1. We have audited the attached Balance Sheet of 3i Infotech Limited
(the Company) as at March 31, 2012 and also the Statement of
Profit and Loss and the Cash Flow Statement for the year ended on that
date annexed thereto. These financial statements are the responsibility
of the Company''s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards
generally accepted in India. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
3. As required by the Companies (Auditors'' Report) order, 2003, issued
by the Central Government of India in terms of sub-section (4A) of
Section 227 of the Companies Act, 1956 (hereinafter referred to as
the Act), we annex hereto a statement on the matters specified in
paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to above, we
i) We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purposes of our
ii) 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
iii) The Balance Sheet, Statement of Profit and Loss and Cash Flow
Statement dealt with by this report are in agreement with the books of
iv) In our opinion, the Balance Sheet, the Statement of Profit and Loss
and the Cash Flow Statement dealt with by this report comply with the
Accounting Standards prescribed by Companies (Accounting Standards)
Rules, 2006, to the extent applicable;
v) On the basis of the written representations received from the
directors, as on March 31, 2012, and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
March 31, 2012 from being appointed as a director in terms of clause
(g) of sub-section (1) of Section 274 of the Act;
vi) Without qualifying attention is drawn to the following :
(a) note no. 2.21(D) regarding the financial statements of the Company
having been prepared on a going concern basis, the appropriateness of
which is interalia dependent on successful implementation of the scheme
approved by the Corporate Debt Restructuring Cell as also that in the
opinion of the management, no impairment provision is considered
(b) note no. 2.21(D) regarding Exceptional write off of Trade
Receivables and reversal of Unbilled Revenues of Rs75.40 crores and
disclosed as exceptional items.
(c) note no. 2.21(D) regarding carrying amount of Rs27.23 crores for
Payment Solution Software Product to be adapted for application in
different geographies which in the opinion of the management will be
localized in due course of time and commercially exploited thereafter.
vii) Attention is also invited to note no. 2.8.2 in respect of Net
Deferred Tax Assets recognized in the earlier years of Rs103.66 crores
being carried forward in the Balance Sheet and expected to reverse in
foreseeable future, on the basis of order book on hand and the
Restructuring Scheme approved by the CDR Cell. However, we are unable
to express an opinion as to when and to what extent the aforesaid net
deferred tax asset would reverse in the near future
viii) Based on our audit and to the best of our information and
according to the explanations given to us, the said financial
statements read together with para (vi) and subject to what is stated
in para(vii) above, the impact whereof on the loss for the year ended
on March 31, 2012 and reserves and assets as at that date is presently
not ascertainable and accompanying Notes 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
a) in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2012;
b) in the case of the Statement of Profit and Loss, of the loss of the
Company for the year ended on that date; and
c) in the case of Cash Flow Statement, of the cash flows of the Company
for the year ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE ON THE
FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED MARCH 31, 2012 OF 3I
(i) (a) The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
(b) The Company in accordance to a phased programme was during the year
required to physically verify Furniture & Fixtures, Office equipment,
Plant and equipment and Computers etc.However only computers/IT Assets
have been verified. Accordingly, in our opinion, the frequency and the
phased programme of physical verification needs to be improved. The
discrepancies noticed on such verification have been dealt with in the
books of account.
(c) During the year, the Company has not sold/disposed off substantial
portion of its fixed assets.
(ii) The Company is a service company, primarily rendering information
technology services. Accordingly, it does not hold any physical
inventories. Hence, paragraph 4(ii) of the Order, is not applicable.
(iii) As informed, the Company has not granted/taken any loans, secured
or unsecured to/from companies, firms or other parties covered in the
register maintained under Section 301 of the Act.
(iv) In our opinion and according to the information and explanations
given to us, having regard to the explanations that some of the items
purchased and sale of services are of special nature and suitable
alternative sources do not exist for obtaining comparable quotations,
there is an adequate internal control system commensurate with the size
of the Company and the nature of its business for the purchase of
inventories and fixed assets and for the sale of goods and services.
During the course of our audit, no major weakness has been noticed in
the internal control system.
(v) According to the information and explanations provided by the
management, we are of the opinion that there are no contracts or
arrangements that need to be entered into the register required to be
maintained under Section 301 of the Act.
(vi) The Company has not accepted any public deposits within the
meaning of Section 58A and 58AA or any other relevant provisions of the
Act and rules framed thereunder.
