To the Members of Indosolar Limited
1. Report on the Financial Statements
We have audited the accompanying financial statements of Indosolar Limited ("theCompany")which comprise the balance sheet as at 31st March 2017 thestatement of profit and loss and the cash flow statement for the year then ended and asummary of significant accounting policies and other explanatory information.
2. Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5)of the Companies Act 2013 ("the Act") with respect to the preparation andpresentation of these financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under section133 of the Act read with Rule 7 of the Companies (Accounts) Rules2014 and the Companies (Accounting Standards) Amendment Rules 2016. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safe guarding the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the financial statements that give a true and fairview and are free from material misstatement whether due to fraud or error.
3. Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act and other applicable authoritative pronouncements issued by theInstitute of Chartered Accountants of India. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the financial statements.
4. Basis for Qualification
a) The Company has continued to incur significant losses in the current year resultingin further erosion of its net worth which had already been fully eroded during the yearended 31st March 2014.The Company's current liabilities exceeds the currentassets by Rs. 132838.85 lakhs as on 31st March 2017. The Company's short termborrowings and other current liabilities as at 31st March 2017 include balancespayable to various lender banks amounting to Rs. 5209.26 lakhs and Rs. 127627.54 lakhsrespectively. These lender banks have exited from Corporate Debt Restructuring (CDR) Cellvide its letter dated 4th November 2016. However in absence of requisiteinformation from the banks we are unable to comment upon the possible impact of such exiton the carrying value of aforesaid short term borrowings other current liabilities as at31st March 2017 and interest expense (including penal interest if any) foryear ended 31st March 2017 and the consequential impact on the accompanyingstatement.
b) The company's claim of it being eligible for certain capital incentives may befurther disputed by the Department of Information Technology before the Honorable SupremeCourt and the outcome will be known upon the conclusion of the litigation. Also refer note43 to the Financial Statements.
c) The company has not been able to meet its commitment to Special Economic Zone on thebasis of which the company imported certain raw material stores and spares andmachineries without payment of custom duty
even after considering the DTA sale of Rs 3864.89 lakhs for which company had filed anappeal before the relevant authorities to consider the DTA sale for calculation of NFEunder para 6.9 (f) of Foreign Trade Policy (FTP) in place of para 6.8 of the FTP. If theappeal is accepted the NFE as on 31st March 2017 would be negative by Rs2034.71 lakhs. Also refer note 33 of Financial Statements.
On the basis of the overall evaluation of the above factors and considering thedomestic content requirements and expression of interests issued by certain Public SectorUnits procurement of recent orders and favorable decision of the High court of Delhi inrelation to the company's eligibility for certain capital incentive the Company'scontinuing efforts to settle with the banker's and sale of the Company's loan by two ofthe lenders to Asset Reconstruction Company (India) Limited management believes that thereis no impairment in respect of the carrying value of its fixed assets including capitalwork in progress as at 31st March 2017 and that it is appropriate to preparethe accounts on a going concern basis. In our view the full erosion of net worthinability of the company to meet its certain material liabilities and commitments thefact that the impact of the government decisions would be known only in future theuncertainty of outcome of claims impact of exit from the Corporate Debt Restructuring(CDR) Cell and uncertainty on the ability of the company to meet its export obligationscreate material uncertainties. Therefore the quantum of impairment in respect of carryingvalue of fixed assets including capital work in progress cannot be determined at present.Consequently material uncertainties exist regarding the use of going concern assumption inpreparing the Statement.
d) During the year two secured lenders have assigned their outstanding dues to anAssets Reconstruction Company (India) Limited (ARCIL) aggregating to Rs 35034.42 lakhs.Pending finalization of terms of assignment the company has not provided for interest ofRs 4654.32 lakhs for the year ended 31st March 2017. Had the Company providedthe interest on such assigned loans the losses the current liabilities and Reserve&Surplus(debit balances) for the year ended March 2017 would have been higher by Rs4654.32 lakhs.
