Winsome Yarn Limited
(A company under corporate Insolvency Resolution process vide NCLT order)
Report on the Audit of the Standalone Financial Statement
1. Qualified Opinion.
We have audited the accompanying Standalone Ind AS financial statements of Winsome Yarns Limited ("the Company under CIRP process"), which comprise the Balance Sheet as at March 31, 2025, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.
The Hon'ble National Company Law Tribunal ("NCLT"), Chandigarh Bench, admitted the Corporate Insolvency Resolution Process ("CIRP") application filed by an financial creditor of Winsome Yarn Ltd ("the Company") and appointed Mr. Sanjay Gupta (IBBI Registration No .IBBI/IPA-002/IP-N00982-C01/2017-2018/10354, as Interim Resolution Professional ("IRP"), in terms of the Insolvency and Bankruptcy Code, 2016 ("the Code") to manage the affairs of the Company vide CP (IB) No. 291/Chd /Chd /2018 dated 22.12.2023. Further Hon'ble National Company Law Tribunal ("NCLT"), Chandigarh Bench, vide order dated 14.03.2024 appointed M/s ARCK Resolution Professionals LLP having IBBI Registration No. IBBI/IPE-0030/IPA-1/2022-23/50013 as the new RP of Winsome Yarns Ltd ("the Company").
In view of pendency of the CIRP, and in view of suspension of the powers of Board of Directors and as explained to us, the powers of adoption of the Standalone Financial statements for the year ended 31st March,2025 vest with the RP.
In our opinion and to the best of our information and according to the explanations given to us, except for the effects/posslble effects of the matters described in paragraph under
Basis of Qualified Opinion', tho aforesaid Ind AS financial statements give tile information
required by the companies Act,2013 ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, State of affairs of the Company as at March 31, 2024, and profit/loss including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.
2. Basis for Qualified Opinion.
1) In view of accumulated losses of the Company as at the end of March 31, 2025, the net worth of the Company as at that date being negative, continuous losses, negative cash flows and due to financial constraints, resignation of KMP andr^deposit of statutoiy
dues on time, material uncertainty exists about the company ability to continue as going concern. The decision of management (Power suspended] and RP of the Company to prepare the accounts of the Company on going concern basis for reasons that mentioned in standalone financial statement note no 3.2 (e] there would arise a need to adjust tile realizable value of assets and liabilities in the event of failure of assumptions as to going concern, and in the absence of impact of aforesaid assumptions having been unascertained, we are unable to comment thereon.
2] The Financial statement for the year ended on March 31,2025 are understated due to:
Non-provisioning of interest expenses, of Rs 26,433.97 Lakhs on borrowings for
the year ended on March 31, 2025 (Rs 22,850.78 lakhs for the year ended on March 31, 2024] and Rs 1,53,285.32 Lakhs being aggregate amount of interest un-provided till the year ended March 31, 2025 (Rs 1,26,851.35 Lakhs till the year ended March 31, 2024], and further amount towards penal interest, penalty, etc. as may be charged by the lenders. (In the absence of statement of account, the above amount has been arrived at as per estimates of the Company, and the aggregate un-provided amount in books of account of the Company is not ascertainable with accuracy]
ii] Non-provisioning against long outstanding receivables of Rs. 118.49 Lakhs which is overdue for more than 365 days. Further Re-instatement of few debtors, advance from customers, creditors for export, etc. on exchange fluctuation is not recognized in line with Ind AS - 21 "The Effects of changes in Foreign Exchange Rates" the effect of which we are unable to comment.
3] The Interna] Control Systems need to be further strengthened in order that they are commensurate with the size of the Company and the nature of its business, more particularly m areas of, purchases and consumption of materials, charging of expenses set-off of balances, and invoicing of sale of goods and services.
