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Auditor Report of Elgi Equipments Ltd.

Mar 31, 2016

We have audited the accompanying Standalone financial statements of ELGI EQUIPMENTS LIMITED ("the Company") which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone 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 and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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.

Auditor''s Responsibility

Our responsibility is to express an opinion on these Standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. 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. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances.An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, and its Profit/Loss and its Cash Flow for the year ended on that date.

Emphasis of Matter:

We draw attention to Note No. 36 to the financial statements. The Company BELAIR SAS subsidiary has filed for protective action with the Commercial Court in Annecy, France. Pursuant to this the court has appointed an Administrator on April 26, 2016. The subsidiary is no longer under the Control of the Company and the Company is under Legal redress as per French Laws. No provision has been considered in the value of investment in the subsidiary as the management is of the view that the same would be evaluated and provided depending upon the progress of the above said legal proceedings in France.

Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order"), as amended, issued by the Central Government of India in terms of sub-Section (11) of section 143 of the Act, we give in the "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

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 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 it appears from our examination of those books;

c. the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account

d. in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e. on the basis of written representations received from the directors as on March 31, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

f. 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 "Annexure B".

g. 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 in its financial statements – Refer Note 27 to the financial statements;

ii. The Company did not have material foreseeable losses,on its long-term contracts including derivative contracts as at 31st March 2016.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

"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, 2016:

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

(b) All the assets have been physically verified by the Management during the year. No material discrepancies were noticed on such verification.

(c) The title deeds of immovable properties are held in the name of the company.

2) (a) The management has conducted the physical verification of inventory at reasonable intervals.

b) The discrepancies noticed on physical verification of the inventory as compared to books records which has been properly dealt with in the books of account were not material.

3) The Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the Register maintained under section 189 of the Act.

4) In our opinion and according to the information and explanations given to us, the Company has not granted any loans,or provided any guarantees,or security to the parties covered under Section 185 of the Act. However the Company has made investments, provided guarentees and loans to its Wholly Owned Subsidiaries, which are within the limits specified in Section 186 of the Companies Act,2013

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) Pursuant to the rules made by the Central Government of India, the Company is required to maintain cost records as specified under Section 148(1) of the Act in respect of its products. We have broadly reviewed the same, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine 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 been generally 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. According to the information and explanations given to us, no undisputed amounts payable in respect of the above were in arrears as at March 31, 2016 for a period of more than six months from the date on when they become payable.

(b) According to the information and explanations given to us, and the records of the Company examined by us, the disputed Central Excise and Sales Tax aggregating Rs. 99 million have not been deposited since matters are pending with relevant forum as indicated below:

(Rs. In Million)

Nature of the Demand Name of the Statute dues Amount

Central Excise Act Excise Duty 9.40

Finance Act (Service Tax) Service Tax 2.57

- DO - - DO - 8.99

Total 20.96

Central Sales Tax Act & TNVAT Central Sales Tax and 74.75 Local Tax (Including VAT)

- DO - - DO - 36.18

Total 110.93

Grand Total 131.89

Name of the Statute Period to which Forum where Amount Relates dispute is Pending

Central Excise Act 1990, 2000-2002, Departmental 2011 Authorities

Finance Act 2012 CESTAT -TRIBUNAL

- DO - 2012-2015 Departmental Authorities

Central Sales Tax Act 2011-12, 2012-13. High Court

- DO - 1987-88, 1988-89, Tribunal 1994-97, 2002-03 & 2007-08

8) In our opinion and according to the information and explanations given to us and the records of the Company examined by us, the Company has not defaulted in the repayment of dues to any financial institution or banks. The Company has not issued any debentures.

9) Based upon the audit procedures performed and the information and explanations given by the management, the Company has not raised moneies by way of initial public offer or further public offer including debt instruments and term Loans.

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 no fraud 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, the Company is not a Nidhi Company. Therefore, the provisions of clause 3 (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 standard AS 18 and Related Party Disclosures specified under Sec. 133 of the Act.

