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AUDITOR'S REPORT

Khaitan Electricals Ltd.

You can view full text of the latest Auditor's Report for the company.
Market Cap. (₹) 1.55 Cr. P/BV 0.00 Book Value (₹) -341.58
52 Week High/Low (₹) 18/1 FV/ML 10/1 P/E(X) 0.00
Bookclosure 29/09/2018 EPS (₹) 0.00 Div Yield (%) 0.00
Year End :2016-03 

To

The Members of Khaitan Electricals Limited Report on the

Financial Statements

We have audited the accompanying financial statements of Khaitan Electricals Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2016, the Statement of Profit and Loss, the Cash Flow, and a summary of the significant accounting policies and other explanatory information for the year then ended.

Management's responsibility for the financial statements

The Company's 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 financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors' responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's 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 Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, 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 on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at 31st March, 2016 and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to note no.2.38 to the financial statements. The company has incurred net loss of Rs.9461.19 lacs during the year ended 31st March, 2016 and as of that date, the Company's net worth is fully eroded and has a negative net worth of Rs.4502.06 lacs, indicating the existence of uncertainty that may cast doubt about the Company's ability to continue as a going concern. Considering the matters set out in the said note, this financial statement is prepared on a going concern basis. Our opinion is not qualified in respect of this matter.

Report on other legal and regulatory requirements

1. As required by the Companies (Auditor's 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 report that:

i. 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.

ii. 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.

iii. The Balance Sheet, the Statement of Profit and Loss and the Cash flow Statement dealt with by this Report are in agreement with the books of account.

iv. In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

v. On the basis of the written representations received from the directors as at 31st March, 2016 and taken on record by the Board of Directors, none of the directors is disqualified as at 31st March, 2016 from being appointed as a director in terms of Section 164

(2) of the Act.

vi. 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".

vii. With respect to the other matters to be included in the Auditor's 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:

a. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note No. 2.28 to the financial statements.

b. The Company did not have any long-term contracts including derivatives contracts for which there were any material foreseeable losses.

c. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

“Annexure A” to the Independent Auditor's Report

Statement referred to in paragraph 'Report on Other Legal and Regulatory Requirements' of our report of even date to the members of Khaitan Electricals Limited on the financial statements for the year ended 31st March, 2016.

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

b) The fixed assets were physically verified during the year by the management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all fixed assets at reasonable intervals except fixed assets lying at Kolkata factory, as the factory has been seized by Kolkata Port Trust. According to the information & explanations given to us, no material discrepancies were noticed on such verification.

c) According to the information and explanations 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 except title deeds of immovable properties having written down value of Rs. 79.31 lacs which were not made available to us for our verification.

(ii) The inventories (excluding stocks with third parties and inventories lying at Kolkata factory which has been seized by Kolkata Port Trust) have been physically verified during the year by the management at reasonable intervals and no material discrepancies were noticed on such physical verification.

(iii) The company has granted unsecured loan to one Company covered in the register maintained under section 189 of the Companies Act, 2013. The Company has not granted any secured/ unsecured loan to firms or other parties covered in the register maintained under section 189 of the Act, 2013.

a) According to the information and explanations given to us, the terms and conditions of the loan are not prima facie prejudicial to the interest of the company.

b) As informed to us, the aforesaid loan is repayable on demand. The company is regular in payment of interest as and when demanded by the company.

c) In respect of the aforesaid loan, there is no overdue amount.

(iv) In our opinion and according to the information and explanations given to us, the company has complied with the provision of section 185 & 186 of the Act, with respect to the loans and investment made.

(v) The Company has not accepted any deposit within the meaning of section 73 to 76 or any other relevant provisions of the Act and the rules framed there under. The directives issued by the Reserve Bank of India are not applicable to the Company.

(vi) We have broadly reviewed the books of account maintained by the Company in respect of products where pursuant to the rules made by the Central Government, the maintenance of Cost records has been prescribed under section 148(1) of the Act and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We, however, as not required, have not made a detailed examination of such records.

(vii) a) On the basis of our examination, the Company has been generally irregular in depositing undisputed statutory dues including provident fund, income tax, sales tax, value added tax, employees' state insurance, duty of excise, service tax, and other statutory dues to the extent applicable with appropriate authorities.

According to the records, the following statutory dues were outstanding as at 31st March, 2016 for a period of more than six months from the date they became payable

Name of the Statute

Nature of Dues

Period to which pertain

Amount

(Rs. In Lacs)

Due date

Paid on

Income Tax Act, 1961

Tax deducted at sources

2014-15 &

2015-16

33.10

7th of the succeeding month

-

The Central/State Sales Tax Act

Value Added Tax

2015-16

267.98

20th of succeeding month

-

b) The disputed statutory dues aggregating to Rs. 1666.00 lacs that have not been deposited on account of matters pending before appropriate authorities are as under:

Name of the Statute

Nature of the Dues

Amount

(Rs in Lacs)

Period

Forum where dispute is pending

Income Tax Act

Income Tax

12.15

2010-11

ITAT, Hyderabad

Income Tax

105.00

2013-14

Commissioner of Income tax (Appeals)-Hyderabad

State Sales Tax

Sales Tax / Penalty

1198.35

2000-01, 2006-07 to 2013-14

AC, DC, Commissioner, Revision Board of Commercial Taxes, Tax Tribunal, High Court.

The Central Excise Act, 1944

Excise Duty

338.03

1994-95, 2000-01 to 2001-02 & 2007-08 to 2013-14

Commissioner of Central Excise, Tribunal, CESTAT

Penalty

10.00

2008-09

Tribunal, Delhi

Finance Act, 1994

Service Tax

2.47

2011-12

Asstt. Commissioner, Service Tax

Total

1666.00

(viii) The Company does not have any loans or borrowings from Government or debenture holder during the year. However, according to the records, the Company have defaulted in repayment of borrowings to following financial institutions or banks :

Name of the financial institutions /banks

Nature of dues

Period to which pertain

Amount (Rs. in lacs)

Delays in days

Bank Of India

Religare Finvest Limited

Bills discounting

Bills discounting

2015-16

2015-16

1165.94

684.48

1 to 313 days

7 to 326 days

(ix) The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) or term loan during the year.

(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 year.

(xi) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) In our opinion, the Company is not a Nidhi Company. Therefore, clause (xii) of paragraph 3 of the said order is not applicable to the Company.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and based on our examination of the records of the

Company, the Company has made preferential allotment of shares during the year. The provisions of section 42 of the Act have been complied with in this regard and amount has been utilized for the purpose for which it was raised. The company has not made any private placement of shares and fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with them. Accordingly, clause (xv) of paragraph 3 of the said order is not applicable to the Company.

(xvi) According to the information and explanations given to us, the provisions of Section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.

“Annexure B” to the Independent Auditor's Report of Even Date on the Financial Statements of Khaitan Electricals Limited

Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section 143 of the Companies Act, 2013 ("the Act") We have audited the internal financial controls over financial reporting of Khaitan Electricals Limited ("the Company") as of March 31, 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's 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 ("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 Company's 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 Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, to the extent applicable to an audit of internal financial controls, both issued by the ICAI.

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 were 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 auditor's 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 Company's internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's 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 company's 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 Company's 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, 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, 2016, 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.

For V. S. Rao & Co. For G. P. Agrawal & Co.

Chartered Accountants Chartered Accountants

(FR No. 003157S) (FR No. 302082E)

(CA. V. G. Tarak Nath) (CA. Rakesh Kumar Singh)

Partner Partner

Membership No.023302 Membership No. 066421

Place: Kolkata

Date: 28th May, 2016

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