4] As per the information given to us, the carrying value of investments have not been marked to realizable value, which if accounted would result in Investments reducing by
Rs. 2568.41 Lakhs and Loss of the year ended 31.03.2025 increasing by Rs 2568 41 Lakhs. '
5] thereof with respective parties are pending,
hich include balances pertaining to, accounts receivable and accounts payable bank ba ances (including FDR], other current assets, advance for leasing, security deposit with government, loans and advances recoverable, secured loans, other liabilities provisions, and contingent liabilities. All balances have been certified by the
As per the information given to us, In reference to note no. 13 of financial Statements we draw attention to the users of the financial statement for the year ended on 31st March, 2025. Fixed Deposit with Canara Bank Amount of Rs 30.66 lakhs had been made for Margin Money for issuing Bank Guarantee, which was adjusted against the dues of working capital outstanding at the time of Account becoming NPA, has not been accounted for as it will change note in Financials of the borrowing amount as per books.
e are unable to comment upon possible impact in the standalone financial statements for the year 31** March, 2025.
We conducted our audit in accordance with the standard on auditing (“SA"] specified under
under those standards are further describes »n die Auditor s Responsibilities for the audit of the standalone financial statement section
company in accordance with the code of ethics issued by the Institute of Chartered Accountants of India ["the ICAI") together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the act and the rules thereunder, and we have fulfilled our other ethical r esponsibilities in accordance with these requirements and the code of ethics. We believe
3. Emphasis of matter
has made advance payment of Rs. 2268 50 Lakhs to Edelweiss Assets Reconstruction Company as an advance against restructuring f lf“ outstanding from Edelweiss Assets Reconstruction Company amounting of
Rs. 47071.08 Lakhs as on 31.03.2025.
n) The company has not made provision for the demand raised by various authorities as the matters are pending before various appellate forum. We are unable to comment upon possible tmpact in the standalone financial statements for the year 31« March.
iii) As per the information given to us, the Corporate Insolvency Resolution Process (CIRP)
the users of the financial ll 31st Match 2025, which states that sales return of Rs 125 J* has becn rec°rded m other Expenses instead of appropriately disclosing of sales andexpen«sVenUe Op^tions. which lraPa“ the presentation of gross revenue
V) As per information given to us, we draw attention to the users of the financial statement the company for the year ended 31st March.2025. The Committee of Creditors (COC)
has approved the Resolution Plan being filed by M/s Mohini Health & Hygiene Limited with requisite majority, through e-voting, in accordance with the provisions of the insolvency & Bankruptcy Code, 2016 and as per terms of Regulation 36B (4A) of the IBBI CIRP Regulations, 2016 read with clause 15 of RFRP Dated 13.08.2024 they are Required to be submitted performance security equivalent of Rs Rs 20,20,19,374/-(Rupees Twenty Crores Twenty lakhs Nineteen Thousand three hundred Seventy Four). The performance security amount has been deposited in the form of a bank deposit in the designated account Furthermore, please also take note that the Resolution Professional has filed an application for approval of the COC approved Resolution Plan with the Hon’ble National Company Law Tribunal, Chandigarh Bench ('NCLT1)
vi) As per information given to us, we draw attention to the users of the financial statement of the company for the year ended 31st March,2025. A theft has been reported in Transformer, with loss of Rs.S9.20.000/- Approx in April 2025 from its housing in the spinning mill complex of the Company situated at Village Kurranwala, Barwala Road, Dera Bassi, Punjab, and complaint is given for registering FIR at Dera Bassi Police station & subsequently Insurance claim has been filed with the Insurance company We
are unable to comment upon Possible impact in the standalone financial statements for the year ended 31st March, 2025.
vu) As per the information and explanations provided to us, we draw the attention of the users of the financial statements for the year ended 31st March, 2025, to the fact that there has been a reduction in the salary of six employees amounting to *26.05 lakhs. This adjustment has resulted in a corresponding decrease in total salary expenses and
salary payable by Rs.26.05 lakhs, leading to an decrease in the loss for the current financial year 2024-25.
Our opinion is not modified in respect of these matters
4. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most gmficance in our audit of the financial statements of the current period. There matters were addressed in the context of our audit of the financial statements as a whole, and in ornimg our opinion thereon, and we do not provide a separate opinion on these matters. In addition, the matters described in the basis for qualified opinion and emphasis of matter paragraph are by their nature are key audit matters.
