Stock Audit Report

Name of the Company M/s B.M. House (India) Limited

Summary of the critical observations

1. While verification of Finished Goods we have found that Excess qty is available in terms of
sqmtr, for the following items Crystalised Glass panel- 20Sqmtr, Marble Slabs – 50 Sqmtr, Slabs
– 120 Sqmtr total amounting to Rs. 1.85 lacs. The borrower has informed us that excess material
has been given by vendor in order to compensate for the damages in transportation.
2. The borrower has a shortfall in the Drawing power to the extent of Rs. 18.61 crs for the month of
Nov’23 reason being the Post Shipment credit of Rs, 18.03crs has been taken into consideration
while arriving at drawing power and also there is increase in creditors.

1.PROFILE OF THE BORROWER

M/s B.M. House (India) Limited
Registered Office:
M-43, Ground Floor, West Patel Nagar,
New Delhi -110008, India

South India Office

14/P-2, 1st Phase, Jigani Industrial Area,
Jigani, Bengaluru – 560105, Karnataka
Borrower Name
Directors
Mr. Shashi kant Rathi
Mr. Rajnish Rathi
Mr. Lalit Rathi
Mr. Abhishek Rathi
Mr. Aditya Rathi
Mr. Pranav Rathi
Mr. Tarun Rathi
Borrower’s representatives contacted Mr. Amit goyal
Date of visit to Office/ factory 05.01.2024
Report submission date 27.01.2024
Subham Kejriwal
Person representing the Audit firm & contact no.
Contact No -9071813153
 On behalf of
Vasudevan &Navneeth
Chartered Accountants
Bank representatives contacted NA

2. UNIT VISIT DETAILS

Manufacturing location
Plot no. 14, Jigani Industrial Area, Jigani
Units visited – Name and Location
Anekal Taluk, Bangalore, Bengaluru Urban,
Karnataka, 560105
Manufacturing location
Plot no. 14, Jigani Industrial Area, Jigani
Godowns visited- Name and location
Anekal Taluk, Bangalore, Bengaluru Urban,
Karnataka, 560105
Whether Bank’s name board is displayed prominently? Yes
Capacity of Units Not given
Level of activity in the unit Not given
Does the unit have any fixed assets that are not put to
No
use?
Management has confirmed that there has been
Any labour unrest or strike in the unit? no instance of unrest during the period under
review.
Are production records being maintained? Yes
If Godowns/ Units are not owned:
Has property tax been paid till date?
Yes
Has no lien letter been obtained from the owner?
Has right of free access letter been obtained?
Though these do not fall under the scope of our
review, the Company’s representative has
Are Excise Records/ GST returns and Assessment orders advised that these have been verified by the
of GST maintained properly? statutory auditors.
GST returns are submitted regularly as we have
taken copy of GSTR 3B .
3. INDEBTEDNESS OF THE BORROWER (In Rs. Cr.) (as on November 30, 2023)
Banking Arrangement – Sole/
Sole Banking Arrangement
Multiple/ Consortium
Credit Limits with HDFC
As on November 30, 2023
Bank
Amount
Nature Sanctioned utilized as Value of
DP Irregularity
of limit Limit on Security
30.11.23
Pre
Fund based Shipment - 30.00 0.00 9.3 NA
Secured

Details of
Cash Credit-
5.00* 2.67* HDFC 2.33* NA
Secured
Bank
Post security has
Shipment been
30.00* 18.03* 9.3* NA
Credit- mentioned
Secured below.

Foreign Bill
Disc under 15.00 0.00 15.00 NA
LC
Auto
Premium
0.68 0.31 0.37 NA
Loan –
126100672

Auto Loan –
0.18 0.15 0.03 NA
133630170

Total Exposure (a) 45.86cr 21.16cr 24.7cr

Details of HDFC Bank’s Reference: -
3. INDEBTEDNESS OF THE BORROWER (In Rs. Cr.) (as on November 30, 2023)
security 1.Original Sanction Letter dated 28/09/2021 and Renewal Letter dated
26/12/2023 for Pre shipment credit of Rs.30cr
and Foreign Bill Disc under LC of Rs. 15cr
2. Sanction Letter dated 12/01/22 For Auto Premium Loan of Rs.0.68cr
3. Sanction Letter dated 07/09/22 For Auto Loan of Rs.0.18cr
Security
Personal Guarantee of Mr. Lalit Mohan Rathi, Mr. Rajnish Rathi , Mr.
Shashi Kant Rathi, Mr. Abhishek Rathi, Mr. Aditya Rathi, Mr. Pranav
Rathi, Mr. Tarun Rathi - Exclusive
Property - Charge on industrial property owned by Lavina Granites (
a unit of BM House.India Ltd) - Survey No. 123- Part, Plot No. 14-P2
of Jigani Industrial Area, Jigani Hobli, Anekal Taluk, Bangalore -
560105 - Exclusive
Stocks And Receivables - Exclusive
Fixed Deposits – Exclusive

