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8K Miles Software Services Ltd.

BSE: 512161 Sector: IT
NSE: 8KMILES ISIN Code: INE650K01021
BSE 00:00 | 20 Apr 8K Miles Software Services Ltd
NSE 05:30 | 01 Jan 8K Miles Software Services Ltd
OPEN 22.85
PREVIOUS CLOSE 23.30
VOLUME 77899
52-Week high 126.80
52-Week low 22.85
P/E 17.92
Mkt Cap.(Rs cr) 71
Buy Price 23.30
Buy Qty 600.00
Sell Price 23.30
Sell Qty 500.00
OPEN 22.85
CLOSE 23.30
VOLUME 77899
52-Week high 126.80
52-Week low 22.85
P/E 17.92
Mkt Cap.(Rs cr) 71
Buy Price 23.30
Buy Qty 600.00
Sell Price 23.30
Sell Qty 500.00

8K Miles Software Services Ltd. (8KMILES) - Auditors Report


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Company auditors report

To The Members of 8K Miles Software Services Limited Report on the Audit of theStandalone Financial Statements

Disclaimer of Opinion

We were engaged to audit the accompanying standalone financial statements of 8KMiles Software Services Limited

("the Company") which comprise the Balance Sheet as at 31 March 2019 andthe Statement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofsignificant accounting policies and other explanatory information.

We do not express an opinion on the accompanying standalone financial statements of theCompany. Because of the significance of the matters described in the Basis for Disclaimerof Opinion section of our report we have not been able to obtain sufficient appropriateaudit evidence to provide a basis for an audit opinion on these standalone financialstatements.

Basis for Disclaimer of Opinion

1. Report under Section 143 (12) of the Companies Act 2013 ("the Act")

During the course of our audit of the standalone and consolidated financial statementsof the Company for the year ended 31 March 2019 we came across certain transactions thatgave us reason to believe that suspected offences involving fraud have been committed inthe Company. Such transactions with regard to the standalone financial statements interalia pertained to:

(a) Several instances of inconsistencies between declarations provided by Directors andinformation available in the public forum which demonstrated existence of probable relatedparties which were not disclosed previously including certain transactions with suchparties which were not disclosed or approved by the Audit Committee/Board of Directors.Also see paragraph 5.1(a) below.

(b) Several instances of transactions with certain customers wherein the Company wasnot able to provide us with the particulars of the services rendered and acknowledged bythe customer the details of employees actually rendering such service theappropriateness and source of the monies received from such customers. Also see paragraph2 below.

(c) Several instances of multiple addresses being considered in various communicationswith certain customers in the invoices website of the customer on cheques received fromcustomers including instances wherein some of the communication addresses coincided withthe residential address of certain employees of the Company or its subsidiaries whichimpacted our ability to establish the authenticity of the customer. Also see paragraph 2below.

(d) Several instances of communications with a vendor wherein there were multiplecommunications using different email ids documents with varying signatures anddifferences in the spelling of the common signatory of the vendor etc. which impacted ourability to establish the authenticity of the vendor. Also see paragraph 4 below.

(e) Appropriate approvals and concerns over recovery of advances made to a relatedparty by a subsidiary of the Company. Refer paragraph 3 for more details.

Several instances of various inconsistencies were also noted during our audit of thebooks of account of certain foreign subsidiaries in association with our audit of theconsolidated financial statements of the Company.

Pursuant inter alia to the above observations we requested the AuditCommittee of the Company to provide us with their replies or observations to the aforesaidmatters for us to consider the same as part of our audit.

Subsequent to our reporting of such matters to the Audit Committee vide our letterdated 15 July 2019 the Audit Committee in its meeting held on 18 July 2019 appointed anexternal firm of Chartered Accountants to carry out an investigation. We are informed thatas on the date of this report the investigation report of the external firm of CharteredAccountants has not yet been received by the Company and hence the same has not beenmade available to us.

Further we also included the aforesaid matters in our report dated 13 September 2019to the Central Government in accordance with the requirements of section 143(12) of theAct. The matters so reported also included observations relating to certain transactionspertaining to some subsidiaries which are included in our report on the consolidatedfinancial statements of the Company.

