you are here:

Spentex Industries Ltd.

BSE: 521082 | NSE: SPENTEX | Series: BZ | ISIN: INE376C01020 | SECTOR: Textiles - Spinning - Cotton Blended

BSE Live

Dec 07, 16:00
2.63 -0.13 (-4.71%)
Volume
AVERAGE VOLUME
5-Day
102,454
10-Day
110,682
30-Day
73,614
97,106
  • Prev. Close

    2.76

  • Open Price

    2.88

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    0.00 (0)

NSE Live

Dec 07, 15:31
2.55 -0.05 (-1.92%)
Volume
AVERAGE VOLUME
5-Day
35,204
10-Day
26,974
30-Day
17,217
165,994
  • Prev. Close

    2.60

  • Open Price

    2.70

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    0.00 (0)

Annual Report

For Year :
2016 2015 2014 2013 2012 2011 2010 2009 2008

Auditor's Report

To the Members of Spentex Industries Limited

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Spentex Industries Limited (the Company), which comprises the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of 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 financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,

2014. 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 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 there under.

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 the 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 auditor''s judgment, 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 We draw attention to:

a. Note No. 39 of the standalone financial statements, wherein, we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs.204,469,921/- in Amit Spinning Industries Limited, subsidiary of the company. Significant uncertainties exist in relation to the recoverability of loans amounting to Rs.320,128,019/-, interest accrued thereon Rs.95,950,582/- and other outstanding amounting to Rs.316,160,592/- due from above subsidiary. Further, we are unable to determine the amount of liability that may arise on account of corporate guarantee mentioned in Note No. 29 the standalone financial statements on behalf of above subsidiary.

b. Note No. 40 of the standalone financial statements, wherein, we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs.561,011,339/- and Rs.9,323,779/-in Spentex Netherland B.V. and Spentex Tashkent Toytepa LLC respectively, subsidiary/step down subsidiary of the company. Uncertainties exist in relation to the recoverability of Rs.95, 070,902/- due from above subsidiary. Further, we are unable to determine the amount of liability that may arise on account of corporate guarantee mentioned in Note No. 29 of the standalone financial statements on behalf of above subsidiary.

c. Note No. 40 of the standalone financial statements wherein, the company has not charged to the statement of profit & loss Rs.70,012,404, due from its step down subsidiary, Spentex Tashkant Toyetpa LLC, shown as trade receivable under the head Other Non Current Assets in the standalone financial statements.

d. Note No. 42 of the standalone financial statements, wherein, the company has not charged to statement of profit & loss Rs.10,135,376/- and Rs.2,695,093/- shown as claim receivables and export incentive respectively under the head Other Non Current Assets in the standalone financial statements.

e. Note No. 43 of the standalone financial statements wherein, we are unable to comment on the recoverability of amounts relating to certain parties aggregating to Rs.44, 489,435/- and Rs.11,493,145/- shown as advance against expenses and advance to trade payable respectively under the head Long Term Loan & Advances for which no provision has been made in the books of amounts.

f. Note No. 49 of the standalone financial statements wherein, the company has not charged to statement of profit & loss penal interest and other charges, if any, in respect of delay in repayment of borrowings from banks. Therefore, we are unable to comment on the adequacy of interest and other charges provided for in the statement of profit & loss.

We further report that, without considering the impact of paragraph (a) ,(b) and (f) above the effect of which could not be determined, had the observation made by us in paragraph (c), (d) and (e) above been considered, the loss before tax for the year would have been Rs.947,937,323/- (as against the reported figure of Rs.809,111,870/-), Reserves and Surplus would have been negative Rs.3,126,702,780/- (as against negative reported figure Rs.2,987,877,827/-), Trade Receivable under the head Other Non Current Assets would have been Rs. Nil (as against the reported figure of Rs.70,012,404/-), Export Incentive under the head Other Non Current Assets would have been Rs. Nil (as against the reported figure of Rs.26,95,093/-), Claim Receivable under the head Other Non Current Assets would have been Rs.1,902,810/- (as against the reported figure of Rs.12,038,186/-), Advance against expenses under the head Long Term Loans and Advances would have been Rs.53,038,267/- (as against the reported figure of Rs.97,527,702/-) and Advance to trade payable under the head Long Term Loans and Advances would have been Rs.23,678,849/- (as against the reported figure of Rs.35,171,994/-).

