To the Members of Zicom Electronic Security Systems Limited
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the standalone financial statements of Zicom Electronic SecuritySystems 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 ended on thatdate and notes to the financial statements including a summary of significant accountingpolicies and other explanatory information (hereinafter referred to as the FinancialStatements). Subject to
1) Refer Note No. 6 of Audited Standalone Financial Statement of the Company whichstates that the Company has not provided for interest amounting to Rs. 2794.23 Lakhs forthe year on its outstanding loans from Banks and Financial Institution. The Company hasalso reversed outstanding dues from Banks and Financial Institution amounting to Rs.6038.86 Lakhs as the Company is in advanced negotiation with bankers for one timesettlement (OTS) of its entire dues. Therefore in the opinion of the management liabilityas reflected in the financial statement is sufficient to meet proposed OTS. However in theabsence of OTS approval letter from each Lender confirming the final OTS amount theliability as reflected in the financial statement may have consequential impact on Loss ofthe Company and Borrowings to the extent of above amount.
2) Refer Note No. 7 of Audited Standalone Financial Statement of the Company whichstates that the Company continues to show goodwill in its books which was on account ofacquisition of a then subsidiary of the Company in 2010 amounting to Rs. 909 Lakhs. Asthere are no future economic benefits expected from the said goodwill the same may leadto consequential impact on the Loss of the Company and Goodwill to the above extent.
3) Refer Note No. 8 of Audited Standalone Financial Statement of the Company whichstates that the Company has been incurring constant losses the Company's accumulatedlosses aggregate to Rs. 36800 Lakhs resulting in complete erosion of its net worth.Further as of that date company's liabilities exceeded its assets. These factors alongwith other matters as set forth in said note raise substantial doubt about the company'sability to continue as a going concern in the foreseeable future. However the company'sfinancial statement has been prepared on going concern basis.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 (the Act) in the manner so required and give a trueand fair view in conformity with the India Accounting Standards prescribed under Section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended (Ind As) and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2019 the loss and totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India (ICAI) togetherwith the ethical requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules made thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theCode of Ethics issued by the ICAI. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion on the financialstatements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment 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 financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the following matter to be the Key audit matter to be communicated in ourReport.
|Key Audit Matter ||Auditor's Response |
|Refer Note No. 9 of Audited Standalone Financial Results of the Company which states that the Company during the year has written off/ provided for (i) Trade Receivable and Advance to supplier amounting to Rs. 2257.04 Lakhs and Rs. 1034.08 Lakhs in view of doubtful of recovery/performance and one time settlement agreements with certain parties. (ii) The Company has identified obsolete/non moving stock and the same has been valued at Net realisable value on account of the said exercise an amount of Rs. 1230.15 Lakhs has been written off. (iii) The Company identified and sold its obsolete/non moving/ non working condition stock costing Rs. 877.85 Lakhs at scrap value leading to loss in the year under review. ||The Company had been trying constantly for recovery of its Trade receivable and Advance to supplier however few of the said parties have gone into liquidation and with few the Company has agreed for one time settlement at a discounted amount as well and hence on conservative approach the Company has identified such parities and Written off/ Provided their balances amounting to Rs. 2257.04 Lakhs. The Company in view of reduced sales and technological upgrades had few dead non moving and slow moving inventory which has been valued at Net realizable value leading to a loss of Rs. 1230.15 Lakhs. The Company has sold its obsolete/non moving/ non working at a scarp value there by the Company has incurred a loss of Rs. 877.57 Lakhs. |
Information Other than the Financial Statements and Auditor's
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the financial statements and our auditor's report thereon. Our opinion on thefinancial statements does not cover the other information and we do not express any formof assurance conclusion thereon. In connection with our audit of the financial statementsOur responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained during the course of our audit or otherwise appears to be materiallymisstated. 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 havenothing to report in this regard.
Management's Responsibility for the Standalone Financial
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 financialstatements that give a true and fair view of the financial position financialperformance total Comprehensive Income changes in equity and cash flows of the Companyin accordance with the Ind AS and other accounting principles generally accepted in India.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing 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 financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error. In preparing the financial statements management 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 management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so. The Board of Directors are alsoresponsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the 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 financial statements. As a part of an audit in accordance with the SAs weexercise professional judgment and maintain professional scepticism throughout the Audit.
Identify and assess the risk of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis of our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under Section143(3)(i) of the Act we are also responsible for expressing an opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting 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. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements thatindividually 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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards. From the matters communicated withthose charged with governance we determine those matters that were of most significancein the audit of the financial statements of the current period and are therefore the keyaudit matters.
