1. We have audited the attached Balance Sheet of Welspun Global Brands
Limited (the Company) as at March 31, 2011, and the related Profit
and Loss Account and Cash Flow Statement for the year ended on that
date annexed thereto, which we have signed under reference to this
report. 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, as
amended by the Companies (Auditor''s Report) (Amendment) Order, 2004
(together the Order), issued by the Central Government of India in
terms of sub- section (4A) of Section 227 of ''The Companies Act, 1956''
of India (the ''Act'') and on the basis of such checks of the books and
records of the Company as we considered appropriate and according to
the information and explanations given to us, we give in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the Order.
4. We draw your attention to Note 4(a) on Schedule 19, regarding: (a)
investments in a subsidiary, Welspun Retail Limited (WRL),
aggregating Rs. 499.63 million as at the year end, in relation to which
diminution in the value of investments, which in our view is other than
temporary, has not been estimated and adjusted against the aforesaid
reported investments balance; resulting in non-compliance with
Accounting Standard 13 - Accounting for Investments; and (b) unsecured
loans to WRL, aggregating Rs. 134.65 million as at the year end, which
have been converted to preference shares subsequent to the year end as
stated in Note 4 (b) on Schedule 19, in relation to which valuation
allowance has not been estimated and adjusted against the aforesaid
reported unsecured loans balance; which does not meet the requirement
to consider prudence in selection of accounting policies, as set out in
Accounting Standard 1 - Disclosure of Accounting Policies; as WRL has
been incurring significant losses (Rs. 199.73 million for the year
ended March 31, 2011 and Rs. 1,205.96 million as at March 31, 2011
basis its audited financial statements as of and for the year ended
March 31, 2011) and has also been unable to achieve its projected
financial results in the previous and current financial reporting
5. Without qualifying our opinion, we draw your attention to:
(a) Note 5 on Schedule 19, regarding the Company''s dependence on
Welspun India Limited (''WIL'') for procuring its products. If the
arrangement between the Company and WIL is discontinued, the business
of the Company could be adversely impacted.
(b) Note 6 on Schedule 19, regarding corporate guarantees, aggregating
Rs. 5,887.40 million at the year end, issued consequent to the demerger
of the marketing arm of WIL effective April 1, 2009, to the bankers of
WIL in relation to the debt facilities provided by them to WIL, and
other corporate guarantees disclosed in Note 3 on Schedule 19
aggregating Rs. 1,677 million at the year end, issued on behalf of WIL
and Welspun Retail Limited (WRL). If WIL and WRL are unable to meet
their obligations as they fall due, the financial condition and cash
flows of the Company could be adversely impacted.
6. Further to our comments in the Annexure referred to in paragraph 3
above, we report that:
(a) Except for the indeterminate effects of the matters referred to
paragraph 4 above, 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, except for the indeterminate effects of the matters
referred to paragraph 4 above, 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, Profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account;
(d) In our opinion, except for the matters referred to paragraph 4
above, 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 Act;
(e) On the basis of written representations received from the
directors, as on March 31, 2011 and taken on record by the Board of
Directors, none of the directors is disqualified as on March 31, 2011
from being appointed as a director in terms of clause (g) of
sub-section (1) of Section 274 of the Act; and
(f) In our opinion and to the best of our information and according to
the explanations given to us, except for the indeterminate effects of
the matters referred to in paragraph 4 above, the said financial
statements together with the notes thereon and attached thereto give,
in the prescribed manner, the information required by the Act, 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, 2011;
(ii) in the case of the Profit and Loss Account, of the profit for the
year ended on that date; and
(iii) in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
ANNEXURE TO AUDITORS'' REPORT
Referred to in paragraph 3 of the Auditors'' Report of even date to the
members of Welspun Global Brands Limited on the financial statements
for the year ended March 31, 2011
1. (a) The Company is maintaining proper records showing full
particulars, including quantitative details and situation, of fixed
(b) The fixed assets of the Company have been physically verified by
the Management during the year and no discrepancies between the book
records and the physical inventory have been noticed. In our opinion,
the frequency of verification is reasonable.
(c) In our opinion and according to the information and explanations
given to us, a substantial part of fixed assets has not been disposed
of by the Company during the year.
2. (a) Goods purchased by the Company from its supplier are
immediately dispatched to customers. In the absence of any inventory
being stocked by the Company, clauses (ii)(a) and (ii)(b) of paragraph
4 of the Order are not applicable.
(b) On the basis of our examination of the inventory records, in our
opinion, the Company has maintained proper records of inventory.
3. (a) The Company has not granted any loans, secured or unsecured, to
companies, firms or other parties covered in the register maintained
under Section 301 of the Act.
(b) The Company has not taken any loans, secured or unsecured, from
companies, firms or other parties covered in the register maintained
under Section 301 of the Act.
4. 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, fixed assets and for the sale of goods. Further,
on the basis of our examination of the books and records of the
Company, and according to the information and explanations given to us,
no major weakness have been noticed or reported.
5. According to the information and explanations given to us, there
have been no contracts or arrangements referred to in Section 301 of
the Act during the year to be entered in the register required to be
maintained under that Section. Accordingly, the question of commenting
on transactions made in pursuance of such contracts or arrangements
does not arise.
6. The Company has not accepted any deposits from the public within
the meaning of Sections 58A and 58AA of the Act and the rules framed
7. In our opinion, the Company has an internal audit system
commensurate with its size and nature of its business.
8. The Central Government of India has not prescribed the maintenance
of cost records under clause (d) of sub- section (1) of Section 209 of
the Act for any of the products of the Company.
9. (a) According to the information and explanations given to us and
the records of the Company examined by us, in our opinion, the Company
is regular in depositing the undisputed statutory dues including
provident fund, investor education and protection fund, employees''
state insurance, income-tax, sales-tax, wealth tax, service-tax,
customs duty, excise duty and cess and other material statutory dues as
applicable with the appropriate authorities.
(b) According to the information and explanations given to us and the
records of the Company examined by us, there are no dues of income-tax,
sales-tax, wealth tax, service-tax, customs duty, excise duty and cess
which have not been deposited on account of any dispute.
10. The Company has no accumulated losses as at March 31, 2011 and it
has not incurred any cash losses in the financial year ended on that
date or in the immediately preceding financial year.
11. According to the records of the Company examined by us and the
information and explanation given to us, the Company has not defaulted
in repayment of dues to any financial institution or bank or debenture
holders as at the balance sheet date.
12. The Company has not granted any loans and advances on the basis of
security by way of pledge of shares, debentures and other securities.
13. The provisions of any special statute applicable to chit fund/
nidhi/ mutual benefit fund/ societies are not applicable to the
14. In our opinion, the Company is not a dealer or trader 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 of the guarantees given by the
Company, for loans taken by others from banks or financial institutions
during the year, are not prima facie prejudicial to the interest of the
16. In our opinion, and according to the information and explanations
given to us, on an overall basis, the term loans have been applied for
the purposes for which they were obtained.
17. On the basis of an overall examination of the balance sheet of the
Company, in our opinion and according to the information and
explanations given to us, there are no funds raised on a short term
basis which have been used for long-term investment.
18. 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 during the year.
19. The Company has not issued any debentures during the year.
20. The Company has not raised any money by public issues during the
21. During the course of our examination of the books and records of
the Company, carried out in accordance with the generally accepted
auditing practices 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 Price Waterhouse & Co.
Firm Registration Number: 007567S
Place: Mumbai Partner
Date: June 21, 2011 Membership Number F055158