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the basis for qualified opinion paragraph, 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 March 31, 2016 and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

Without qualifying our opinion, we draw attention to:

a. Note No. 41 of the standalone financial statements which indicates that the Company has accumulated losses and its net worth has been fully eroded, the Company has incurred a net cash loss during the current and previous year(s) and, the Company''s current liabilities exceeded its current assets as at the balance sheet date. Further majority of the banks have categorized borrowing of the company as Non performing Assets (NPA) during the year and have sent recall notices u/s 13(2) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 to the company. These conditions, along with other matters set forth in Note No. 41, indicate the existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern. However, the financial statements of the Company has been prepared on a going concern basis for the reasons stated in the said Note.

b. Note No. 42 of the standalone financial statements regarding balance recoverable of Rs.18,410,722/- shown as advance to trade payable under the head Long Term Loans & Advances of the standalone financial statements which has been considered good by the management in view of the reasons stated therein. We have relied upon the assertions given by the management as to the recoverability of the said amounts.

c. Note No. 4 of the standalone financial statement, wherein, the Company has not allotted shares against the share application amount of Rs.110,950,000/- which was brought in by the promoters in more than one installments under restructuring scheme approved by the Bankers. However, the company has not complied with the provisions of Section 42 of the Companies Act, 2013 for the reasons stated in the said Note.

d. Note No. 44 of the standalone financial statements requiring deposit/invest a sum of at least 15% of the amount of its debentures maturing during the financial year 2016-17 in one or more of the prescribed methods vide circular no. 04/2013 dated February 11, 2013 issued by Ministry of Corporate Affairs. However, the company has not complied with the requirement of the said circular.

e. Note No. 45 of the standalone financial statements regarding balances of parties under the head trade receivables, trade payables and loans & advances which are subject to confirmation, reconciliation and consequential adjustments, if any.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 (the Order) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure 1, a statement on the matters specified in the paragraph 3 and 4 of the Order.

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

a. We have sought and except for the matters described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph above, in our opinion, proper books of account 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 and the cash flow statement dealt with in this report are in agreement with the books of account;

d. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e. The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

f. On the basis of written representations received from the directors as on March 31, 2016 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of section 164(2) of the Act;

g. With respect to the adequacy of the internal financial controls over financial reporting of the company and operating effectiveness of such controls, refer to our separate report in Annexure 2 to this report.

h. 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, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigation on its financial position in its financial statements. Refer Note No. 29 of the 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 were no amounts which were required to be transferred to the Investor Education and Protection Fund by the

Annexure 1 to Independent Auditor''s Report of even date of the Standalone Financial Statements of Spentex Industries Limited

Referred to in paragraph 1 of the Independent Auditors'' Report of even date under the heading Report on Other Legal and Regulatory Requirements to the members of Spentex Industries Limited on the standalone financial statements as of and for the year ended March 31, 2016.

We report that:

1. (a) The Company has generally 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 according to a phased programmed 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 programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies were noticed on such verification as compare to the book records.

(c) According to the information and explanation given to us and on the basis of examination of title deeds, other relevant records

provided to us evidencing the title, confirmation from the lenders with whom title deeds have been deposited as security in respect of funding facilities availed, we are of the opinion that the title deeds of immovable properties, as disclosed in Note No. 12 on fixed assets to the financial statements, are held in the name of the company as at the balance sheet date except the following:

Particulars of Land & Building

Gross Block

as on 31.03.2016

Net Block

as on 31.03.2016

Remarks

Leasehold Land & Building thereon

490,047,029

240,278,431

The title deeds are in the name of the erstwhile Company that merged with the Company under section 391 to 394 of the Companies Act, 1956 pursuant to Schemes of Amalgamation as approved by the Honorable High Court.

2. (a) Inventories other than inventory lying with third party have been physically verified by the Management to extent practicable at reasonable intervals during the year. In our opinion the frequency of verification is reasonable. The discrepancies noticed on physical verification as compared to the books records were not material having regard to the size and nature of the operations of the company and have been properly adjusted in the books of account.

3. according to the information and explanation given to us, the Company has not granted any loan, secured or unsecured to companies, firms, limited liability partnership or other parties covered in the register maintained under Section 189 of the Act. Accordingly paragraphs 3(iii)(a) and 3(iii)(b) & 3(iii)(c) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the Company.

