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3i Infotech
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« Mar 13
Auditor's Report (3i Infotech) Year End : Mar '14
We have audited the accompanying financial statements of 3i Infotech
 Limited (the Company), which comprise the Balance Sheet as at
 31st March, 2014, the Statement of Profit and Loss and the Cash Flow
 Statement of the Company for the year then ended and a summary of the
 significant accounting policies and other explanatory information.
 
 Management''s Responsibility for the Financial Statements
 
 The Company''s Management is responsible for the preparation of these
 financial statements that give a true and fair view of the financial
 position, financial performance and cash flows of the Company in
 accordance with the Accounting Standards referred to in sub-section
 (3C) of section 211 of the Companies Act, 1956 (the Act) read
 with the General Circular 15/2013 dated 13th September, 2013 of the
 Ministry of Corporate Affairs in respect of section 133 of the
 Companies Act, 2013.  This responsibility includes the design,
 implementation and maintenance of internal control 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 conducted our audit in accordance
 with the Standards on Auditing issued by the Institute of Chartered
 Accountants of India. Those Standards require that we comply with the
 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 the internal control relevant to the
 Company''s preparation and fair presentation of the financial statements
 in order to design audit procedures that are appropriate in the
 circumstances but not for the purpose of expressing an opinion on the
 effectiveness of the entity''s internal control. An audit also includes
 evaluating the appropriateness of accounting policies used and the
 reasonableness of the accounting estimates made by the Management, as
 well as evaluating the overall presentation of the financial
 statements.
 
 We believe that the audit evidence we have obtained is sufficient and
 appropriate to provide a basis for our audit opinion.  Opinion
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the 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:
 
 (a) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2014;
 
 (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 the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 Emphasis of Matter:
 
 Without qualifying, we draw attention to the following:
 
 (a) Going Concern and Impairment analysis:
 
 During the financial year 2011-12, the Company undertook to
 restructuring of its debts through CDR cell and also renegotiated with
 the FCCB holders with respect to its obligations. Post the debts
 restructuring and, as explained, the Company is confident of successful
 implementation of the CDR package and meeting its FCCB obligations. The
 financial statements, therefore, have been prepared on a going concern
 basis.
 
 The Company, as per its Accounting Policy and in accordance with the
 requirements of the Accounting Standard (AS) 28 - Impairment of Assets
 and Accounting Standard (AS) - 13 Accounting for Investments,
 prescribed under Companies (Accounting Standard) Rules 2006, has
 carried out an impairment analysis on 31st December, 2013 of its Cash
 Generating Units / Long term Investments in order to ascertain the
 extent of impairment. The said analysis as carried out by an
 independent expert valuer did not reveal any impairment. The same has
 been relied upon by the auditors being a technical matter (Refer note
 no. 2.27.1 & 2.27.2 of the Standalone financial statements).
 
 (b) Deferred Tax Assets:
 
 In respect of justification of carrying the deferred tax asset of
 Rs.121.33 crores (previous year Rs. 103.66 crores), the management,
 based on the confirmed order book on hand and relying on the
 Restructuring Scheme approved by the CDR Cell, is confident of having
 sufficient taxable income in foreseeable future, which would enable
 reversal of such deferred tax asset (Refer note no. 2.27.3 of the
 Standalone financial statements).
 
 Report on Other Legal and Regulatory Requirements
 
 (1) As required by the Companies (Auditor''s Report) Order, 2003(the
 Order) issued by the Central Government of India in terms of
 sub-section (4A) of section 227 of the Act, we give in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the Order.
 
 (2) As required by section 227(3) of the Act, we report that:
 
 (a) we have obtained all the information and explanations which to the
 best of our knowledge and belief were necessary for the purposes 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 and the Cash Flow
 Statement dealt with by this Report are in agreement with the books of
 account;
 
 (d) in our opinion, the Balance Sheet, Statement of Profit and Loss and
 the Cash Flow Statement comply with the Accounting Standards referred
 to in sub-section (3C) of section 211 of the Act read with the General
 Circular 15/2013 dated 13th September, 2013 of the Ministry of
 Corporate Affairs in respect of section 133 of the Companies Act, 2013.
 
