DATAMATICS Auditors Report

To,


The Members of DATAMATICS GLOBAL SERVICES LIMITED Report on the Standalone Financial Statements


We have audited accompanying standalone financial statements of DATAMATICS GLOBAL SERVICES LIMITED (“the Company”), which comprise the Balance Sheet as at March 31, 2016 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.


Management’s Responsibility for the Financial Statements


The Company''''s Board of Directors is responsible for the matters stated in Section 134(5) of 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. Those Standards and pronouncements 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 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:


a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2016;


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.


Emphasis of Matter


a) Attention is drawn to Note No.39, the Company has an investment of '''' 670.18 million in three of its wholly owned subsidiaries and also extended loans and advances of '''' 0.89 million to these subsidiaries as on March 31, 2016. The net worth of these subsidiaries has declined. We are given to understand that, these investments are for long term and of strategic nature and the management are confident of turning around the subsidiaries in the near future. In view of this, we are unable to comment on whether provision if any, for the diminution in the value of investments is required to be made.


b) Attention is drawn to Note No. 43, Datamatics Global Services GmbH, a subsidiary company along with its subsidiary Datamatics Global Services Solutions GmbH has filed for voluntary winding up / liquidation / de-registration procedure on June 15, 2015. As informed to us, the winding up procedure generally takes at least a year. Management has estimated a diminution in value of investments to the extent of '''' 65.66 million, which is not temporary in nature as the subsidiary and step down subsidiary companies are currently carrying on its operations prior to closing as contractually / statutorily required. Based on the judgment and estimation of the management, the said investment has been stated at cost (i.e. '''' 195.95 million) less provision for diminution in value of investment of '''' 65.66 million as at March 31, 2016.


Report on other Legal and Regulatory Requirements


1. As required by ''''the Companies (Auditor''''s Report) Order, 2016'''', issued by the Central Government of India in terms of subsection (11) of section 143 of the Act (hereinafter referred to as the “Order”), 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”, 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 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.


c) 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.


d) In our opinion, the Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards specified under section 133 of Companies Act, 2013, read with rule 7 of the Companies (Accounts) Rules, 2014.


e) On the basis of the written representations received from the directors, as on March 31, 2016 and taken on record by the Board of Directors, we report that 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 Companies Act, 2013.


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”; and


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 26(a) to the financial statements;


ii. The Company did not have any material foreseeable losses on long-term contracts including derivatives 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 March 31, 2016.


Referred to in paragraph 1 of ''''Report on other Legal and Regulatory Requirements'''' in our Report of even date on the accounts of DATAMACTICS GLOBAL SERVICES LIMITED for the year ended March 31, 2016


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


(b) As explained to us, fixed assets have been physically verified by the management at reasonable intervals during the year and no material discrepancies were noticed on such verification.


(c) On the basis of our examination and as explained to us, the title deeds of immovable properties are held in the name of the Company.


ii. The Company''''s nature of operations does not require it to hold inventories. Consequently, clause 3(ii) of the order is not applicable.


iii. As informed to us, the Company has not granted loans, secured or unsecured, to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Act. Hence sub clauses (a) and (b) of clause 3(iii) of the order are not applicable to the Company.


iv. According to information and explanation provided to us in respect of loans, investments, guarantees and securities, the Company has complied with the provisions of Section 185 and 186 of the Companies Act, 2013.


v. The Company has not accepted any deposits from the public within the meaning of Sections 73, 74, 75 and 76 of the Act and the rules framed there under to the extent notified and therefore clause (v) is not applicable.


vi. The Central Government has not prescribed the maintenance of cost records under sub-Section (1) of Section 148 of the Companies Act, for any of the products of the Company.


vii. (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including


provident fund, employees'''' state insurance, income tax, sales tax, service tax, duty of custom, duty of excise, value added tax, cess and other material statutory dues applicable to it. According to the information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at March 31, 2016 for a period of more than six months from the date they became payable.


(b) The disputed statutory dues aggregating '''' 17.23 million pending before the appropriate authorities are as under:































Sr.


No.



Name of the Statute



Nature of the dues



Forum where the dues is pending



Rs, in million



1



Income Tax



Income Tax



ACIT AY 2012-13



12.16



2



Sales Tax Act



Sales Tax



Ass. Commissioner of Sales Tax



5.07



Total



17.23



viii. According to the records of the Company examined by us and information and explanation given to us, the Company has not defaulted in repayment of dues to financial institution, bank or debentureholders as at the Balance Sheet date.


ix. The Company has not raised any moneys by way of public issue / further offer including debt instruments. The moneys raised on term loans have been applied for the purpose for which it was raised.


x. To the best of our knowledge and according to the information and explanation given to us, no fraud by the Company and no fraud on the Company by its officers or employees has been noticed or reported during the year.


xi. The managerial remuneration paid by the Company is in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V to the Companies Act, 2013.


xii. The Company is not a Nidhi Company.


xiii. The Company has complied with the provisions of section 177 and 188 of the Companies Act, 2013 in respect of transactions with the related parties and has disclosed the details in the Financial Statements in accordance with the accounting standards.


xiv. The Company has not made any preferential allotment or private placement of shares or has fully or partly convertible debentures during the year under review.


xv. The Company has not entered into any non-cash transactions with directors or persons connected to directors during the year under review.


xvi. According to the information and explanations given to us the Company is not required to obtain registration under section


45 IA of the Reserve Bank of lndia Act, 1934 and therefore clause XVI is not applicable.


Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)


We have audited the internal financial controls over financial reporting of DATAMATICS GLOBAL SERVICES LIMITED (“the Company”) as of March 31, 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.


Management’s Responsibility for Internal Financial Controls


The Company''''s Board of Directors are responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (''''ICAI''''). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Company''''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information, as required under the Companies Act, 2013.


Auditors’ Responsibility


Our responsibility is to express an opinion on the Company''''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of Internal Financial Controls and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.


Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. 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.


We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''''s internal financial controls system over financial reporting.


Meaning of Internal Financial Controls over Financial Reporting


A Company''''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company''''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company''''s assets that could have a material effect on the financial statements.


Inherent Limitations of Internal Financial Controls over Financial Reporting


Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Opinion


In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.


For Kanu Doshi Associates LLP


Chartered Accountants


Firm Registration No: 104746W/W100096



Jyoti Kawa


Partner


Membership No: 105654



Place: Mumbai


Date: May 27, 2016

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