Annual Report Summary
Here is a comprehensive summary of the provided PDF document, meticulously capturing all crucial information, key arguments, supporting data, methodologies, findings, conclusions, and actionable insights presented throughout the document:
Section 1: Independent Auditor's Report
- Overview: This section presents the Independent Auditor's Report for Mayasheel Retail India Limited, focusing on the audit of the financial statements as of March 31, 2021. The audit was conducted by Sanjay Kathuria & Associates, Chartered Accountants.
- Qualified Opinion: The auditor issues a "qualified opinion" on the standalone financial statements. This means that, except for the effects of the matters described in the Basis for Qualified Opinion section, the financial statements give a true and fair view of the Company's state of affairs in conformity with accounting principles generally accepted in India and the requirements of the Companies Act 2013.
- Basis for Qualified Opinion: The qualification stems from the following issues: Balance confirmations for Trade Payables, Trade Receivables, Loans Advances Deposits etc. have not been received from the parties and hence it is unable to state whether these balances are recoverable / payable to the extent stated. The Company also changed its inventory valuation methodology from the standard cost method to the retail method, resulting in an Rs. 8.62 crores increase in inventory value. Inventories were verified on sampling basis with discrepancies found.
- The company has total 55 stores all over India and have total inventories of Rs.104.07 Cr. as on year end which forms. 65.61% of Total assets. During the course of Audit, inventories were verified on sampling basis and considerable damages and deficiency/surplus in inventories were found. However, no accounting effect has been given to such loss, damage and deficiency/surplus while preparing the financial statements.
Section 2: Responsibilities
- Management's Responsibilities: The Board of Directors is responsible for the preparation of financial statements, maintenance of accounting records, safeguarding of assets, prevention and detection of fraud, and implementation of adequate internal financial controls as per Section 134(5) of the Companies Act, 2013. It also includes assessing the company's ability to continue as a going concern and disclosing related matters.
- Auditor's Responsibilities: The auditor's objectives are to obtain reasonable assurance about whether the financial statements are free from material misstatement and to issue an auditor's report with their opinion. This includes identifying and assessing risks, obtaining an understanding of internal controls (without expressing an opinion on their effectiveness), evaluating accounting policies, and assessing the going concern assumption.
Section 3: Report on Other Legal and Regulatory Requirements
- Companies (Auditor's Report) Order (CARO) 2020: The auditor provides a statement on matters specified in paragraphs 3 and 4 of the Order, as applicable.
- Section 143 (3) of the Act Reporting: The auditor reports on various aspects as required by Section 143 (3) of the Act, including having obtained necessary information, the maintenance of proper books of account (qualified by the "Basis for Qualified Opinion"), agreement of financial statements with books of account, compliance with Accounting Standards (qualified by the "Basis for Qualified Opinion"), the potential adverse effect of the qualified opinion on the functioning of the Company, and the directors' qualifications.
- Other Matters: The report also covers disclosures related to pending litigations, compliance with Companies (Audit and Auditors) Rules, 2014, long-term contracts, and amounts required to be transferred to the Investor Education and Protection Fund.
- The auditor states that the company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses, and there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
- The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 3 to the financial statements.
- The auditor states that the company has not accepted any deposits from the public and hence the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under are not applicable.
- The auditor states that the central government has not specified maintenance of cost records under sub section (1) of section 148 of the Companies Act, 2013 for the products of the company. Hence this clause is not applicable to the company.
- The company has been generally regular in depositing undisputed statutory dues including Goods and Services Tax, provident fund, employees' state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of above were in arrears as at March 31, 2021 for a period of more than six months from the date when they became payable.
- In the auditor's opinion and according to the information and explanations given to us the company has not defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender.
- The company is not a declared willful defaulter by any bank or financial institution or other lender;
- All the term loans were applied for the purpose for which the loans were obtained.
- The Company has not raised any funds on short term basis which have been utilized for long term purposes.
- The company has not raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies
- The auditor states that no fraud by the company or on the company by its officers or employees has been noticed or reported during the year. We have not received any whistler-blower complaint.