Pending receipt of the report on the findings of such investigation from the externalfirm of Chartered Accountants and pending receipt of information and explanations andevidences relating to the aforesaid matters from the management of the Company we havebeen unable to obtain sufficient and appropriate audit evidence in respect of the abovematters/transactions that gave us reason to believe that suspected offences involvingfraud may have been committed in the Company and/or its subsidiaries.

In view of the above we are unable to comment on the consequential adjustments ifany that may be required to these standalone financial statements in this regard.

2. Revenue from Contracts with Customers and related outstanding receivables

During the year ended 31 March 2019 the Company recognised revenue aggregating to Rs.2428.69 Lakhs from the customers referred to in paragraphs 1(b) and 1(c) above whereinsuch customers have an outstanding balance aggregating Rs. 3464.01 Lakhs as at 31 March2019 (includes balances of Rs. 1022.36 Lakhs outstanding even as at 31 March 2018).

In the absence of complete information regarding the proof of services renderedefforts expended and in view of our observations in paragraphs 1(b) and 1(c) above inrespect of these customers we are unable to conclude on the appropriateness / correctness/ completeness / validity of the revenue recognised compliance with the recognition andmeasurement of revenue required under the Indian Accounting Standard (Ind AS) 115 Revenuefrom Contracts with Customers and the corresponding receivables in these standalonefinancial statements.

The Company has also not carried out an evaluation of the expected credit loss requiredunder Indian Accounting Standard (Ind AS) 109 - Financial Instruments for the outstandingtrade receivables as at 31 March 2019 and therefore we are unable to comment on theadequacy and appropriateness of the provision made against the trade receivable balancesas at 31 March 2019.

3. 8K Miles Media Private Limited ("8K Miles Media")

3.1. Around the last week of September 2018 we were made aware of the resignation ofthe statutory auditor of 8K Miles Media a company promoted by the promoter directors ofthe Company vide their resignation letter dated 30 April 2018. As per the said letterthe resignation was due to the misuse of that Audit Firm's Letter Head and signature oftheir Partner through forgery in certain ODI Certificates submitted by 8K Miles Media toits bankers for transfer of funds of USD 71.51 Lakhs (Rs. 4612.91 Lakhs) to 8K MilesMedia Holdings Inc. USA a subsidiary of 8K Miles Media. 8K Miles Media and itssubsidiaries (together "8K Miles Media Group") were identified as a relatedparty in the consolidated financial statements of the Company for the year ended 31 March2018.

During the period ended 31 December 2018 the management of 8K Miles Media initiated anindependent forensic review to evaluate the authenticity of the signatures in the ODICertificates referred above. 8K Miles Media has submitted a copy of the forensic report tothe Company. We understand that the aforesaid forensic report states that the writer ofthe signature in the ODI certificates is the same as that of the specimen signatures ofthe audit partner as provided to the forensic auditor thereby concluding that there was noforgery in the ODI certificates.

Since this matter relates to a company where another firm is the statutory auditor andsince the financial statements of that company are not included in the consolidatedfinancial statements of the Company we have not been able to perform any proceduresrelated to the allegation or the forensic report.

3.2. Further during the last week of September 2018

(a) the CEO and Managing Director of the Company who was also a promoter director in8K Miles Media resigned as a director in 8K Miles Media.

(b) the CFO and Executive Director of the Company who was the other promoter directorin 8K Miles Media resigned from his role as CFO of the Company stating that hisresignation was to have the necessary time to clear all the baseless allegations andunsubstantiated allegations relating to 8K Miles Media. However he continues to be adirector in both the Company as well as 8K Miles Media.

3.3. The Company has trade and other receivables aggregating Rs. 3309.10 Lakhs as at31 March 2019 receivable from 8K Miles Software Services Inc. a subsidiary. It may benoted that this subsidiary had loans receivable from entities of 8K Miles Media Group inthe USA aggregating USD 89.61 Lakhs (Rs. 5808.44 Lakhs) as at 31 March 2018.

We are informed by the management of the Company that such amounts due includinginterest as accrued have been fully recovered as at 31 March 2019 by that subsidiary.However in the absence of appropriate workings for the interest documentation regardingloan agreements and due to inconsistencies noted between the transactions as per the BankStatements of the subsidiary with the transactions as recorded in the books of account ofthe subsidiary we were unable to confirm the management's assertion on the saidcollections made by the subsidiary.