(vii) In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
(viii) To the best of our knowledge and as explained, the Central
Government has not prescribed maintenance of cost records under clause
(d) of sub-section (1) of Section 209 of the Act for the services
rendered by the Company. Accordingly, paragraph 4(viii) of the Order
is not applicable.
(ix) (a) The Company during the year, as explained in note no. 2.21 has
been facing liquidity stress due to which there were delays in payment
of various statutory dues such as Provident fund, income tax and
service tax. However, as at the close of the year, there were no
arrears outstanding for a period of more than six months from the date
they become payable except in respect of Professional Tax of Rs0.13
(b) According to the information and explanation given to us, there are
no dues of Income tax, Sales Tax Wealth tax, Service Tax, Custom Duty,
Excise Duty and Cess which have not been deposited on account of any
dispute except following :
Statute Nature of Period to which
amount Amount Forum where
Demand Relates (Rs in pending
Tax Act, Income Tax Assessment Year
1999-00, 3.19 Income Tax
Tax Act, Income Tax Assessment Year
2003-04, 2.76 Commissioner
1961 2004-05,2005-06 Tax (Appeals)
Act,1994 Service Tax 2004-05, 2005-06,
2006- 175.55 Assistany
2008-09,2009- Service Tax
10 & 2010-11
Pradesh Value Added
Tax 2007-08, 2008-09,
2009-10, 0.28 Deputy
2005 2010-11, 2011-12 (Commercial Tax),
VAT Value Added
Tax 2006-07, 2007-08
& 2008- 0.12 Assistant
Act, 2003 09 (Commercial
Sales Value Added
Tax 2004-05 0.69 Deputy
1959 Sales Tax,
Sales tax 2007-08, 2008-09,
2009-10, 0.14 Commissioner
Tax, 1956 2010-11 Hyderabad
Sales tax 2006-07,2007-08,
2008-09 0.17 Assistant
Tax, 1956 (Commercial
Sales Tax Central
Sales tax 2004-05 *0.00 Deputy
Rules, Sales Tax,
*0.00 crores denotes figures less than Rs50,000
(x) The Company''s accumulated losses at the end of the financial year
do not exceed 50% of its networth. However,it has incurred cash losses
in the current year under review but it did not incurr cash losses in
the immediately preceding financial year.
(xi) There have been defaults in repayment of dues to the banks during
the year, which have been subsequently either rescheduled by way of
Corporate debt restructuring package (CDR) except certain overdues of
Rs108.84 crores, including interest of Rs7.21 crores (defaults for the
period upto six months) to certain banks who did not opt for CDR
scheme. The management, as explained, is negotiating with these banks
and confident of an amicable restructuring/settlement.
(xii) In our opinion and according to the information and explanations
given to us, and based on the documents and records produced to us, the
Company has not granted loans and advances on the basis of security by
way of pledge of shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of
the Order are not applicable to the Company.
(xiv) In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Order are not applicable to the
(xv) In our opinion and according to the information and explanations
given to us, the terms and conditions on which the Company has given
guarantees for loans taken by others from banks and financial
institutions, are not, prima facie prejudicial to the interest of the
(xvi) In our opinion and according to the information and explanations
given to us, the term loans were applied for the purposes for which
they were obtained.
(xvii) According to the information and explanations given to us and on
an overall examination of the Balance sheet and Cash Flow Statement of
the Company, in our opinion, the funds raised on short term basis have,
prima facie, not been used for long term investment.
(xviii)The Company has not made any preferential allotment of shares to
parties and companies covered in the register maintained under Section
301 of the Act.
(xix) The Company has not issued any debentures during the year or in
the recent past.
(xx) The Company has not raised any money by public issues during the
year or in the recent past.
(xxi) During the course of our examination of the books of account and
records of the Company carried out in accordance with the generally
accepted auditing practices in India, we have neither come across any
instance of fraud on or by the Company, noticed or reported during the
year nor have been informed of such case by the management.
For R.G.N. Price & Co. For Lodha & Co.
Chartered Accountants Chartered Accountants
Firm Registration No: 002785S Firm Registration No: 301051E
Mahesh Krishnan R.P. Baradiya
Membership No. 206520 Membership No. 44101
Place: Mumbai Place: Mumbai
Date: May 16, 2012 Date: May 16, 2012