4. According to the information and explanations given to us and in our opinion the company has not advanced any loan, investment, guarantee or security to any person as specified under section 185 of the Companies Act, 2013. The company has not advanced any loan, guarantee or security to any person within the meaning of section 186 of the Companies Act, 2013. The company has compiled with provision of section 186 of the Companies Act, 2013 with regards to investment made.

5. according to the information and explanation given to us, the Company has not accepted any deposits from the public under the provisions of Sections 73 to 76 of the Act or other relevant provisions of the Act and rules framed there under during the year.

6. We have broadly reviewed the books of account, maintained by the Company in respect of products where pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under Section 148(1) of the Act 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.

7. (a) The Company is not regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income tax, sales tax, service tax, customs duty, excise duty, value added tax, cess and there have been serious delays in a large no of cases. According to the information and explanations given to us, undisputed amounts payable in respect of aforesaid dues were in arrears as at March 31, 2016 for a period of more than six months from the date they became payable, are as follows:

Name of the statute

Nature of dues

Amount (Rs.)

Period to which the amount relates (F.Y.)

Due Date

Date of Payment

Provident Fund Act

Provident Fund

1,868,650

August 2015

15th September 2015

5th April 2016

Income Tax

TDS&TCS

1,076,823

July 2015

7th August 2015

Rs.462,000/- on 5th April 2016 and Rs.614,823/- on 21st April 2016

Income Tax

TDS&TCS

616,622

August 2015

7th September 2015

21st April 2016

Finance Act 1994

Service Tax

87,296

June 2015

6th July 2015

Unpaid Till date

Finance Act 1994

Service Tax

1,870,792

July 2015

6th August 2015

Rs.11,99,271/- paid on 4th May 2016 & Rs.671,521/- still unpaid

Finance Act 1994

Service Tax

1,628,056

August 2015

6th September 2015

Rs 1,202,790/- paid on 4th May 2016 & Rs.425,266/- still unpaid

(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, sales tax, wealth tax, service tax, customs duty, excise duty, value added tax and cess which have not been deposited on account of matters pending before appropriate authorities are as under:

Name of the statute

Nature of dues

Amount (Rs.)

Period to which the amount relates (F.Y.)

Forum where the dispute is pending

Income Tax

The Income Tax Act, 1961

Disallowance of goodwill amortization & other expenses

10,875,657

(including amount paid Rs.3,981,354)

AY 2001-02 AY 2003-04

Income Tax Tribunal Delhi Bench - Rs.3,981,354/-

High Court - Rs.6,894,303/-

The Income Tax Act, 1961

Disallowances of various expenses viz. sales tax subsidy, etc.

27,095,747

(including amount paid Rs.2,000,000)

AY 2003-04 AY 2005-06 AY 2006-07

High Court, New Delhi

The Income Tax Act, 1961

Addition on account of arm''s length price of compensation for corporate guarantee to Associated Enterprises

36,403,835

AY 2008-09

Income Tax Appellate Tribunal Delhi Branch

Sales Tax

The M.P Commercial Tax Act, 1994

Penalty - Purchase Tax demand

164,195

(including amount paid Rs. 128,195)

1996-97

First Appellate Authority

The M.P Commercial Tax Act, 1994

Sales Tax Demand

815,157

(including amount paid Rs.815,157)

2009-10

First Appellate Authority

The M.P Commercial Tax Act, 1994

Sales Tax demand on sale of DEPB licenses

1,970,233

2001-03

2009-10

Assessing Authority, Indore

The M.P. Commercial Tax Act, 1994

Sales Tax Demand

455,160

(including amount Paid

Rs 45520)

2013-14

First Appellate Authority

The M.P. Commercial Tax Act, 1994

Sales Tax Demand

375,803

(including amount paid

Rs. 105,250)

2010-11

First Appellate Authority

Entry Tax Act, 1976

Entry Tax demand

1,538,453

(including amount paid Rs.414,844)

1992-97

Assessing Authority, Indore

Maharashtra Value Added Tax Act, 2002

Sales Tax Demand

532,870

(including amount paid Rs.200,000)

2004-05

Deputy Commissioner, Nagpur

Central Sales Tax, 1956

Sales Tax Demand

2,999,290

(including amount paid Rs.1,000,000)

