Mar 31, 2013
Report on the Financial Statements:
We have audited the accompanying financial statements of Kingfisher
Airlines Limited (formerly known as Deccan Aviation Limited) ("the
Company") which comprises of Balance Sheet as at March 31, 2013, the
Statement of Profit and Loss and Cash Flow Statement for the year ended
on that date and a summary of significant accounting policies and other
explanatory information.
Management''s Responsibility for the Financial Statements:
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 fair presentation of the financial statements
that are free from material misstatement, whether due to fraud or
error.
Auditor''s Responsibility:
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.
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 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 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.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion:
1. Attention is invited to note 48 forming part of the Financial
Statements (ÂNotes'') regarding method of accounting of costs incurred
on major repairs and maintenance of engines of aircrafts taken on
operating lease of Rs. 664.22 lacs (year ended March 31, 2012 Rs.
28,480.24 lacs) (aggregate expenditure up to March 31, 2013 after
eliminating expenditure on returned/redelivered assets Rs.25,020.97
lacs), which have been capitalized and amortized over the estimated
useful life of the repairs. In our opinion, this treatment is not in
accordance with generally accepted accounting standards prevalent in
India and ought to have been recognized in the Statement of Profit and
Loss as and when incurred.
2. We further report that, except for the effect, if any, of matters
stated in paragraphs 3 and 4 below, which are not ascertainable, had
the observations made in paragraph 1 above and paragraphs 4 and 10 of
our report to the members of the Company on the audit of the financial
statements for the year ended March 31, 2012, dated May 30, 2012
(Previous year''s Report) been considered,
a. The working results for the year ended March 31, 2013 would have
been a loss of Rs. 415,801.51 lacs (year ended March 31, 2012 Rs.
344,402.41 lacs) as against the reported loss of Rs. 430,111.96 lacs
(year ended March 31, 2012 Rs. 232,800.75 lacs). This does not take
into account the derecognition of deferred tax credit recognized up to
March 31, 2012 of Rs. 404,586.77 lacs during the year which should have
been done through the Statement of Profit and Loss and not directly in
the Surplus account (debit) included under the head ÂReserves and
Surplus'' in the balance sheet
b. The reserves and surplus as at March 31, 2013 would have been debit
of Rs. 1,434,042.48 lacs (as at March 31, 2012 debit of Rs.
1,046,090.41 lacs) as against the reported figure of debit of Rs.
1,428,164.15 lacs (as at March 31, 2012 debit of Rs 621,314.83 lacs),
other current liabilities as at March 31, 2012 would have been Rs
325,183.68 lacs as against the reported figure of Rs 325,171.29 lacs,
fixed assets as at March 31, 2013 would have been Rs. 65,314.71 lacs
(as at March 31, 2012 Rs 124,126.34 lacs) as against the reported
figure of Rs. 71,193.04 lacs (as at March 31, 2012 Rs 144,302.75 lacs)
and deferred tax asset as at March 31, 2012 would have been Rs. Nil as
against the reported figure of Rs. 404,586.77 lacs.
c. The earnings (loss) per share for the year ended March 31, 2013
would have been Rs. (54.42) (year ended March 31, 2012 Rs. (68.92) as
against the reported earnings (loss) per share of Rs. (56.27) (year
ended March 31, 2012- Rs. (46.92)).
3. Attention is invited to paragraph 1 of the annexure to our report
(impact of discrepancies, if any pending reconciliation of physical
inventory of fixed assets taken during the year 2010-11 with book
records), note 34 of the Notes (borrowing costs that may have to be
decapitalized consequent to temporary suspension of work of supply of
aircrafts in terms of AS 16), note 44 (certain accounts detailed in the
said note being under review and reconciliation), note 46 (basis of
computation of unearned revenue as at period end/refunds due on account
of cancelled tickets/flights. Such estimates of number of unflown
tickets and their average value,
based on which management has reportedly estimated the amount of
unearned revenue/ refunds due, not being drawn from accounting records,
could not be reviewed by us), note 49 (use fees/ hourly and cyclic
utilization charges payable by the Company in respect of certain assets
taken on operating lease being treated as maintenance reserves, pending
formalization of the matter with the relevant lessor), note 52 (write
back of withholding tax accrued till March 31, 2011 and non provision
for withholding tax thereafter, on amounts paid/ provided as payable to
certain non residents/interest thereon, based on professional advice,
which are subject to receipt of certain documentation from the relevant
payees, the Company complying with the requisite formalities under the
relevant tax laws and validation of the position stated in the books of
account), note 53 regarding not writing off of unamortized borrowings
costs of Rs. 3,021.78 lacs although the consortium banks have recalled
their dues, for reasons stated in the note, note 56 regarding
compensation and other costs payable by the Company consequent to
termination of certain agreements not being determined and accordingly
not provided for and foot note to note 17 regarding adhoc provision of
Rs. 2,000.00 lacs made during the year (aggregate provision as at March
31, 2013 Rs. 2,634.71 lacs) for unserviceable/damaged engineering and
in-flight inventories, pending detailed review and assessment (effect
on revenue in all cases is not ascertainable).
4. Management has informed us that the Ârecoverable amount'' of assets
within the meaning of accounting standard 28 is more than their
carrying value and as such no amount needs to be recognized in the
financial statements for impairment loss. We have not been able to
validate this assertion in the absence of bids from prospective
buyers/valuation report of an independent agency and the uncertainty of
resumption of future operations/results of operations thereafter.
Qualified Opinion:
In our opinion and to the best of our knowledge and according to the
information and explanations given to us, except for the effects of the
matters described in paragraphs 1 to 4 of the Basis for Qualified
Opinion paragraph, the said 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.
i. In the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2013,
ii. In the case of Statement of Profit and Loss, of the loss for the
year ended on that date and
iii. In the case of Cash Flow statement, of the cash flows for the year
ended on that date.
Emphasis of Matter:
Attention is invited to note 45 to the Notes regarding the financial
statements being prepared on a going concern basis, notwithstanding the
fact that the Company''s net worth is eroded (Net worth as at March 31,
2013 (Rs.1,291,981.85 lacs), the scheduled air operator''s permit issued
by the Director General of Civil Aviation, Government of India (Permit)
has lapsed and the consortium banks have recalled their debts to the
Company. These events cast significant doubt on the ability of the
Company to continue as a going concern. The appropriateness of the said
basis is interalia dependent on the Company''s ability to obtain renewal
of the Permit, infuse requisite funds for meeting its obligations
(including statutory liabilities and those in respect of contracts
entered into for purchase of goods and assets), rescheduling of debt/
other liabilities and resuming normal operations. Our opinion is not
modified in this respect.
Report on Other Legal and Regulatory Requirements:
1. As required by the Companies (Auditor''s Report) Order, 2003 ("the
Order") issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Act, we give in the annexure a
statement on the matters specified in paragraphs 4 and 5 of the Order.
2. 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, the Company has kept proper books of account as
required by law so far as appears from our examination of those books.
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.
d. In our opinion, except for the effects of matters described in
paragraph 1 of the Basis for Qualified Opinion paragraph, the Balance
Sheet, Statement of Profit & Loss and Cash Flow Statement dealt with by
this report, comply in all material respects, with the mandatory
Accounting Standards referred to in sub- section (3C) of section 211 of
the Act.
e. On the basis of written representations received from Directors as
on March 31, 2013 and taken on record by the Board of Directors, we
report that none of the Directors of the Company, are disqualified as
on that date from being appointed as a director, under clause (g) of
sub-section (1) of section 274 of the Act.
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 Act
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.
