| 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 (`Notes') 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 `Reserves 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 `recoverable 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 - 09 144.74 Commissioner of
Income tax (Appeals)
2007 - 08 272.94 Commissioner of
Income tax (Appeals)
2008 - 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 - 06 to 2009 - 10 168.38 Customs, Excise and
Service Tax Appellate
Tribunal.
2010 - 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 | 