could create an incentive for revenue to be overstated or recognised before control has been transferred.||We performed substantive testing by selecting samples of revenue transactions, recorded during the year by testing the underlying documents using statistical sampling.|
|We carried out analytical procedures on revenue recognised during the year to identify unusual variances.|
|We performed confirmation procedures on selected customer balances at the balance sheet date.|
|We tested, on a sample basis, specific revenue transactions recorded before and after the financial year end date to determine whether the revenue had been recognised in the appropriate financial period.|
|We tested manual journal entries posted to revenue to identify unusual items.|
|Litigations, provisions and contingencies||In view of the significance of the matter we applied the following audit procedures in this area, among others to obtain sufficient appropriate audit evidence:|
|The Company is involved in several ongoing direct and indirect tax litigations.|
|The assessment of the existence of the present legal or constructive obligation, analysis of the probability or possibility of the related payment require the management to make judgement and estimates in relation to the issues of each matter.||We tested the effectiveness of key controls around the recording and assessment of tax provisions and contingent liabilities.|
|The management with the help of opinion and advise of its experts have made such judgements and estimates relating to the likelihood of an obligation arising and whether there is a need to recognize a provision or disclose a contingent liability.||We assessed the value of the provisions and contingent liabilities in light of the nature of the exposures, applicable regulations and related correspondences with the authorities. We have reviewed and held discussions with the management to understand their processes to identify new possible obligations and changes in existing obligations for compliance with the requirements of Ind AS 37 on Provisions, Contingent Liabilities and Contingent Assets.|
|The Company recognises a provision when it has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.||We have also discussed with the management significant changes from prior periods and obtained a detailed understanding of these items and assumptions applied. We have held regular meetings with the management and key legal personnel responsible for handling legal matters.|
|A disclosure for contingent liabilities is made where there is a possible obligation or a present obligation that may probably not require an outflow of resources. When there is a possible or a present obligation where the likelihood of outflow of resources is remote, no provision or disclosure is made.||In addition, we have reviewed the details of the proceedings before the relevant authorities including communication from the advocates / experts; status of each of the material matters as on the date of the balance sheet.|
|We have identified litigations, provisions and contingencies as a key audit matter because it requires the management to make judgements and estimates in relation to the exposure arising out of litigations. The key judgement lies in the estimation of provisions where they may differ from the future obligations. The Company operates under several tax laws and some of these have a significant impact on the standalone financial statements of the Company.||We have assessed the appropriateness of provisioning based on assumptions made by the management and presentation of the significant contingent liabilities in the financial statements.|
Information Other than the Standalone Financial Statements and Auditors Report Thereon ("Other Information")
The Companys Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Directors Report including Annexures to Directors Report and Corporate Governance Report but does not include the standalone financial statements and our auditors report thereon. The Boards Report including Annexures to Boards Report and Corporate Governance Report is expected to be made available to us after the date of this auditors report.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
When we read the Boards Report including Annexure to Boards Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Managements Responsibility for the Standalone Financial Statements
The Company has been under the Corporate Insolvency Resolution Process (CIRP) under the provisions of the Insolvency and Bankruptcy Code, 2016 (the Code) vide order dated June 6, 2018 passed by the National Company Law Tribunal (NCLT). The powers of the Board of Directors stand suspended as per Section 17 of the Code and such powers are being exercised by the Resolution Professional (RP) appointed by the NCLT by the said order under the provisions of the Code. As per Section 20 of the Code, the management and operations of the Company were being managed by Interim Resolution Professional / Resolution Professional Mr. Anuj Jain.
Subsequently, NCLT Principal Bench on October 24, 2018 directed to transfer all insolvency petitions related to certain Videocon group/affiliate entities to one bench at NCLT, Mumbai and left open the matter of substantive consolidation to be decided by NCLT, Mumbai bench. Further, State Bank of India had filed a petition at NCLT, Mumbai bench for substantive consolidation of CIRP of group/affiliate entities.
The NCLT, Mumbai Bench has, vide order dated August 8, 2019, directed consolidation of 13 entities out of 15 group/affiliate entities including the Company. Subsequently, the NCLT vide Order dated September 25, 2019 has appointed Mr. Abhijit Guhathakurta as Resolution Professional (RP) for the consolidated CIRP cases of the 13 Videocon group entities including the Company, which was published on September 27, 2019 and has been directed to take over the process of insolvency. Further, as per the order dated August 8, 2019, the CIRP is to be completed within 180 days from the date of the said order i.e. August 8, 2019. Therefore, the management and operations of the Company and other 12 consolidated entities, namely, Videocon Telecommunications Limited, Evans Fraser & Co. (India) Limited, Millennium Appliances India Limited, Applicomp (India) Limited, Electroworld Digital Solutions Limited, Techno Kart India Limited, Century Appliances Limited, Techno Electronics Limited, Value Industries Limited, PE Electronics Limited, CE India Limited and Sky Appliances Limited are being managed by Resolution Professional Mr. Abhijit Guhathakurta.