2004-05

Deputy Commissioner, Nagpur

Finance Act

Finance Act, 1994

Refund against export services

4,381,611

2006-16

Assistant Commissioner of Central Excise, Nagpur

Finance Act, 1994

Service Tax on GTA paid including penalty

280,282

Apr-05 to Sept-06

Customs, Excise & Service Tax Appellate Tribunal, New Delhi

Finance Act, 1994

Service Tax on Foreign Commission paid to overseas agents

1,079,549

(including amount paid

Rs. 107,955)

2009-10 to 2010-11

Customs, Excise & Service Tax Appellate Tribunal, New Delhi

Finance Act, 1994

Suo Moto credit taken from Additional Excise Duty

145,531

(including amount paid

Rs. 10,915)

Aug- 12

Commissioner (Appeals), Central Excise, Bhopal

Finance Act, 1994

Service Tax credit taken on invoices not having Serial No. & Registration No.

3,744,510

(including amount paid

Rs. 140,419)

Apr-09 to Oct- 13

Commissioner (Appeals), Central Excise, Bhopal

Finance Act, 1994

Service Tax credit taken on photocopied copies of Bill of Entry and foreign commission

426,338

(including amount paid

Rs 21,317)

Apr-09 to Oct- 13

Customs, Excise & Service Tax Appellate Tribunal, New Delhi

Finance Act, 1994

Service Tax credit taken on tour operator services bill

490,872

Apr-09 to Apr-13

Commissioner (Appeals), Central Excise, Bhopal

Finance Act, 1994

Service Tax credit taken on foreign commission

375,464

(including amount paid

Rs. 13,705)

Apr-11 to Mar-12

Commissioner (Appeals), Central Excise, Bhopal

Central Excise Act

The Central Excise Act, 1944

Excise duty demands (Baramati unit)

10,806,176

Jun-99 to Dec-01

Customs, Excise & Service Tax Appellate Tribunal, Mumbai

The Central Excise Act, 1944

Excise duty - demand of duty on clearance of goods under

notification 30/2004 without payment of duty (Butibori unit)

75,185,214

(including amount paid

Rs.2,314,143)

Aug-04 to Apr-07

Deputy Commissioner of Central Excise, Nagpur - Rs.77,371/-

Commissioner, Central Excise Nagpur -Rs.72,693,700/-

Customs, Excise & Service Tax Appellate Tribunal, New Delhi - Rs.2,414,143/-

The Central Excise Act, 1944

Cenvat demand for packing material including penalty (Pithampur unit)

168,812

Apr-00 to Mar-04

Commissioner (Appeals), Central Excise, Indore

The Central Excise Act, 1944

Cenvat demand on packing material / scrap (Butibori unit)

920,697

Apr-03 to July 2015

Customs, Excise & Service Tax Appellate Tribunal, New Delhi -Rs.81,195/-

Commissioner (Appeals), Rs.786,496/-

Deputy Commissioner /Assistant Commissioner, Rs 53,006/-

The Central Excise Act, 1944

Cenvat on samples used in quality control (Butibori unit)

333,101

(including amount paid Rs.67,597)

Apr-03 to Oct-13

Customs, Excise & Service Tax Appellate Tribunal, Nagpur - Rs.117,762/-

Deputy Commissioner, Central Excise, Nagpur -Rs.215,339/-

The Central Excise Act, 1944

Excise duty - demand of duty on clearance of goods under notification 30/2004 without payment of duty (Pithampur unit)

53,291,002

(including amount paid Rs.13,322,751)

Mar-04 to Feb-07

High Court , Indore

The Central Excise Act, 1944

Demand under section Rule 6(3)(i)

121,563,064

2012-13

Customs, Excise & Service Tax Appellate Tribunal, New Delhi

The Central Excise Act, 1944

Cenvat on Capital Goods

5,332,642

(including amount paid

Rs. 673,329

2002-2003 to 2010-11

Customs, Excise & Service Tax Appellate Tribunal, Nagpur - Rs. 2,565,854/-

Additional Commissioner of Central Excise, Nagpur Rs.2,551,564/-

Commissioner (appeals) central excise Rs 63,026/-

Deputy Commissioner of Central Excise, Nagpur- Rs.152,198/-

8. Based on our audit procedures and according to the information and explanations given to us, we are of the opinion that company has defaulted in repayment of dues to the banks or government during the year. The Company has outstanding dues in respect of financial institutions, government or debenture holders are as follows:

S.

No.

