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MIC Electronics Ltd.

BSE: 532850 Sector: Engineering
NSE: MIC ISIN Code: INE287C01029
BSE 00:00 | 24 Apr 2020 MIC Electronics Ltd
NSE 05:30 | 01 Jan 1970 MIC Electronics Ltd

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OPEN 0.58
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VOLUME 7
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P/E
Mkt Cap.(Rs cr) 13
Buy Price 0.58
Buy Qty 6093.00
Sell Price 0.50
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OPEN 0.58
CLOSE 0.58
VOLUME 7
52-Week high 1.08
52-Week low 0.46
P/E
Mkt Cap.(Rs cr) 13
Buy Price 0.58
Buy Qty 6093.00
Sell Price 0.50
Sell Qty 4250.00

MIC Electronics Ltd. (MIC) - Auditors Report


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Company auditors report

ON STANDALONE FINANCIAL STATEMENTS

To

The Members of MIC Electronics Limited

1. Corporate Insolvency Proceedings as per Insolvency and Bankruptcy Code 2016 (IBC)

The Hon'ble National Company Law Tribunal Hyderabad Bench (NCLT) admitted on 13/03/2018 an insolvency and bankruptcy petition filed against MIC ELECTRONICS LIMITED (the Company) and appointed Mr. N. Prabhakar to act as Interim Resolution Professional (IRP) with direction to initiate appropriate action contemplated with extent provisions of the Insolvency and Bankruptcy Code 2016 and other related rules. Mr. N. Prabhakar was subsequently confirmed by the Committee of Creditors (CoC) as the Resolution Professional (RP).

Report on the Audit of Financial Statements:

Disclaimer of Opinion

We were engaged to audit the accompanying financial statements of M/s. MIC ELECTRONICS LIMITED (the Company) which comprise the Balance Sheet as on 31stMarch 2019 and the Statement of Profit and Loss (including other Comprehensive Income) statement of changes in equity and statement of cash flows for the year ended 31st March 2019 and notes to the financial statements including a summary of significant accounting policies and other explanatory information (hereinafter referred to as the financial statements).

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

Basis for Disclaimer of Opinion

We refer to the following notes to stand alone financial statements.

(a) Note 2.42 to the standalone financial statements in respect of preparation of financial statements of the Company on going concern basis. During the year the Company has incurred a Net Loss of Rs. 27.48 crores resulting into accumulated losses of Rs.155.46 crores and erosion of its Net worth as at 31st March 2019. The Company has obligations towards fund based borrowings aggregating to Rs.182.14 crores. Even though the resolution plan submitted for the company is approved by Committee of Creditors the matter is still pending before Honorable NCLT Hyderabad bench. The ultimate outcome of these matters at present is uncertain. We are unable to obtain sufficient and appropriate audit evidence in relation to going concern.

(b) Note 2.43 to the standalone financial statements in connection with trade receivables security deposits loans and advances other financial and current assets aggregating to Rs. 34.59 crores. There is existence of material uncertainties over the realisability of these amounts due to various factors such as disputes age of these assets etc. There is also non-availability of confirmation of various trade receivables trade payables etc. In absence of alternative corroborative evidence we are unable to comment on the extent to which such balances are recoverable/payable.

(c) Note 2.44 to the standalone financial statements the Company has neither counted the physical inventories nor stated the inventories at the lower of cost and net realizable value as on 31st March 2019 which constitute departure from the accounting standards prescribed under section 133 of the Companies Act 2013. We were unable to satisfy ourselves by alternative means concerning the inventory quantities held at March 31 2019 which are stated in the balance sheet at Rs 49.88 crores.

(d) Note 2.45 to the standalone financial statements according to the information and explanation given to us 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. However the management is still in the process of reconciliation of quantities as per verification reports with the fixed assets records. Pending such reconciliation and physical verification we are unable to comment on the reasonableness of the physical verification programme and discrepancies that may arise on such reconciliation and physical verification of fixed assets as well as requirement of any provision for impairment of fixed assets. We were unable to satisfy ourselves by alternative means concerning the fixed assets held at March 312019 which are stated in the balance sheet at Rs 83.96 crores.