14) Based upon the audit procedures performed and the information and explanations given by the management, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, the provisions of clause 3 (xiv) of the Order are not applicable to the Company.

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.

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.

For RJC ASSOCIATES Chartered Accountants

Firm Regn.No. 003496S

R. JAYACHANDRAN

Place :Coimbatore Partner

Date :27/05/2016 Membership No.021848


Mar 31, 2016

We have audited the accompanying Standalone financial statements of ELGI EQUIPMENTS LIMITED ("the Company") which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone 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 and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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.

Auditor''s Responsibility

Our responsibility is to express an opinion on these Standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. 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. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances.An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, and its Profit/Loss and its Cash Flow for the year ended on that date.

Emphasis of Matter:

We draw attention to Note No. 36 to the financial statements. The Company BELAIR SAS subsidiary has filed for protective action with the Commercial Court in Annecy, France. Pursuant to this the court has appointed an Administrator on April 26, 2016. The subsidiary is no longer under the Control of the Company and the Company is under Legal redress as per French Laws. No provision has been considered in the value of investment in the subsidiary as the management is of the view that the same would be evaluated and provided depending upon the progress of the above said legal proceedings in France.

Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order"), as amended, issued by the Central Government of India in terms of sub-Section (11) of section 143 of the Act, we give in the "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

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 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 it appears from our examination of those books;

c. the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account

d. in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e. on the basis of written representations received from the directors as on March 31, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

f. 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 "Annexure B".

g. 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 in its financial statements – Refer Note 27 to the financial statements;

ii. The Company did not have material foreseeable losses,on its long-term contracts including derivative contracts as at 31st March 2016.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

"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, 2016:

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

(b) All the assets have been physically verified by the Management during the year. No material discrepancies were noticed on such verification.

(c) The title deeds of immovable properties are held in the name of the company.

2) (a) The management has conducted the physical verification of inventory at reasonable intervals.

b) The discrepancies noticed on physical verification of the inventory as compared to books records which has been properly dealt with in the books of account were not material.

3) The Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the Register maintained under section 189 of the Act.

4) In our opinion and according to the information and explanations given to us, the Company has not granted any loans,or provided any guarantees,or security to the parties covered under Section 185 of the Act. However the Company has made investments, provided guarentees and loans to its Wholly Owned Subsidiaries, which are within the limits specified in Section 186 of the Companies Act,2013

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) Pursuant to the rules made by the Central Government of India, the Company is required to maintain cost records as specified under Section 148(1) of the Act in respect of its products. We have broadly reviewed the same, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine 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 been generally 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. According to the information and explanations given to us, no undisputed amounts payable in respect of the above were in arrears as at March 31, 2016 for a period of more than six months from the date on when they become payable.

(b) According to the information and explanations given to us, and the records of the Company examined by us, the disputed Central Excise and Sales Tax aggregating Rs. 99 million have not been deposited since matters are pending with relevant forum as indicated below:

(Rs. In Million)

Nature of the Demand Name of the Statute dues Amount

Central Excise Act Excise Duty 9.40

Finance Act (Service Tax) Service Tax 2.57

- DO - - DO - 8.99

Total 20.96

Central Sales Tax Act & TNVAT Central Sales Tax and 74.75 Local Tax (Including VAT)

- DO - - DO - 36.18

Total 110.93

Grand Total 131.89

Name of the Statute Period to which Forum where Amount Relates dispute is Pending

Central Excise Act 1990, 2000-2002, Departmental 2011 Authorities

Finance Act 2012 CESTAT -TRIBUNAL

- DO - 2012-2015 Departmental Authorities

Central Sales Tax Act 2011-12, 2012-13. High Court

- DO - 1987-88, 1988-89, Tribunal 1994-97, 2002-03 & 2007-08

8) In our opinion and according to the information and explanations given to us and the records of the Company examined by us, the Company has not defaulted in the repayment of dues to any financial institution or banks. The Company has not issued any debentures.