Foreign Bill Disc under LC

Wb Intangible – Exclusive - Accepted LC of other bank with approved
bank lines with HDFC Bank

4. STOCK PARTICULARS (In Rs. Cr.)

A. Stocks under Hypothecation as on November 30, 2023
As per Borrower As per Auditor Remarks
a. Stock at site

Raw materials 0.00 0.00

Stores and Spares 0.00 0.00

Work in Progress 0.00 0.00

Finished Goods 1.88 1.88
Total 1.88 1.88
rd
b. Stock at 3 Party Location
Raw materials 0.00 0.00
Work in Progress 0.00 0.00
Finished Goods 0.00 0.00

Total 0.00 0.00

c. Stock in transit
Raw materials NIL NIL
Work in Progress NIL NIL
Finished Goods NIL NIL
Total NIL NIL
d. Stock at warehouse pledged (Others)
Raw materials NIL NIL
Finished Goods NIL NIL
Total NIL NIL
Total Stock
Raw materials 0.00 0.00
Stores and Spares 0.00 0.00
Work in Progress 0.00 0.00
Finished Goods 1.88 1.88
Total 1.88 1.88
B. Slow moving, Obsolete, Non-Moving Stock on hand for > 6 months (In Rs. Cr)
Value of the item considered for
Description Quantity Amount
DP by the Auditors If any
-NIL-

C. Stock received under Outstanding LC in respect of which the Company has not retired bills
Description Quantity Amount Remarks by Auditor
-NIL-

D. Unpaid/ Third Party stock exclusive of above

Description Quantity Amount Remarks by Auditor
-NIL-

E. Value of PaidStock
Pledged/ Slow Moving / Stock under LC Other Unpaid Stock/ Paid Stock Value
 Hypothecated Obsolete Third Party Stock
1.88 -- -- -- 1.88

5. DEBTORS/ RECEIVABLES (In Rs. Cr.)

Debtors position as on November 30, 2023
As per As per
Remarks
Borrower Auditor
Debtors has been
verified with the
Debtors O/s (a) 44.96 44.96
Debtors aging
Schedule.
14.75 14.75 Debtors>90days
Less Debtors above stipulated age (b) has been
excluded.
Less receivables already advanced by way of bills 0.00 0.00
purchased/ Bills discounted (c)
Net debtors eligible for DP(d) = (a) – (b) – (c) 30.21 30.21
Dues from Group concerns NA NA

Details of long pending dues (>90days) from Group NA NA

concerns, if any.
Details of book debts under dispute NA NA

Have any provisions been made for book debts under

The borrower’s representative confirmed that
dispute? If so, quantum of provisions and details of
none of the book debts are under dispute
debtors to be provided for the current period.
As discussed with the borrower’s
Is the write-off of book debts in line with the representative, we understand that write off
provisioning policy of the entity? book debts not done and no provision for bad
debts
Debtor-wise details (Name/ Amount) of write-offs in
NA
excess of Rs. 1 Cr. over the past 3 years
As confirmed by the borrower’s representative,
Sales during the period
Sales as at Nov 30, 2023 is Rs. 157.32 crores
Debtors collection period As discussed with the borrower’s
 representative, debtor’s collection period is 341
days.
Based on discussion with borrower’s
How much of Sales is on cash basis and is it the normal
representative, we understand that the company
industry practice?
has no cash sales.
During the process of verification, we did not
Position of book debts to be ascertained with invoices
observed any discrepancies on samples
and bills raised. Discrepancies, if any, to be highlighted
selected.

Age-wise Debtors position as on November 30, 2023 (In Rs. Cr.)

As per As per
Remarks
Borrower Auditor
≤ 90 days 27.24 27.24
We have taken the value from
> 90 to ≤120 days 3.88 3.88 the Drs Ageing schedule
> 120 to ≤180 days 2.94 2.94 provided by client.

>180 7.93 7.93

2.97 2.97
Advances to the Customers

Total 44.96 44.96

Whether age of book debts is in line

with normal credit period? Reason for The borrower’s representative is of the view that the debtors are
any drastic change in collection period in line with normal credit period applicable to the customers
to be provided.

Top debtors with outstanding in excess of Rs. 25 Cr.

