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-1.45 (-1.3%) | Auditor's Report (Reliance Communications) | Year End : Mar '12 |
1 We have audited the attached Balance Sheet of Reliance Communications
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 the 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
our opinion.
3 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 Companies Act, 1956 (''the Act''),
we enclose in the Annexure, a statement on the matters specified in
paragraphs 4 and 5 of the said Order.
4 Without qualifying our report, we draw your attention to Note 2.38 of
the financial statements regarding the Scheme of Arrangement (''the
Scheme'') sanctioned by the Hon''ble High Court of Judicature at Mumbai.
The Scheme permits the Company to adjust expenses and/ or losses
identified by the Board of Directors, which are required to be debited
to the Statement of profit and loss by a corresponding withdrawal from
General Reserve, which is considered to be an override to the relevant
provisions of Accounting Standard 5 (AS 5) Net Profit or Loss for the
Period, Prior Period Items and Changes in Accounting Policies''. The
Company has identified exchange variations of Rs. 1,064 crore (including
Rs. 775 crore in the nature of borrowing costs), provision for doubtful
debt of Rs. 220 crore and provision for subsidy receivable of Rs. 48 crore,
as in the opinion of the Board, such exchange loss and provisions are
considered to be of an exceptional nature and accordingly, these
expenses have been met by corresponding withdrawal from General
Reserve. Pending clarification from the Institute of Chartered
Accountants of India (ICAI), the Company has credited such withdrawal
to the Statement of profit and loss. Had such write off of expenses and
losses not been met from General Reserve, the Company would have
reflected a loss after tax for the year of Rs. 1,176 crore and the
consequential effect of this on the profit after tax for the year would
have been of Rs. 1,332 crore.
5 Further to our comments in the Annexure referred to in the paragraph
3 above, 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 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
Cash flow statement dealt with by this report comply with the
Accounting Standards referred to in sub-section (3C) of Section 211 of
the Companies Act, 1956; as referred in paragraph (4) above, the
Company has exercised the option available as per the Court Order which
overrides the relevant provisions of Accounting Standard 5 (AS 5);
(e) on the basis of written representations received from the directors
of the Company as at March 31, 2012 and taken on record by the Board of
Directors, we report that none of the directors is disqualified as at
March 31, 2012 from being appointed as a director of the Company under
clause (g) of sub-section (1) of Section 274 of the Companies Act,
1956; and
(f) 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.
i. in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2012;
ii. in the case of the Statement of profit and loss, of the profit 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.
With reference to the Annexure referred to in the Auditors'' Report to
the Members of Reliance Communications Limited (''the Company'') on the
financial statements for the year ended March 31, 2012, we report the
following:
1. (a) The Company is in the process of updating its fixed asset
register including, to give effect to the assets transferred on
demerger of the optical fibre undertaking and the passive
infrastructure to a subsidiary company,
(b) We are informed that the Company physically verifies its assets
over a three year period, except for base trans-receiver stations. We
are informed that these assets are under continuous operational
surveillance at National Network Operating Centre and are therefore not
separately physically verified. In our opinion, this periodicity of
physical verification is reasonable having regard to the size of the
Company and the nature of its assets. In accordance with this policy,
the Company has physically verified certain fixed assets during the
year,
(c) Fixed assets disposed off during the year were not substantial and,
therefore, do not affect the going concern assumption.
2. (a) The inventory has been physically verified by management during
the current year. In our opinion, the frequency of such verification is
reasonable.
(b) The procedures for the physical verification of inventories
followed by management are reasonable and adequate in relation to the
size of the Company and the nature of its business.
(c) The Company is maintaining proper records of inventory.
Discrepancies identified on physical verification of inventories as
compared to book records were not material.
3. The Company has neither granted nor taken any loans, secured or
unsecured, to or from companies, firms or other parties covered in the
register maintained under section 301 of the Companies Act, 1956.
Accordingly, paragraph 4(iii) of the Order is not applicable.
4. In our opinion, and according to the information and explanations
given to us, and having regard to the explanation that purchases of
certain items of inventories and fixed assets are for the Company''s
specialised requirements for which suitable alternative sources are not
available to obtain comparable quotations, there is an adequate
internal control system commensurate with the size of the Company and
nature of its business with regard to the purchase of inventories and
fixed assets and with regard to the sale of services. In our opinion,
activities of the Company do not involve sale of goods. In our opinion,
and according to the information and explanations given to us, there is
no continuing failure to correct major weaknesses in the internal
control system.
5. In our opinion, and according to the information and explanations
given to us, there are no contracts and arrangements the particulars of
which need to be entered into the register maintained under section 301
of the Companies Act, 1956.
6. The Company has not accepted any deposits from the public.
7. In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
8. We have broadly reviewed the books of account maintained by the
Company pursuant to the rules prescribed by the Central Government for
maintenance of cost records under section 209(1)(d) of the Companies
Act, 1 956 in respect of telecommunication activities and are of the
opinion that prima facie, the prescribed accounts and records have been
made and maintained. However, we have not made a detailed examination
of the records.
9. (a) According to the information and explanations given to us and
on the basis of our examination of the records of the Company, amounts
deducted/ accrued in the books of account in respect of undisputed
statutory dues including Provident Fund, Wealth Tax, Income Tax,
Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees'' State
Insurance and other material statutory dues have been generally
regularly deposited during the year by the Company with the appropriate
authorities. As explained to us, the Company did not have any dues on
account of excise duty and Investor Education and Protection Fund.
