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3i Infotech

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« Mar 14
Auditor's Report (3i Infotech) Year End : Mar '15
Report on the Standalone Financial Statements
 
 We have audited the accompanying standalone financial statements of 3i
 Infotech Limited (the Company), which comprise the Balance Sheet as
 at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow
 Statement for the year then ended, and a summary of the significant
 accounting policies and other explanatory information.
 
 Management''s Responsibility for the Standalone 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 standalone 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.
 
 Auditor''s Responsibility
 
 Our responsibility is to express an opinion on these standalone
 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
 thereunder.
 
 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, but not for the purpose of expressing
 an opinion on whether the Company has in place an adequate internal
 financial controls system over financial reporting and the operating
 effectiveness of such controls. 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 standalone
 financial statements.
 
 Opinion
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the aforesaid standalone 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,
 
 (i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2015;
 
 (ii) in the case of the Statement of Profit and Loss, of the loss of
 the Company for the year ended on that date, and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 Emphasis of Matter:
 
 Without qualifying, we draw attention to the following:
 
 a) Going Concern and Impairment analysis:
 
 (i) During the financial year 2011-12, the Company undertook
 restructuring of its debts through CDR cell and also renegotiated with
 the Foreign Currency Convertible Bond (FCCB) holders with respect to
 its obligations. Post the debts restructuring, there have been
 substantial delays in repayment of Principal and payment of Interest in
 respect of CDR lenders as well as for the interest on the FCCB , which
 may be construed as Default as per the Master Restructuring Agreement
 (MRA) and the terms of FCCB. The Company is negotiating with the
 aforesaid lenders as also with the lease financiers to restructure the
 debt and is reasonably certain to renegotiate and meet its financial
 obligations.
 
 (ii) The Company, as per itsAccounting Policy and in accordance with
 the requirements ofthe Accounting Standard (AS) 28-''lmpairmentofAssets''
 and Accounting Standard (AS)-13 Accounting for Investments, specified
 under Section 133 of the Act, has carried out an impairment analysis of
 its Cash Generating Units/Long term Investments on a going concern
 basis, with the assistance of an independent expert valuer and
 accordingly provision for diminution in value of long term investments
 (subsidiaries) of Rs.350 crores (Previous yearRs. Nil) has been made.
 Besides, the Company has provided forRs.305.79croreson account of
 divestment of stake in step down subsidiaries during theyear Pending
 negotiations with lenders and restructuring of business, the Company
 has prepared the financial statements on a going concern basis which is
 dependent, inter alia, upon the positive outcome of negotiations with
 lenders, restructuring of business and infusion of funds.
 
 (Refer note no.2.26.1 and 2.26.2 ofthe standalone financial statements)
 
 b) In respect of justification of carrying deferred tax assets
 recognized in earlier years of Rs.121.33 crores (Previous year
 Rs.121.33 crores), the management based on the confirmed order book on
 hand and relying on the restructuring scheme as mentioned in para (a)
 (i) above, is confident of having sufficient taxable income in the
 foreseeable future enabling reversal ofthe said deferred tax assets.
 
 (Refer note no.2.11 ofthe standalone financial statements)
 
 Report on Other Legal and Regulatory Requirements
 
 1.  As required by the Companies (Auditor''s Report) Order, 2015 (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
 statement on the matters specified in paragraphs 3 and 4 ofthe Order.
 
 2.  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) 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, and the Cash
 Flow Statement dealt with by this Report are in agreement with the
 books of account.
 
 d) In our opinion, the aforesaid standalone financial statements comply
 with the Accounting Standards specified under Section 133 of the Act,
 read with Rule 7 ofthe Companies (Accounts) Rules, 2014.
 
 e) On the basis ofthe written representations received from the
 directors as on 31st March, 2015 taken on record by the Board of
 Directors, none ofthe directors is disqualified as on 31st March, 2015
 from being appointed as a director in terms of Section 164 (2) of the
 Act.
 
 f) 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:
 
 i.  The Company has disclosed the impact of pending litigations on its
 financial position in its standalone financial statements.(Refer note
 no 2.25.1 of the standalone financial statements).
 
 ii.  The Company has made provision, as required under the applicable
 law or accounting standards, for material foreseeable losses on
 long-term contracts including derivative contract.
 
 iii.  There were no delays in amounts which were required to be
 transferred to the Investor Education and Protection Fund by the
 Company.
 