5. Information Other than the Financial Statement and Auditor's Report
responsible for the other information but does not me Ude the financial statements and our auditors report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of ^utance conclusion thereon. In Connection with our audit of the finandai statements our
information doing so, consider whether the other nht^H hK m! yu inconsistent with the financial statement or our Knowledge obtained m the audit or otherwise appears to be materially misstate. If, based on the work we
statement of this other information, we are required to report that fact. We have nothing to report in this regard
6. Responsibilities of Management and Those Charged with Governance for the standalone Financial Statements.
The company is under CIRP process vide CP (IB) No.291/chd/chd/2018 by Hon'ble NCLT Chandigarh Bench dated 22.12.2023 and all management responsibilities vested with Resolution professional
The Company's Board of Directors (Powers suspended) is responsible for the matters stated .n Section 134 (5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Indian Accounting Standards (Ind AS) Prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India. 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 implementation and maintenance of 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 piesentation of the Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statement, management is responsible for assessing the company's ability to continue as a going concern, disclosing, as application, matters related to going concern and using the going concern basis of accounting unless management either operations, or has no realistic alternative but to
Those board of directors (Powers suspended) are also responsible for overseeing the company s financial reporting process.
7. Auditor's Responsibilities for the Audit of Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an
Reasonable assurance is a high level of assurance, s not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
they could reasonably be expected to uence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with the Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the Statement, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The nsk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery intentional omissions, misrepresentations, or the override of internal control
• Obtain an understanding of internal control relevant to the audit in order to design au it procedures that are appropriate in the circumstances. Under Section 143(3) fi) of the Act, we are also responsible for expressing our opinion on whether the
Company has in place adequate internal financial controls with reference to financial statements and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management
• Conclude on the appropriateness of the management's use of the going concern basis of account.ng and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
goinge concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the reiated disclosures in the Statement or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date our auditors report. However, iiiture events or conditions may cause the Company to cease to continue as a going concern.
8. Report on Other Legal and Regulatory Requirement
9. As required by the Companies (Auditor's Report] Order, 2020 (the Order] issued by he Central Government of India in terms of section 143Cii) of the Act, we give in
ii] 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 purpose of our audit, cept as stated in para under the head "Basis of Qualified Opinion"
matters described in the "Basis of Qualified Opinion paragraph above, in our opinion, proper books of account as
required by law have been kept by the Company in so far as it appears from our examination of those books.
C) The Balance Sheet, the Statement of Profit and Loss, the Cash Flow Statement
and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.
d) Except for the matter described in para under the "Basis for Qualified Opinion" in our opinion, the aforesaid Ind AS financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act
e) The matters described in the "Basis of Qualified Opinion" paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.
f) The company is under corporate Insolvency Resolution process vide the order of Hon'bie NCLT, Chandigarh Bench dated 22.12.2023 and all management responsibilities vest with the Resolution professional, Hence the requirement to comment upon the Director's qualification is not Applicable
g) The matters described in the "Basis of Qualified Opinion" paragraph above, in
our opinion, may have an adverse Impact Relating to maintenance of Accounts and other matters connected there with.
h) 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".
i) 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 no. 3.2 to the standalone financial statement
IL Except as matter described under paragraph of "basis for qualified opinion" as required under the applicable law or Accounting Standards, The Company has made provision, for material foreseeable losses, if any, on long term contracts including derivative contracts;
Investor Education and Protection Fund by the Company.
a) The management has represented that, to the best of its knowledge and elief, other than as disclosed in the notes to the Accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kinds of funds) by the company to or in any other person (s) or entities including foreign entities C intermediaries"), with the understanding whether recorded in writing or otherwise, that the intermediary shall, whether directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company ("ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
presented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the company from any persons) or entity (ies) including foreign entities ("Funding parties"), with the understanding whether
recorded in writing or otherwise, that the company shall, whether directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the funding parties ("ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the ultimate beneficiaries; and
c) Based on the audit procedures that the auditor has considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused them to believe that the representation under sub point (a) and (b) contain any mis-statement
V. The company does not declare or paid any dividend during the year
VI. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books if account for the
MarCh 2025 which has a feature of recording audit trail (edit Log) facility and same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is apphcabie from ist April 2023 reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention. The audit trail of the prior
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