% of overall > 90 – 180
Particulars ≤90 days > 180 days
debtors days
Nil
Are any of the debtors habitually delaying
NOT APPLICABLE
payments?
6. DRAWING POWER CALCULATION ( Rs. in Crs)
Amount as on Nov-23 Eligible Asset
Paid Inventory (as per 4 E) above (a) 1.88
Eligible Debtors (as per 5 D) above (b) 30.21
Total 32.09
Sundry creditors 17.45
Inventory + Eligible Debtors - Sundry creditors (c) 14.65
Margin 25 % on the stocks (d) 0.47
Margin 40 % on the Debtors(e) 12.08
Drawing Power (c-d-e) 2.09
Outstanding with HDFC Bank 20.70
Excess or Shortfall in DP vis-à-vis Outstanding (18.61)

Note : The above calculation is based on the numbers provided by the company

DRAWING POWER COMPARATIVE STATEMENT (Rs. in Crs)

Aug -23 Sep- 23 Oct-23

Paid Inventory (a) 2.26 2.28 2.01
Eligible Debtors (b) 31.45 34.04 36.21
Total c=(a+b) 33.71 36.33 38.22
Sundry creditors (d) 8.53 8.84 10.82
Inventory + Eligible Debtors - Sundry creditors 25.18
27.49 27.40
e = (c-d)
Margin 25 % on the stock f= (a) *0.25 0.56 0.57 0.50
Margin 40 % on the Drs excluding Crs g= (b)*0.40 12.58 13.62 14.49
Drawing Power (e-f-g) 12.04 13.30 12.41
Outstanding with HDFC Bank 21.03 25.81 26.04
Excess or Shortfall in DP vis-à-vis Outstanding (8.99) (12.51) (13.63)

7. SUNDRY CREDITORS (In Rs. Cr.)

Creditors position as at November 30 , 2023
Reasons for
As per As per As per
disproportionate
projections Borrower Auditor
Increase, if any
Creditors O/s - 17.45 17.45 NA

Top Creditors with outstanding in excess of Rs. 25 Cr.

Name Amount
Nil

8. INSURANCE DETAILS
Stock
Insurance Company United India Insurance Company Limited
1.2001001222P109259629 - Burglary insurance
2.2001001123P110763807 – United Value Udyam
Suraksha Policy
3.2001001123P111638900 - – United Value Udyam
Suraksha Policy
Policy Number
4. 2001001223P111639287 – Burglary standard
policy
5. 2001001122P109258997 – UNITED BHARAT
SOOKSHMA UDYAM SURAKSHA POLICY
Floater cover
1.15/12/2022 to 14/12/23
2.27/11/2023 to 26/11/2024
3.15/12/2023 to 14/12/2024
Period of Insurance
4.15/12/2023 to 14/12/2024
5. 15/12/2022 to 14/12/2023

1.SY.NO.24,BEGIHALLI VILLAGE,
JIGANIHOBLI,ANEKALTALUK,BENGALURU
2.14P-2 INDUSTRIAL AREA PHASE-1 JIGNI
Insured Location INDUSTRIAL AREA ANEKAL TALUK
BANGLORE
3. SY. NO. 24,BEGIHALLI
VILLAGE,JIGANIHOBLI, ANEKAL TALUK,
 BENGALURU,BANGALORE,KARNATAKA,Pin-
560105
4.SY.NO.24,BEGIHALLI
VILLAGE,JIGANIHOBLI, ANEKAL TALUK,
BENGALURU
5. SY. NO. 24,BEGIHALLI
VILLAGE,JIGANIHOBLI, ANEKAL TALUK,
BENGALURU,BANGALORE,KARNATAKA,Pin-
560105
1.Rs. 2.5 crores
2.Rs. 4.6 crores
Amount of Insurance 3.Rs. 2.5 crores
4. Rs. 2.5 crores
5. Rs. 2.5 crores
1. Rs. 2.5 crores stock (100%)
2. Rs. 1.2 crores stock(26%)
Coverage 3. Rs. 2.5 crores stock(100%)
4. Rs. 2.5 crores stock (100%)
5. Rs. 2.5 crores stock (100%)
Whether "Bankers Clause" is included in the policy? Yes
If stock is located at Godowns/ Job work units, is
the stock at these locations also insured adequately, Yes. All the location stock are insured adequately.
with insurance in force, and with banker’s clause?
If stock is being transported to processing units/
sub-contractors etc., is stock-in-transit also insured
NA
adequately with insurance in force, and with
banker’s clause?
Are there any risks for which cover is not available? All risks covered