(e) The Company has received communication from State Bank of India to conduct a forensic audit and appointed an audit firm to conduct the forensic audit and as on the date of the report the forensic audit is still under progress. The Company is of the view that material adjustments or disclosures if any arising out of the forensic audit would be considered after conclusion of the forensic audit and the Management has not estimated the impact of any adjustment that may arise to the amounts and disclosures in the financial statements.

As a result of these matters we have not been able to obtain sufficient appropriate audit evidence to state whether any adjustments or disclosure would be required to the information included in the financial statements and the impact thereof.

Responsibilities of Management and Those Charged with Governance for the 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 financial statements that give a true and fairview of the financial position financial performance in accordance with the accounting principles generally accepted in India including the accounting Standards 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 of 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.

In preparing the financial statements the Board of Directors is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the company's financial reporting process. Pursuant to ongoing Corporate Insolvency Resolution Process (CIRP) powers of the board of Directors have been suspended and these Powers are now vested with Resolution Professional.

Auditor's Responsibilities for the Audit of the Financial Statements

Auditor's responsibility is to conduct an audit of the entity's financial statements in accordance with Standards on Auditing and to issue an auditor's report. However because of the matter(s) described in the Basis for Disclaimer of Opinion section we are not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements.

We are independent of the entity in accordance with the Code of Ethics andprovisions of the Companies Act 2013 that are relevant to our audit of the standalone financial statements in India under the Companies Act 2013 and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics and the requirements under the Companies act 2013.

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 Companies Act 2013 we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order to the extentapplicable.

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

a) Except for possible effects of the matters as described in the Basis for Disclaimer of opinion paragraph we have sought and obtained the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) Except for possible effects of the matters as described in the Basis for Disclaimer of opinion paragraph 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 (including other comprehensive income) Statement of changes in equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of accounts.

d) Due to the matters as described in the Basis for Disclaimer of opinion paragraph in our opinion the aforesaid standalone financial statements do not 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 Disclaimer of opinion may have an adverse effect on the functioning of the company.

f) In view of the CIRP process the powers of the Board of Directors are suspended. Therefore written representations have not been taken on record by the Board of Directors. However on the basis of written representations received from Directors as on 31st March 2019 and taken on record by the Resolution Professional none of the directors are disqualified from being appointed as director in terms of sec 164(2) of the Act.

g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Disclaimer of opinion paragraph above;

h) 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 AnnexureB. Our report expresses a Disclaimer of opinion on the Company's internal financial controls over financial reporting.

i) 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 litigations on its financial position to the extent ascertained in its standalone financial statements;

(ii) Except for the possible effects of the matters described under Basis for Disclaimer of opinion paragraph the company has made a provision as required under the applicable law or accounting standards for material foreseeable losses if any on long-term contracts. The company did not have any derivative contracts.

(iii) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

For PAVULURI&Co.
Chartered Accountants
Firm Reg. No:0l2l94S
(CA N. RAJESH)
Date : 30.05.2019PARTNER
Place : HyderabadM.No : 223169

ANNEXURE A TO THE INDEPENDENT AUDITORS' REPORT

Annexure A to the Independent Auditors' Report

Referred to in paragraph 1 under the heading `Report on Other Legal & Regulatory Requirement' of our report of even date to the financial statements of the Company for the year ended March 31 2019:

1) (a) Subject to our comments in para 1 (b) below the Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets;

(b) According to the information and explanation given to us 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 business. However the management is still in the process of reconciliation of quantities as per verification reports with fixed assets records. Pending such reconciliation and physical verification we are unable to comment on the reasonableness of the physical verification programme and discrepancies that may arise on such reconciliation and physical verification of fixed assets.

