THE MEMBERS OF PRABHAT TELECOMS (INDIA) LIMITED Report on the Audit of the StandaloneFinancial Statements
We have audited the accompanying standalone financial statements of Prabhat Telecoms(India) Limited ("the Company") which comprise the Balance Sheet as at March31 2019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows for the year then endedand a summary of the significant accounting policies and other explanatory information(hereinafter referred to as "the Standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the "Basis forQualified Opinion" the aforesaid financial statements give the information requiredby the Companies Act 2013 ("the Act') in the manner so required and give a true andfair view in conformity with the Indian Accounting Standards prescribed under section 133of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 its loss changes in equity and itscash flow for the year ended on that date.
Basis for Qualified Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under section 143 (10) of the Companies Act 2013.Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. Weare independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India together with the ethical requirements thatare relevant to our audit of the standalone financial statements under the provisions ofthe Companies Act 2013 and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our qualified opinion on the standalone financial statements.
Balances in respect of certain secured and unsecured loans trade payables tradereceivables other liabilities and advances are subject to confirmation reconciliationand adjustment if any in the books of accounts. Impact on profit/loss if any could notbe ascertained. Therefore no provision is been made in respect of above stated items.
Key Audit Matters
Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the standalone financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. We have determined the matters described below to be the key audit mattersto be communicated in our report.
|Key Audit Matter Accuracy of recognition measurement presentation and disclosures of revenues and other related balances in view of adoption of Ind AS (Indian Accounting Standard) applicable from 1st April 2018. ||Auditor's Response Principal Audit Procedures |
|The application of the new accounting standard from current financial year involves certain key judgments relating to identification of distinct performance obligations the appropriateness of the basis used to measure revenue recognized over a period and disclosures including presentations of balances in the financial statements. ||We assessed the Company's internal process to identify the impact of adoption of the accounting standards. Our audit approach consisted testing of the design and operating effectiveness of internal controls and procedures. We Evaluated the design of internal controls relating to implementation of the accounting standards. Tested the relevant information accounting systems and change relating to change in standards and related information used in recording and disclosing accounting information in accordance with the new accounting standard. Performed analytical procedures and test of details for reasonableness of incurred and estimated efforts. |
|Refer Notes to the standalone financial statements. || |
|Receivables outstanding for more than 3 years ||Principal Audit Procedures |
|Company has debtor's outstanding for a period more than of 3 years which have not been adequately provided for by way of provision against them in books of accounts. However Management is of the view that the same are in the process of recoverability and are not required to be written-off from the Books. ||We assessed the reasonableness of the Management opinion by way of confirmations received to us from the parties. We also recommendto boost the process of recovery to depict the more real position of the quantum of receivables. |
|Evaluation of Uncertain Tax Positions ||Principal Audit Procedures |
|The Company has material uncertain tax positions including matters under dispute which involves significant judgement to determine the possible outcome of these disputes. ||Obtained details of complete tax assessments and demands for the year ended 31st March 2019 from management. We involved our internal experts to review the management's underlying assumptions in estimating the tax provision and the possible outcome of this disputes. We also considered legal precedence and other rulings in evaluating management's position on these uncertain tax positions. |
|One-Time Settlement Scheme for NPA Classified Loan Account ||Principal Audit Procedures |
|Banks has classified Company loan account as Non-Performing Assets. However Company Management is in the process of clearing the dues with OTS Plan & Management is confident for the positive revert from banks. ||We have reviewed the process & negotiations undergoing between the company & banks. We recommended to boost up the process and resolve the same. |
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Management is responsible for the preparation of the other information.The other information comprises the information included in management analysis companyperformance report but does not include the standalone financial statements and ourauditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We want tostate regarding the matter of One Time Settlement of loan account which was classified bybanks as NPA also one of the lead bank approached NCLT. The company management said thatthey are in process of resolving the same through OTS Scheme.