9) Based upon the audit procedures performed and the information and explanations given by the management, the Company has not raised moneies by way of initial public offer or further public offer including debt instruments and term Loans.

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 no fraud 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, the Company is not a Nidhi Company. Therefore, the provisions of clause 3 (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 standard AS 18 and Related Party Disclosures specified under Sec. 133 of the Act.

14) Based upon the audit procedures performed and the information and explanations given by the management, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, the provisions of clause 3 (xiv) of the Order are not applicable to the Company.

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.

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.

For RJC ASSOCIATES Chartered Accountants

Firm Regn.No. 003496S

R. JAYACHANDRAN

Place :Coimbatore Partner

Date :27/05/2016 Membership No.021848


Mar 31, 2015

1. We have audited the accompanying standalone financial statements of Elgi Equipments Limited ("the Company"), which comprise the Balance sheet as at 31st March 2015, the statement of Profit & Loss and the Cash Flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

2. The Company''s Board of Directors are responsible for the matters stated in Section 134(5) of the Companies Act,2013 ("the Act") with respect to the preparation and presentation of these standalone financial statements that give a true & fair view ofthe financial position, financial performanceand cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 ofthe Act, read with Rule 7 ofthe Companies (Accounts) Rules, 2014.This responsibility also includes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding the assets of the Company and for preventing and detecting frauds & other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design , implementation and maintenance of adequate internal financial controls, that are necessary for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation ofthe financial statements that give a true and fair viewand are free from material misstatement,whether due to fraud or error.

Auditor''s Responsibility

3. Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act and the Rules, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions ofthe Act and the Rules made there under.

4. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) ofthe Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

5. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation ofthe financial statements that give true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial control system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

6. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on thestandalonefinancial statements.

Opinion

7. In our opinion and to the best of our knowledge and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, ofthe state of affairs ofthe Company as at 31st March 2015 and its profit and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

8. As required by ''the Companies (Auditor''s Report) order ,2015'' ("the Order") issued by the Central Government of India in terms ofsub-section (11)ofSection 143 ofthe Act, and on the basis of such checks ofthe books and records ofthe Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in the paragraph 3 and 4of the order, to the extent applicable.

9. 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 best of our knowledge and belief were necessary forouraudit.

(b) In ouropinion proper books ofaccountas required by law have been kept by the Company so far as it appears from our examination ofthose books;

(c) TheBalancesheet,theStatementofProfitandLossandthe Cash Flow Statement dealt with by this Report are in agreement with books ofaccount;

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards , specified under Section 133 ofthe Act, read with Rule 7 of theCompanies (Accounts) Rules,2014;

(e) On the basis ofthe written representations received from the Directors as on 31st March 2015 taken on record by the Board of Directors, none ofthe Directors is disqualified as on 31st March 2015 from being appointed as a Director in terms of Section 164(2) ofthe Act;

(f) 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 knowledge and belief and according to the information and explanations given to us:

i. The Company has disclosed the impact of pending litigation as at March 31,2015 on its financial position in its financial statements as referred in Note No.26.

ii. The Company did not have material foreseeable loses on its long-term contracts.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended 31st March,2015.

Annexure to the Auditor''s Report Referred to in paragraph 8of our report of even date, i. (a) The Company is maintaining proper record, showing full particulars including quantitative details and situation of fixed assets.

(b) All the assets have been physically verified by the Management during the year. No material discrepancies were noticed on such verification.

ii. (a) The inventory, including stock with certain third parties, has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size ofthe Company and the nature ofits business.