Name of Bank

Type of loan

Amount of default as at balance sheet (includes Interest)

Period of Default

1

Axis Bank Ltd

Non Convertible Debentures

16,892,900

1-90

2

Axis Bank Ltd

Term Loan

8,345,029

1-90

3

Bank of Baroda

Term Loan

82,523,860

Non Performing asset (NPA) as on 31.03.2016.

4

Canara Bank

Term Loan

43,086,793

Non Performing asset (NPA) as on 31.03.2016.

5

ICICI Bank Ltd

Term Loan

660,796,727

Non Performing asset (NPA) as on 31.03.2016.

6

IDBI Bank Ltd

Term Loan

41,418,826

Non Performing asset (NPA) as on 31.03.2016.

7

Indian Bank

Term Loan

193,716,328

Non Performing asset (NPA) as on 31.03.2016.

8

IndusInd Bank Ltd

Term Loan

5,759,957

Non Performing asset (NPA) as on 31.03.2016.

9

ING Vysya Bank Ltd

Term Loan

172,479,747

Non Performing asset (NPA) as on 31.03.2016.

10

Oriental Bank of Commerce

Term Loan

359,295,528

Non Performing asset (NPA) as on 31.03.2016.

11

State Bank of India

Term Loan

973,995,302

Non Performing asset (NPA) as on 31.03.2016.

12

State Bank of India

Short Term Borrowings

1,826,424,955

Non Performing asset (NPA) as on 31.03.2016.

13

Oriental Bank of Commerce

Short Term Borrowings

674,347,445

Non Performing asset (NPA) as on 31.03.2016.

14

ING Vysya Bank Ltd

Short Term Borrowings

182,106,227

Non Performing asset (NPA) as on 31.03.2016.

15

Indian Bank

Short Term Borrowings

244,660,096

Non Performing asset (NPA) as on 31.03.2016.

16

Axis Bank Ltd

Short term Borrowings

128,820,288

1-90

Total

5,614,670,008

9. In our opinion and according to information and explanation given by the management, the term loans obtained by the company have been applied for the purpose for which they were raised. According to the information and explanation given to us, there was no money raised by the way of initial public offer or further public offer by the company during the year.

10. During the course of our examination of the books of accounts and records carried out in accordance with the generally accepted auditing practices and according to the information and explanations given to us, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.

11. According to the information and explanation given to us, the company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.

12. In our opinion and according to the information and explanations given to us, the Company is not a Nidhi company. Accordingly, clause 3(xii) of the Companies (Auditors Report) Order, 2016 is not applicable.

13. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

14. The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, clause 3(xiv) of the Companies (Auditors Report) Order, 2016 is not applicable.

15. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, clause 3(xv) of the Companies (Auditors Report) Order, 2016 is not applicable.

16. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

Annexure 2 to Independent Auditors'' Report of even date on standalone Financial Statement of Spentex Industries Limited

Referred to in paragraph 2 (g) of the Independent Auditors'' Report of even date under the heading Report on Other Legal and Regulatory Requirements to the members of Spentex Industries Limited on the standalone financial statements as of and for the year ended March 31, 2016.

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 Spentex Industries Limited (the Company) as of March 31, 2016 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. 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 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 Companies Act, 2013.

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) and the Standards on Auditing, issued by The Institute of Chartered Accountants of India and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. 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 risk. 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 qualified 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.

Qualified Opinion

According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified in the operating effectiveness of the Company''s internal financial controls over financial reporting as at March 31, 2016.

The company did not have an appropriate internal control system for obtaining confirmation from certain parties included under the head trade receivables, trade payables, loans & advances and other current liabilities and its reconciliation/consequential adjustments, if any. Further, the company''s internal financial controls over recovery of certain long outstanding trade receivable, claim receivables and advance balances are not adequate.

The company''s internal financial controls were not operating effectively in respect of the above which may potentially impact the results of the company.

A ''material weakness'' is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company''s annual or interim financial statements will not be prevented or detected on a timely basis.

In our opinion, except for the possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as of March 31, 2016, 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.

We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2016 standalone financial statements of the Company, and these material weaknesses have affected our opinion on the standalone financial statements of the Company and we have accordingly issued a qualified opinion on the standalone financial statements.

For J.C. Bhalla & Company

Chartered Accountants

Firm Regn. No. 001111-N

Sd/-

(Akhil Bhalla)

Place : New Delhi Partner

Dated : May 27, 2016 Membership No.505002