(AS REFERRED TO IN PARAGRAPH 1 OF PARA ON REPORT ON OTHER LEGAL AND
REGULATORY REQUIREMENTS OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF
KINGFISHER AIRLINES LIMITED)
1. a. The Company has maintained records showing full particulars
including quantitative details and situation of fixed assets. However,
comprehensive description of assets and current location are to be
incorporated in the asset records after completion of reconciliation
referred to in paragraph 1(b) below.
b. Fixed assets were physically verified by the management during the
year 2010-11. Pending completion of reconciliation which has not been
completed, discrepancies, if any, cannot be ascertained (refer note 51
of the Notes). Certain assets of the Company are in the custody of
airports to which it has no access (carrying value not
ascertained)(refer foot note 4 to note 13 of the Notes)
c. There was no substantial disposal of fixed assets during the year.
2. a. Management has conducted physical verification of inventory at
reasonable intervals during the year.
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. Pending updating of records and reconciliation, book balances as at
March 31, 2013 have been adopted.
3. a. As informed, the Company has not granted any loans, secured or
unsecured to companies, firms or other parties covered in the register
maintained under section 301 of the Act.
b. As informed, the Company has taken loans from two companies covered
in the register maintained under section 301 of the Act. The total loan
amount outstanding as at year end was Rs. 49,004.26 lacs and the
maximum amount outstanding at any time during the year was the same
amount. The rate of interest and terms and conditions on which the said
loans are taken is not prima-facie prejudicial to the interests of the
Company. No stipulations for repayment have been prescribed and as such
no comments regarding regularity of payments are being made.
4. In our opinion and according to the information and explanation
given to us, and taking into consideration management''s representation
that a large number of items purchased are of a special nature for
which alternative quotations cannot be obtained, there are adequate
internal control procedures commensurate with the size of the Company
and the nature of its business for the purchases of inventory. Internal
controls in respect of sale of services to be strengthened. Subject to
our observations in paragraph 1(b) above and note 46 of the Notes,
during the course of our audit, no continuing failure to correct major
weakness in internal controls has been noticed.
5. a. According to the information and explanations given to us, we
are of the opinion that transactions that need to be entered into the
register maintained under section 301 of the Act have been so entered.
b. Further, contracts or arrangements referred to in section 301 of the
Act and aggregating to Rs. 5.00 lacs or more per party have been
entered into at prices which are reasonable as compared to similar
services rendered to / by other parties except in respect of
advertisement & sales promotional expenses of Rs. 38.19 lacs, purchases
of goods of Rs. 0.10 lacs, and miscellaneous income of Rs. 9.19 lacs
where we are unable to make any comments on reasonability of rates
since there were no similar transactions with third parties at the
relevant time.
6. The Company has not accepted any deposits from the public.
7. The Company has an internal audit system commensurate with its size
and nature of its business.
8. To the best of our knowledge and as explained, the Central
Government has not prescribed the maintenance of cost records under
section 209 (1) (d) of the Act for the products of the Company.
9. a. Undisputed statutory dues in respect of service tax,
withholding taxes, fringe benefit tax dues and professional tax have
not been regularly deposited with the appropriate authorities.
Undisputed statutory dues in respect of provident fund, employees''
state insurance, investor education and protection fund, wealth tax,
customs, excise duty, cess as applicable, have generally been regularly
deposited with the appropriate authorities barring delays in certain
months.
b. According to the information and explanations given to us:-
(i) No amounts were outstanding as at year end on account of undisputed
amounts payable in respect of employees'' provident fund and state
insurance, investor education and protection fund, wealth tax, sales
tax, customs duty, excise duty and cess for a period of more than six
months from the date they became payable.
(ii) Undisputed amounts payable in respect of tax deducted at source of
Rs.62,035.34 lacs, service tax of Rs. 7,303.77 lacs, professional tax
of Rs. 44.04 lacs (In all cases relating to the years 2007-08 to
2012-13), fringe benefit tax of Rs. 55.87 Lacs (balance of tax for the
financial year 2008-09) and gratuity to resigned employees of Rs.
410.10 Lacs (relating to the year 2011-2012 and 2012-13) were
outstanding for a period of more than six months from the date they
became payable (excluding applicable interest in all cases) (to the
extent identified pending review and reconciliation of the relevant
accounts). The due dates for these amounts are as per respective
statutes. The tax deducted at source liability indicated in this
paragraph is without considering tax on certain payments to
non-residents (liability withdrawn/ not provided for based on
professional advice) as referred to in note 52 of the Notes.
c. According to the information and explanations given to us, the
following dues have not been deposited with the concerned authorities
on account of dispute
Estimated
Year amount Pending before
(Rs. in Lacs)
Tax deducted at source
Liability arising out of 12,028.73 Supreme Court of
rejection of
approvals India
under section 10(15A)
of the Income Tax Act,
1961,
2004 Â 09 144.74 Commissioner of
Income tax (Appeals)
2007 Â 08 272.94 Commissioner of
Income tax (Appeals)
2008 Â 09 1,194.32 Commissioner of
Income tax (Appeals)
Service Tax
2004-05 to 2007-08 464.94 Customs, Excise and
Service Tax Appellate
Tribunal
January 2005 to 19,067.67 Customs, Excise and
September 2007 Service Tax Appellate
Tribunal.
June  October 2006 553.80 Customs, Excise and
Service Tax Appellate
Tribunal.
June 2008 to April 722.20 Customs, Excise and 2010
Service Tax Appellate
Tribunal.
2005 Â 06 to 2009 Â 10 168.38 Customs, Excise and
Service Tax Appellate
Tribunal.
2010 Â 11 429.14 Customs, Excise and
Service Tax Appellate
Tribunal.
10. The Company''s accumulated losses at the end of the financial year
were more than fifty percent of its net worth. The Company has incurred
cash losses during the financial year and in the immediately preceding
financial year.
11. Based on our audit procedures and as per the information and
explanations given by the management, the Company has defaulted in
repayment of loans and interest to banks and financial institutions.
Estimated unpaid overdue interest and installments to banks and
institutions as at March 31, 2013 aggregated to Rs. 284,538.21 lacs
including devolved guarantees/ letters of credit unfunded as at that
date. The over dues relate to the financial years 2011- 2012 and
2012-13.
12. According to the information and explanations given to us and based
on the documents and records
produced 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. Accordingly, the provisions of the clause 4(xii) of the
Order are not applicable to the Company.
13. In our opinion, the Company is not a chit fund or a nidhi, mutual
benefit fund / society. Accordingly, the provisions of the clause
4(xiii) of the Order are not applicable to the Company.
14. 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 Order are not applicable to the
Company.
15. According to the information and explanations given to us, the
Company has not given guarantees during the year for loans taken by
others from banks or financial institutions. Accordingly, the
provisions of clause 4(xv) of the Order are not applicable to the
Company.
16. Based on information and explanations given to us by the
management, term loans taken during the year have been applied for the
purpose for which they were obtained, wherever specified by the bank in
the relevant sanction letters.
17. According to the information and explanations given to us and on an
overall examination of the balance sheet of the company, we report that
funds raised on short- term basis to an aggregate extent of Rs.
745,468.39 lacs have been used for long term investment as at March 31,
2013.
18. Based on information and explanations given to us by the
management, the Company has made not any preferential allotment of
shares to parties or companies covered in the register maintained under
section 301 of the Act. Accordingly, the provisions of clause 4(xviii)
of the Order are not applicable to the Company.
19. No debentures were outstanding as at March 31, 2013. Accordingly,
the provisions of clause 4(xix) of the Order are not applicable to the
Company.