The Companys management is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs, profit and other comprehensive income, changes in equity 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. 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 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 standalone financial statements, management 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 management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The management / RP is also responsible for overseeing the Companys financial reporting process.
Auditors Responsibilities 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 standalone 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 standalone 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
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, to the extent applicable.
(A) 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 purposes of our audit.
b) except for the possible effects of the matters described in the Basis of Qualified opinion paragraph above, 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, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books of account.
d) In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015 as amended, except requirement of Ind AS 26 on Impairment of Assets and Ind AS 37 on Provisions, Contingent Liabilities and Contingent Assets with regard to matters described in the Basis of Qualified Opinion paragraph above.
e) The matters described under the basis for qualified opinion paragraph and Material Uncertainty relating to Going Concern paragraph above in our opinion, may have an adverse effect on functioning of the Company and on the amounts disclosed in standalone financial statements of the Company.
f) We have not received any written representations from the directors as on March 31,2019 with regard to disqualification from being appointed as a director in terms of Section 164(2) of the Act. However, considering the fact, that the Company has defaulted in repayment of Foreign Currency Convertible Bonds, in our opinion, all the directors are disqualified from being appointed as director in terms of Section 164 (2) of the Act.
g) 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.
(B) 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, as amended 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 as at March 31, 2019 on its financial position in its standalone financial statements - Refer Note 37, 38, 39, 40 and 41 to the standalone financial statements.
ii. The Company did not have any long term contracts including derivatives contracts for which there were any material foreseeable losses.
iii. The Company has defaulted in transferring amounts of Rs. 1.11 Million, required to be transferred to the Investor Education and Protection Fund during the year ended March 31,2019.
(C) 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 according to the information and explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) which are required to be commented upon by us.
For S Z DESHMUKH & CO.
(Firm Registration No. 102380W)
D. U. KADAM
Membership No. 125886
Date: November 27, 2019
ANNEXURE A TO THE INDEPENDENT AUDITORS REPORT
The Annexure referred to in Independent Auditors Report to the members of the Videocon Industries Limited (the Company) on the standalone financial statements for the year ended March 31,2019. We report the following:
(i) In respect of fixed assets:
(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
(b) We have been informed that a physical verification and valuation of fixed assets has been carried out by external agencies. However, we have not been given any such report. Hence, we are unable to comment as to whether there is any material discrepancies on physical verification. In our opinion, the frequency of verification is not satisfactory, having regard to the size of the Company and nature of its business.
(c) According to the information and explanation 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) (a) As per the information and explanation given to us, the inventories (excluding stock of crude oil lying at extraction site with the Operator) have been physically verified during the period by the management at reasonable intervals. In our opinion, having regard to the nature and location of stocks, the frequency of the physical verification is reasonable.
(b) As per information and explanation given to us, the verification of inventory related to consumer electronics business and its valuation was carried out by a firm of chartered accountants, who has identified shortages, damages and non moving items and valued the inventory at Rs. 2,786.50 Million as against the book carrying value of Rs. 12,048.20 Million as on May 31,2018 (Refer Note No. 55 of the standalone financial statements). The values arrived by the valuer have been considered by the Company and the difference has been charged to consumption of materials and increase/decrease in inventory.
(iii) The Company has granted unsecured loans that are repayable on demand to 6 companies covered in the register maintained under section 189 of the Companies Act, 2013. The Company has not granted any secured/unsecured loans to firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013.
(a) The terms and conditions of the aforesaid loans are prejudicial to the Companys interest, in as much as that no interest has been charged by the Company during the year considering the financial conditions of those companies.
(b) In respect of the aforesaid loans, we are informed that repayment terms are not stipulated as the loans are repayable on demand. As informed to us, two companies are under the Corporate Insolvency Resolution Process under the provisions of the Insolvency and Bankruptcy Code, 2016.
(c) In respect of the aforesaid loans, as informed to us, there is no overdue amount as at year end.
(iv) The Company has not charged interest on the loans granted to its subsidiaries as required under section 186(7) of the Act. Except for this, in our opinion and according to the information and explanation given to us, the Company has complied with the other provisions of Section 185 and 186 of the Act, in respect of loans, investments, guarantees and security.
(v) According to the information and explanations given to us, the Company has not accepted any deposit during the period. Therefore, the provisions of clause (v) of the Order is not applicable.
(vi) According to the information and explanations given to us, in our opinion, the Company has made and maintained the prescribed cost records pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended and prescribed by the Central Government under section 148(1) of the Companies Act, 2013.