9. OTHERS
Comment on - Costing & Inventory accounting systems
like Method of valuing the stocks, Weighted Average Inventories are stated at lower of cost and net
Cost, Average Cost, Standard Cost, Current Price realisable value. Cost is determined using the
Method, FIFO, LIFO system etc. first in, first-out. (FIFO) method. Net
 realisable value is the estimated selling price
in the ordinary course of business,
The Borrowers have confirmed that they
Whether necessary registers have been maintained and
maintain registers for periodic inspections of
arrangements in place for periodic inspection of stocks?
stocks.
Whether the following records of the borrower have been
checked?
a) Excise records
Yes, the Sundry creditors and Debtors ledgers
b) Raw materials consumption, Production register,
has been verified.
c) Purchase and sales invoice
d) Cost records and order books
e) Sales, Purchase, Sundry creditors and Debtors ledgers
Based on our discussion with the borrower’s
Were there were any instances of breakdown of representative, there have been no instances of
machinery/ other factors causing interruptions in the breakdown of machinery / other factors
working of the unit in the past one year? causing interruptions in the production of the
unit in the past one year.
Based on our observation during the physical
Are security arrangements/ fire protection measures at the
inventory we found fire protection
units/ godowns satisfactory?
equipment’s installed at the premises.
As per confirmation of borrower, factory
Has the factory licence been renewed?
licence has been renewed
Are the stocks in good and marketable condition and do As per our observation, stocks are in good &
they show any signs of deterioration in quality? marketable condition.
NA
Whether Stock received for job work and the Borrower’s
stock are kept separately?

Are purchase orders/ invoices/ delivery challans kept in a This does not fall under the scope of our
readily accessible manner? review.
Are there any purchases from Sister concerns and is it a
No
normal industry practice?
Does the borrower use a computerized system to manage As discussed with the borrower’s
stock and receivables? representative, we understand that the
 company has a computerised system to
manage stock and receivables.

As discussed with the borrower’s

representative, the movement of stock in and
Whether the movement of stock in and out of the godown
out of the unit is properly accounted and
is properly accounted and monitored?
monitored.

Whether the following checks have been conducted and

found to be in order?
This does not fall under the scope of our
-GST provision and assessment orders
review.
-Income Assessment Orders
-Provisions relating to ESIS challans
-Provisions relating to PF challans and assessment orders
Whether details of skilled and unskilled employees
This does not fall under the scope of our
employed has been corroborated against the salary
review.
register?
As per our observation, high valued items are
Comment on high value items and their management
kept in Separate room with Lock.
Whether the position of stocks as revealed from the books Based on our sample verification, stocks as
of the party and actually lying at the site have been tallied revealed from the books of the party and
with each other? actually lying at the site have been tallied with
each other.
Stock Verified and Valuation as on 05/01/2024 ( In Rs. Crs)
Total Variation
Class %
Stock Stock Verified in stock Remarks
of items Verified
Value value

Stocks
Finished Goods 2.07 1.78 85.99% NA Same as summary of
Critical observation
 We have verified the
44.96 23.81 52.96% value from Drs
Debtors NA
Ageing with the
Customer Ledgers.

Same as stated in summary of Critical

Other Critical Observations
Observation

Have a sample of sales invoices been checked for

a) Prices?
Yes
b) Calculations (including excise duty and GST)?
c) Terms of payment?
As discussed with the borrower’s
Are confirmations of Debtors’ balances obtained by the
representative, the company is having practice
co/ firm/ entity periodically? If not, confirmations to be
of sending confirmations to debtors at the year
obtained.
end.
As discussed with the Borrowers
Whether all realizations from debtors are routed through Representative All the realizations from
the borrower’s account? debtors are routed through the borrower’s
account.
As discussed with the borrower’s
representative, we understand that the
Whether reasons for non-realisation of overdue debts
company has taken necessary step to realise
have been examined?
overdue debts and hence the company does
not have any overdue debts.

Verification from GST Records: Not covered under the scope of review
(Sales to be verified from GST Returns and discrepancies, if any, should be reported.)

Environmental Risk Analysis: Not Applicable

(Any potential or existing environmental or reputational issues associated with either the borrower or the
transaction are to be reported. Additionally, waste disposal practices, environmental approvals and
compliance with the terms thereof to be commented upon.)

Disclaimer
This report has been prepared solely for the purpose of providing selective information on a confidential
basis for which it is issued and should not be used for any other purpose. Our scope of work is not
equivalent to an audit conducted in accordance with generally accepted auditing standards, an
examination of internal controls or other attestation or review services or services to perform agreed upon
procedures in the accordance with standards established by the ICAI. We did not independently verify all
the matters discussed and consequently we have relied upon the records and documents produced before
us and certain explanations and representation provided by the management/representative of the
company and appropriately considered their replies while finalizing our report. No technical or economic
viability study or market survey was conducted for the purpose of this assignment. Also, no responsibility
is assumed for matters of a legal nature. We were not required to carry out a legal audit / review. Our
findings and comments in the report in connection with the audit are strictly based on information
/explanation /documents provided to us by the company and the physical prevailed on the date of our
audit. It does not cover any future responsibility and liability arising due to changes in the functioning
and financial condition of the company, subsequent to the date of our stock audit.