According to the information and explanations given to us, no
undisputed amounts payable in respect of Provident Fund, Wealth Tax,
Income Tax, Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees''
State Insurance and other material statutory dues were in arrears as at
March 31, 2012 for a period of more than six months from the date they
became payable.
(b) According to the information and explanations given to us, there
are no dues of Provident Fund, Wealth Tax, Income Tax, Service Tax,
Customs Duty, Employees'' State Insurance which have not been deposited
on account of any dispute. The dues of Excise Duty, Sales Tax and Entry
Tax as disclosed below have not been deposited by the Company on
account of disputes.
Name of the
Statute Nature of
dues Amount Period to which Forum where dispute
is pending
(Rs.
crore) the amount
relates
Central
Sales Tax,
West
Bengal Central
Sales Tax 0.34 2007-08 West Bengal Tax
revision board
Central
Sales Tax 1.73 2008-09 Joint Commissioner
(Appeals)
Central
Sales Tax,
Uttar
Pradesh Central
Sales Tax 0.24 2003-04 UP Trade Tax Tribunal
0.93 2004-05 High Court of Uttar
Pradesh
0.07 2006-07 UP Trade Tax Tribunal
Central
Sales Tax,
Orissa Central
Sales Tax 0.02 Oct 06 - Mar 09 Joint Commissioner
(Appeals)
Central
Sales Tax,
Maharashtra Central
Sales Tax 4.79 2004-05 Joint Commissioner
(Appeals)
Central
Sales Tax,
Bihar Central
Sales Tax 0.03 2005-06 Deputy Commissioner
(Appeals)
Entry Tax,
Assam Entry Tax 0.10 2007-08 Deputy Commissioner
(Appeals)
Entry Tax,
Bihar Entry Tax 0.76 2007-08 Joint Commissioner
(Appeals)
0.20 2008-09 Joint Commissioner
(Appeals)
Entry Tax,
Madhya
Pradesh Entry Tax 0.05 2006-07 Deputy Commissioner
(Appeals)
0.29 2002-03 MP Taxation Board
0.19 2003-04 MP Taxation Board
0.12 2005-06 MP Taxation Board
0.12 2006-07 MP Taxation Board
0.52 2007-08 Deputy Commissioner
(Appeals)
0.07 2008-09 MP Taxation Board
Entry Tax,
Orissa Entry Tax 0.05 Oct 06 - Mar 09 Joint Commissioner
(Appeals)
Entry Tax,
Rajasthan Entry Tax 0.03 2005-06 Deputy Commissioner
(Appeals)
6.64 2007-08 High Court of
Rajasthan
6.52 2008-09 High Court of
Rajasthan
0.96 2009-10 Supreme Court
Entry Tax,
Uttar
Pradesh Entry Tax 0.13 2003-04 UP Trade Tax Tribunal
Excise duty,
Maharashtra Excise duty 2.08 2002-04 UP Trade Tax Tribunal
VAT, Bihar VAT 0.68 2005-06 Deputy Commissioner
(Appeals)
VAT,
Uttarakhand VAT 0.01 2005-06 Uttarakhand Sales
Tax Tribunal
0.03 2007-08 Joint Commissioner
(Appeals)
VAT, West
Bengal VAT 1.49 2005-06 West Bengal Tax
revision board
1.80 2006-07 West Bengal Tax
revision board
2.34 2007-08 West Bengal Tax
revision board
2.75 2008-09 Joint Commissioner
(Appeals)
10. The Company does not have any accumulated losses at the end of the
financial year and has not incurred cash losses in the current
financial year and in the immediately preceding financial year,
11. In our opinion and according to the information and explanations
given to us, the Company has not defaulted in repayment of dues to its
bankers or debenture holders or to any financial institutions.
12. According to the information and explanations given 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.
13. In our opinion and according to the information and explanations
given to us, the Company is not a chit fund/ nidhi/ mutual benefit
fund/ society
14. According to the information and explanations given to us, the
Company is not dealing or trading in shares, securities, debentures and
other investments.
15. 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 wholly owned subsidiaries and other
companies with whom the Company has business dealings, from banks or
financial institutions are not prejudicial to the interest of the
Company.
16. In our opinion and according to the information and explanations
given to us and the records of the Company examined by us, the term
loans taken by the Company have been applied for the purpose for which
they were raised.
17. According to the information and explanations given to us and on
an overall examination of the balance sheet of the Company, we are of
the opinion that the funds raised on the short term basis have not been
used for long-term investment.
18. The Company has not made any preferential allotment of shares to
companies/ firms/ parties covered in the register maintained under
Section 301 of the Companies Act, 1956.
19. According to the information and explanations given to us, the
Company has created securities in respect of Debentures issued except
for certain Debentures issued during the year as mentioned in Note
2.03.1 for which the Company is in the process of creating the security
20. The Company has not raised any money by public issues during the
year,
21. According to the information and explanations given to us, no
significant fraud on or by the Company, that causes a material
misstatement to the financial statements, has been noticed or reported
during the year.
For Chaturvedi & Shah For B S R & Co.
Chartered Accountants Chartered Accountants
Firm Reg. No.: 101720W Firm Reg. No.: 101248W
C. D. Lala Bhavesh Dhupelia
Partner Partner
Membership No: 035671 Membership No: 042070
Mumbai
May 26, 2012 |
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