We describe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.
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 Companies Act 2013 we give in the Annexure A a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
2. As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the 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 Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of accounts.
d) In our opinion the aforesaid standalone financial statements comply with the Ind Asspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
e) On the basis of the written representations received from the Directors as on March31 2019 taken on record by the Board of Directors none of the Directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct.
f) 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. Our report expresses a modified opinion on theadequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of Section 197(6) of the Act as amended Rule 11 of theCompanies (Audit and Auditors) Rules 2014 in our opinion and to the best of ourinformation and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements.
ii. The Company does not have long-term contracts including derivative contractsrequiring provision for material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For S M M P & Associates
Firm Registration No. 120438W
Membership No. 139852
Mumbai dated May 28 2019
Annexure A to the Auditors' Report
(Referred to in paragraph V (1) of our report of even date)
In terms of the information and explanations given to us and the books and recordsexamined by us and on the basis of such checks as we considered appropriate we furtherreport as under :
1. Property Plant and Equipment's
a) As per the information and explanation given to us the Company has maintained properrecords showing full particulars including quantitative details and situation ofProperty Plant and Equipment's.
b) As explained to us the Property Plant and Equipment's have been physicallyverified by the management as per a phased programme of verification. In our opinion thefrequency of verification is reasonable having regard to the size of the Company and thenature of its fixed assets. The discrepancies noticed on such verification were notmaterial and have been properly dealt with in the Company's books of accounts.
c) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.
As explained to us the management has conducted physical verification of inventory atreasonable intervals during the year. In our opinion the procedures of physicalverification of inventory followed by the management needs to be strengthened in relationto the size of the Company and the nature of its business. In our opinion the Company ismaintaining proper records of inventory. The discrepancies noticed on such verificationbetween physical inventories and the book records which were material in relation to theoperations of the Company have been properly dealt with in the Company's books of account.
3. Loans to parties of Directors' interest
According to the information and explanations provided to us and as per the recordsexamined by us during the year the Company has not granted any unsecured loans to bodiescorporate representing the parties listed in the register maintained under Section 189 ofthe Act.
4. Loans/Guarantees/Investments in / Provision of Security to certain parties
In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Act with respectto the loans and investments made.
5. Acceptance of Deposits
According to the information and explanations given to us the Company has not accepteddeposits as per the directives issued by Reserve Bank of India and the provisions ofSections 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder.
6. Maintenance of Cost Records
The Central Government has prescribed maintenance of cost records under section (1) ofsection 148 of the Act. The Company during the year under review does not have anymanufacturing facility and hence the said clause was not applicable.
7. Undisputed & Disputed Statutory Dues
a) According to the information and explanations given to us and as per the recordsverified by us the Company generally not regular in depositing the undisputed statutorydues involving Provident Fund Investor Education and Protection Fund Professional TaxEmployee State Insurance Customs Duty Value Added Tax Income Tax Service Tax CustomsDuty Goods & Service Tax and other statutory dues with the appropriate authoritiesand the arrears under the above heads which were due for more than six months from thedate they become payable as at the close of the year are 1)Value Added Taxes amounting toRs. 37.90 Lakhs
2) Dividend Distribution Tax amounting to Rs. 49.35 Lakhs and
3) Income Tax (TDS) Rs. 24.36 Lakhs
4) Provident Fund Rs. 0.05 Lakhs .
b) As per explanations provided to us and according to the records of the Company thefollowing are the particulars of disputed dues on account of Income Tax that have not beendeposited:
|Name of the Statute ||Nature of Dues ||Amount ||Period to which the amount relates ||Forum where the dispute is pending |
| || ||(Rs. in Lakhs) || || |
|Income Tax ||Disallowance of Expenses and penalty thereon ||62.16 ||FY 13-14 ||Commissioner of Income Tax (Appeals) |
|Sales Tax ||Disallowance of Input Tax Credit ||4.20 ||FY 11-12 ||Joint Commissioner Of Appeals |
|Sales Tax ||Disallowance of Input Tax Credit ||10.87 ||FY 14-15 ||Joint Commissioner Of Appeals |
|Sales Tax ||Disallowance of Input Tax Credit ||30.54 ||FY 14-15 ||Joint Commissioner Of Appeals |
|Entry tax ||Disallowance of Credit ||1.09 ||FY 14-15 ||Joint Commissioner Of Appeals |
|Income Tax ||Transfer pricing adjustment and penalty there on ||26.15 ||FY 11-12 ||Commissioner of Income Tax (Appeals) |
|Income Tax ||Transfer pricing adjustment and penalty there on ||66.04 ||FY 13-14 ||Commissioner of Income Tax (Appeals) |
8. Loans from Banks / Financial Institutions / Government / Debentures
Based on our audit procedures books of account and as explained to us we are of theopinion that during the year the Company has defaulted in repayment of dues to any banksas well as financial institution the same is given in table below. Further No debentureswere issued or were outstanding during the year. Further as stated in the IndependentAuditors report that the Company has not provided for interest amounting to Rs. 2794.23Lakhs for the year on its outstanding loans from Banks and Financial Institution. TheCompany has also reversed outstanding dues from Banks and Financial Institution amountingto Rs. 6038.86 Lakhs as the Company is in advanced negotiation with bankers for one timesettlement (OTS) of its entire dues. Therefore in the opinion of the management liabilityas reflected in the financial statement is sufficient to meet proposed OTS.