20. The Company has not raised any money by public issue during the
year. Accordingly, the provisions of clause 4(xx) of the Order are not
applicable to the Company.
21. As per the information and explanations furnished to us by the
management, no material frauds on or by the Company and causing
material misstatements to financial statements have been noticed or
reported during the course of our audit, except for charge backs
received by the Company from credit card service providers due to
misutilisation of credit cards by third parties of Rs. 34.02 lacs.
For B. K. RAMADHYANI & CO.
Chartered Accountants
Firm registration number: 002878S
Place : Mumbai (Shyam Ramadhyani)
Date : May 30, 2013 Partner
Membership No. 019522
Mar 31, 2012
1. We have audited the attached Balance Sheet of Kingfisher Airlines
Limited (formerly known as Deccan Aviation Limited) ("the Company") as
at March 31, 2012, the Statement of Profit and Loss and the Cash Flow
Statement 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 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 issued
by the Central Government of India in terms of sub-section (4A) of
section 227 of the Companies Act, 1956 ("the Act"), as amended by the
Companies (Auditor's Report) (Amendment) Order, 2004 (herein after
collectively referred to as the "Order") we enclose in the annexure a
statement on matters specified in paragraphs 4 and 5 of the Order.
4. Other Income for the fifteen months ended June 30, 2006 included a
sum of Rs. 2,672.20 Lacs towards certain subsidy provided to the
Company by one of its suppliers in conjunction with lease of aircrafts
on operating lease basis. The previous auditors had reported that they
were of the opinion that such accounting treatment was not in
accordance with Accounting Standard 19 on "Leases" and the subsidy
should be recorded on a straight-line basis over the period of the
lease. Their audit report on the financial statements for the fifteen
months ended June 30, 2006 was modified in this matter. We concur with
the views of the said auditors in principle that such subsidy should be
recognized on a systematic basis in the Statement of Profit and Loss
over the periods necessary to match them with the related costs, which
they are intended to compensate although the matter does not appear to
be covered explicitly by the said AS 19.
5. Attention is invited to note 48 of the Notes forming part of the
Financial Statements ('Notes') regarding method of accounting of costs
incurred on major repairs and maintenance of engines of aircrafts taken
on operating lease during the year aggregating to Rs. 28,480.24 Lacs
(year ended March 31, 2011 Rs. 12,256.85 Lacs) (aggregate amount as at
March 31,
2012 Rs. 36,978.84 Lacs), which have been included under fixed assets
and amortized over the estimated useful life of the repairs. In our
opinion, this accounting treatment is not in accordance with current
accounting standards.
6. As reported in paragraph 6 of our report dated July 28, 2009, the
Company novated its rights in certain aircrafts purchase agreements
during the year ended March 31, 2009 in favor of certain lessors and
took such aircrafts back on operating lease from the same persons. The
Company incurred a loss of Rs. 8,110.36 Lacs on such novation
(including interest on loans borrowed for making pre-delivery payments
to aircraft manufacturers of Rs. 2,706.77 Lacs) (after eliminating loss
in respect of redelivered aircrafts). As already reported in the said
report, in the absence of an independent valuation report, we had
relied on the representations of the management that the novation was
not established at fair value, the fair value of the aircrafts is at
least equal to or more than the cost of acquisition and the
preconditions specified in AS 19 for deferring the said loss are
satisfied. We do not express any independent opinion in the matter
7. Attention is invited to note 49 of the Notes regarding use
fees/hourly and cyclic utilization charges payable by the Company in
respect of certain assets taken on operating lease aggregating to Rs.
6,033.53 Lacs (year ended March 31, 2011 Rs. 5,576.45 Lacs) (aggregate
amount till March 31, 2012 Rs. 12,418.61 Lacs), as maintenance
reserves, in accordance with its understanding. Pending formalization
of understanding with the relevant lessor, we do not express any
independent opinion in the matter.
8. Attention of the members is invited to note 52 of the Notes
regarding write back of withholding tax earlier accrued and non
provision for withholding tax for the year, on amounts paid/provided as
payable to certain non residents/interest thereon, based on
professional advice. This is subject to receipt of certain
documentation from the relevant payees, the Company complying with the
requisite formalities under the relevant tax laws and validation of the
position stated in the books of account.
9. Attention of the members is invited to note 36(b) of the Notes
regarding write back/non provision for guarantee and security
commission to guarantors, which we understand was done at the behest of
the consortium bankers (aggregate amount Rs.13,772.30 Lacs). We
understand that consent of the concerned guarantors has not been
received. We cannot express any opinion in the matter.
10. Attention of the members is invited to note 39 of the Notes
regarding recognition of deferred tax credit on account of unabsorbed
losses and allowances during the year aggregating to Rs.111,808.46 Lacs
(year ended March 31, 2011 Rs. 49,341.80 Lacs) (Total amount recognized
up to March 31, 2012 Rs. 404,586.77 Lacs). This does not satisfy the
virtual certainty test for recognition of deferred tax credit as laid
down in Accounting Standard 22.
11. We further report that, except for the effect, if any, of the
matters stated in paragraphs 6 to 9 above, paragraph 1(b) of the
annexure to this report and notes 34(a), 44, 46 and 53 of the Notes,
whose effect are not ascertainable, had the observations made in
paragraphs 4, 5 and 10 above been considered, the loss after tax for
the year ended March 31, 2012 would have been Rs. 344,402.41 Lacs
(March 31, 2011 - Rs. 155,349.03 Lacs) as against the reported loss of
Rs. 232,800.75 Lacs (March 31, 2011- Rs. 102,739.80 Lacs), earnings
per share would have been Rs.(68.92) (March 31, 2011 - Rs.(59.90)) as
against the reported figure of Rs. (46.92) (March 31, 2011- Rs.
(40.16)), debit balance in statement of profit and loss as at March 31,
2012 vide note 4 of the Notes would have been Rs.1,192,423.76 Lacs
(March 31, 2011 - Rs. 848,021.34 Lacs) as against the reported figure
of Rs. 767,648.18 Lacs (March 31, 2011 - Rs. 534,847.43 Lacs), Other
current liabilities would have been Rs. 321,876.74 Lacs (March 31,
2011 - Rs. 202,878.92 Lacs) as against the reported figure of Rs.
321,864.34 Lacs (March 31, 2011 - Rs. 202,600.40 Lacs), fixed assets
would have been Rs.124,126.34 Lacs (March 31, 2011- Rs. 137,071.61
Lacs) as against the reported figure of Rs.144,302.75 Lacs (March 31,
2011 - Rs. 157,188.69 Lacs), deferred tax asset (net) as at March 31,
2012 would have been Nil (March 31, 2011 - Nil) as against the reported
figure of Rs. 404,586.77 Lacs (March 31, 2011 - Rs.292,778.31 Lacs).
Data for the year ended March 31, 2011 recast from that stated in our
previous year's report taking into account deferred tax credit to be
derecognized.
12. Attention of the members is invited to note 45 of the Notes
regarding the financial statements of the Company having been prepared
on a going concern basis, notwithstanding the fact that its net worth
is completely eroded. The appropriateness of the said basis is
interalia dependent on the Company's ability to infuse requisite funds
for meeting its obligations, rescheduling of debt and resuming normal
operations.
Further to our comments in the annexure referred to above, we report
that:
13. 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.
14. In our opinion, the Company has kept proper books of account as
required by Law so far as appears from our examination of those books.
15. 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.