(vii) (a) According to the information and explanations given to us and the records examined by us, the Company is regular in depositing undisputed statutory dues including provident fund, employees state insurance, income tax, goods and service tax, sales tax, service tax, duty of customs, duty of excise, value added tax, cess and other statutory dues with appropriate authorities wherever applicable. According to the information and explanations given to us, undisputed arrears of statutory dues which were outstanding as on March 31,2019 for a period of more than six months from the date they became payable and not paid till date are given below:
|Nature of the Dues||Rs. in Million|
|1. Central Sales Tax||2.19|
|2. Value Added Tax||155.54|
|3. Goods and Service Tax||88.87|
|4. Entry Tax||45.63|
|5. Profession Tax||1.72|
|6. Provident Fund||14.25|
|7. Employees State Insurance||4.68|
|8. Labour Welfare Fund||0.01|
(b) According to the information and explanation given to us and on the basis of our examination of the records of the Company, details of dues of income tax, goods and service tax, sales tax, service tax, custom duty, excise duty, value added tax, cess which have not been deposited as on March 31,2019 on account of disputes are given below:
|Name of Statute||Nature of the Dues||Rs. in Million||Forum where dispute is pending|
|1. Customs Act, 1962||Custom Duty and Penalties||5.83||Supreme Court|
|2. Central Excise Act, 1944||Excise Duty and Penalties||48.21||Supreme Court|
|3. Finance Act, 1994 (Service||Service Tax and Penalties||20.89||CESTAT|
|4. Central Sales Tax Act,||Sales Tax||48.02||High Court|
|1956 and Sales Tax Acts||40.50||Tribunal|
|of various States||11.26||Commissioner (Appeals)|
|53.98||Joint Commissioner (Appeals)|
|24.38||Additional Commissioner (Appeals)|
|0.19||Deputy Commissioner (Appeals)|
|0.20||Commercial Tax Officer|
|5. Income Tax Act, 1961||Income Tax||2,842.66||High Court|
|34.09||Income Tax Appellate Tribunal|
|6. Navi Mumbai Municipal Corporation||Cess||1,012.64||High Court|
(viii) According to the information and explanation given to us and on the basis of our examination of the records of the Company, we observed that, the Company has defaulted in repayment of interest and principal amount of all loans to financial institutions and banks. The default runs into more than 365 days.
The Company has not borrowed from government and has not issued any debentures.
(ix) According to the information and explanations given to us, the Company has not raised money by way of initial public offer or further public offer (including debt instruments) or term loans during the year.
(x) According to the information and explanations given to us, no material fraud by the Company or any fraud on the Company by its officers or employees has been noticed or reported during the period.
(xi) The Company has not paid or provided the managerial remuneration to any of its Director.
(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of the Order is not applicable.
(xiii) According to the information and explanation given to us and on the basis of our examination of the records of the Company, we observed that, transactions with the related parties are in compliance with Section 177 and 188 of the Companies Act, 2013 where applicable and the details have been disclosed in the financial statements, etc., as required by the applicable accounting standards.
(xiv) According to the information and explanation given to us and on the basis of our examination of the records of the Company, we observed that, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the period.
(xv) According to the information and explanation given to us and on the basis of our examination of the records of the Company, we observed that, the Company has not entered into any non-cash transactions with its directors or persons connected with him and hence provisions of section 192 of the Companies Act, 2013 are not applicable.
(xvi) In our opinion, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Therefore, the Clause (xvi) of paragraph 3 of the Order is not applicable to the Company.
For S Z DESHMUKH & CO.
(Firm Registration No. 102380W)
D. U. KADAM
Membership No. 125886
Date: November 27, 2019
ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT
Report on the Internal Financial Controls Over 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 Videocon Industries Limited (the Company) as of March 31,2019 in conjunction with our audit of the standalone 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 (the Guidance Note) issued by the Institute of Chartered Accountants of India (ICAI). 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 Act.
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 and the Standards on Auditing prescribed under Section 143(10) of the Act, 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 ICAI. 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 standalone 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.
According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified in the operating effectiveness of the Companys internal financial controls over financial reporting as at March 31,2019:
i. The confirmations and reconciliation of balances of certain secured and unsecured loans, balances with banks, trade receivables, trade and other payables and loans and advances are not being taken and reconciliations are pending. (Refer Note No. 51).
ii. The Company has not made any assessment of impairment of the fixed assets, loans and advances and other assets as at the balance sheet date.
iii. Non compliance of the requirements of Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 with regard to preparation of periodical financial results from quarter ended March 31,2019 till date.
iv. Statutory dues (Goods and Service Tax / Value Added Tax / Tax Deducted at Source) accounts are in the process of reconciliation and there are delays in filing of certain statutory returns with the respective authorities. Company needs to strengthen internal control system in this regard.
A material weakness is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Companys annual or interim financial statements will not be prevented or detected on a timely basis. In our opinion, except for the effects / possible effects of the material weaknesses described above under Qualified Opinion paragraph on the achievement of the objectives of the control criteria, 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 ICAI.
We have considered material weakness identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31,2019 standalone financial statements of the Company and these material weaknesses affect our opinion on standalone financial statements of the Company for the year ended March 31,2019 [our audit report dated November 27, 2019, which expressed a qualified opinion on those standalone financial statements of the Company].
For S Z DESHMUKH & CO.
(Firm Registration No. 102380W)
D. U. KADAM
Membership No. 125886
Date: November 27, 2019