3.4. We are unable to conclude if the above events in 8K Miles Media have any effecton:

(a) the Company and its operations in view of the allegations in the aforesaidresignation letter of the statutory auditor of that company and the nature of theCompany's relationship with 8K Miles Media as described in paragraphs 3.1 and 3.2 aboverespectively;

(b) the ability of the Company's subsidiary to transfer funds back to the Company inview of the loans receivable by it from the entities of 8K Miles Media Group in the USA asdescribed in paragraph 3.3 above which could result in a possible impairment in theinvestment of Rs. 9816.65 Lakhs held in that subsidiary trade receivables of Rs.2819.92 Lakhs and interest recoverable of Rs. 489.18 Lakhs from such subsidiary; and

(c) the consequential impact if any of the same on the operations of the Company.

4. Procurement of services and trade payables

4.1. Based on the master service agreement with the external service provider referredto in paragraph 1(d) above for technical and referral services to be rendered towardscertain customers referred to in paragraphs 1 (b) and 1(c) above the Company hasrecorded consultancy charges of Rs. 1706.40 Lakhs for the year ended 31 March 2019 withan outstanding liability of Rs. 1709.16 Lakhs.

In the absence of complete information regarding proof of the services rendered by thevendor and in view of our observations in paragraph 1(d) above in respect of this vendorwe are unable to conclude on the appropriateness / correctness / completeness / validityof the expense and the corresponding liability recorded in these standalone financialstatements.

4.2. Further the Company has not evaluated the applicability or coverage of suchservices under the Goods and Service Tax Regulations and has not accrued / paid the same.However in our opinion such tax is payable on those services. The management has notdetermined the amount of Goods and Service Tax payable and any interest thereon. We areunable to conclude on the consequential impact of the same on these standalone financialstatements.

5. Regulatory compliances

5.1. We are unable to conclude on the consequential impact if any on the operationsand the financial performance of the Company arising out of the following matterspertaining to non-compliance with the provisions of the Companies Act 2013 andnotifications issued by the Securities and Exchange Board of India (SEBI) as applicable:

(a) In the absence of appropriate processes for identifying related parties in view ofthe matters reported in paragraph 1 (a) above we are unable to comment on the accuracyand completeness of the related parties identified and disclosed by the Company includingcompliance with obtaining necessary approvals as required from those charged withgovernance.

(b) It was noted that in the case of two of the Directors who were re-appointed at theAnnual General Meeting (AGM) held on 18 September 2015 and designated as independentdirectors (One was also the Chairman of the Audit Committee and the other a member of theNomination and Remuneration Committee and also the Chairman of the StakeholderRelationship Committee) they may have ceased to be independent directors under the Actwith effect from 17 November 2015 and 12 August 2015 respectively being the date fromwhen their relatives were employed either with the Company or its subsidiary. Thesedirectors have been designated as non-independent directors by the Company from 06September 2019 and 13 February 2019 respectively.

Considering the above we are unable to opine on the validity of the meetings of theBoard of Directors Audit Committee Stakeholder Relationship Committee and Nomination andRemuneration Committee in regards to the quorum in such meetings and the resolutionsapproved in those meetings from the aforesaid AGM date until the dates when the Companydesignated them as non-independent directors.

5.2. We are unable to conclude on the consequential impact if any on the standalonefinancial statements arising out of the matters pertaining to noncompliance with theapplicable master directions/ notifications issued by the Reserve Bank of India("RBI") and provisions of The Foreign Exchange Management Act 1999 as amendedin respect of the following:

(a) The Company has export trade receivables and foreign currency interest receivableaggregating Rs. 3037.28 Lakhs and Rs. 336.13 Lakhs respectively which are outstandingfor more than nine months from the invoice date as at 31 March 2019 which is beyond thetime limit stipulated under the Foreign Exchange Management (Export of Goods &Services) Regulations 2015 for repatriation of foreign currency receivables.

(b) As at 31 March 2019 the Company had not made the necessary intimations to theAuthorised Dealer/ RBI as required under the Master Directions provided by the RBI onForeign Investment in India for loan/ collaterals/ pledge received from the promoter ofthe Company being a resident outside India amounting to Rs. 1395.02 Lakhs during theyear ended 31 March 2019.