 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 3i INFOTECH LIMITED ON THE STANDALONE FINANCIAL STATEMENTS
 
 On the basis of such checks as we considered appropriate and according
 to the information and explanations given to us during the course of
 our audit, we state that:
 
 1.  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 accounts.
 
 2.  (a) As explained to us, the inventories (hardware held for
 rendering services) were physically verified during the year by the
 Management at reasonable intervals.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the Management were reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 (c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verification.
 
 3.  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 189 of the Act.
 
 4.  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 are
 adequate internal control systems 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 systems.
 
 5.  In our opinion and according to the information and explanations
 given to us, the Company has not accepted any public deposits within
 the meaning of Section 73 to 76 or any other relevant provisions of the
 Act and rules framed thereunder.
 
 6.  To the best of our knowledge and as explained, the Central
 Government has not prescribed maintenance of cost records under Section
 148 (1) of the Act for the services rendered by the Company.
 Accordingly, paragraph 3(vi) of the Order is not applicable.
 
 7.  a) During the year, the Company has been facing liquidity stress
 due to which there were substantial 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 ofRs.
 1.52 lacs.
 
 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 the following :
 
                            Nature of         Period to which amount
 Name of Statute            Demand            Relates
 
                                              Financial Year 2005-06,
 MVAT Act, 2002             Sales Tax         2006-07,2009-10
 
 UP VAT Act, 2008           Sales Tax         Financial Year 2009-10 
                                              and 2010-11
 
 AP VAT Act, 2005           Sales Tax         Financial Year 2009-10
                                              and 2010-11
 
 Income Tax Act, 1961       Income Tax        Assessment Year 2004-05
 
                                              Assessment Year 2008-09
 
 Income Tax Act, 1961                         Assessment Year 2007-08
 
                                              Assessment Year 2006-07
 
                                              Financial year 2004-05 to
                                              2009-10,2011-12,2012-13
 Finance Act, 1994          Service Tax     
                                              Financial year 2010-11
 
 
 Name of Statute                         Forum where dispute 
                         Rs. in crores   is pending
 
 MVAT Act, 2002               32.77      Sales Tax Officer
 
 UP VAT Act, 2008                        The Assistant 
                               0.10      Commissioner,Commercial Taxes
 
 AP VAT Act, 2005                        Appellate Deputy
                               0.68      Commissioner
 
 Income Tax Act, 1961                    Commissioner of Income 
                               1.00      Tax (Appeals)
 
                               5.19 
 Income Tax Act, 1961
                               2.83      Income Tax Appellate Tribunal
 
                               0.18
 
 Finance Act, 1994                       Commissioner of
                             158.99      Service Tax
 
                                         Assistant 
                              19.47      Commissioner of Service Tax
 
 b) There were no delays in amounts which were required to be
 transferred to the Investor Education and Protection Fund by the
 Company.
 
 8.  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.
 
 9.  During the year, there have been defaults in repayment of dues to
 the banks, financial institutions and debenture holders as per
 details hereunder:
 
 Particulars               Principal                Interest
 
                     Amount                   Amount 
                                  Delay in 
                                  months                    Delay in
                                                            months
                    (Rs. in 
                     crores)                 (Rs. in 
                                              crores)
 
 Banks                100.59         1-17     123.46          1-12
 
 Finance Lease
 (Banks)               29.99         1-44       6.72          1-44
 
 Debenture holders-      Nil          Nil      14.59           4-8
 FCCB
 
 10.  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.
 
 11.  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.
 
 12.  During the course of our examination of the books and records of
 the Company, carried out in accordance with the generally accepted
 auditing standards in India and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by the management.
 
                                         For Lodha & Company 
 
                                         Chartered Accountants 
 
                                         Firm Registration No. 301051E
 
                                         R.P. Baradiya 
 
 Place: Mumbai                           Partner
 
 Date : 28th May, 2015                   Membership No. 44101
Source : Dion Global Solutions Limited
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