Sobha Developers
BSE: 532784 | NSE: SOBHA | ISIN: INE671H01015 | Construction & Contracting - Real Estate
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| Auditor's Report | Year End : Mar '09 |
1. We have audited the attached balance sheet of Sobha Developers
Limited (‘the Company’) as at March 31, 2009 and also the profit and
loss account 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 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 (as
amended) 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
specifiedinparagraphs4and5ofthe said Order.
4. Without qualifying our opinion, we draw attention to Note 7 in
Schedule 19 to the financial statements pertaining to an amount of
Rs.475 million received by the Company from the promoters, as advance
towards share subscription amount with regard to the proposed rights
issue. During the year, the Company has obtained an approval from the
Reserve Bank of India to refund the aforementioned advance by September
30, 2009. As the Company intends to refund the advance share
subscription amount, this amount has been recorded under current
liabilities and accordingly, diluted EPS has been calculated without
considering dilutive effect of advance share subscription.
5. Without qualifying our opinion, we draw attention to Note 25 under
Schedule 19, regarding the purchase of material and services in the
current and prior years from private limited companies/ firms, covered
under section 297 of the Act. In this regard, the Company is in the
process of making an application for condonation of delay and obtaining
approval from the Company Law Board under Section 637B of the Act. The
ultimate outcome of the Companys application in this regard cannot be
presently determined. Pending the final outcome, no adjustments have
been made in this regard, in the financial statements
6. Further to our comments in the Annexure referred to above, we
report that :
i. 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;
ii. 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;
iii. The balance sheet, profit and loss account and cash flow statement
dealt with by this report are in agreement with the books of account;
iv. In our opinion, the balance sheet, profit and loss account 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;
v. On the basis of the written representations received from the
directors, as on March 31, 2009, and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
March 31, 2009 from being appointed as a director in terms of clause
(g) of sub-section (1) of section 274 of the Companies Act, 1956; and
vi. In our opinion and to the best of our information and according to
the explanations given to us, the said accounts give the information
required by the Companies Act, 1956, 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 March 31, 2009;
b) in the case of the profit and loss account, of the profit for the
year ended on that date; and
c) in the case of cash flow statement, of the cash flows for the year
ended on that date.
Annexure referred to inparagraph3 of our report of even date Re: Sobha
Developers Limited
(i) (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
(b) The Company has a regular programme of physical verification of
fixed assets which, in our opinion, is reasonable having regard to the
size of the Company and the nature of its assets. In accordance with
this programme, certain fixed assets were physically verified by the
management during the year and we are informed that no material
discrepancies were noticed on such verification.
(c) There was no substantial disposal of fixed assets during the year.
(ii) (a) The management has conducted physical verification of
inventory at reasonable intervals during the year.
(b) The procedures of physical verification of inventory followed by
the 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 and no
material discrepancies were noticed on physical verification.
(iii) (a) As informed, the Company has granted loan to one party
covered in the register maintained under section 301 of the Act. The
maximum amount involved during the year was Rs.83.26 million and the
year-end balance was Rs.83.26 million. In our opinion and according to
the information and explanations given to us, the rate of interest and
other terms and conditions for such loan are not prima facie
prejudicial to the interest of the Company. According to the
information and explanations given to us, there are no specific
covenants with regard to the repayment of the loan and the Company has
not demanded repayment of the loan or interest during the year, thus,
there is no overdue amount and there has been no default on the part of
the party to whom the money has been given.
(b) As informed, the Company has taken loan from one party covered in
the register maintained under section 301 of the Act. The maximum
amount involved during the year was Rs.4.53 million and the year end
balance was Rs.4.50 million. In our opinion and according to the
information and explanations given to us, the rate of interest and
other terms and conditions for such loans are prima facie not
prejudicial to the interest of the Company. According to the
information and explanations given to us, there are no specific
covenants with regard to the repayment of loan. The loan taken is re-
payable on demand and the repaymentof the principal amount is as
demanded and payment of interest has been regular.
(iv) In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business, for the
purchase of inventory and fixed assets and for the sale of goods and
services. Internal controls pertaining to recording of income from real
estate development needs to be further strengthened to make it
commensurate with size of the Company and nature of its business.
During the course of our audit, no major weakness has been noticed in
the internal control system in respect of these areas.
(v) (a) According to the information and explanations provided by the
management, we are of the opinion that the particulars of contracts or
arrangements referred to in Section 301 of the Act that need to be
entered into the register maintained under section 301 have been so
entered.
(b) In respect of transactions made in pursuance of such contracts or
arrangements exceeding value of Rs.0.50 million entered into during the
financial year, because of the unique and specialized nature of the
items involved and absence of any comparable prices, we are unable to
comment whether the transactions were made at prevailing market prices
at the relevant time.
