We have audited the attached Balance Sheet of AMBICA AGARBATHIES AROMA
& INDUSTRIES LIMITED, as at 31st March 2011, the Profit and Loss
Account, and also 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.
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 the management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
As required by the Companies (Auditor''s Report) Order, 2003 issued by
the Central Government of India in terms of Sub-Section (4A) of Section
227 of the Companies Act, 1956 and on the basis of such checks of the
books and records of the Company, as we considered appropriate and the
information and explanations given to us during the course of our
audit, we report that in our opinion:
1. (a) The Company has maintained proper records showing full
particulars including quantitative details and situation of fxed
(b) As explained to us, the fixed assets of the company have been
physically verified by the management at the year-end and no
discrepancies have been noticed on such verification.
(c) In our opinion and according to the information and explanation
given to us, substantial part of fixed assets has not been disposed off
during the year and the going concern status of the Company is not
2. (a) The inventories have been physically verified during the year
by the Management. In our opinion, the frequency of verification is
(b) In our opinion and according to the information and explanations
given to us, the procedures of physical verification of inventories
followed by the Management are reasonable and adequate in relation to
the size of the Company and nature of its business.
(c) In our opinion, the Company is maintaining proper records of
inventory. The discrepancies noticed on physical verification of
inventory as compared to book records were not material.
3. In respect of loans, secured or unsecured, granted by the company
to companies, firms or other parties covered in the Register under Sec.
301 of the Companies Act, 1956, according to the information and
explanations given to us:
(a) The company has granted loan aggregating Rs. 1,07,40,100/- to one
party during the year. The year-end and the maximum balance due amounts
to Rs. 1,10,42,738/-.
(b) The rate of interest and other terms and conditions of such loans
are, in our opinion, prima facie not prejudicial to the interests of
(c) The receipts of principal amounts and interest have .generally been
regular as per stipulations.
(d) There are no over dues of interest as at the year-end as per the
terms of conditions of the agreement with the party.
Since the company has not taken any loans from parties listed in the
register maintained U/Sec 301, Clauses (iii) (e) to (g) of Paragraph 4
of CARO are not applicable.
4. In our opinion and according to the information and explanations
given to us, the Company follows a system of internal control
procedures, which in our view requires improvement, commensurate with
the size of the Company and the nature of its business with regard to
the purchases of stores, raw materials including components, plant and
machinery, equipment and other assets and with regard to the sale of
goods manufactured by the Company. Further on the basis of examination
of the books and records of the Company, we have not come across any
instances of major weaknesses in the aforesaid internal control
5. (a) In our opinion, the transactions that need to be entered into a
register in pursuance of Section 301 of the Act have been so entered.
(b) Each of the above transactions has been made at prices which are
reasonable having regard to the prevailing market prices at the
6. According to the information and explanations given to us, the
Company has not accepted any deposits from the public. Hence the
directives issued by the Reserve Bank of India and the provisions of
Section 58A and 58AA of the Companies Act 1956 and the Rules there
under etc. are not applicable.
7. In our opinion, the internal audit system of the Company needs to
be strengthened commensurate to the size and nature of its business.
8. According to the information given to us the Central Government has
not prescribed maintenance of cost records U/Sec 209(1) (d) of the
Companies Act in respect of the business of the Company.
9. (a) (i) As per the records of the company and information and
explanation provided to us, the Company is generally regular in
depositing the undisputed statutory dues with appropriate authorities
including Provident Fund, Employees State Insurance, Sales Tax and
other statutory dues. Except the following, no undisputed amounts were
outstanding as at 31.03.11 for a period more than six months from the
day they become payable:
Sl Particulars Amount
1 Works Contracts (TDS)-
F Y. 2007-08-Construction Division 13,20,000
2 Works Contracts (TDS)-
F Y. 2008-09-Construction Division 8,85,388
3 Income Tax - FY. 2008-09 13,33,308
4 FBT - FY. 2008-09 11,32,421
5 Income Tax - FY. 2009-10 18,41,750
(a) (ii) As per the information furnished to us the amounts of Rs.4.27
Lakhs lying with the company in unpaid dividend account which have
remained unclaimed or unpaid for a period of 7 years or more have not
been transferred to the account of the Central Government as required
by Sec 205A (5) of the Companies Act, 1956.
