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Videocon Industries Ltd - Auditor's Report

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Code: 511389
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166.70 -1.2 (-0.71%)
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Code: VIDEOIND
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AUDITORS





To,

The Members of

VIDEOCON INDUSTRIES LIMITED

1. We have audited the attached Balance Sheet of VIDEOCON INDUSTRIES LIMITED (the Company), as at 30th June, 2013, Statement of Profit and Loss and also the Cash Flow Statement of the Company for the 18 months period ended on that date annexed thereto. These financial statements are the responsibility of the Company`s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the Auditing Standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor`s Report) Order, 2003, issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, on the basis of such checks as considered appropriate and according to the information and explanations given to us during the course of the audit, we give in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books. Proper returns adequate for the purpose of our audit have been received from branches not visited by us. The branch Auditors Reports have been forwarded to us and have been appropriately dealt with;

c) The Balance Sheet, Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account and with the audited returns from the foreign branches;

d) In our opinion, the Balance Sheet, Statement of Profit and Loss and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 (which continue to be applicable in respect of Section 133 of the Companies Act, 2013, in terms of General Circular 15/2013 dated 13th September, 2013, of the Ministry of Corporate Affairs);

e) On the basis of written representations received from the directors as on 30th June, 2013 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 30th June, 2013, from being appointed as a director in terms of Section 274(1)(g) of the Companies Act, 1956;

f) As mentioned in Note No. 37, to the financial statements, the Company has, directly and through its subsidiaries, made investments of Rs. 49,337.50 Million and advanced loans of Rs. 782.74 Million to Videocon Telecommunications Limited (VTL), the subsidiary. VTL had been awarded licenses by the Department of Telecommunications (DoT) to provide Unified Access Service (UAS) in 21 circles in India w.e.f. 25th January, 2008, which were valid for 20 years. VTL had also been allotted spectrum in 20 circles and had launched its commercial operations in 17 circles.

The Hon `ble Supreme Court of India, vide its order and judgment dated 2nd February, 2012 ("Judgment") in two separate writ petitions, quashed the UAS licenses granted on or after 10th January, 2008 pursuant to two press releases issued on 10th January, 2008 and the subsequent allocation of spectrum to licensees which included the 21 UAS licenses issued and allocation of spectrum to VTL.

The Hon`ble Supreme Court of India vide its Judgment had also directed the Central Government to grant fresh UAS licenses and spectrum allocation by auction. The DoT, had issued a Notice inviting applications for auction of spectrum, VTL participated in the said auction and has been awarded the Unified Licenses (Access Services) for 6 circles w.e.f. 16th February, 2013, which are valid for a period of 20 years. VTL has also been allotted spectrum in these 6 circles. VTL is continuing its commercial operations.

VTL has been continuously incurring losses and has huge accumulated losses as at 30th June, 2013. The ability of VTL to continue as a going concern is substantially dependent on its ability to fund its operating and capital funding requirements. VTL is confident of mobilizing the necessary resources for continuing its operations as per the business plan.

However, in view of the accumulated losses of VTL, we are unable to express an opinion on the extent of realisability of aforesaid investments in and advances to VTL. The consequential effect of the above on assets and liabilities as at 30th June, 2013 and the loss for the period ended on that date is not ascertainable.

g) Without qualifying our report we draw attention to Note No. 38(A), to the financial statements, regarding incorporation of the Company`s share, in the operations of the joint ventures based on the statements received from the respective Operator. The Company has received the audited financial statements for the period upto 31st March, 2013 and un-audited financial statements for the period 1st April, 2013 to 30th June, 2013, in respect of Ravva Oil & Gas Field Joint Venture on which we have placed reliance.

h) In our opinion and to the best of our information and according to explanations given to us, the said financial statements subject to our comment in paragraph (f) above, the impact of which on the financial statements of the Company, if any, is unascertainable and read together with the Significant Accounting Policies and notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at 30th June, 2013;

(ii) In the case of the Statement of Profit and Loss, of the loss for the period ended on that date; and

(iii) In the case of the Cash Flow Statement, of the cash flows for the period ended on that date.

For KHANDELWAL JAIN & CO. For KADAM & CO.
Chartered Accountants Chartered Accountants
(Firm Registration No. 105049W) (Firm Registration No. 104524W)
SHIVRATAN AGARWAL U. S. KADAM
Partner Partner
Membership No.: 104180 Membership No.:31055
Place : Mumbai
Date : 29th November, 2013

ANNEXURE TO THE AUDITORS` REPORT

Statement referred to in paragraph 3 of the Auditors` Report of even date to the Members of VIDEOCON INDUSTRIES LIMITED (the Company) on the financial statements for the period ended 30th June, 2013.

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) As per the information and explanations given to us, physical verification of fixed assets, other than those under joint venture, has been carried out at reasonable intervals in terms of the phased programme of verification adopted by the Company and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and the nature of its business.

(c) In our opinion, during the period the Company has not disposed off substantial part of fixed assets.

(ii) (a) As per the information and explanations given to us, the inventories (excluding stock of crude oil lying at extraction site with the Operator) have been physically verified during the period by the management. In our opinion, having regard to the nature and location of stocks, the frequency of the physical verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. As per the information and explanations given to us, the discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

(iii) (a) As per the information and explanations given to us, the Company has not granted or taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

(b) As the Company has neither granted nor taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956, sub-clauses (b), (c), (d), (f) and (g) of Clause (iii) of paragraph 4 of the Order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and for the sales of goods and services. During the course of our audit, we have not observed any continuing failure to correct the major weakness in the internal control systems.