| ||(Rs. Lakhs) |
|Name of Bank ||Amount |
|Industrial Development Bank of India ||4729.32 |
|Bank of Baroda ||2690.49 |
|Union Bank Of India ||1793.79 |
|Allahabad Bank ||2443.54 |
|Central Bank of India ||3887.99 |
|The Saraswat Co op Bank Ltd ||2355.28 |
|DBS Bank ||807.43 |
|Total Amount ||18707.86 |
9. Proceeds of Public issue (including debt instruments) /Term Loans
The Company has not raised any money during the year through initial / further publicoffer (including debt instruments). Also the Company has not availed any term loansduring the current or earlier years and hence the matter of application of the samedoesn't arise.
10. Frauds on or by the Company
During the course of our examination of the books and records of the Company carriedout in accordance with the generally accepted auditing practices in India and accordingto the information and explanations given to us we have neither come across any instanceof fraud on or by the company or its officers noticed or reported during the year norhave we been informed of such case by the management.
11. Managerial Remuneration
During under our review the Company is provided managerial remuneration to CompanySecretary Section 197 read with Schedule V.
12. Nidhi Companies
The Company is not a Nidhi company during the year under review and hence the criteriaas stipulated under Nidhi Rules 2014 is not applicable to the Company.
13. Related Party Transactions
As per the information and explanations given during the course of our verification inour opinion all transactions with the related parties made by the Company were incompliance with Sections 177 and 188 of the Act to the extent applicable to the Companyduring the year. The relevant details in respect of the same have been appropriatelydisclosed as per the requirements of the Accounting Standard.
14. Preferential Issue
During the year the Company has not made any preferential allotment or privateplacement of shares or convertible debentures and hence the requirements of Section 42 ofthe Act are not applicable.
15. Non-cash Transactions with Directors etc.
As per the information and explanations provided to us during the year the Companyhas not entered into any non-cash transactions with directors or persons connected withthe directors within the purview of Section 192 of the Act.
16. Provisions of 45-IA of the Reserve Bank of India Act1934
As per the information and explanations provided to us and based on the overalloperations of the Company the Company is a Non-banking Finance Company within thedefinition of Section 45-IA of the Reserve Bank of India Act 1934 and has been registeredas such with the RBI.
For S M M P & Associates
Firm Registration No. 120438W
Membership No. 139852
Mumbai dated May 28 2019
Annexure B to the Auditors' Report
(Referred to in paragraph V(2)(g) of our report of even date)
Report on the Internal Financial Controls under Section 143(3)(i) of the Companies Act2013 (the Act) We have audited the internal financial controls over financialreporting of Zicom Electronic Security Systems Limited (the Company) as ofMarch 31 2019 in conjunction with our audit of the financial statements of the Companycomprising Balance Sheet as at March 31 2019 the Statement of Profit and Loss (includingother Comprehensive Income) the Statement of Changes in Equity and the Statement of CashFlows for the year ended on that date and notes to the financial statements including asummary of significant accounting policies and other explanatory information (hereinafterreferred to as the Financial Statements).
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 (the ICAI). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Auditors' 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 Reportingand the Standards on Auditing issued by the ICAI deemed to be prescribed under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls both applicable to an audit of Internal Financial Controls and bothissued by the ICAI. Those standards and the Guidance Note 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 included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement 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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company;
2) Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and
3) Provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial
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.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were not operating effectively as per the size of the Company andnature of its business in respect of as at March 31 2019in respect of Sales PurchaseInventory Trade Receivable Trade Payable Advance to supplier and Advance from customerbased on the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.
For S M M P & Associates
Firm Registration No. 120438W
Membership No. 139852
Mumbai dated May 28 2019