(c) According to the information and explanation given to us title deeds of immovable properties have been mortgaged as securities with lenders i.e. banks financial institutions and others for security of the borrowings raised by the company. On the basis of examination of records of the company and the copies of the title deeds available with the company the title deeds of immovable properties are held in the name of the company.

2) According to the information and explanation given to us the management has not conducted the physical verification of inventory at reasonable intervals due to shortage of resources as the company is undergoing CIRP. The management has relied upon the physical verification of inventories and its valuation done during Financial Year 2017-18 by external valuers as no material movements to the inventories have taken place during the financial year 2018-19 due to lower level of operations of the company.

3) The Company has not granted interest free unsecured loan to a company covered in the Register maintained under section 189 of the Act during the year.

4) In our opinion and according to the information and explanations given to us the company has complied with the provisions of section 185 and 186 of the Companies Act 2013 in respect of loans investments guarantees and security.

5) The Company has not accepted any deposits from the public and hence the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the Companies (Acceptance of Deposit) Rules 2015 with regard to the deposits accepted from the public are not applicable.

6) We have broadly reviewed the cost records maintained by the company pursuant to the rules made by the Central Government under sub-section (1) of Section 148 of the Act and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have however not made a detailed examination of these records with a view to determining whether they are accurate or complete.

7) (a) According to information and explanations given to us and on the basis of our examination of the books of account and records the Company has not been regular in depositing undisputed statutory dues including Provident Fund Employees State Insurance Income-Tax Sales tax Service Tax Duty of Customs Duty of Excise Value added Tax Cess and any other statutory dues with the appropriate authorities. There have been significant delays in a large number of cases in depositing these dues with the appropriate authorities.

According to the information and explanations given to us and records of the company examined by us the following are the undisputed amounts payable in respect of Provident Fund Income Tax Wealth Tax Service Tax Sales Tax Duty of Customs Excise Duty Value added tax and Other material statutory dues were in arrears as at March 31 2019 for a period of more than six months from the date they became payable.

border=0 cellSpacing=0 cellPadding=2 width=100%>
Name of the statueNature of the duesAmount

Period to which the amount relates

Due datedate of pay ment
Finance Act 1994Service Tax10092802From 2011onwardsVarious datesNil
Employees Provident Fund & Miscellaneous provisions act 1952Provident Fund21640556From 2009onwardsVarious datesNil
Employees State InsuranceEmployee State
Act 1948Insurance3331260From 2011onwardsVarious datesNil
APPT Act 1987Professional Tax1584060From 2011onwardsVarious datesNil
Income Tax Act 1961TDS22053825From 2012onwardsVarious datesNil
AP Valuse Added Tax Act 2005VAT16280572From 2015onwardsVarious datesNil
Goods and services Tax ActGST1904966From 2017onwardsVarious datesNil
The Central Sales Tax Act 1956CST10777639From 2013onwardsVarious datesNil
T.S. Municipalities Act 1965Property Tax6673655From 2013onwardsVarious datesNil
Income Tax Act 1961Income Tax6897374From 2017onwardsVarious datesNil

(b) According to the information and explanations given to us and records of the company examined by us the following are disputed dues relating to Wealth tax Duty of Customs and Cess which have not been deposited with the appropriate authorities on account of any dispute.

Name of the StatueNature of the DisputeAmount (Rs)Period to which the amounts relate (F.Y)Forum where the dispute is pending and amount deposited
Central Excise Act 1944Excise Duty3896982/-2008-2009Customs Excise & Service Tax Appelate tribunal south zonal bench Bangalore vide appeal no.C/2303 of 2010. Amt. deposited : Rs.2896982/-
Customs Act 1962Customs Duty1801111/-2008-2009O/o. The Commissioner of Customs Central Excise and Service Tax Hyderabad III Commissionerate vide Appeal No.C/2302 of 2010.
The A.P.VAT Act 2005APVAT840705/-2008-2009Appelate Deputy Commissioner (CT) Secunderabad Division vide Appeal No.S/ 23/09-10/V. Amt. deposited :Rs. 840705/-
The A.P.VAT Act 2005APVAT545677/-2007-2008Appelate Deputy Commissioner (CT) Secunderabad Division. Amt. deposited : Rs.545677/-
The A.P.VAT Act 2005APVAT1809145/-2005-2006WP No.14764/2009 filed with High Court AP. Amt. deposited : Rs.1809145/-