(v) (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956, have been entered in the register required to be maintained under that Section.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956, and exceeding the value of Rupees Five Lakhs, in respect of any party during the period, have been made at prices which are reasonable having regard to prevailing market price at the relevant time.

(vi) The Company has not accepted any deposits from the public within the meaning of the provisions of Section 58A and 58AA or any other relevant provision of the Companies Act, 1956 and rules framed there under.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

(viii) The Central Government has prescribed maintenance of the cost records under Section 209(1)(d) of the Companies Act, 1956, in respect of the Company`s products. As per the information and explanations provided to us, we are of the opinion that prima facie, the prescribed records have been made and maintained. We have however not made a detailed examination of the records with a view to determine whether they are accurate or complete.

(ix) (a) According to the information and explanations given to us and the records examined by us, the Company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees` State Insurance, Investor Education and Protection Fund, Income tax, Sales tax, Wealth tax, Service tax. Custom duty, Excise duty, Cess and other statutory dues wherever applicable. According to the information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at 30th June, 2013, for a period of more than six months from the date they became payable.

(b) According to the records of the Company examined by us and information and explanations given to us, the particulars of dues of Sales tax, Income tax, Wealth tax, Service tax, Custom duty, Excise duty, Cess which have not been deposited on account of any disputes, are given below:

Name of the Statute Nature of Dues Rs. in Million Forum where dispute is pending
1. Customs Act, 1962 Custom Duty and Penalties 315.31 Supreme Court
15.15 High Court
50.24 CESTAT
4.37 Commissioner (Appeals)
72.46 Commissioner
15.49 Joint Commissioner
18.28 Deputy Commissioner
7.75 Asst. Commissioner
2. Central Excise Act, 1944 Excise Duty and Penalties 1.11 Supreme Court
27.81 High Court
449.34 CESTAT
3.61 Tribunal
0.96 Commissioner (Appeals)
338.93 Commissioner
25.50 Addl. Commissioner
0.85 Deputy Commissioner
110.46 Asst. Commissioner
3. Finance Act, 1994 (Service Tax Provisions) Service Tax and Penalties 24.68 CESTAT
0.52 Commissioner (Appeals)
14.09 Commissioner
1.94 Addl. Commissioner
4.18 Asst. Commissioner
0.11 Superintendent
4. Central Sales Tax Act, 1956 and State Sales Tax Acts of various States Sales Tax 0.46 Supreme Court
0.85 High Court
18.98 Tribunal
10.30 Commissioner
100.44 Sr. Joint Commissioner
154.68 Joint Commissioner - Sales Tax (Appeals)
18.58 Joint Commissioner - Commercial Tax
0.72 Joint Commissioner
17.13 Joint Commissioner (Appeals)
0.24 Addl. E&T Commissioner
4.19 Deputy Commissioner (Appeals)
0.68 Deputy Commissioner
389.09 Addl. Commissioner
1.50 Addl. Commissioner (Appeals)
9.53 Deputy Commissioner of Commercial Tax
15.05 Asst. Commissioner (Appeals)
11.34 Asst. Commissioner of Commercial Tax
0.27 Asst. Commercial Taxation Officer
0.39 Sales Tax Officer/Commercial Taxation Officer
5. Income Tax Act, 1961 Income Tax 155.23 High Court
209.36 Appellate Tribunal
2,784.82 Commissioner (Appeals)
6. Navi Mumbai Municipal Corporation Cess 1,012.64 High Court

(x) There are no accumulated losses as at 30th June, 2013. The Company has not incurred any cash losses during the period covered by our audit and the immediately preceding financial year.

(xi) Based on our audit procedures and the information and explanations given to us, we observed that, the Company has defaulted in repayment of loans and payment of interest to banks and financial institutions is summarized below:

Particulars Rs. in Million Delay in Days
Principal Repayment 20,731.85 1 to 89 Days
Interest 19,515.97 1 to 89 Days

(xii) Based on our examination of the records and the information and explanations given to us, the Company has not granted any loans and/or advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund company or nidhi/mutual benefit fund/society. Therefore the Clause (xiii) of paragraph 4 of the Order is not applicable to the Company.

(xiv) The Company has maintained proper records of transactions and contracts in respect of dealing and trading in shares, securities, debentures and other investments and timely entries have generally been made therein. All shares, debentures and other securities have been held by the Company in its own name except to the extent of the exemption granted under Section 49 of the Companies Act, 1956.

(xv) According to the information and explanations given to us, the terms and conditions of guarantees given by the Company for loans taken by others from banks or financial institutions are prima facie not prejudicial to the interest of the Company.

(xvi) According to the information and explanations given to us, the term loans raised during the period were applied, on an overall basis, for the purposes for which the loans were obtained.

(xvii) According to the information and explanations given to us and on our overall examination of the Balance Sheet of the Company, we report that the Company has not used funds raised on short term basis for long term investments.

(xviii) The Company has not made any preferential allotment of shares during the period to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The Company has not issued any secured debentures during the period.

(xx) During the period, the Company has not raised any money by way of public issue.

(xxi) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the period.

For KHANDELWAL JAIN & CO. For KADAM & CO.
Chartered Accountants Chartered Accountants
(Firm Registration No. 105049W) (Firm Registration No. 104524W)
SHIVRATAN AGARWAL U. S. KADAM
Partner Partner
Membership No.: 104180 Membership No.:31055
Place : Mumbai
Date : 29th November, 2013
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