(c) On the basis of our examination ofthe records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification ofinventory as compared to the book records were not material.

iii. The Company has not granted any loans unsecured/secured, to any Company, Firms or other parties covered in the register required to be maintained underSection 189oftheAct.

iv. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size ofthe Company and the nature ofits business with regard to purchases ofinventory, fixed assets and with regard to the sale of goods and services. Further on the basis of our examination of the books and records ofthe Company and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.

v. The Company has not accepted any deposits from the public within the meaning of Section 73 and 74 of the Act and the Rules framed there underto the extent notified.

vi. We have broadly reviewed the books of accounts maintained by the Company in respect of product costing. Vide notification dated 31.12.2014 by Ministry of Corporate Affairs, Government of India, requirement of maintenance of books under sub-section(1) of Section 148 ofthe Act, is mandatory only from 01.4.2015. In our opinion, prima facie, costing accounts and records have been made and maintained. We have however not made a detailed examination ofthe costing records.

vii. (a) According to the information and explanations given to us, and the records ofthe Company examined by us, in our opinion, the Company is regular in depositing undisputed statutory dues, including Provident Fund, Employees State Insurance, Income Tax, Wealth Tax, Service Tax, Sales Tax, Customs Duty, Excise Duty, Value Added Tax and other material statutory dues as applicable, with the appropriate authorities.

(b) According to the information and explanations given to us, and the records ofthe Company examined by us, there are no dues of Income Tax and wealth tax which have not been deposited on account ofany dispute.

(c) According to the information and explanations given to us, and the records of the Company examined by us, the disputed Central Excise and Sales Tax aggregating 73.64 million have not been deposited since matters are pending with relevantforum as indicated below:

[Rs In Million'' Name ofthe Nature of the Demand Statute dues Amount

Sales Tax LST &Penalty 8.49

Sales Tax LST &Penalty 59.79

Sales Tax CST &Penalty 29.87

Sales Tax CST 3.28

Total 101.43

Central Excise Excise Duty & Penalty 0.29

Central Excise Excise Duty & Penalty 5.46

Total 5.75

GrandTotal 107.18



Name ofthe Forum where dispute is Pending Statute

Sales Tax ST AT (AB)-CBE

Sales Tax The High Court of Madras Sales Tax ST AT (AB)-CBE

Sales Tax JC (APPEALS)-CBE

Total

Central Excise Commnr.Appeals

Central Excise CESTAT

(d) According to the information and explanations given to us, and the records of the Company examined by us, the amount required to be transferred to Investors Education and Protection fund has been transferred within the stipulated time in accordance of the provisions of the Companies Act, 1956 and the Rules made there under.

viii. TheCompany does nothaveanyaccumulated lossesattheend ofthe Financial year and has not incurred cash losses in the current and in the immediately preceding financial year.

ix. According to theinformation and explanations given to us, and the records ofthe Company examined by us, the Company has not defaulted in repayment of dues to any financial institution or bank as at the Balance Sheet Date.

x. According to the information and explanations given to us, and the records ofthe Company examined by us and in our opinion, the terms and conditions, on which the Company has given guarantee for the loans taken by Subsidiary Companies from Banks during the year, is not prejudicial to the interest of theCompany.

xi. According to the information and explanations given to us, and the records ofthe Company examined by us the company has notavailedany termloansduringtheyear.

xii. During the course of our examination ofthe books and records ofthe Company carried out in accordance with the generally accepted Auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed ofany such case by the Management.

Place: Coimbatore Date : 29/05/2015

For R J C Associates Chartered Accountants Firm Regn. No.: 003496S

R. Jayachandran Partner Membership No. 021848


Mar 31, 2013

Report on the Financial Statements

1. We have audited the accompanying financial statements of ELGI EQUIPMENTS LIMITED("the Company"), which comprise the Balance Sheet as at March 31,2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report.

Management''s Responsibility for the Financial Statements

2. The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control 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.

Auditor''s Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

6. In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013

(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

7. As required by the Companies (Auditor''s Report) Order, 2003, as amended by ''the Companies(Auditor''s Report) (Amendment) Order 2004'' ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

8. As required by section 227(3) of the Act, 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;[and proper returns adequate for the purposes of our audit have been received from branches not visited by us];

(c). the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account [and with the returns received from branches not visited by us];

(d). in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

(e). on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

(f). Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

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

(b) As explained to us, fixed assets have been physically verified by the management according to a phased programme designed to cover all the items over a period, which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies have been noticed on such verification.