Management's Responsibility for the Standalone Financial Statements
The Management of the Company is responsible for the matters stated in Section 134(5)of the Companies Act 2013 ("the Act") with respect to the preparation of thesefinancial statements that give a true and fair view of the financial position financialperformance including other comprehensive income and changes in equity (reserves) of theCompany in accordance with the Ind AS and other accounting principles generally acceptedin India.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements Management of Company is responsiblefor assessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless the Management of Company either intends to liquidate the Company or tocease operations or has no realistic alternative but to do so.
The Management of Company are responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Companies Act 2013 we are also responsible for expressing our opinionon whether the company has adequate internal financial controls system in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
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 ofthe Act we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
(2) As required by Section 143 (3) of the Act based on our audit we report that:
a. We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b. In our opinion proper books of account as required by law have been kept by thecompany so far as it appears from our examination of those books.
c. The Balance Sheet the Statement of Profit and Loss including other comprehensiveincome and Statement of Changes in Equity (reserves)dealt with by this Report are inagreement with the books of account.
d. In our opinion the aforesaid financial statements comply with the Indian Accounting
Standards prescribed under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules2014.
e. 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 B" and f. With respect to the other matters to beincluded in the Auditor's Report in accordance with Rule 11 of the Companies (Audit andAuditors) Rules 2014 in our opinion and to the best of our information and according tothe explanations given to us:
i. The company does not have any pending litigation which would impact its financialposition
ii. The company did not have any long term contracts including derivatives contractsfor which there were any material foreseeable losses.
iii. There has been no delay in transferring the amount required to be transferred inaccordance with the relevant provisions of the Companies Act 2013 and the rules madethereunder to the Investor Education and Protection Fund by the Company.
For Harish Arora& Associates Chartered Accountants
CA Harish Arora M.No. 407420 FRN 015226C
Date: 31.05.2019 Place: Mumbai
"Annexure A" to Independent Auditors' Report
(Referred to in Paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of our report of even date on the accounts of PrabhatTelecoms (India) Limited for the year ended March 31 2019)
i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of its fixed assets.
(b) According to the information and explanations given to us physical verification ofproperty plant & equipment is being conducted in a phased manner by the managementincluding intangible assets over a period of three years which in our opinion isreasonable having regard to the size of the Company and nature of its business and nomaterial discrepancies were noticed on such verification to the extent verification wasmade during the year.
(c) The title deeds of the immovable properties are held in the name of the company
ii) As explained to us physical verification of inventory has been conducted by themanagement under Perpetual Inventory Programme at regular intervals during the year exceptfor stock of work in progress and finished goods in few units where these are verified atthe year end with reference to the inspection reports and production reports of theProduction Planning Department of such units.. In regard to stocks lying withcontractors/fabricators and other parties confirmations were received in few cases only.In our opinion the frequency of verification is reasonable .No material discrepancies hasbeen reported.
iii) According to the information given to us the Company has not granted any loanssecured or unsecured to companies firms Limited Liability Partnerships or other partiescovered in the register maintained under section 189 of the Companies Act 2013. Thereforeclauses (iii) (a) (iii) (b) and (iii) (c) of Paragraph 3 of the Order are not applicableto the Company.
iv) In respect of loans investments guarantees and security the Company has compliedwith the provisions of section 185 and 186 of the Act.
v) According to the information and explanations given to us the Company has notaccepted any deposits from public during the year within the meaning of sections 73 to 76or any other relevant provisions of the Companies Act 2013 and the
Companies (Acceptance of Deposits) Rules 2014 and rules framed thereunder asapplicable.
vi) We have broadly reviewed the books of account and records maintained by the Companypursuant to the Companies (Cost Records and Audit) Rules 2014 prescribed by the CentralGovernment under section 148(1) of the Companies Act 2013 and are of the opinion thatprima facie the prescribed accounts and records have been made and maintained. We havehowever not made a detailed examination of the cost records with a view to determinewhether they are accurate and complete.
vii) (a) According to the information and explanations given to us and according to therecords produced before us for verification in our opinion the Company is generallyregular in depositing with appropriate authorities undisputed statutory dues includingProvident Fund Employees' State Insurance Income Tax duty of Customs Goods &Service taxCess and any other material statutory dues as applicable to it.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees State Insurance Income Tax duty ofCustoms Goods& Service taxCess and any other material statutory dues wereoutstanding as at March 31 2019 for a period of more than six months from the date theybecame payable.