16 In our opinion, subject to the effect of the matters stated in
paragraphs 4 to 6 and 10 above, the Balance Sheet, Statement of Profit
& Loss and Cash Flow Statement dealt with by this report comply in all
material respects, with the mandatory Accounting Standards referred to
in sub-section (3C) of section 211 of the Act.
17. On the basis of written representations received from Directors as
on March 31, 2012 and taken on record by the Board of Directors, we
report that none of the Directors of the Company, are disqualified as
on that date from being appointed as a director, under clause
(g) of sub-section (1) of section 274 of the Act.
18. In our opinion and to the best of our knowledge and according to
the information and explanations given to us, the said accounts subject
to note 43 of the Notes and read with other notes, give the information
required by the Act in the manner so required and subject to the effect
of the matters stated in paragraphs
4 to 11 above, foot note to note 38(a) regarding carve out of certain
costs from their natural heads based on estimates made by management
and presentation of the same as 'Restructuring/Idle costs' and note 46
of the Notes regarding the basis of computation of unearned revenue
(including refunds due on account of cancelled tickets/flights) as at
March 31, 2012 (Data of number of unflown tickets and their aggregate
average value, based on which management has estimated the amount of
unearned revenue, not being drawn from accounting records, have not
been verified by us) (Effect thereof on revenue not ascertainable) 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 March 31, 2012,
ii. In the case of Statement of Profit and Loss, of the loss for the
year ended on that date and
iii. In the case of Cash Flow Statement, of the cash flows for the year
ended on that date.
(AS REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE TO THE
MEMBERS OF KINGFISHER AIRLINES LIMITED)
1. a. The Company has maintained records showing full particulars
including quantitative details and situation of fixed assets. However,
comprehensive description of assets and current location are to be
incorporated in the asset records after completion of reconciliation
referred to in paragraph 1(b) below.
b. Fixed assets were physically verified by the management during the
year 2010-11. Pending completion of reconciliation which is reportedly
under progress, discrepancies, if any, cannot be ascertained (refer
note 51 of the Notes).
c. There was no substantial disposal of fixed assets during the year.
2. a. Management has conducted physical verification of inventory at
reasonable intervals during the year.
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. No material discrepancies were noticed on physical verification.
3. a. As informed, the Company has not granted any loans, secured or
unsecured to companies, firms or other parties covered in the register
maintained under section 301 of the Act.
b. As informed, the Company has taken loans from three companies
covered in the register maintained under section 301 of the Act. The
total loan amount outstanding as at year end was Rs.15,109.77 Lacs and
the maximum amount outstanding at any time during the year were
Rs.15,363.91 Lacs. The rate of interest and terms and conditions on
which the said loans are taken is not prima-facie prejudicial to the
interests of the Company. No stipulations for repayment have been
prescribed and as such no comments regarding regularity of payments are
being made.
4. In our opinion and according to the information and explanation
given to us, and taking into consideration management's representation
that a large number of items purchased are of a special nature for
which alternative quotations cannot be obtained, there are adequate
internal control procedures commensurate with the size of the Company
and the nature of its business for the purchases of inventory. Internal
controls in respect of sale of services and purchase of fixed assets to
be strengthened. Subject to our observations in paragraph 1(b) above
and notes 46 of the Notes, during the course of our audit, no
continuing failure to correct major weakness in internal controls has
been noticed.
5. a. According to the information and explanations given to us, we
are of the opinion that transactions that need to be entered into the
register maintained under section 301 of the Companies Act, 1956 have
been so entered.
b. Further, contracts or arrangements referred to in section 301 of
the Act and aggregating to Rs. 5.00 Lacs or more per party have been
entered into at prices which are reasonable as compared to similar
services rendered to / by other parties except in respect of
advertisement & sales promotional expenses of Rs. 394.98 Lacs and
miscellaneous income of Rs. 707.76 Lacs where we are unable to make any
comments on reasonability of rates since there were no similar
transactions with third parties at the relevant time
6. The Company has not accepted any deposits from the public.
7. The Company's internal audit system needs to be strengthened to
make the same commensurate with the size and nature of its business.
8. To the best of our knowledge and as explained, the Central
Government has not prescribed the maintenance of cost records under
section 209 (1) (d) of the Act for the products of the Company.
9. a. Undisputed statutory dues in respect of service tax, withholding
taxes and fringe benefit tax dues have not been regularly deposited
with the appropriate authorities. Undisputed statutory dues in respect
of provident fund, employees' state insurance, investor education and
protection fund, wealth tax, customs, excise duty, cess as applicable,
have generally been regularly deposited with the appropriate
authorities barring few months.
b. According to the information and explanations given to us:-
(i) No amounts were outstanding as at year end on account of undisputed
amounts payable in respect of investor education and protection fund,
sales tax, customs duty, excise duty and cess for a period of more than
six months from the date they became payable.
(ii) Undisputed amounts payable in respect of tax deducted at source of
Rs. 53,938.17 Lacs, service tax of Rs. 1,984.41 Lacs, professional tax
of Rs. 8.61 Lacs (pertaining to regions for which registration is not
obtained) (In all cases relating to the years 2007-08 to 2011-12),
fringe benefit tax of Rs. 55.87 Lacs (balance of tax for the financial
year 2008-09) and gratuity to resigned employees of Rs. 25.39 Lacs
relating the year 2011-2012 were outstanding for a period of more than
six months from the date they became payable (excluding applicable
interest in all cases except in respect of fringe benefits tax) (to the
extent identified pending review and reconciliation of the relevant
accounts). The due dates for these amounts are as per respective
statutes. The tax deducted at source liability indicated in this
paragraph is without considering tax on certain payments to
non-residents (liability withdrawn/ not provided for based on
professional advice) as referred to in note 52 of the Notes and tax on
guarantee and security commission payable to certain guarantors
(liability withdrawn at the behest of consortium bankers) as referred
to in note 36(b) of the Notes.
c. According to the information and explanations given to us, the
following dues have not been deposited with the concerned authorities
on account of dispute.
Estimated
Year amount Pending before
(Rs. in Lacs)
Tax deducted at source
Liability arising out of 9,730.67 Delhi High Court. In
rejection of approvals certain cases, writs
under section 10(15A) proposed by the
of the Income Tax Act, Company are yet to be
1961. filed.
Service Tax
2004-05 to 2007-08 475.02 Customs, Excise and
Service Tax Appellate
Tribunal
January 2005 to 18,333.78 Customs, Excise and
September 2007 Service Tax Appellate
Tribunal.
June 2008 to 687.82 Customs, Excise and
April 2010 Service Tax Appellate
Tribunal.
10. The Company's accumulated losses at the end of the financial year
were more than fifty percent of its net worth. The Company has incurred
cash losses during the financial year and in the immediately preceding
financial year.
11. Based on our audit procedures and as per the information and
explanations given by the management, the Company has defaulted in
repayment of loans and interest to banks and financial institutions.
Delays were noticed in payment of interest & principal on several
occasions during the year. Estimated unpaid overdues to banks and
institutions as at March 31, 2012 aggregated to Rs. 79,774.60 Lacs
including devolved guarantees/letters of credit unfunded as at March
31, 2012. The over dues relate to the financial year 2011- 2012.
Interest aggregating to Rs. 5,107.10 Lacs for the calendar year 2011
were due to debenture holders as at March 31, 2012 (net of tax).
12. According to the information and explanations given to us and
based on the documents and records produced 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. Accordingly, the provisions of
the clause 4(xii) of the Order are not applicable to the Company.
13. In our opinion, the Company is not a chit fund or a nidhi, mutual
benefit fund / society. Accordingly, the provisions of the clause
4(xiii) of the Order are not applicable to the Company.