However subsequent to the year-end the Company has made an intimation to theAuthorised dealer on 12 July 2019 and is yet to make an application for condonation ofdelay.

(c) It appears that the Company has provided a corporate guarantee to Columbia Bank fora line of credit availed by 8K Miles Software Services Inc. a subsidiary of the Companyand Nexage Technologies Inc. a step down subsidiary of the Company aggregating USD5000000 on 12 September 2018. As per the loan sanction document issued by Columbia Bankthe line of credit was approved by Columbia Bank based on a representation by the ManagingDirector of the Company that the corporate guarantee was approved by the shareholders ofthe Company. We have not been provided with minutes of the meeting of the shareholdersreferred above approving such corporate guarantee. Further the Company has also notintimated the Authorised Dealer for providing such corporate guarantee as required underthe Master Directions provided by the RBI on Direct Investment by Residents in JointVenture (JV) / Wholly Owned Subsidiary (WOS) Abroad.

5.3. Further the Company has not carried out a comprehensive review of compliance withlaws and regulations and therefore we are unable to comment if there are any otherinstances of non-compliance with laws and regulations and any consequential impactthereof.

6. Information / clarifications requested but not provided

During the course of our audit we have requested from the management variousinformation and clarifications that were required for the purposes of our audit. Inaddition to the information and clarifications pending in respect of the matters describedin paragraphs 1 to 5 above information inter alia relating to assessment of howthe revenue recognised by the Company was in compliance with the provisions of Ind AS 115documentation supporting evaluation of the expected credit losses as at 31 March 2019documentation on services received against certain consultancy expenses confirmation ofbalances from customers vendors and other parties etc. are also pending to be providedto / received by us. In view of such pending information we have not been able to obtainsufficient appropriate evidence to conclude on those matters to express an opinion on thestandalone financial statements.

7. Use of going concern assumption

In view of the matters reported in paragraphs 1 to 6 above and in the absence ofreliable cash flow projections by the management and any consequential impact of thosematters on the standalone financial statements and operations of the Company we areunable to comment on the appropriateness of the going concern assumption adopted by themanagement in the preparation of these standalone financial statements.

8. Information on subsidiaries

Based on information in the public domain 8K Miles Cloud Solutions Pte. LimitedSingapore has stated itself to be a subsidiary of the Company. This entity appears to havebeen incorporated on 08 May 2017. Further 8K Miles Software Services Pte. Ltd Singaporeand 8K Miles Software Services UK Limited United Kingdom exist with the promoterdirectors appearing as shareholders/ directors. The incorporation of wholly ownedsubsidiaries in these countries were approved by the Board of Directors of the Company on30 May 2018.

However all these three entities have not been considered by the management of theCompany as subsidiaries in these standalone financial statements. We are informed by themanagement that these entities are not subsidiaries of the Company and the information inthe public domain including with the regulatory authorities in those geographies are notcorrect.

We have not been provided with the audited financial statements of these entitiesand/or any other verifiable evidence to ascertain the relationship of these entities withthe Company. Hence we are unable to comment on the relationship of these entities and theconsequential impact these entities may have on the standalone financial statements.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the Indian Accounting Standards prescribed under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended (‘Ind AS') and otheraccounting principles generally accepted in India. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statement that give a true andfair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibility for the Audit of the Standalone Financial Statements

Our responsibility is to conduct an audit of the standalone financial statements of theCompany in accordance with Standards on Auditing specified under section 143(10) of theAct and to issue an auditor's report. However because of the matters described in theBasis for Disclaimer of Opinion section of our report we were not able to obtainsufficient appropriate audit evidence to provide a basis for an audit opinion on thesestandalone financial statements.

We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI) together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics.

Report on Other Legal and Regulatory Requirements

1. In view of the matters described in paragraphs 1 2

3.3 4 and 6 of the Basis for Disclaimer of Opinion section of our report we areunable to state if any of the transactions referred to in those paragraphs wererepresented by mere book entries.