(b) According to the information and explanations given to us, there
are no statutory dues with appropriate authorities including Provident
Fund, Employees State Insurance, Sales Tax and other statutory dues
which have not been deposited on account of any dispute as at 31st
March, 2011, excepting:
Year to Forum where
the Nature of the Demand which the dispute
Statue dues (Rs.) amount is pending
Tax Asst. made u/s 87,75,480/- AY 2003-04 CIT(A)
1961 143(3) r.w.s. 147 Chennai,
10. The Company has no accumulated losses as at 31st March, 2011 and
it has not incurred any cash losses in the financial year covered by the
audit or in the immediately preceding financial year.
11. Based on our audit procedures and according to the information and
explanations given to us, we are of the opinion that the Company has
not, as at 31st March, 2011, defaulted in repayment of dues to financial
institutions, banks or debenture holders.
12. The Company has not granted any loans or advances on the basis of
security by way of pledge of shares, debentures and other securities.
13. The Company is not in the business of chit funds and hence any
special statutes relating to chit fund / nidhi / mutual beneft fund /
societies are not applicable to the operations of the Company.
14. 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 Company has not given any guarantee for loans taken by
others from banks or financial institutions, except
(a) The corporate guarantee given to Indian Overseas Bank on behalf of
Ambica Infraventures Pvt. Ltd., which was a subsidiary of the company
at the time when the Corporate Guarantee was issued by the company and
according to the information and explanation furnished to us, the
process of substitution of the said Corporate Guarantee by the new
management of Ambica Infraventures Pvt Ltd., is in progress.
(b) Bank Guarantee availed from Dhanalakshmi Bank for an amount of
Rs.21,57,500/- and issued to Visakhapatnam Urban Development Authority
which has matured on 14-4-2009, issued on behalf of M/s. Ambica Infra
Ventures Pvt. Ltd., which was the subsidiary at the time when the Bank
Guarantee was issued by the company.
16. On a broad examination of the records of the Company we are of the
opinion that the term loans availed by the Company from Banks/
Financial institutions have been applied for the purposes for which
term loans were obtained, except the Term Loan of Rs. 3 crores availed
from Corporation Bank sanctioned for the purpose of acquiring new
machinery for Agarbathi Unit, which has been used partly for the
purpose of acquiring machinery for the Agarbathi Unit and partly for
other business purposes of the company.
17. According to the information and explanations given to us and on
an overall examination of the balance sheet of the Company, the funds
raised on short term basis have not been used for long term investments
and vice versa.
18. The Company has made 8,00,000 Equity Shares on preferential
allotment basis to two parties namely (1) Mrs. P. A. Y. Madhavi and (2)
Mrs. Alapati Santoshi each 4,00,000 Equity shares who are listed in the
register maintained U/Sec 301 of the Companies Act, 1956 and the price
at which shares have been issued is in terms of approval of the
shareholders of the company and as per the applicable statutory
provisions including the SEBI(ICDR) Regulations, 2009 and hence is not
prejudicial to the interest of the company.
All the formalities regarding the above preferential allotment has been
duly complied with by the company and the said 8,00,000 Equity shares
of Rs. 10/- each allotted on preferential basis made by the company are
listed and admitted to dealings on Bombay stock exchange vide Notice
19. The Company has not issued any debentures during the year and
outstanding as at the end of the year.
20. The Company has not raised any monies by way of public issues
during the year.
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 instances of
fraud on or by the Company, noticed or reported during the year nor
have we been informed of any such case by the management.
Further to our comments 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
(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
(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 written representations received from the
directors, as on 31st March, 2011, and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
31st March, 2011 from being appointed as a director in terms of Clause
(g) of Sub-Section (1) of Section 274 of the Companies Act, 1956;
(vi) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read together with the
Significant Accounting Policies and Notes thereon 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 31st March, 2011;
(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 the Cash Flow Statement, of the cash flow for the
year ended on that date.
(T S Ajai)
Place : Hyderabad
Date : 30.05.2011