8) As matters described in note 2.12 2.14 and 2.16 to the financial statements and to the financial statements and pursuance of repayment schedule stipulated in the sanction letter the entire amount of borrowing including interest are overdue and continuing default as on 31st March 2019 therefore we are unable to provide periods of default. Details of defaults in repayment of borrowings including interest are given below as per the books of accounts of the company.

Sl. No.Name of the bank/institutionAmount of default (Rs.)
1.UCO Bank153183988
2.Technology Development Board273800664
3.State Bank of India998884007
4.Srei Equipment Finance Ltd115430151
5.Reliance Capital Limited35102000

However though the below amounts are admitted by the Resolution Professional as part of CIRP the company has not made a provision for these amounts in respect of the below financial institutions.

Sl. No.Name of the bank/institutionAmount of default not provided in the books (Rs.)
1.Srei Equipment Finance Ltd321454641
2.Reliance Capital Limited513741645

9) Based upon the audit procedures performed and the information and explanations given by the management the company has not raised moneys by way of initial public offer or further public offer including debt instruments and term Loans. Accordingly the provisions of clause 3 (ix) of the Order are not applicable to the Company and hence not commented upon.

10) Based upon the audit procedures performed and the information and explanations given by the management we report that no fraud by the Company or on the company by its officers or employees has been noticed or reported during the year.

11) 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;

12) In our opinion and according to the information and explanation given to us the Company is not a Nidhi Company. Therefore the provisions of clause 4 (xii) of the Order are not applicable to the Company.

13) In our opinion all transactions with the related parties are in compliance with section 177 and 188 of Companies Act 2013 and the details have been disclosed in the Financial Statements as required by the applicable accounting standards.

14) Based upon the audit procedures performed and the information and explanations given by the management the company has not made preferential allotment or private placement of shares during the year under review according to the requirement of Sec 42 of the Companies Act 2013 and the amount raised have been used for the purposes for which the funds were raised.

15) 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 him. Accordingly the provisions of clause 3 (xv) of the Order are not applicable to the Company and hence not commented upon.

16) In our opinion 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 and hence not commented upon.

For PAVULURI & Co.
Chartered Accountants
Firm Reg. No:012194S
Sd/-
(CA N. RAJESH)
Date : 30.05.2019PARTNER
Place : HyderabadM.No : 223169

Annexure B to the Independent Auditor's Report of even date on the Financial Statements of MIC ELECTRONICS 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 MIC ELECTRONICS LIMITED (the Company) as of March 31 2019 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 ICAI 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 not 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 controls 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 authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised 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.

Basis for Disclaimer of Opinion

According to the information and explanation given to us the Company still has not established the internal financial controls over financial reporting on criteria based on or considering the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. Further the company did not have proper internal audit system during the year commensurate with the size of the company and nature of its business.

Disclaimer of Opinion

Because of the significance of matters described in the basis for a disclaimer of opinion paragraph we are unable to obtain sufficient appropriate audit evidence to provide a basis for our opinion whether the Company had adequate internal financial controls over financial reporting and whether such internal financial controls were operating effectively as at March 31 2019.

We have considered the disclaimer reported above in determining the nature timing and extent of audit tests applied in our audit of the financial statements of the Company and the disclaimer has affected our opinion on the financial statements of the Company and we have issued Disclaimer of opinion on the financial statements.

For PAVULURI & Co.
Chartered Accountants
Firm Reg. No:012194S
Sd/-
(CA N. RAJESH)
Date : 30.05.2019PARTNER
Place : HyderabadM.No : 223169

   


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