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Madhucon Projects

BSE: 531497|NSE: MADHUCON|ISIN: INE378D01032|SECTOR: Construction & Contracting - Civil
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Mar 15
Auditor's Report (Madhucon Projects) Year End : Mar '16

TO THE MEMBERS OF MADHUCON PROJECTS LIMITED Report on the Financial Statements

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

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 and presentation 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 (as amended). 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 misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and 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 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 the affairs of the Company as at 31st March, 2016, its profit and its cash flows for the year ended on that date.

Emphasis of Matters

We draw attention to the following matter in the Notes to the accompanying financial statements for the year ended March 31, 2016:

a. Note No. 2.12(iii) to the financial statements, in relation to Madhucon Mega Mall Private Limited (MMMPL) a subsidiary of the company incorporated for developing shopping mall cum multiplex on leased land taken from Andhra Pradesh Housing Board(the Board) (now known as Telangana Housing Board) at Kukatpally in Hyderabad. The Board issued letter for revoking the power of attorney and resumption of land due to non completion of the project within the time. The Company got a status quo order from Honorable XI ACJ Court, CCC, Hyderabad and the same is pending. Taking in to account the management internal assessment and legal opinion obtained by the management of the Company, it is confident in succeeding the case and carrying values of investments in and loans sanctioned to MMMPL are realizable at the values stated in the books of accounts. According to the books of accounts and information and explanations given to us, the closing balance as at March 31, 2016 is Rs.3633.80 Lakhs.

b. Note No. 2.12(iv) to the financial statements indicates that the outstanding loans and advances which were granted to Nama Investments Limited and NNR Infra Investments Private Limited in which the company''s directors have significant influence and are realizable at the carrying values in the books of accounts though both these companies have been incurring losses and accumulated losses exceeded the net worth of these companies for the reasons stated therein.

According to the books of accounts and information and explanations given to us, the closing balance as at March 31, 2016 with respect to Nama Investments Limited and NNR Investments Limited are Rs.3886.45 Lakhs and Rs.473.34 Lakhs respectively.

c. Note No. 2.12(vii) to the financial statements, in relation to the carrying value of investments held in and unsecured loans and advances given by the Company to the subsidiaries or associates listed in that note, which have been incurring losses and in some of these companies, net worth was fully or substantially eroded. Taking the management''s internal assessment and initiatives to be implemented to improve the profitability in the medium to long run into account, the management of the Company is of the view that carrying value of the investments and loans and advances are realizable at the value stated in the books.

As per the books of accounts and according to information and explanations given to us, the Company has granted interest free loans and advances during the year to these companies is Rs.24039.95 lakhs and closing balances against these loans and advances as at March 31, 2016 are aggregating to Rs.72854.13 lakhs.

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 the paragraph 3 and 4 of the Order.

2. As required by the section 143(3) of the Act, we report that:

(a) we have sought and obtained all the information and explanations which to the best 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 financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014(as amended);

(e) on the basis of the written representations received from the directors as on 31st March, 2016 taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March, 2016 from being appointed as a Director in terms of section 164(2) of the Act;

(f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectives of such controls, refer to our separate report in ‘Annexure-B''; and

(g) 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 explanation given to us:

i. the Company has disclosed the impact of pending litigations if any on its financial position in its financial statements;

ii. the Company has made provision, as required under the applicable law or accounting standards for material foreseeable losses, if any, on long-term contracts including derivative contracts; and

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

Referred to in our Audit Report to the members of the Company on the financial statements for the year ended 31st March 2016, we report that:

TO THE MEMBERS OF MADHUCON PROJECTS LIMITED

(i) (a) The Company has maintained proper records showing full particulars including quantitative details of Fixed Assets.

(b) All the assets have been physically verified by the management during the year, which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. 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.

(ii) The physical verification of inventory has been conducted at reasonable intervals by the management. The Company is maintaining proper records of inventory and any discrepancies noticed on physical verification are being properly dealt in the books of accounts.

(iii) According to information and explanations given to us, the Company has granted loans to 30parties covered in the register maintained under section 389 of the Act. Out of which 8 parties have been granted interest free loans. (a), (b) & (c) Since the repayment schedule for such loans is not stipulated, we are unable to comment on the regularity of receipt of principal and interest as well as the adequacy of steps taken to recover the amount.

(iv) In our opinion, and according to Information and explanations given to us, the Company has complied with the provisions of section 385 and 386 of the Act to the extent applicable, in respect of loans, investments, guarantees and security.

(iv) According to the information and explanations given to us, the Company has not accepted deposits from the public and therefore, the provisions of Sections 73 to 76 or any other relevant provisions of the Act and Rules there under are not applicable to the Company.