- In the auditor's opinion, all the transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 and the details have been disclosed in the financial statements as required by the applicable accounting standards.
- In the auditor's opinion the company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934) accordingly, the provision of clause 3 (xvi) (a) to (d) of the order are not applicable to the company and hence cannot be commented upon.
- The company has not incurred cash losses in the financial year and in the immediately preceding financial year.
- There has not been any resignation of the statutory auditors during the year.
Section 4: Annexure B - Report on Internal Financial Controls
- Scope: This annexure covers the audit of internal financial controls over financial reporting for Mayasheel Retail India Limited as of March 31, 2021, in conjunction with the audit of the standalone financial statements.
- Management's Responsibility: Management is responsible for establishing and maintaining internal financial controls based on criteria established by the company and the Institute of Chartered Accountants of India's Guidance Note. This includes design, implementation, and maintenance of controls to ensure the orderly conduct of business, safeguarding of assets, prevention of fraud, accuracy of accounting records, and timely preparation of financial information.
- Auditor's Responsibility: The auditor's responsibility is to express an opinion on the Company's internal financial controls over financial reporting.
- Qualified Opinion: According to the information and explanations given to us and based on our audit, we have identified following material weaknesses that has been identified as a material weakness in Management's assessment: The Company does not have an appropriate internal control system for preparing fixed asset register. Therefore, the asset cannot be identifiable properly as per the classification.
Section 5: Financial Statements
- Balance Sheet: As of March 31, 2021, the balance sheet shows total equity and liabilities of INR 1,58,63,20,715 and total assets of INR 1,58,63,20,715.
- Profit & Loss Account: The net profit/(loss) for the year is INR 1,88,22,191, with earnings per share of 0.75. The total revenue is INR 1,87,45,02,047 and total expenses are INR 1,86,17,80,833.
- Cash Flow Statement:
- Net cash flow from operating activities: INR 3,75,61,741
- Net cash flow from investing activities: INR 3,87,41,165
- Net cash flow from financing activities: INR (6,99,83,336)
Section 6: Notes to Financial Statements
- Accounting Policies: Notes outline significant accounting policies, including the basis of preparation, use of estimates, tangible fixed assets, depreciation method, investments, inventories (change in valuation to retail method impacting value by Rs. 8.62 Cr), intangible assets, impairment of assets, revenue recognition, retirement benefits, borrowing cost, and taxation.
- Share Capital: The authorized, issued, subscribed, and fully paid-up share capital is INR 25,00,00,000 divided into 2,50,00,000 equity shares of Rs. 10 each.
- Reserves and Surplus: Details are provided for general reserve and surplus/(deficit) in the Statement of Profit and Loss.
- Long-Term Borrowings: This includes term loans from banks and other parties, as well as long-term maturities of finance lease obligations.
- Trade Payables: Details are given for creditors for expenses and goods.
- Loans & Advances: Notes provide details on both short-term and long-term loans and advances, including those to employees and security deposits.
- Inventories: Inventories were Rs. 1,04,07,00,565 as on March 31st 2021.
- Litigations: There is an uncertainity in the probable obligation to pay any liability on the basis of current status of filled suites on company, hence we are not made any provision for uncertain liabilities.
Key Considerations/Actionable Insights:
- Qualified Opinion: The qualified audit opinion is a critical point. The Company should address the issues raised by the auditor regarding the balance confirmations and inventory valuation.
- Internal Controls: The material weakness in the internal control system related to the fixed asset register needs to be addressed to improve asset management.
- Change in Inventory Valuation:
- There have been change in methodology of inventory valuation and which impact valuation of inventory & profit with Rs 8.62 Cr increase.
Overall Conclusion:
The document paints a picture of a company that requires attention to both its financial statement presentation and internal control procedures. The "qualified opinion" and identified weakness in internal control procedures surrounding the fixed asset register are key areas needing immediate remediation. Addressing these issues should enhance the reliability and credibility of the Company's financial reporting.