2. Subject to the possible effects of the matters described in the Basis for Disclaimerof Opinion section above and in paragraph 1 above as required by Section 143(3) of theAct based on our engagement to audit we report that:

a) We have sought and considering the matters described in the Basis for Disclaimer ofOpinion section above and in paragraph 1 above were not able to obtain all theinformation and explanations which to the best of our knowledge and belief were necessaryfor the purposes of our audit of the aforesaid standalone financial statements.

b) Due to the possible effects of the matters described in the Basis for Disclaimer ofOpinion section above and in paragraph 1 above we are unable to comment if proper booksof account as required by law have been kept by the Company so far as it appears from ourexamination of those books.

c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the relevant books of account.

d) Due to the possible effects of the matters described in the Basis for Disclaimer ofOpinion section above and in paragraph 1 above we are unable to comment if the aforesaidstandalone financial statements comply with the Ind AS specified under Section 133 of theAct.

e) The matters described in the Basis for Disclaimer of Opinion section above and inparagraph 1 above in our opinion may have an adverse effect on the functioning of theCompany.

f) On the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164 (2) of the Act.

g) The adverse remarks relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Disclaimer of Opinion section above andin paragraph 1 above.

h) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an adverse opinion on theCompany's internal financial controls over financial reporting for the reasons statedtherein.

i) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16)[1] of the Act as amended in ouropinion and to the best of our information and according to the explanations given to usthe remuneration paid by the Company to its directors during the year is in accordancewith the provisions of section 197 of the Act.

j) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion except for the possible effect of the matters described in the Basis forDisclaimer of Opinion section above and to the best of our information and according tothe explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

3. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder subject to the possible effects of the matters described in the Basis for Disclaimerof Opinion section above and in paragraph 1 above.

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

Firm's Registration No. 117366W/W-100018

V. Balaji

Partner

Membership No. 203685

2 November 2019 VB/JT/RB/2019

Unique Identification Number: 19203685AAAABD8282

ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 2(h) under ‘Report on Other Legal and RegulatoryRequirements' of our report of even date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

In conjunction with our engagement to audit the standalone financial statements of theCompany as of and for the year ended 31 March 2019 we have audited the internal financialcontrols over financial reporting of 8K Miles Software Services Limited ("theCompany") as of that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to respective company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing prescribed under Section 143(10) of the Companies Act 2013to the extent applicable to an audit of internal financial controls. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected dep end on the auditor's j udgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our adverse audit opinion on the Company's internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany'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 financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Basis for Adverse Opinion

According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified in the Company's internal financialcontrols over financial reporting as at 31 March 2019. Inadequacies were noted in:

(a) entity level controls to prevent and detect fraud as more fully described inparagraph 1 of the Basis for Disclaimer of Opinion section of the Independent Auditor'sReport.

(b) evaluating the appropriateness of the customer contracts compliance with theaccounting standards for the purpose of revenue recognition and the appropriateness ofassessment of expected credit losses. Also see paragraph 2 of the Basis for Disclaimer ofOpinion section of the Independent Auditor's Report.

(c) evaluation of services being provided by key vendors examination and review ofterms of contracts / purchase orders / SOWs as applicable to assess the authenticity ofthe documents and assessment of appropriateness of the liability being accrued. Also seeparagraph 4 of the Basis for Disclaimer of Opinion section of the Independent Auditor'sReport.

(d) identification of related parties of the Company which may result in transactionsnot authorized by audit committee/ board of directors (where applicable) inadequatedisclosure of the related party transactions in the financial statements andidentification of conflicts and designation of directors as independent or otherwise. Alsosee paragraphs 1(a) 5 and 8 of the Basis for Disclaimer of Opinion section of theIndependent Auditor's Report.

(e) ensuring compliance with applicable laws and regulations. Also see paragraph 5 ofthe Basis for Disclaimer of Opinion section of the Independent Auditor's Report.

(f) ensuring compliance with the applicable accounting standards and generally acceptedaccounting principles. Also see paragraphs 1(a) 2 3.4 and 8 of the Basis for Disclaimerof Opinion section of the Independent Auditor's Report.

(g) financial book closing procedures to ensure preparation of timely reliable andappropriate financial statements. Also see paragraphs 3 5 6 7 and 8 of the Basis forDisclaimer of Opinion section of the Independent Auditor's Report.

A ‘material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company's annual or interim financialstatements will not be prevented or detected on a timely basis.