(v) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (3) of Section 348 of the Act in respect of Company''s products and services and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vi) a) According to the information and explanations given to us, and on the basis of our examination of the records of the Company, undisputed statutory dues including Provident Fund, Sales tax, Service tax, duty of customs, duty of excise, value added tax, cess and all other statutory dues have been generally regularly deposited with the appropriate authorities except the following:

Name of the Statute

Nature of Dues

Period

Rs. in Lacs

The Income Tax Act, 3963

Dividend Distribution Tax & Interest there on

2033-32 to 2035-36

78.32

The Building and other Construction workers welfare Cess Act, 3996

LabourCess

203 3 -3 2

343.28

Professional Tax

P T Payable

203 3-32 to 2035-36

43.88

The Employees Provident funds and Miscellaneous provision act 3952

Provident Fund

2032-33 to 2035-36

364.34

Sales Tax

Sale Tax payable

2033-34 to 2035-36

390.47

Works Contract Tax

Works Contract Tax

2034-35 to 2035-36

293.98

The Income Tax Act, 3963

Tax Deducted at Source & Interest there on

2035-36

438.93

(b) According to the information and explanations given to us, there are no dues of Income tax, Wealth tax, Sales tax, duty of customs, duty of excise which have not been deposited on account of any dispute, except the following:

Nature of Duty

Dispute pending before

Period

Rs. In Lacs

Income Tax

CIT (Appeals), Hyderabad

2009-10to 2012-13

8701.82

Sales Tax

Hon''ble High Court

2001 to 2005 & 2009-10

5795.52

Entry Tax

Hon''ble Supreme Court

2006-07, 2007-08, 2009-10 & 2010-11

629.11

(vii) Based on the examination of books of accounts and related records and according to the information and explanations given by the management, the company has defaulted in repayment of dues to financial institutions and banks during the year, as follows:

Delay in Interest payments: Amount in Rs. Lakhs

Name of the Bank

0 to 30 days

31 to 60 days

61 to 90 days

91 to 180 days

181 and above days

Axis Bank

128.48

77.71

26.03

0

0

Bank of India

125.42

96.13

98.40

29.32

0

ICICI Bank

1389.51

567.80

435.03

0

0

IDBI Bank

672.52

0

0

0

0

ING Vysya Bank

222.11

202.95

180.00

181.05

0

Oriental Bank of Commerce

263.49

163.76

110.26

59.07

0

Standard Chartered Bank

26.67

0

0

0

0

State Bank of India

326.11

328.57

217.97

0

0

United Bank of India

2.87

5.44

0

4.35

193.52

Name of the Financial Institution

Magma Fincorp Limited

0

0.29

0.05

3.72

14.08

SREI Equipment Finance Ltd.

222.98

150.08

168.38

443.10

33.23

Delay in Principal repayments: Amount in Rs. Lakhs

Name of the Bank

0 to 30 days

31 to 60 days

61 to 90 days

91 to 180 days

181 and above days

ICICI Bank

526.74

533.77

1439.49

0

0

Name of the Financial Institution

Magma Fincorp Limited

0

9.65

0

0

19.59

SREI Equipment Finance Ltd.

278.64

359.04

357.35

1067.63

91.70

The Company has repaid all the above dues on or before 31st March, 2016 except for an amount of Rs.846.34 lakhs and 853.16 Lakhs pertaining to Interest and principal respectively.

(viii) During the year, no monies were raised by way of public offer or further public offer and as per information and explanations given to us, term loans were applied for the purpose for which they were obtained.

(ix) According to the information and explanations given to us, no fraud on or by the Company by its officers or employees has been noticed or reported during the year.

(x) As per the information and explanations given to us, managerial remuneration provided are in accordance with approvals mandated by the provisions of section 197 of the Act.

(xi) In our opinion the company is not a chit fund or a nidhi company or mutual benefit fund / society. Accordingly, para 3(xii) of the Order is not applicable.

(xii) As per the explanations and information given to us, transactions with the related parties are in compliance with sections 177 and 188 of the Act, where applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards.

(xiii) According to the information explanations given to the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xiv) 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 any non cash transactions with directors or persons connected with him during the year. Accordingly, paragraph 3(xv) of the Order is not applicable.

(xv) The Company is not required to be registered under 45-IA of the Reserve Bank of India Act, 1934.

For Kota & Company

Chartered Accountants

Firm''s Registration Number: 011982S

K. S. R. K. Prasad

Partner

Membership Number: 022964

Place: Hyderabad

Date :30.05.2016

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