14. 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 Order are not applicable to the
Company.
15. According to the information and explanations given to us, the
Company has not given guarantees during the year for loans taken by
others from banks or financial institutions. Accordingly, the
provisions of clause 4(xv) of the Order are not applicable to the
Company.
16. Based on information and explanations given to us by the
management, term loans taken during the year have been applied for the
purpose for which they were obtained, wherever specified by the bank in
the relevant sanction letters.
17. According to the information and explanations given to us and on
an overall examination of the balance sheet of the Company, we report
that funds raised on short- term basis to an aggregate extent of Rs.
630,444.28 Lacs have been used for long term investment as at March 31,
2012.
18. Based on information and explanations given to us by the
management, the Company has made not any preferential allotment of
shares to parties or companies covered in the register maintained under
section 301 of the Act. Accordingly, the provisions of clause 4(xvii)
of the Order are not applicable to the Company.
19. Debentures outstanding during the year ended March 31, 2012 are
unsecured. Accordingly, the provisions of clause 4(xix) of the Order
are not applicable to the Company.
20. The Company has not raised any money by public issue during the
year. Accordingly, the provisions of clause 4(xx) of the Order are not
applicable to the Company.
21. As per the information and explanations furnished to us by the
management, no material frauds on or by the Company and causing
material misstatements to financial statements have been noticed or
reported during the course of our audit, except for charge backs
received by the Company from credit card service providers due to
misutilisation of credit cards by third parties of Rs. 92.18 Lacs.
For B. K. RAMADHYANI & CO.
Chartered Accountants
Firm registration number: 002878S
Place : Mumbai (Shyam Ramadhyani)
Date : May 30, 2012 Partner
Membership No. 019522
B. K. Ramadhyani & Co.
Chartered Accountants
4B, Chitrapur Bhavan
No. 68, 8th Main, 15th Cross
Malleswaram
Bangalore - 560 055
Mar 31, 2011
1. We have audited the attached Balance Sheet of Kingfisher Airlines
Limited (formerly known as Deccan Aviation Limited) ("the Company") as
at March 31, 2011, the Profit and Loss Account and the Cash Flow
Statement 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 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 issued
by the Central Government of India in terms of sub-section (4A) of
section 227 of the Companies Act, 1956 ("the Act"), as amended by the
Companies (Auditor's Report) (Amendment) Order, 2004 (herein after
collectively referred to as the "Order") we enclose in the annexure a
statement on matters specified in paragraphs 4 and 5 of the Order.
4. Other Income for the fifteen months ended June 30, 2006 included a
sum of Rs. 2,672.20 Lacs towards certain subsidy provided to the
Company by one of its suppliers in conjunction with lease of aircrafts
on operating lease basis. The previous auditors had reported that they
were of the opinion that such accounting treatment was not in
accordance with Accounting Standard 19 on "Leases" and the subsidy
should be recorded on a straight-line basis over the period of the
lease. Their audit report on the financial statements for the fifteen
months ended June 30, 2006 was modified in this matter. We concur with
the views of the said auditors in principle that such subsidy should be
recognized on a systematic basis in the Profit and Loss Account over
the periods necessary to match them with the related costs, which they
are intended to compensate although the matter does not appear to be
covered explicitly by the said AS 19.
5. As reported in paragraph 6 of our report dated July 28, 2009, the
Company novated its rights in certain aircrafts purchase agreements
during the year ended March 31, 2009 in favor of certain lessors and
took such aircrafts back on operating lease from the same persons. The
Company incurred a loss of Rs. 14,437.15 Lacs on such novation
(including interest on loans borrowed for making pre-delivery payments
to aircraft manufacturers of Rs. 5,305.34 Lacs). As already reported in
the said report, in the absence of an independent valuation report, we
had relied on the representations of the management that the novation
was not established at fair value, the fair value of the aircrafts is
at least equal to or more than the cost of acquisition and the
preconditions specified in AS 19 for deferring the said loss are
satisfied. We do not express any independent opinion in the matter.
6. Attention is invited to note 27 of schedule 19 regarding method of
accounting of costs incurred on major repairs and maintenance of
engines of aircrafts taken on operating lease during the year
aggregating to Rs.12,256.85 lacs (year ended March 31, 2010 Rs.
207,00.76 lacs) which have been included under fixed assets and
amortized over the estimated useful life of the repairs. In our
opinion, this accounting treatment is not in accordance with current
accounting standards.
7. Attention is invited to note 28 of Schedule 19 regarding use fees
payable by the Company in respect of certain assets taken on operating
lease aggregating to Rs 5,576.45 Lacs as maintenance reserves, in
accordance with its understanding. Pending formalization of the matter
with the relevant lessor, we do not express any independent opinion in
the matter.
8. We further report that, except for the effect, if any, of the
matters stated in paragraph 5 and 7 above and 13(a) below, paragraph
1(b) of the annexure to this report and notes 23 and 25 of schedule 19,
whose effect are not ascertainable, had the observations made in
paragraphs 4 & 6 above been considered, the loss after tax for the year
ended March 31, 2011 would have been Rs.104,951.58 Lacs (March 31, 2010
- Rs.175,350.66 Lacs) as against the reported loss of Rs.102,739.80
Lacs (March 31, 2010 - Rs 164,722.06 Lacs), debit balance in profit and
loss account as at March 31, 2011 would have been Rs.548,493.43.Lacs
(March 31, 2010 - Rs. 443,541.85 lacs) as against the reported figure
of Rs. 534,847.43 Lacs (March 31, 2010 - Rs. 432,107.63 Lacs), other
liabilities would have been Rs. 58,553.65 Lacs (March 31, 2010 -
Rs.44,043.05 Lacs) as against the reported figure of Rs.58,275.12 Lacs
(March 31, 2010 - Rs.43,311.74. Lacs), and fixed assets (excluding
capital work in progress) would have been Rs. 137,071.61 Lacs (March
31, 2010 - Rs. 139,061.17 Lacs) as against the reported figure of Rs.
157,188.69 Lacs (March 31, 2010 - Rs.155,451.42 Lacs).
9. Attention of the members is invited to note 24 of schedule 19
regarding the financial statements of the Company having been prepared
on a going concern basis, notwithstanding the fact that its net worth
is completely eroded. The appropriateness of the said basis is
interalia dependent on the Company's ability to infuse requisite funds
for meeting its obligations.
Further to our comments in the annexure referred to above, we report
that:
10. 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. ^
11. In our opinion, the Company has kept proper books of account as
required by Law so far as appears from our examination of those books.
12. The Balance Sheet, Profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account.
13. (a) Attention of the members is invited to note 16 of schedule 19
regarding recognition of deferred tax credit during the year
aggregating to Rs. 49,341.80 Lacs (year ended March 31, 2010
Rs.76,463.31lacs) (Total amount recognized up to March 31, 2011 Rs.
292,778.31 Lacs) by virtue of which its loss for the year and debit
balance in Profit and Loss Account stand reduced by Rs. 493,41.80 Lacs
(year ended March 31, 2010 Rs. 76,463.31 Lacs) and Rs. 292,778.31 Lacs
(as at March 31, 2010 Rs.243,436.51 Lacs) respectively. In view of
explanation 1 to clause 17 of Accounting Standard 22, we cannot express
any independent opinion in the matter.
(b) In our opinion, subject to the effect of the matters stated in
paragraphs 4 to 6 and 13(a) above, the Balance Sheet, Profit & Loss
Account and Cash Flow Statement dealt with by this report comply in all
material respects, with the mandatory Accounting Standards referred to
in sub-section (3C) of section 211 of the Act.