 (e) On the basis of the written representations received from the
 directors as on 31st March 2014 taken on record by the Board of
 Directors, none of the directors is disqualified as on 31st March, 2014
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of the Act
 
 ANNEXURE REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING REPORT ON
 OTHER LEGAL AND REGULATORY REQUIREMENTS OF OUR REPORT OF EVEN DATE
 TO THE MEMBERS OF THE 3I INFOTECH LIMITED
 
 On the basis of such checks as we considered appropriate and according
 to the information and explanations given to us during the course of
 audit, we state that:
 
 (i) (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) During the year, the Company in accordance to a phased programme
 has physically verified Furniture & Fixtures, Office equipment, Plant
 and equipment and Computers at five locations which in our opinion, is
 reasonable considering the size of the Company and nature of its fixed
 assets. 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
 of purchase and sale 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) During the year, the Company has been facing liquidity stress
 due to which there were delays in payment of various statutory dues 
 such as income tax, sales tax, profession 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 Tax Deducted at Source of 
 Rs.6.42 crores and Service tax of Rs. 0.26 crores.
 
 (b) According to the information and explanations given to us, there
 are no dues of Income Tax, Sales Tax, Service Tax, Custom Duty, Wealth
 tax, Excise Duty and Cess which have not been deposited on account of
 any dispute except following :
 
 Name of     Nature of    Period to which 
                          amount Relates        Rs in    Forum where
                                                         dispute is
 Statute       Demand                           crores   pending
 
 MVAT Act,   Sales Tax    Financial Year 
                          2005-06 and 2008-09    2.95    Sales Tax 
                                                         Officer
 2002
 
 UP VAT Act, Sales Tax    Financial Year 
                          2008-09 and 2010-11    0.12    The Assistant
                                                         Commissioner,
 2008                                                    Commercial 
                                                         Taxes
 
 AP VAT Act, Sales Tax    Financial Year  
                          2009-10 to 2010-11     0.02    Appellate 
                                                         Deputy 
                                                         Commissioner
 2005
 
 KVAT Act,   Sales Tax    Financial Year 
                          2005-06                0.01    Dept. 
                                                         Commissioner of
 2003                                                    Commercial 
                                                         Taxes Bangalore
 
 
 Name of     Nature of    Period to which 
                          amount Relates        Rs in    Forum where
                                                         dispute is
 Statute       Demand                           crores   pending
 
 Income Tax  Income       Assessment Year 
                          2004-05                 1.00   Commissioner 
                                                         of Income Tax
 Act, 1961   Tax          Assessment Year 
                          2006-07                 0.19   (Appeals)
 
                          Assessment Year 
                          1999-00 to 01-02        0.18   Income Tax 
                                                         Appellate 
                                                         Tribunal
 
                          Assessment Year 
                          2006-07 to 2008-09      8.20
 
 Finance     Service      Financial year 
                          2004-05 to 2011-12    180.40   Commissioner 
                                                         of Service Tax
 Act,1994    Tax          Financial year 
                          2004-05 & 2005-06       0.16   Joint 
                                                         Commissioner 
                                                         of Service Tax
 
 (x) The Company''s accumulated losses at the end of the financial year
 have exceeded 50% of its net-worth. It has incurred cash losses in the
 current year under review and in the immediately preceding financial
 year.
 
 (xi) During the year, there has been delay of 30-121 days in repayment
 of dues to the banks in respect of principal of Rs.23.03 crores and
 interest of Rs.124.31 crores. There are also overdues of Rs.113.21 crores
 and interest of Rs.77.78 crores (defaults for the period upto 2 years)
 including in respect of 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
 Company.
 
 (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
 Company.
 
 (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 short term funds of '' 128.74 crores
 have 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 & COMPANY
 
 Chartered Accountants               Chartered Accountants
 
 Firm Registration No: 002785S       Firm Registration No: 301051E
 
 Mahesh Krishnan                     R.P. Baradiya
 
 Partner                             Partner
 
 Membership No. 206520               Membership No. 44101
 
 Place: Mumbai                       Place: Mumbai
 
 Date: May 2,2014                    Date: May 2,2014
Source : Dion Global Solutions Limited
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