(c) In our opinion and according to the information and explanations given to us, no substantial part of the fixed assets have been disposed off during the year and therefore does not affect the going concern assumption.

ii. (a) The inventory has been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable.

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

(c) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. No material discrepancy was noticed on physical verification of stocks by the management as compared to book records.

iii. (a) The Company has granted loan to companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 46.63 million and the year end balance of loans granted to the Company was Rs. 8.09 million.

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been granted to the Company listed in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company.

(c) The Company is in regular receipt of principal repayment and interest on the above loans.

(d) There is no overdue amount of loans granted to Companies, listed in the register maintained under section 301 of the Companies Act, 1956.

(e) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

iv. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business, for the purchase of inventories & fixed assets and payment for expenses and for sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system.

v. a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements that need to be entered in to the register maintained under section 301 of the Act have been so entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements exceeding Rs. 5 lakhs each have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

vi. The Company has not accepted any deposits from the public covered under section 58A and 58AA of the Companies Act, 1956 and the rules framed thereunder.

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

viii. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Act and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

ix. (a) According to the information and explanations given to us and the records of the company, in our opinion, the Company is regular in depositing with appropriate authorities, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-tax, Sales- tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess to the extent applicable and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Income tax, Wealth Tax, Service Tax, Sales Tax, Customs duty, Excise Duty and cess were in arrears, as at 31st of March, 2013 for a period of more than six months from the date they became payable.

(c) Disputed Central Excise and Sales tax aggregating Rs. 24.23 million have not been deposited since matters are pending with relevant forum as indicated below:

(Rs. In Million)

Name of the Nature of the Demand Forum where Statute dues Amount dispute is pending

Sales Tax LST & Penalty 8.49 STAT (AB)-CBE

Sales Tax CST & Penalty 29.87 STAT (AB)-CBE

Sales Tax LST 3.02 JC (APPEALS)-CBE

Sales Tax CST 5.14 JC (APPEALS)-CBE

Total 46.52

Central Excise Excise Duty & Penalty 11.16 Dy. Commnr.Appeals

Central Excise Excise Duty & Penalty 3.01 CESTAT

Total 14.17

Grand Total 60.69

x. The Company does not have any accumulated loss at the end of the financial year and has not incurred cash loss during the financial year covered by our audit and in the immediately preceding financial year.

xi. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

xii. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities/investments.

xiii. The Company is not a chit fund or a nidhi /mutual benefit fund/society. Therefore, the Para 4(xiii) of the Companies (Auditor''s Report) Order, 2003 (as amended) is not applicable to the Company.

xiv. In our opinion, the Company is not dealing in or trading in Shares, securities, debentures, mutual funds and other Investments. Accordingly, the provisions of Clause 4(xiii) of the Companies (Auditor''s Report) Order, 2003 and Companies (Auditor''s Report) (Amendment) Order 2004 are not applicable to the Company.

xv. In our opinion, the terms and conditions, on which the Company has given guarantee for the loan taken by other Company from a bank or financial institution is not prejudicial to the interest of the Company.

xvi. The Company has not obtained any long term loans during the year under audit.

xvii. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31st March, 2013, we report that no funds raised on short-term basis have been used for long- term investment by the Company.

xviii. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

xix. The Company has not issued any debentures during the year under audit.

xx. The Company has not raised any money by public issue during the year.

xxi. To the best of our knowledge and belief and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the year, nor have we been informed of any such case by the management.