14. On the basis of written representations received from Directors as
on March 31, 2011 and taken on record by the Board of Directors, we
report that none of the Directors of the Company, are disqualified as
on that date from being appointed as a director, under clause (g) of
sub-section (1) of section 274 of the Act.
15. In our opinion and to the best of our knowledge and according to
the information and explanations given to us, the said accounts subject
to note 21 of schedule 19 and read with other notes on accounts, give
the information required by the Act in the manner so required and
subject to the effect of the matters stated in paragraphs 4 to 8 &
13(a) above, note 23 of schedule 19 regarding certain accounts detailed
in the said note being under review and reconciliation and note 25 of
schedule 19 regarding the basis of computation of unearned revenue as
at March 31, 2011 (Data of number of unflown tickets and their average
value, based on which management has estimated the amount of unearned
revenue, not being drawn from accounting records, could not be verified
by us) (Effect thereof on revenue not ascertainable) 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 March 31, 2011,
ii. In the case of Profit and Loss account, of the loss for the year
ended on that date and
iii. In the case of Cash Flow Statement, of the cash flows for the year
ended on that date.
Annexure to the Auditors' report
(As referred To in PArAgrAPh 3 of oUr rePorT of eVen dATe To The
MeMbers of Kingfisher Airlines li MiTed)
1. a. The Company has maintained records showing full particulars
including quantitative details and situation of fixed assets. However,
comprehensive description of assets and current location are to be
incorporated in the asset records after completion of reconciliation
referred to in paragraph 1(b) below.
b. Fixed assets have been physically verified by the management during
the year. Pending completion of reconciliation which is reportedly in
progress, discrepancies, if any, cannot be ascertained (refer note 30
of schedule 19).
c. There was no substantial disposal of fixed assets during the year.
2. a. Management has conducted physical verification of inventory at
reasonable intervals during the year.
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. No material discrepancies were noticed on physical verification.
3. a. As informed, the Company has not granted any loans, secured or
unsecured to companies, firms or other parties covered in the register
maintained under section 301 of the Act.
b. As informed, the Company has taken loans from four companies covered
in the register maintained under section 301 of the Act. The total loan
amount outstanding as at year end was Rs. 6,554.14 lacs and the maximum
amount outstanding at any time during the year were Rs. 113,433.14
lacs. The rate of interest and terms and conditions on which the said
loans are taken is not prima-facie prejudicial to the interests of the
Company. No stipulations for repayment have been prescribed and as such
no comments regarding regularity of payments are being made.
4. In our opinion and according to the information and explanation
given to us, and taking into consideration management's representation
that a large number of items purchased are of a special nature for
which alternative quotations cannot be obtained, there are adequate
internal control procedures commensurate with the size of the Company
and the nature of its business for the purchases of inventory and sale
of services (subject to note 25 of schedule 19). Internal controls in
respect of purchase of fixed assets to be strengthened. Subject to our
observations in paragraph 1(b) above and note 25 of schedule 19, during
the course of our audit, no continuing failure to correct major
weakness in internal controls has been noticed.
5. a. According to the information and explanations given to us, we
are of the opinion that transactions that need to be entered into the
register maintained under section 301 of the Companies Act, 1956 have
been so entered.
b. Further, contracts or arrangements referred to in section 301 of the
Act and aggregating to Rs. 5.00 lacs or more per party have been
entered into at prices which are reasonable as compared to similar
services "~rendered to / by other parties except in respect of
advertisement & sales promotional expenses of Rs 630.65 lacs and
miscellaneous income of Rs.787.36 lacs where we are unable to make any
comments on reasonability of rates since there were no similar
transactions with third parties at the relevant time.
6. The Company has not accepted any deposits from the public.
7. The Company has an internal audit system commensurate with the size
and nature of its business.
8. To the best of our knowledge and as explained, the Central
Government has not prescribed the maintenance of cost records under
section 209(1) (d) of the Act for the products of the Company.
9. a. Undisputed statutory dues in respect of service tax,
withholding taxes, provident fund, fringe benefit tax, investor
education and protection fund and employees' state insurance dues have
not been regularly deposited with the appropriate authorities.
Undisputed statutory dues in respect of wealth tax, customs, excise
duty, cess as applicable, have generally been regularly deposited with
the appropriate authorities. Since to the best of our knowledge, the
Central Government has till date not prescribed the amount of cess
payable under section 441A of the Act, no comments in this respect have
been made.
b. According to the information and explanations given to us:-
(i) No amounts were outstanding as at year end on account of undisputed
amounts payable in respect of investor education and protection fund,
sales tax, customs duty, excise duty and cess for a period of more than
six months from the date they became payable.
(ii) Undisputed amounts payable in respect of employees state insurance
of Rs.0.75 lacs, provident fund of Rs.43.80 lacs, tax deducted at
source of Rs. 42,297.52 lacs, service tax of Rs.1,047.76 lacs,
professional tax of Rs.2.46 lacs (In all cases relating to the years
2008-09, 2009- 2010 and 2010 - 2011) and fringe benefit tax of Rs.
450.70 lacs (balance of tax and interest for the financial year
2008-09) were outstanding for a period of more than six months from the
date they became payable (excluding applicable interest in all cases
except in respect of fringe benefits tax) (to the extent identified
pending review and reconciliation of the relevant accounts). The due
dates for these amounts are as per respective statutes.
c. According to the information and explanations given to us, the
following dues have not been deposited with the concerned authorities
on account of dispute
Year Amount Pending before
(Rs in
lacs)
Tax deducted at source
2006-07 and 2007-08 333.25 Commissioner of
Income Tax (Appeals)
Estimated total 6,019.06 Delhi High Court. In
liability arising out of certain cases, writs
rejection of approvals proposed by the
under section 10(15A) Company are yet to be
of the Income Tax Act, filed.
1961.
service Tax
2004-05 to 2007-08 448.63 Customs, Excise and
Service Tax Appellate
Tribunal
January 2005 to 16,164.30 Customs, Excise and
September 2007 Service Tax Appellate
Tribunal.
10. The Company's accumulated losses at the end of the financial year
were more than fifty percent of its net worth. The Company has incurred
cash losses during the financial year and in the immediately preceding
financial year.
11. Based on our audit procedures and as per the information and
explanations given by the management, the Company has defaulted in
repayment of loans and interest to banks and financial institutions.
Delays were noticed in payment of interest & principal on several
occasions during the year. The unpaid overdue installments and interest
to banks and institutions as at March 31, 2011 were Rs.3,750.00 lacs
and Rs.2,066.14 lacs respectively. The unpaid installments fell due on
December 31, 2010. Unpaid interest relate to the months of December
2010 to March 2011. There were no dues payable to the debenture holders
as at March 31, 2011.
12. According to the information and explanations given to us and
based on the documents and records produced 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. Accordingly, the provisions of
the clause 4(xii) of the Order are not applicable to the Company.
13. In our opinion, the Company is not a chit fund or a nidhi, mutual
benefit fund / society. Accordingly, the provisions of the clause
4(xiii) of the Order are not applicable to the Company.
14. 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 Order are not applicable to the
Company.
15. According to the information and explanations given to us, the
Company has not given guarantees during the year for loans taken by
others from banks or financial institutions. Accordingly, the
provisions of clause 4(xv) of the Order are not applicable to the
Company.
16. Based on information and explanations given to us by the
management, term loans taken during the year have been applied for the
purpose for which they were obtained, wherever specified by the bank in
the relevant sanction letters.