5. Qualified opinion
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion paragraph 4 (abc) which highlight material uncertainties the impactof which is currently not as certainable including the ability of the company to continueas a going concern and paragraph 4(d) regarding non provision of interest the aforesaidfinancial statements give the information required by the Act in the manner so requiredand give a true and fair view in conformity with the accounting principles generallyaccepted in India of the state of affairs of the Company as at 31 March 2017 its loss andits cash flows for the year ended on that date.
6. Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 (Order') issued bythe Central Government of India in terms of sub-section (11) of section 143 of the Act(hereinafter referred to as the "Order"') we give in the Annexure A astatement on the matters specified in paragraphs 3 and 4 of the Order.
As required by section 143(3) of the Act we report that:
a. We have sought and except for the matters described in the Basis for QualifiedOpinion paragraph obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit;
b. Except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph above in our opinion proper books of account as required by law havebeen 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 statementdealt with by this Report are in agreement with the books of account;
d. Except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph in our opinion the financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014 and the Companies ( Accounting Standards) Amendment Rules 2016;
e. The matter described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company;
f. On the basis of written representations received from the directors as on 31 March2017 and take non record by the Board of Directors none of the directors is disqualifiedas on 31 March 2017 from being appointed as a director in terms of Section 164(2) of theAct;
g. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in Annexure B; and
h. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 financialposition in its financial Statements -Refer note 41 & 43 to the financial statements;
ii. The Company did not have any long term contracts including derivative contracts forwhich there were any foreseeable losses; and
iii. The Company did not have any dues on account of Investor Education and ProtectionFund.
iv. The Company has provided requisite disclosures in the financial statements as toholdings as well as dealings in Specified Bank Notes during the period from 8th November2016 to 30th December 2016. Based on audit procedures and relying on the managementrepresentation we report that the disclosures are in accordance with the books of accountmaintained by the Company and as produced to us by the Management- Refer Note 37 tofinancial statements.
| ||For ARUN K GUPTA & ASSOCIATES |
| ||Chartered Accountants |
| ||Firm Registration No. 000605N |
| ||(GIREESH KUMAR GOENKA) |
|Place: Greater Noida ||PARTNER |
|Date: 27 May 2017 ||M. No. 096655 |
Annexure-A to the Auditor's Report
The Annexure referred to in Independent Auditors' Report to the members of the Companyon the financial statements for the year ended 31 March 2017. We report that:
(i) (a) According to the information and explanations given to us the Company hasmaintained proper records showing
full particulars including quantitative details and situation of fixed assets.
(b) According to the information and explanations given to us the fixed assets havebeen physically verified by the management during the year in a phased manner and nomaterial discrepancies have been noticed on such verification. In our opinion thefrequency of physical verification of fixed assets is reasonable having regard to the sizeof the Company and the nature of its assets.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of the immovable properties areheld in the name of the Company.
(ii) According to the information and explanations given to us the inventories havebeen physically verified by the management during the year. In our opinion the frequencyof such verification is reasonable and no material discrepancies were noticed.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly Paragraph 3 (iii) (a) (b) and (c) of the Order are notapplicable.
(iv) The Company has not given any loans or made any investments or provided anyguaranteeor security as specified under section 185 and 186 of the Companies Act 2013.Accordingly Paragraph 3(iv) of the Order is not applicable.
(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public during the year.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules prescribed by Central government for maintenance of cost records undersection 148 (1) of the Companies Act 2013 and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have not however madea detailed examination of the records with a view to determine whether they are accurateor complete.