For RJC Associates

Regn.No.: 003496S

Chartered Accountants

R.Jayachandran

Place : Coimbatore Partner

Date : 09/05/2013 Membership No. 021848


Mar 31, 2012

1. We have audited the attached Balance Sheet of Elgi Equipments Limited, as at 31st March, 2012 the Statement of Profit and Loss and also the Cash Flow Statement of the Company for the year 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 the 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 and Companies (Auditor's Report) (Amendment) Order, 2004 (together the Order) issued by the Central Government of India in terms of Sub-Section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure, 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 above, we report that:

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

ii) 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;

iii) The Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

iv) In our opinion, the Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

v) On the basis of the written representations received from the Directors, as on 31st March, 2012 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2012 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts 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:

a) In the case of the Balance Sheet, of the state of the affairs of the Company as at 31st March, 2012;

b) In the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

c) In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure to the Auditor's Report Referred to in paragraph 3 of our report of even date,

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

(b) All the assets have been physically verified by the Management during the year. No materia discrepancies were noticed on such verification.

(c) No substantial part of fixed assets were disposed off during the Year, hence it will not have any effect on the going concern assumption.

ii. (a) The inventory has been physically verified by the Management during this year. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. No material discrepancies were noticed on physical verification of inventory.

iii. (a) The Company has granted loan to Companies covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was `. 207.38 millions and the year end balance of loans granted to the company was `. 76.17 million.

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been granted to the Company listed in the register maintained under section 301 of the Companies Act,1956, are not, prima facie, prejudicial to the interest of the Company.

(c) The Company is regular in the receipt of principal and interest.

(d) There is no overdue amount of loans granted to Companies, listed in the register maintained under section 301 of the Companies Act, 1956.

(e) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the companies Act, 1956.

iv. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in Interna Control System.

v. (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act,1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements exceeding Rs. 5 lakhs each have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

vi. In our opinion, the Company has an Internal Audit System to commensurate with the size and nature of its business.

vii. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the rules made by the Centra Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

viii. (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income Tax, Wealth Tax, Service Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears, as at 31st March, 2012 for the year or more than six months from the date they became payable.

(c) Disputed Central Excise and Sales Tax aggregating `. 23.92 million have not been deposited since matters are pending with relevant forum as indicated below:- (`.In Million)

Name of the Nature of Demand Forum where Statute the dues Amount dispute is pending

Sales Tax LST &Penalty 11.51 ST AT (AB)-CBE

Sales Tax CST 35.01 JC (APPEALS)-CBE

Total 46.52

Central Excise Excise Duty & Penalty 9.48 Dy. Commnr.Appeals

Excise Duty & Penalty 3.01 Tribunal

Total 12.49

Grand Total 59.01

ix. The Company does not have any accumulated losses at the end of the Financial Year and has not incurred cash losses in the Financial Year and in the immediately preceding financial Year.

x. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution, bank or debenture holders.

xi. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other Investments.

xii. The Company is not a chit fund, nidhi, mutual benefit fund or a society. Therefore the para 4(xiii) of the order is not applicable.

xiii. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 and Companies (Auditor's Report) (Amendment) Order, 2004 (together the Order) are not applicable to the Company.

xiv. In our opinion, the terms and conditions, on which the Company has given guarantee for the loan taken by other Company from Bank, is not prejudicial to the interest of the Company.

xv. The Company has not obtained any long term loan during the year under audit.

xvi. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

xvii. The Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under Section 301 of the Act.

xviii. The Company has not issued any debentures.

xix. To the best of our knowledge and belief and according to the information and explanation given to us, no material fraud on or by the Company was noticed or reported during the year.

For RJC Associates

Regn.No.:003496S Chartered Accountants

R Jayachandran

Place : Coimbatore Partner

Date : 14/05/2012 Membership No. 021848


Mar 31, 2011

1. We have audited the attached Balance Sheet of Elgi Equipments Limited, as at 31st March 2011, the Profit and Loss account and also the Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financia statements are the responsibility of the Companys 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 materia misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 (Auditors Report) Order, 2003 and Companies (Auditors Report) (Amendment) Order, 2004 (together the Order) issued by the Central Government of India in terms of Sub-Section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure,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 above, we report that

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

ii) 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;

iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

v) On the basis of the written representations received from the Directors, as on 31st March 2011 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2011 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts 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:

a) In the case of the Balance Sheet, of the state of the affairs of the Company as at 31st March 2011;

b) In the case of the Profit and Loss Account, of the profit for the year ended on that date; and

c) In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure to the Auditors Report Referred to in paragraph 3 of our report of even date,

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

(b) All the assets have been physically verified by the Management during the Year. No materia discrepancies were noticed on such verification.

