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.
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
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
(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
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
(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
(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
(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
(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
(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
Statute Demand crores pending
MVAT Act, Sales Tax Financial Year
2005-06 and 2008-09 2.95 Sales Tax
UP VAT Act, Sales Tax Financial Year
2008-09 and 2010-11 0.12 The Assistant
AP VAT Act, Sales Tax Financial Year
2009-10 to 2010-11 0.02 Appellate
KVAT Act, Sales Tax Financial Year
2005-06 0.01 Dept.
Name of Nature of Period to which
amount Relates Rs in Forum where
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)
1999-00 to 01-02 0.18 Income Tax
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
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
(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
(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 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
Membership No. 206520 Membership No. 44101
Place: Mumbai Place: Mumbai
Date: May 2,2014 Date: May 2,2014