17. According to the information and explanations given to us and on
an overall examination of the balance sheet of the company, we report
that funds raised on short- term basis to an aggregate extent of
Rs.279,659.60 Lacs has been used for long term investment as at March
31, 2011.
18. The Company has made preferential allotment of shares to parties
or companies covered in the register maintained under section 301 of
the Act. In our opinion, the price at which such shares were issued is
prima facie not prejudicial to the interests of the Company.
19. Debentures issued during the year are unsecured. Accordingly, the
provisions of clause 4(xix) of the Order are not applicable to the
Company.
20. The Company has not raised any money by public issue during the
year. Accordingly, the provisions of clause 4(xx) of the Order are not
applicable to the Company.
21. As per the information and explanations furnished to us by the
management, no material frauds on or by the Company and causing
material misstatements to financial statements have been noticed or
reported during the course of our audit, except for charge backs
received by the Company from credit card service providers due to
misutilisation of credit cards by third parties of Rs.107.76 lacs.
For B. K. RAMADHYANI & Co.
Chartered Accountants
Firm registration number: 002878S
Place : Bangalore (shyam ramadhyani)
Date : June 29, 2011 Partner
Membership No. 019522
b. K. ramadhyani & Co.
Chartered Accountants
4B, Chitrapur Bhavan
No. 68, 8th Main, 15th Cross
Malleswaram
Bangalore - 560 055
Mar 31, 2010
1. We have audited the attached Balance Sheet of Kingfisher Airlines
Limited (formerly known as Deccan Aviation Limited) ("the Company") as
at March 31, 2010, the Profit and Loss Account and the Cash Flow
Statement for the year ended on that date, annexed thereto. 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 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 issued
by the Central Government of India interms of sub-section (4A) of
Section 227 of the Companies Act, 1956 ("the Act"), as amended by the
Companies (Auditors Report) (Amendment) Order, 2004 (herein after
collectively referred to as the "Order") we enclose in the annexure a
statement on matters specified in paragraphs 4 and 5 of the Order.
4. Other Income for the fifteen months ended June 30, 2006 included a
sum of Rs. 2,672.20 Lacs towards certain subsidy provided to the
Company by one of its suppliers in conjunction with lease of aircrafts
on operating lease basis. The previous auditors had reported that they
were of the opinion that such accounting treatment was not in
accordance with Accounting Standard 19 on "Leases" and the subsidy
should be recorded on a straight-line basis over the period of the
lease. Their audit report on the financial statements for the fifteen
months ended June 30, 2006 was modified in this matter. We concur with
the views of the said auditors in principle that such subsidy should be
recognized on a systematic basis in the Profit and Loss Account over
the periods necessary to match them with the related costs, which they
are intended to compensate although the matter does not appear to be
covered explicitly by the said AS 19.
5. As reported in paragraph 6 of our report dated July 28, 2009, the
Company novated its rights in certain aircrafts purchase agreements
during the year ended March 31, 2009 in favour of certain lessors and
took such aircrafts back on operating lease from the same persons. The
Company incurred a loss of Rs. 14,437.15 Lacs on such novation
(including interest on loans borrowed for making pre-delivery payments
to aircraft manufacturers of Rs. 5,305.34 Lacs). As already reported in
the said report, in the absence of an independent valuation report, we
had relied on the representations of the management that the novation
was not established at fair value, the fair value of the aircrafts is
at least equal to or more than the cost of acquisition and the
preconditions specified in AS 19 for deferring the said loss are
satisfied.
6. Attention is invited to note 29 of schedule 21 regarding change in
the method of accounting of costs incurred on major repairs and
maintenance of engines of aircrafts taken on operating lease during the
year aggregating to Rs.20,700.76 lacs which have been included under
fixed assets and amortized over the estimated useful life of the
repairs. In our opinion, the revised accounting treatment is not in
accordance with current accounting standards.
7. We further report that, except for the effect, if any, of the
matters stated in paragraph 5 above & 13(a) below and note 27 of
schedule 21, whose effect are not ascertainable, had the observations
made in paragraphs 4 & 6 above been considered, the loss after tax for
the year ended March 31,2010 would have been Rs. 175,350.66 Lacs (March
31, 2009 - Rs. 160,407.96 Lacs) as against the reported loss of Rs.
164,722.06 Lacs (March 31, 2009 - Rs. 160,882.99 Lacs), the debit
balance in profit and loss account as at March 31, 2010 would have been
Rs. 443,541.85 Lacs (March 31, 2009 - Rs. 258,864.90 Lacs) as against
the reported figure of Rs. 432,107.63 Lacs (March 31, 2009 - Rs.
257,658.57 Lacs), other liabilities would have been Rs. 49,831.75 Lacs
(March 31, 2009 - Rs. 35,975.62 Lacs) as against the reported figure of
Rs. 49,100.45 Lacs (March 31, 2009 - Rs. 34,766.28 Lacs), and Fixed
Assets (excluding capital work in progress) would have been
Rs.139,061.17 Lacs (March 31, 2009 - Rs. 157,551.66 Lacs) as against
the reported figure of Rs. 155,451.42 Lacs (March 31, 2009 - Rs.
157,551.66 Lacs).
8. As a result of the changes in the methods of accounting referred to
in notes 29 and 31 of schedule 21, the loss for the year before tax
expense, loss for the year after tax expense and debit balance in
Profit and Loss Account as at March 31, 2010 stand reduced by Rs.
27,692.01 Lacs, Rs. 18,493.42 Lacs and Rs. 18,493.42 Lacs respectively.
9. Attention of the members is invited to note 26 of schedule 21,
regarding reasons for preparing the financial statements of the Company
on a going concern basis, notwithstanding the fact that its net worth
is completely eroded. The appropriateness of the said basis is
interalia dependent on its ability to refix repayment obligations of
its loans and interest falling due during the year ending March 31,
2011 and infusion of funds for meeting obligations.
Further to our comments in the annexure referred to above, we report
that:
10. 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.
11. In our opinion, the Company has kept proper books of account as
required by Law so far as appears from our examination of those books.
12. The Balance Sheet, Profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account.
13. (a) Attention of the members is invited to note 18 of
schedule 21 regarding recognition of deferred tax credit during the
year aggregating to Rs. 76,463.31 Lacs (year ended March 31, 2009 Rs.
55,887.62 Lacs) (Total amount recognized up to March 31, 2010 Rs.
243,436.51 Lacs) by virtue of which its loss for the year and debit
balance in Profit and Loss Account stand reduced by Rs. 76,463.31 Lacs
(year ended March 31, 2009 Rs. 55,887.62 Lacs) and Rs. 243,436.51 Lacs
(as at March 31, 2009 Rs. 166,973.20 Lacs) respectively. In view of
explanation 1 to clause 17 of Accounting Standard 22, we cannot express
any independent opinion in the matter.
(b) In our opinion, subject to the effect of the matters stated in
paragraphs 4 to 6 and 13(a) above, the Balance Sheet, Profit & Loss
Account and Cash Flow Statement dealt with by this report comply in all
material respects, with the mandatory Accounting Standards referred to
in sub-section (3C) of Section 211 of the Act.
14. On the basis of written representations received from Directors as
on March 31, 2010 and taken on record by the Board of Directors, we
report that none of the Directors of the Company, are disqualified as
on that date from being appointed as a director, under clause (g) of
sub-section (1) of Section 274 of the Act.