(c) No substantial part of fixed assets were disposed off during the Year, hence it will not have any effect on the going concern assumption.

ii. (a) The inventory has been physically verified by the Management during this Year. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

iii. (a) The Company has granted loan to Companies covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the Year was Rs. 168.64 millions and the Year end balance of loans granted to the company was Rs.168.64 million.

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been granted to the Company listed in the register maintained under section 301 of the Companies Act,1956, are not, prima facie, prejudicial to the interest of the Company.

(c) The Company is regular in the receipt of principal and interest.

(d) There is no overdue amount of loans granted to Companies, listed in the register maintained under section 301 of the Companies Act, 1956.

(e) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the companies Act, 1956.

iv In our opinion and according to the information and explanations given to us, there are adequate interna control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in Internal Control System.

v. (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act,1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements exceeding Rs 5 lakhs each have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

vi. In our opinion, the Company has an Internal Audit System commensurate with the size and nature of its business.

vii. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

viii.(a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Service Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears, as at 31st March 2011 for the year or for more than six months from the date they became payable.

(c) Disputed Central Excise and Sales Tax aggregating Rs.20.97 million have not been deposited since matters are pending with relevant forum as indicated below:-

Name of the Nature of Demand Forum where Statute the dues Amount dispute is pending

Sales Tax LST &Penalty 11.51 Sales Tax Appellate DC

Sales Tax CST 33.15 Sales Tax Appellate DC

Total 44.66

Central Excise Excise Duty & Penalty 7.59 Dy. Commnr.Appeals

Excise Duty & Penalty 3.14 Tribuna

Total 10.73

Grand Total 55.39

ix The Company does not have any accumulated

losses at the end of the Financial Year and has not incurred cash losses in the Financial Year and in the immediately preceding financia Year.

x. In our opinion and according to the information

and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

xi. The Company has not granted loans and

advances on the basis of security by way of pledge of shares, debentures and other nvestments.

xii. The Company is not a chit fund, nidhi, mutual benefit fund or a society. Therefore the para 4(xiii) of the order are not applicable.

xiii. In our opinion, the Company is not dealing in or trading in shares, securities, debentures, and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 and Companies (Auditors Report) (Amendment) Order, 2004 (together the Order) is not applicable to the Company.

xiv. In our opinion, the terms and conditions, on which the Company has given guarantee for the loan taken by other Company from Bank, is not prejudicial to the interest of the Company.

xv. The Company has not obtained any long term loan during the Year under audit.

xvi. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

xvii. The Company has not made any preferentia allotment of shares to parties and Companies covered in the register maintained under Section 301 of the Act.

xviii. The Company has not issued any debentures.

xix. During the year, the Company issued 78935454 nos. of Bonus Shares at the ratio of 1:1, by capitalization of Share Premium. Further, 583600 nos. of shares at Re.1 each were issued under Employees Stock Purchase Scheme to the eligible employees.

xx. To the best of our knowledge and belief and according to the information and explanation given to us, no material fraud on or by the Company was noticed or reported during the Year.

