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INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF FINANCIAL TECHNOLOGIES (INDIA) LIMITED
Report on the standalone financial statements
We have audited the accompanying standalone financial statements of Financial Technologies (India) Limited ('the Company'), which comprise the balance sheet as at March 31, 2015, the statement of profit and loss and the cash flow statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.
Management's responsibility for the standalone financial statements
The Company's board of directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ('the Act') with respect to the preparation 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 judgements 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.
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 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.
Basis for Qualified Opinion
As stated by the Management of the Company in Note 57 to the standalone financial Statement, Writ Petitions (WP), Public Interest Litigation (PIL), Civil Suits have been filed against the Company in relation to NSEL event, wherein the Company has been made a party in the WP and Civil Suits. These matters are pending at various stages of adjudication. As stated in the said note, based on legal advice, the management of the Company does not foresee that the parties who have filed the WP PIL, Civil Suits would be able to sustain any claim against the Company. In addition, as stated by the management in note 57 and 59 to the standalone financial Statement, there are First Information Reports registered against various parties including the Company with the Economic Offences Wing of the Mumbai Police (EOW), Central Bureau of Investigation (CBI) and MIDC, Police Station, Mumbai District.
In this regard, the Management and those charged with Governance have represented to us that other than as stated in the said note to the Statement, there are no claims, litigations, potential settlements involving the Company directly or indirectly which require adjustments to/disclosures in the Statement.
In the light of the above representations regarding the ongoing investigations and matters, the outcome of which is not known and is uncertain at this stage, we are unable to comment on the consequential impact in respect of the same on the results for the year ended March 31, 2015.
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter specified under 'Basis for Qualified Opinion' paragraph, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2015, and its profit and its cash flows for the year ended on that date.
Emphasis of Matter
1. We draw attention to Note 61 to the standalone financial statements, regarding utilisation of unexpired MAT credit entitlement by the Company. The Company has a total MAT credit entitlement of Rs. 19,270.02 Lakhs as at March 31, 2015 including recognition of Rs. 10,081.20 Lakhs during the year ended March 31, 2015. Based on the projections as made by the Company's management regarding income–tax liability of the Company, Management is of the view that the Company will be able to utilise the unexpired MAT credit entitlement in projected years.
2. We draw attention to Note 55 to the standalone financial statements, which describe the receipt of the draft order proposing amalgamation of National Spot Exchange Limited with the Company. The Company has filed a Writ Petition before the Honourable Bombay High Court challenging the said order.
3. We draw attention to Note 56 to the standalone financial statements. Government of India has filed a petition with Company Law Board under the Companies Act, 1956 seeking inter alia removal and supersession of the Board of Directors of the Company, which has been protested by the Company and the matter is pending before CLB for consideration.
Our opinion is not qualified in respect of these matters of emphasis.
The financial statements of the Company for the year ended March 31, 2014, were audited by another auditor whose report dated May 30, 2014 expressed modified opinion on those statements.
Report on other legal and regulatory requirements
1. As required by the Companies (Auditor's Report) Order, 2015 (the 'Order') issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the Annexure, a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by section 143 (3) of the Act, we report that:
a) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
c) The balance sheet, the statement of profit and loss, and the cash flow statement dealt with by this report are in agreement with the books of account.
d) in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014.
e) On the basis of the written representations received from the directors as on March 31, 2015 taken on record by the board of directors, none of the directors is disqualified as on March 31, 2015 from being appointed as a director in terms of section 164 (2) of the Act.
f) With respect to the other matters to be included in the Auditor's Report in accordance with rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our 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 standalone financial statements (refer note 29);
ii. the Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long–term contracts including derivative contracts; and
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in 'other matters' and paragraph 1 under 'Report on other legal and regulatory requirements' of our report of even date)
(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.
(b) The fixed assets have been physically verified by the management in accordance with a phased programme of verification which in our opinion, is reasonable, having regard to the size of the Company and nature of its assets. The frequency of physical verification is reasonable and no material discrepancies were noticed on such verification.
(ii) According to the process explained to us as followed by the Company, the Company's inventory items are directly delivered to its customers on their procurement. Therefore the Company does not carry any inventory on a regular basis. Accordingly reporting on Paragraph 3 (ii) (a), (b) and (c) is not required. On the basis of our examination, in our opinion, the Company has maintained proper records of its inventories.
(iii) The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 189 of the Act. Accordingly, the Paragraph 3 (iii) (a) and (b) of the Order are not applicable.
(iv) On the basis of verification of transactions carried out by us, we report that there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and the sale of goods and services. Further, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in internal control system.
(v) According to the information and explanations given to us and records verified by us, the Company has not accepted any deposits during the year from the public to which the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 and any other relevant provisions of the Act and the rules framed thereunder apply. Accordingly, the Paragraph 3 (v) of the Order is not applicable.
(vi) The Central Government has not prescribed maintenance of cost records under Section 148(1) of the Act. Accordingly, the Paragraph 3 (vi) of the Order is not applicable.
(vii) (a) According to the records verified by us, the Company is generally regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, value added tax, cess and other material statutory dues, as applicable to the Company, with the appropriate authorities. There are no arrears of outstanding statutory dues as at the last day of the financial year for a period of more than six months from the date they became payable.
(c) During the year, there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company in accordance with the relevant provisions of the Companies Act, 1956 and the rules made thereunder.
(viii) Without considering the possible effects of our audit qualification reported in the 'Basis for Qualified Opinion' in our accompanying Audit Report which is not quantifiable, the Company does not have accumulated losses as at March 31, 2015 and it has not incurred cash losses during current financial year and in the immediately preceding financial year.
(ix) According to the information and explanations given to us and as per the records of the Company examined by us, the Company has not defaulted in repayment of dues to banks. The Company has neither availed any assistance from financial institutions nor has issued any debentures. Accordingly, the additional reporting under Paragraph 3 (ix) of the Order is not applicable.
(x) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by its subsidiary companies from banks and financial institutions are not, prima facie, prejudicial to the interests of the Company.
(xi) During the year, the Company has not availed any additional term loan. As per the records of the Company examined by us, there has been no additional utilization of the term loan, being external commercial borrowing by the Company during the year.
(xii) Except for the matter(s) referred in the 'Basis for Qualified Opinion' of our audit report which are subjudice and hence are inconclusive, to the best of our knowledge and according to the information and explanations gives to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.
For Sharp & Tannan Associates
Firm's Registration no. 109983W
by the hand of
Membership No. (F) 037457
Place : Mumbai,
date : May 22, 2015