15. In our opinion and to the best of our knowledge and according to
the information and explanations given to us, the said accounts subject
to note 23 of schedule 21 and read with other notes on accounts, give
the information required by the Act in the manner so required and
subject to the effect of the matters stated in paragraphs 4 to7& 13(a)
above and note 27 of schedule 21 regarding the basis of computation of
unflown revenue as at March 31, 2010 (effect thereof on revenue not
ascertainable) 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 March 31, 2010,
ii. In the case of Profit and Loss account, of the loss for the year
ended on that date; and
iii. In the case of Cash Flow statement, of the cash flows for the
year ended on that date.
Annexure to the Auditors Report
(AS REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE TO THE
MEMBERS OF KINGFISHER AIRLINES LIMITED)
1. a. The Company has maintained proper records
showing full particulars including quantitative details and situation
of fixed assets. However, comprehensive description of assets and
current location are to be incorporated in the asset records after
completion of reconciliation referred to in paragraph 1(b) below.
b. Fixed assets have been physically verified by the management after
the close of the year. Pending completion of reconciliation which is in
progress, discrepancies, if any, cannot be ascertained.
c. There was no substantial disposal of fixed assets during the year.
2. a. Management has conducted physical verification of inventory at
reasonable intervals during the year.
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. No material discrepancies were noticed on physical verification.
3. a. As informed, the Company has not granted any loans, secured or
unsecured to companies, firms or other parties covered in the register
maintained under Section 301 of the Act.
b. As informed, the Company has taken loans from a company covered in
the register maintained under Section 301 of the Act. The total amount
outstanding as at year end was Rs. 34,462.00 Lacs and the maximum
amount outstanding at any time during the year was the same amount. The
rate of interest and terms and conditions on which the said loans are
taken is not prima-facie prejudicial to the interests of the Company.
No stipulations for repayment have been prescribed and as such no
comments regarding regularity of payments are being made.
4. In our opinion and according to the information and explanation
given to us, and taking into consideration managements representation
that a large number of items are of a special nature for which
alternative quotations cannot be obtained, there are adequate internal
control procedures commensurate with the size of the Company and the
nature of its business for the purchases of inventory & fixed assets
and sale of services. During the course of our audit, no continuing
failure to correct major weakness in internal controls has been
noticed.
5. a. According to the information and explanations given to us, we
are of the opinion that transactions that need to be entered into the
register maintained under Section 301 of the Companies Act, 1956 have
been so entered.
b. Further, contracts or arrangements referred to in Section 301 of the
Act and aggregating to Rs. 5.00 Lacs or more per party have been
entered into at prices which are reasonable as compared to similar
services rendered to / by other parties except in respect of
advertisement & sales promotional expenses of Rs. 738.22 Lacs and
miscellaneous income of Rs. 1,048.61 Lacs where we are unable to make
any comments on reasonability of rates since there were no similar
transactions with third parties at the relevant time.
6. The Company has not accepted any deposits from the public.
7. The Company has an internal audit system commensurate with the size
and nature of its business.
8. To the best of our knowledge and as explained, the Central
Government has not prescribed the maintenance of cost records under
Section 209(1) (d) of the Act for the products of the Company.
9. a. Undisputed statutory dues in respect of service tax, withholding
taxes, provident fund, fringe benefit tax, wealth tax and employees
state insurance dues have not been regularly deposited with the
appropriate authorities. Undisputed statutory dues in respect of
investor education and protection fund, customs, excise duty, cess as
applicable, have generally been regularly deposited with the
appropriate authorities. Since to the best of our knowledge, the
Central Government has till date not prescribed the amount of cess
payable under Section 441A of the Act, no comments in this respect have
been made.
b. According to the information and explanations given to us:-
(i) No amounts were outstanding as at year end on account of undisputed
amounts payable in respect of investor education and protection fund,
sales tax, customs duty, excise duty, and cess for a period of more
than six months from the date they became payable.
(ii) Undisputed amounts payable in respect of provident fund of Rs.
45.23 Lacs, tax deducted at source of Rs. 27,340.23 Lacs, service tax
of Rs. 809.69 Lacs; professional tax of Rs. 5.43 Lacs (In all cases
relating to the years 2008 - 2009 and 2009-2010) and fringe benefit tax
of Rs. 643.82 Lacs (self assessment tax for the financial year 2008 -
2009) were outstanding for a period of more than six months from the
date they became payable (excluding applicable interest in all cases).
The due dates for these amounts are as per respective statutes.
c. According to the information and explanations given to us, dues
aggregating to Rs. 1,336.84 Lacs (Relating to assessment years 2007 -
2008 and 2008 - 2009) had not been deposited as at March 31, 2010 (on
account of withholding tax under the Income Tax Act, 1961) on account
of disputes. Appeals are pending before the Commissioner of Income Tax
(Appeals). The Company has also not deposited withholding tax amount
estimated at Rs. 3,614.10 Lacs, pending reconsideration of rejected
applications under Section 10(15A) of the Income Tax Act, 1961.
10. The Companys accumulated losses at the end of the financial year
were more than fifty percent of its net worth. The Company has incurred
cash losses during the financial year and in the immediately preceding
financial period.
11. Based on our audit procedures and as per the information and
explanations given by the management, the Company has defaulted in
repayment of loans and interest to banks and financial institutions.
Delays were noticed in payment of interest & principal on several
occasions during the year. The unpaid overdue installments and
interest to banks and institutions as at March 31, 2010 were Rs.
20,319.47 Lacs and Rs. 8,168.39 Lacs respectively. There were no dues
payable to the debenture holders.
12. According to the information and explanations given to us and
based on the documents and records produced 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. Accordingly, the provisions of
the clause 4(xii) of the Order are not applicable to the Company.
13. In our opinion, the Company is not a chit fund or a nidhi, mutual
benefit fund/society. Accordingly, the provisions of the clause 4(xiii)
of the Order are not applicable to the Company.
14. 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 Order are not applicable to the
Company.
15. According to the information and explanations given to us, the
Company has not given guarantees during the year for loans taken by
others from banks or financial institutions. Accordingly, the
provisions of clause 4(xv) of the Order are not applicable to the
Company.
16. Based on information and explanations given to us by the
management, term loans taken during the year have been applied for the
purpose for which they were obtained.
17. According to the information and explanations given to us and on
an overall examination of the balance sheet of the Company, we report
that funds raised on short- term basis to an aggregate extent of Rs.
418,249.39 Lacs has been used for long term investment as at March 31,
2010.
18. The Company has not made any preferential allotment of shares to
parties or companies covered in the register maintained under ection
301 of the Act. Accordingly, the provisions of clause 4(xviii) of the
Order are not applicable to the Company.
19. There were no debentures outstanding at any time during the year.
Accordingly, the provisions of clause 4(xix) of the Order are not
applicable to the Company.
20. The Company has not raised any money by public issue during the
year. Accordingly, the provisions of clause 4(xx) of the Order are not
applicable to the Company.
21. As per the information and explanations furnished to us by the
management, no material frauds on or by the Company and causing
material misstatements to financial statements have been noticed or
reported during the course of our audit, except for charge backs
received by the Company aggregating to Rs. 475.44 Lacs from credit card
service providers due to misutilisation of credit cards by third
parties.
For B. K. RAMADHYANI & CO.
Chartered Accountants
Firm registration number: 0028785
Place : Mumbai Shyam Ramadhyani
Date : May 28, 2010 Partner
Membership No. 019522
B. K. Ramadhyani & Co.
Chartered Accountants
4B, Chitrapur Bhavan
No. 68, 8th Main, 15th Cross
Malleswaram
Bangalore-560 055
Disclaimer: This is 3rd Party content/feed, viewers are requested to use their discretion and conduct proper diligence before investing, GoodReturns does not take any liability on the genuineness and correctness of the information in this article