For RJC Associates

Regn.No.:003496S

Chartered Accountants

R.Jayachandran

Partner

Membership No. 021848

Place: Coimbatore Date: 28/04/2011


Mar 31, 2010

1. We have audited the attached Balance Sheet of Elgi Equipments Limited, as at 31st March 2010, the Profit and Loss account and also the Cash Flow Statement of the Company for the year ended on that date annexed thereto. The financial statements are prepared consequent to the amalgamation of Elgi Industrial Products Limited with this company effective from 1st April 2009 duly approved by the Honarable High Court of Madras vide itsorderdated24thSeptember2010. These financial statements are the responsibility of the Companys 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 the 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 (Auditors Report) Order, 2003 and Companies Auditors Report (Amendment) Order, 2004 (together the Order) issued by the Central Government of India in terms of Sub-Section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure.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 above.we report that:

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

ii) 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;

iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

v) On the basis of the written representations received from the Directors, as on 31st March 2010 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2010 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi)ln our opinion and to the best of our information and according to the explanations given to us, the said accounts 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:

a) In the case of the Balance Sheet, of the state of the affairs of the Company as at 31st March 2010;

b) In the case of the Profit and Loss Account, of the profit for the year ended on that date; and

c) In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure to the AuditorsReport: Referred to in paragraph 3 of our report of even date,

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

(b) All the assets have been physically verified by the Management during the year. No material discrepancies were noticed on such verification.

(c) No substantial part of fixed assets were disposed off during the year, hence it will not have any effect on the going concern assumption.

ii. (a) The inventory has been physically verified by the Management during this year. In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

iii. (a) The Company has granted loan to Companies covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the Year was Rs. 124.04 millions and the year end balance of loans granted by the company was Rs.114.04 million.

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been granted to the Company listed in the register maintained under section 301 of the Companies Act, 1956, are not, prima facie, prejudicial to the interest of the Company.

(c) The Company is regular in the receipt of principal and interest

(d) There is no overdue amount of loans granted to Companies, listed in the register maintained under section 301 of the CompaniesAct,1956.

(e) The Company has not taken any loans, secured or unsecured from Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Amalgamation of EPIL with the company ICD of 0 95 Million is out standing as long term unsecured loans.

iv. In our opinion and according to the information and explanations given to us there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in Internal Control System.

v. (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements exceeding Rs 5 lakhs each have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

vi. In our opinion, the Company has an Internal Audit System commensurate with the size and nature of its business.

vii. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

viii. (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Service Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears, as at 31st March 2010 for the year of more than six months from the date they became payable.

(c) Disputed Central Excise and Sales Tax aggregating Rs.10.56 million have not been deposited since matters are pending with relevant forum as indicated below:-

Name of the Nature of Demand Forum where

Statute the dues Amount dispute is pending

Sales Tax CST & LST & Penalty 8.49 Sales Tax Appellate DC

Sales Tax CST & LST 17.58 Sales Tax Appellate DC

Total 26.07

Central Excise Excise Duty & Penalty 7.59 Dy. Commnr.Appeals

Excise Duty & Penalty 3.16 Tribunal

Total 10.75

Grand Total 36.82

ix The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial year and in the immediately preceding financial year.

x. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

xi. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other Investments.

xii. The Company is not a chit fund, nidhi, mutual benefit fund or a society. Therefore the para 4(xiii) of the order are not applicable.

xiii. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 and Companies (Auditors Report) (Amendment) Order, 2004 (together the Order) are not applicable to the Company.

xiv. In our opinion, the terms and conditions, on which the Company has given guarantee for the loan taken by other Company from Bank, is not prejudicial to the interest of the Company.

xv. The Company has not obtained any long term loan during the year under audit. However on amalgamation of EIPL with the company ICD of Rs. 0.95 Million is outstanding as long term unsecured loans.

xvi. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

xvii. The Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under Section 301 of the Act.

xviii.The Company has not issued any debentures.

xix. During the year the Company has raised money of Rs 231.52 million by calling up the balance amount on partly paid up share of Rs12.75 per share comprising of 85 paise towards face value and Rs. 11.90/- towards share premium.

xx. To the best of our knowledge and belief and according to the information and explanation given to us, no material fraud on or by the Company was noticed or reported during the year.

For RJC Associates

Regn. No. : 003496S

Chartered Accountants

R.Jayachandran

Place : Coimbatore Partner

Date : 28.10.2010 Membership No. 021848

 
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