(vi) The Company has not accepted any deposits from the public.
(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 Companies Act, 1956 for
the products of the Company
(ix) (a) Undisputed statutory dues including provident fund, investor
education and protection fund, employees’ state insurance, income-tax,
sales-tax, excise duty, wealth-tax, service tax, customs duty,
income-tax cess and other material statutory dues applicable to it have
generally been regularly deposited with the appropriate authorities
though there have been slight delays in few cases pertaining to tax
deducted at source and service tax, and significant delay in case of
corporate dividend tax.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of provident fund, investor
education and protection fund, employees’ state insurance, wealth- tax,
service tax, sales-tax, income-tax, customs duty, excise duty and cess
were outstanding, at the year end, for a period of more than six months
from the date they became payable, except undisputed dues in respect of
corporate dividend tax which was outstanding, at the year end for a
period of more than six months from the date it became payable, as
follows:
Name Nature Amount Period to Due Date of
of of (Rs.in which Date Payment
the dues Million) amount
relates
statute
Income Corporate 81.00 2007-08 August Not yet
Tax Act Dividend 12, 2008 paid
Tax
c) According to the records of the Company, the dues outstanding of
income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
duty and cess on account of any dispute, are as follows:
Name of Nature of Amount Period to Forum
the dues (Rs. which where
statute in Million) amount dispute
relates is pending
Andhra Basis of 5.25 2002-04 Sales tax
Pradesh charge of appellate
Sales Tax sales tax tribunal
Act
Karnataka Basis of - 1997-04 Joint
Sales Tax charge of commissioner
Act sales tax of
commercial
taxes
Income Differential 3.54 1999-01 High Court
Tax Act tax
treatment
Income Disallowance 27.80 2004-05 Commissioner
Tax Act of in come
tax (appeals)
Income Disallowance 53.33 2005-06 Commissioner
Tax Act of in come
tax (appeals)
Finance Basis of 648.76 2006-08 Central Excise
Act,1994 valuation and Service
(Service Tax Appellate
Tax Tribunal
Provisions)
Finance CENVAT 94.75 2006-08 Central Excise
Act,1994 credit and Service
(Service Tax Appellate
Tax Tribunal
Provisions)
Finance Disallowance 4.23 2002-07 Commissioner
Act,1994 of central
(Service excise and
Tax service tax
Provisions)
- NetofRs.71.63 million, paid under protest
(x) The Company has no accumulated losses at the end of the financial
year and it has not incurred cash losses in the current and immediately
preceding financial year.
(xi) Based on our audit procedures and as per the information and
explanations given by the management,the Company has delayed beyond the
stipulated dates, repayment of dues to debenture holders and banks
amounting to Rs.820 million and Rs.962 million respectively, for which
necessary approvals for rescheduling of repayments were obtained from
the lenders before the year-end. In case of repayment of dues amounting
to Rs.28 million due to a bank on March 7, 2009, the Company has not
yet received permission to reschedule repayment of the said amount. The
Company has not defaulted in repayment of dues to a financial
institution
(xii) 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) According to the information and explanations given to us, the
Company is not a chit fund or a nidhi / mutual benefit fund / society.
Therefore, the provisions of clause 4(xiii) of the Companies (Auditor’s
Report) Order, 2003 (as amended) are not applicable to the Company.
(xiv) According to the information and explanations given to us, the
Company is not dealing in or trading in shares, securities, debentures
and other investments. Accordingly, the provisions of clause 4(xiv) of
the Companies (Auditor’s Report) Order, 2003 (as amended) are not
applicable to the Company.
(xv) According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others from bank
or financial institutions.
(xvi) Based on information and explanations given to us by the
management, term loans (representing loans with a repayment period
beyond 36 months) were applied for the purpose for which the loans 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, we report that no funds raised on short- term basis have
been used for long-term investment.
(xviii) The Company has not made any preferential allotment of shares
to parties or companies covered in the register maintained under
section 301 of the Companies Act, 1956.
(xix) According to the information and explanations given to us, during
the period covered by our audit report, the Company had issued 120
debentures, 500 debentures and 2,500 debentures of Rs.10 million, Rs.1
million and Rs.0.10 million each, respectively. The Company has
created security or charge in respect of debentures issued.
(xx) The Company has not raised any money by public issues during the
year. Accordingly, the provisions of clause 4(xx) of the Order are not
applicable to the Company.
(xxi) Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the course of our audit.
For S.R. BATLIBOI & ASSOCIATES
Chartered Accountants
per Sunil Bhumralkar
Partner
Membership No. 35141
Bengaluru, India
May 18, 2009
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