Adverse Opinion

In our opinion to the best of our information and according to the explanations givento us because of the effect of the material weaknesses described in Basis for AdverseOpinion paragraph above on the achievement of the objectives of the control criteria theCompany has not maintained adequate and effective internal financial controls overfinancial reporting as of 31 March 2019 based on the criteria for internal control overfinancial reporting established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India and theCompany's internal financial controls over financial reporting were not operatingeffectively as of 31 March 2019.

We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the standalonefinancial statements of the Company for the year ended 31 March 2019 and these materialweaknesses have affected our opinion on the said standalone financial statements of theCompany and we have issued a disclaimer of opinion on the standalone financial statementsof the Company.

For DELOITTE HASKINS & SELLS LLP Chartered Accountants Firm's Registration No.117366W/W-100018

V. Balaji Partner

Membership No. 203685

2 November 2019 VB/JT/RB/2019

Unique Identification Number: 19203685AAAABD8282

ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 3 under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

(i) In respect of its property plant and equipment:

(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.

(b) The property plant and equipment were physically verified during the year by themanagement in accordance with a regular programme of verification which in our opinionprovides for physical verification of all the property plant and equipment at reasonableintervals. According to the information and explanations given to us no materialdiscrepancies were noticed on such verification.

(c) The Company does not have any immovable properties of freehold land or buildingwhich are reported under Property Plant and Equipment and hence reporting under clause(i)(c) of the Order is not applicable.

(ii) The Company does not have any inventory and hence reporting under clause (ii) ofthe Order is not applicable.

(iii) According to the information and explanation given to us the Company has grantedunsecured loans to companies covered in the register maintained under Section 189 of theCompanies Act 2013 in respect of which:

(a) The terms and conditions of the grant of such loans as applicable are in ouropinion prima facie not prejudicial to the Company's interest.

(b) The schedule of repayment of principal and payment of interest has been stipulatedand there were no principal repayment due during the year as per such stipulations.However receipts of interest have not been regular as per stipulations.

(c) There is an overdue interest receivable amount of Rs. 287.29 Lakhs as at the yearend. Out of the above an amount of Rs. 287.29 Lakhs is outstanding as overdue for morethan 90 days as at the balance sheet date. The management is in the process of initiatingreasonable steps to recover the overdue balances. Also refer paragraph 3.4 in the Basisfor Disclaimer of Opinion section in the Independent Auditor's Report.

(iv) In our opinion and according to the information and explanations given to usexcept for the matters described in paragraph 5.2(c) in the Basis for Disclaimer ofOpinion section in the Independent Auditor's Report the Company has complied with theprovisions of Section 185 and 186 of the Companies Act 2013 in respect of grant of loansmaking investments and providing guarantees and securities as applicable.

(v) According to the information and explanations given to us the Company has notaccepted any deposit during the year and hence reporting under clause (v) of the Order isnot applicable.

(vi) Having regard to the nature of the Company's business/ activities reporting underclause (vi) of the Order with regard to maintenance of cost records is not applicable.

(vii) According to the information and explanations given to us in respect ofstatutory dues:

(a) Except for delays ranging from 1 day to 66 days for remittance of Goods andServices Tax Provident Fund Tax deducted at Source and Income Tax subject to ourcomments on non-payment of Goods and Services Tax on certain vendor invoices referred toin paragraph 4.2 of the Basis for Disclaimer of Opinion section in the IndependentAuditor's Report which amount has not been determined and in case of Employee's StateInsurance for the year which was remitted subsequent to the year end the Company hasgenerally been regular in depositing undisputed statutory dues including Customs DutyCess and other material statutory dues applicable to it with the appropriate authorities.

(b) Subject to our comments on the non-payment of Goods and Services Tax on certainvendor invoices referred to in paragraph 4.2 of the Basis for Disclaimer of Opinionsection in the Independent Auditor's Report which amount has not been determined therewere no undisputed amounts payable in respect of Provident Fund Tax deducted at SourceCustoms Duty Cess and other material statutory dues in arrears as at 31 March 2019 for aperiod of more than six months from the date they became payable except for Employees'State Insurance and Income tax amounting to Rs. 2.43 Lakhs and Rs. 34.55 Lakhsrespectively.

