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Hubtown | Auditor's Report > Construction & Contracting - Real Estate > Auditor's Report from Hubtown - BSE: 532799, NSE: HUBTOWN
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Hubtown

BSE: 532799|NSE: HUBTOWN|ISIN: INE703H01016|SECTOR: Construction & Contracting - Real Estate
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Auditor's Report (Hubtown) Year End : Mar '18

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of HUBTOWN LIMITED (‘the Company’), which comprise the Balance Sheet as at 31st March, 2018, the statement of profit and loss (including other comprehensive income), the cash flow statement and the statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone 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 of these standalone financial statements that give a true and fair view of the state of affairs (financial position), profit or loss (financial performance including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (‘Ind AS’) specified under Section 133 of the Act. 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone 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 thereunder.

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 these standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, 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 the 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 qualified audit opinion on the standalone financial statements.

Basis for Qualified Opinion

(a) As stated in Footnote (a) to Note 28 to the standalone financial statements of the Company for the year, with regards the Company not having provided for Interest amounting to Rs. 4,162.00 Lakhs on certain Inter-corporate deposits, including reversal of interest in current quarter amounting to Rs. 2,561.57 Lakhs provided in a previous quarter’s. Consequent to above, finance cost for the quarter and year ended 31st March, 2018 has been understated by Rs. 2,561.57 and Rs. 4,162.00 Lakhs respectively resulting in a consequential increase in the profit for the quarter and year ended 31st March, 2018.

(b) As stated in Footnote (c) Note 23 to the standalone financial statements of the Company for the year, with regards the company not having recognized finance Income from Deep Discount bond held in one of its Joint Venture entities. Consequently, Finance Income and profit for the year has been understated by Rs. 18,508.44 Lakhs.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, the aforesaid standalone 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 affairs of the Company as at 31st March, 2018, and its profit/loss and its cash flows for the year ended on that date.

Emphasis of Matters

We draw attention to:

(a) Note 2 (II) (b) (i) to the standalone financial statements regarding recognition of expense and income for ongoing projects which is based upon estimated project costs, as per the judgement of the management, which have been relied upon by us, these being technical matters.

(b) Footnote to Note 17 of standalone financial results, regarding the company has not created investments to the extent of 15% of the value of the such debentures, which is required to be created and earmarked in the manner prescribed under Rule 18(7)(c) of the Companies (Share Capital and Debentures) Rules, 2014 notified by the Ministry of Corporate Affairs.

(c) Footnote (a) to Note 13 to the standalone financial statements regarding the status of the projects and the opinion framed by the Company’s management regarding realizable value of the costs incurred on the projects, which, being a technical matter is relied upon by us.

(d) Note 36 (i) (B) to the standalone financial statements regarding Corporate guarantees issued and securities provided aggregating Rs. 98,457.50 lakhs by the Company to banks and financial institutions on behalf of various entities as at 31st March, 2018, which are significant in relation to the profits for the year and the net worth of the Company. In the opinion of the Management, these are not expected to result into any financial liability to the Company.

(e) Footnote (c) to Note 36 of the standalone financial statements regarding the above corporate guarantees issued and securities provided are disclosed at amounts outstanding as at 31st March, 2018. The financial liabilities on account of such financial guarantee contracts have not been measured at fair value as management is of the opinion that there is no material benefit which is expected to accrue to the borrowers on behalf of whom the company has provided the corporate guarantees.

(f) Footnote (b) to Note 36 of the standalone financial statements, regarding reliance placed by the auditors on certification received from the management with regard to the disclosure of contingent liabilities of the Company.

(g) Note 42 of the standalone financial statements regarding balances that are subject to confirmations, reconciliation and adjustments, if any.

(h) Footnote (a) to Note 19 of the standalone financial results, regarding the Company’s default in redemption of non-convertible debentures along with interest amounting to Rs. 2,199 lakhs. We are however informed by the management that the company is in the process of negotiation for settlement / redemption of the said debentures.

(i) Footnote (c) to Note no. 9 of the standalone financial statements regarding the company not having charged interest on advances given by it to various group entities developing real estate projects, in which the Company has a commercial and business interest.

(j) Footnote (f) to Note 6 of the standalone financial statements regarding the Company’s investments, in certain subsidiaries, joint ventures and associates as at 31st March, 2018 which have incurred losses and carry an eroded net worth as at 31st March, 2018.

Our opinion is not qualified in respect of the above matters.

Other Matters

Attention is further invited to:

1. The Statement of Profit and Loss of the Company which includes share of Profit from investments in partnership firms / joint ventures aggregating Rs. 325.47 lakhs that are based on the financial statements of the firms/joint ventures prepared by the management and presented to us on which we have relied.

2. The audited standalone financial statements for the year ended 31st March 2017, was carried out and reported by Dalal Doshi & Associates, vide their unmodified audit report dated 29th May 2017, whose report has been furnished to us by the management and which has been relied upon by us for the purpose of our audit of the standalone financial statements.

Our opinion is not qualified in respect of the above matter.

Report on Other Legal and Regulatory Requirements

I. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of section 143(11) of the Act, we give in the Annexure “A”, a statement on the matters specified in paragraphs 3 and 4 of the Order;

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

(a) We have sought and 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 accounts 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 including Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of accounts.

(d) In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standard specified under Section 133 of the Act.