(c) According to the information and explanations given to us the particulars ofIncome Tax Sales Tax Service Tax duty of Customs duty of Excise and Value Added TaxGoods & Service Taxwhich have not been deposited on account of dispute are as under:
|Nature of Statute ||Nature of dues ||Forum where dispute is pending ||Period to which the amount relates ||Amount Disputed |
|Income Tax ||Income Tax ||CIT Appeals ||AY 11-12 ||90041431 |
| || || ||AY 12-13 || |
| || || ||AY 13-14 || |
| || || ||AY 14-15 || |
| || || ||AY 16-17 || |
| || || ||AY 17-18 || |
|Sales Tax Act ||Value ||Deputy ||AY 11-12 ||777166364 |
|& VAT Laws ||AddedTax ||Comissioner ||AY 13-14 || |
| || ||(Appeal) ||AY 14-15 || |
| || || || ||AY 15-16 || |
|Sales Tax Act & VAT Laws ||Central Tax ||Sales ||Deputy ||AY 11-12 ||168224083 |
| || || ||Commissioner ||AY 13-14 || |
| || || ||(Appeal) ||AY 14-15 || |
| || || || ||AY 15-16 || |
viii) According to the records of the Company examined by us and the information andexplanations given to us the Company has not defaulted in repayment of loans orborrowings to financial institutions banks or government. The Company has not issued anydebentures.
ix) Provisions of clause no. (ix) relating to utilization of moneys raised by way ofinitial public offer or further public offer including debt instruments and term loans isnot applicable to the Company since these matters are dealt with at corporate level
x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us by the management no fraud bythe Company or any fraud on the Company by its officers or employees has been noticed orreported during the year.
xi) In our opinion & 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 Act.
xii) Provisions of clause no. (xii) of the Order regarding Nidhi Company is notapplicable to the Company;
xiii) According to the records of the Company examined by us and the information andexplanations given to us during the year the related party transactions have been enteredat arm's length basis in ordinary course of business and are in compliance with section177 and 188 of the Companies Act 2013 and have been disclosed in the FinancialStatements.
xiv) Based on our examinations and the information and explanations given to us theCompany has not made any preferential allotment or private placement of shares or fully orpartly convertible debentures during the year. Therefore provision of clause no. (xiv) isnot applicable to the Company.
xv) The Company has not entered into any non-cash transactions with directors orpersons connected with him as envisaged under section192 of the Act. xvi) According to theinformation and explanation given to us the Company is not required to be registeredunder section 45-IA of the Reserve Bank of India. Act 1934.
For Harish Arora & Associates Chartered Accountants S/d
CA Harish Arora M. No. 407420 FRN 015226C
Date: 31.05.2019 Place: Mumbai
"ANNEXURE B" TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THEFINANCIAL STATEMENTS OF Prabhat Telecoms (India) Limited .
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of PrabhatTelecoms (India) Limited as of March 31 2019 in conjunction with our audit of thestandalone 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 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 company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.
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") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated 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 depend on the auditor's judgement 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 audit opinion on the Company's internal financial controls systemover 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 authorisation 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 Qualified Opinion
The Company's internal financial controls relating to review of Unsecured loans TradeReceivables Trade Payables and Other Current Assets and Advances for appropriateprovisioning did not operate effectively which resulted in non-ascertainment of adequateprovision pertaining to such receivables & payables.
In our opinion except for the effects of the described in the Basis for QualifiedOpinion paragraph above the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
For Harish Arora& Associates Chartered Accountants S/d CA Harish Arora M.No. 407420FRN 015226C
Date: 31.05.2019 Place : Mumbai