(c) Details of dues of Income-tax sales tax service tax goods and service taxcustoms duty excise duty and value added tax which have not been deposited as on 31March 2019 on account of disputes are given below:

Name of Statute Nature of Dues Forum where Dispute is Pending Period to which the amount relates (Financial Year) Amount involved (Rs. in Lakhs) Amount unpaid (Rs. in Lakhs)
Income Tax Act 1961 Income Tax Assistant Commissioner of Income Tax 2007-08 9.51 9.51
2009-10 56.76 56.76
2010-11 1.39 1.39
2011-12 11.91 11.91
2012-13 0.25 0.25
2014-15 15.16 15.16

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to financialinstitutions and banks except as under:

Particulars Amount of default of repayment as at 31 March 2019 (Rs. in Lakhs) Period of default upto 31 March 2019
Due to Banks: Principal Interest
Indian Bank - Term Loan 4.11 4.67 Principal: Represents amounts due on 1 March 2019. Hence period of default is one month.
Interest: Represents amounts of Rs. 2.04 lakhs and Rs. 2.63 lakhs due on 28 February 2019 (period of delay is one month) and 31 March 2019 (period of delay is one day) respectively.
Indian Bank - Open Cash Credit (‘OCC') 300 3.1 Period of default for Principal and Interest is one day.

Further the Company has not taken any loans or borrowings from government and has notissued any debentures.

(ix) In our opinion and according to the information and explanations given to usmoney raised by way of term loans from banks and financial institutions have been appliedby the Company during the year for the purposes for which they were raised other thantemporary deployment pending application of proceeds. Further the Company has not raisedmoneys by way of Initial public offer or further public offer (including debtinstruments).

(x) We refer to the matters stated in the Basis for Disclaimer of Opinion section ofthe Independent Auditor's Report where suspected offences involving fraud that have beencommitted on and by the Company have been reported. Since the report of the investigationinitiated by the Company through an external firm of Chartered Accountants has not yetbeen received we are unable to quantify the amount involved.

(xi) In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) ofthe Order is not applicable.

(xiii) Subject to the matters highlighted in the Basis for Disclaimer of Opinionsection in the Independent Auditor's Report including the following transactions whereapprovals have not been obtained at the time of entering into the transaction and whichare relating to the matter reported in paragraph 5.1(b) of the Basis for Disclaimer ofOpinion section in the Independent Auditor's Report in our opinion and according to theinformation and explanations given to us the Company is in compliance with the Section177 and 188 of the Companies Act 2013 where applicable for transactions with therelated parties:

Particulars Amount of default of repayment as at 31 March 2019 (Rs. in Lakhs) Period of default upto 31 March 2019
Due to Banks: Principal Interest
Principal: Represents amounts due on 1 March 2019. Hence period of default is one month.
Indian Bank - Term Loan 4.11 4.67 Interest: Represents amounts of Rs. 2.04 lakhs and Rs. 2.63 lakhs due on 28 February 2019 (period of delay is one month) and 31 March 2019 (period of delay is one day) respectively.
Indian Bank - Open Cash Credit (‘OCC') 300 3.1 Period of default for Principal and Interest is one day.
Name of the Related Party and relationship Underlying Transaction Amount Involved (Rs. in Lakhs)
S. Ravichandran (Spouse of a Director) Office or Place of Profit in the Company 43.7
Sustainable Certification India Private Limited (Company in which the above Spouse is a Director) Professional and Consultancy Charges 3.64
Gautam Gurumurthi (Son of a Director) Office or Place of Profit in the subsidiary of the Company 85.75

In our opinion and according to the information and explanations given to us exceptfor the matter described in paragraphs 1(a) 5.1 (a) and 8 under Basis for Disclaimer ofOpinion section in the Independent Auditor's Report the Company has disclosed the detailsof related party transactions in the standalone financial statements etc. as required bythe applicable accounting standards

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause (xiv) of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions during thecurrent year with any of the directors of the Company or its holding or subsidiary companyor a person connected with him that are covered under the provisions of Section 192 of theAct.

(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

Firm's Registration No. 117366W/W-100018

2 November 2019 VB/JT/RB/2019

Unique Identification Number: 19203685AAAABD8282

V. Balaji

Partner

Membership No. 203685