(e) On the basis of the written representations received from the directors taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2018 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 effectiveness 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 (as amended), 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 on its financial position in its standalone financial statements.

ii. The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

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

ANNEXURE “A” REFERRED TO IN OUR REPORT TO THE MEMBERS OF HUBTOWN LIMITED ON THE STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st MARCH, 2018;

On the basis of such checks as we considered appropriate and in terms of the information and explanations given to us, we state that: -

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the Management in a phased manner, designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and nature of its assets. Pursuant to the program, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies between the book records and the physical fixed assets have been noticed.

(c) 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 during the year. The discrepancies noticed on physical verification of inventory as compared to book records were not material and have been appropriately dealt with in the books of accounts;

(iii) The Company has granted unsecured loan to one company covered under the register maintained under Section 189 of the Act;

(a) The terms and condition of the loan are prima facie not prejudicial to the interest of the Company, and

(b) The schedule of repayment of principal and interest has been stipulated as per terms of the arrangement;

(c) As per the terms and conditions of the arrangement, the amount of the loan is not overdue;

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Companies Act, 2013 in respect of the loans and investments made, and guarantees and security provided by it;

(v) The Company has not accepted any deposits during the year from the public within the meaning of Sections 73 to 76 of the Act and the Rules framed thereunder to the extent notified;

(vi) Pursuant to the rules made by the Central Government of India, the Company is required to maintain cost records as specified under Section 148(1) of the Act. We have broadly reviewed the cost records maintained by the Company in respect of projects and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete;

(vii) (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, except for dues in respect of Income Tax, Provident Fund, Profession Tax, Tax Deducted at Source, Value Added Tax, Goods and Service Tax and Service Tax, the Company is generally regular in depositing undisputed statutory dues, including, Employees’ State Insurance, Wealth Tax, duty of customs, duty of excise and other material statutory dues, as applicable, with the appropriate authorities. The extent of arrears of statutory dues outstanding including Interest as at the Balance Sheet date, for a period exceeding six months from the date they became payable are Rs. 1316.75 lakhs relating to Income Tax Deducted at Source, Rs. 11.86 lakhs relating to Provident Fund, Rs. 111.99 lakhs relating to Value Added Tax, Rs. 173.82 relating to Works Contract Tax and Rs. 156.84 lakhs relating to Service Tax;

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of Income Tax, Value Added Tax and Service Tax as at the Balance Sheet date which have not been deposited on account of a dispute, are as follows:

Statute and nature of dues

Financial Year

Amount (Rs. in lakhs)

Forum where dispute is pending

Income Tax Act, 1961

Income Tax

2003-04

17.48

Mumbai High Court

Income Tax

2004-05

21.31

Mumbai High Court

Income Tax

2005-06

20.92

Mumbai High Court

Maharashtra Value Added Tax Act, 2002

Maharashtra Value Added Tax

2006-07

1.64

Joint Commissioner of Sales Tax (Appeals)

Service Tax

(Finance Act,1994)

Service Tax

2011-12

481.60

Commissioner of Service Tax

Service Tax

2012-13

451.00

Commissioner of Service Tax

Service Tax

2013-14

520.83

Commissioner of Service Tax

Service Tax

2014-15

727.52

Commissioner of Service Tax

(viii) On the basis of the records examined by us and the information and explanations given to us, the Company has delayed in repayment of dues to banks, financial institution and debentures holders. Attention is invited to footnote “e” to Note 18 - Non-Current Borrowings, with regards to banks, footnote “e” to Note 18 - Current Borrowings, with regards to financial institution and footnote “b” to Note 19 with regards to debentures, for the amounts and period of delays in payment of principle and interest thereon;

(ix) In our opinion, and according to the information and explanations given to us, the term loans have been applied on an overall basis for the purposes for which they were obtained;

(x) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practice in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud by the Company or on the Company by its officers or employees, noticed or reported during the year, nor have we been informed of any such case by the management. Attention is however invited to Note 36(ii)(c) to accounts in connection with a commercial transaction with an erstwhile associate company;

(xi) Based upon the audit procedures performed and the information and explanations given by the management, the managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act, 2013;

(xii) As the Company is not a Nidhi company, the provisions of clause 3(xii) of the Order are not applicable to the Company;

(xiii) The company has entered into transactions with related parties in compliance with the provisions of section 177 and 188 of the Act. The details of such related party transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards;

(xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, the provision of clause 3(xiv) of the Order are not applicable to the Company;

(xv) Based upon the audit procedures performed and the information and explanations given by the management, the Company has not entered into any non-cash transactions with directors or persons connected with them. Accordingly, the provisions of clause 3(xv) of the Order are not applicable to the Company;

(xvi) The Company is not required to be registered under Section 45 IA of the Reserve Bank of India Act, 1934 and accordingly, the provisions of clause 3(xvi) of the Order are not applicable to the Company.

“ANNEXURE B” TO THE INDEPENDENT AUDITOR’S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF HUBTOWN LIMITED

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (the ‘Act’)

We have audited the internal financial controls over financial reporting of Hubtown Limited (“the Company”) as of March 31, 2018 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risks. 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.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that;

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2018, based on the internal controls over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.

For M H DALAL & ASSOCIATES

Firm Registration No.: 112449W

Chartered Accountants

DEVANG DALAL

Partner

Membership No.:109049

Place: Mumbai

Date: May 29, 2018

Source : Dion Global Solutions Limited
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