(vii) a According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including provident fund employees' stateinsurance income tax sales tax service tax duty of customs
duty of excise value added tax cess and other material statutory dues have generallybeen regularly deposited during the year with the appropriate authorities.
b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income tax sales taxservice tax duty of excise duty of custom value added tax cess and other materialstatutory dues were in arrears as at 31 March 2017 for a period of more than six monthsfrom the date they became payable.
c) According to the information and explanations given to us and on the basis of therecords of the Company examined by us there are no dues of income tax sales tax duty ofcustoms duty of excise and value added tax which have not been deposited with theappropriate authorities on account of any dispute except as mentioned below:
|Name of the statute ||Nature of the dues ||Amount in Rupees (lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|Finance Act 1994 ||Service tax ||19.40 ||2010-2011 ||Commissioner of Service tax |
|Finance Act 1994 ||Service tax ||151.06 ||2011-2012 ||Commissioner of Service tax |
|Finance Act 1994 ||Service tax ||19.69 ||2012-2013 ||Commissioner of Service tax |
|Finance Act 1994 ||Service tax ||11.52 ||2013-2014 ||Commissioner of Service tax |
|Income Tax Act 1961 ||Penalty ||13.81 ||2013-2014 ||Commissioner Appeal - Delhi |
(viii) In our opinion and according to the information and explanations given to usand based on our examination of the books of account and related records the Company hasdefaulted in repayment of dues to its bankers as disclosed below. Due to non fulfilment ofits obligation under CDR package exited from CDR cell all long term borrowings becomecurrent liabilities. The Company did not have any outstanding dues to financialinstitutions government and debenture holders during the year.
|Nature of the lender ||Nature of dues ||Amount in rupees (lakhs) ||Period to which it relates |
|Andhra Bank ||Interest ||5875.24 ||July 2013- March 2017 |
|Andhra Bank ||Principal ||16226.23 ||October 2013- March 2017 |
|Bank of Baroda ||Interest ||5766.59 ||July 2013- March 2017 |
|Bank of Baroda ||Principal ||10561.59 ||October 2013- March 2017 |
|Corporation Bank ||Interest ||7622.69 ||April 2013- March 2017 |
|Corporation Bank ||Principal ||15530.83 ||October 2013- March 2017 |
|Indian Bank ||Interest ||3753.73 ||April 2013- March 2017 |
|Indian Bank ||Principal ||9179.22 ||October 2013- March 2017 |
|Union Bank of India ||Interest ||17389.66 ||April 2013- March 2017 |
|Union Bank of India ||Principal ||4100731 ||October 2013- March 2017 |
(ix) According to the information and explanations given to us the Company did notraise any money by way of initial public offer or further public offer (including debtinstruments) and the term loans during the year. Accordingly Paragraph 3 (ix) is notapplicable.
(x) According to the information and explanations given to us no material fraud by oron the Company by its officers or employees has been noticed or reported during the courseof our audit.
(xi) According to the records of the Company examined by us and the information andexplanation given to us the Company has paid and provided managerial remuneration inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V of the Companies Act 2013.
(xii) According to the information and explanations given to us the Company is not anidhi company. Accordingly Paragraph 3(xii) of the Order is not applicable.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company there are no transactions with the relatedparties which are not in compliance with Section 177 and 188 of the Companies Act 2013and the details have been disclosed in the Financial Statements as required by theapplicable accounting standards.
(xiv) According to the information and explanation given to us and on the basis of ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
(xv) According to information and explanations given to us the Company has not enteredin to any non-cash transactions with directors or persons connected with them as referredto in section 192 of the Companies Act 2013. Accordingly Paragraph 3(xv) of the Order isnot applicable.
(xvi) According to the information and explanations given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.
| ||For ARUN K GUPTA & ASSOCIATES Chartered Accountants Firm Registration No. 000605N |
|Place: Greater Noida Date: 27 May 2017 ||(GIREESH KUMAR GOENKA) PARTNER M. No. 096655 |
Annexure-B to the Independent Auditor's Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 (the Act')
We have audited the internal financial controls over financial reporting of IndosolarLimited ("the Company") as on 31st March 2017 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extent applicableto an audit of internal financial controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become in adequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2017 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
| ||For ARUN K GUPTA & ASSOCIATES Chartered Accountants Firm Registration No. 000605N |
|Place: Greater Noida Date: 27 May 2017 ||(GIREESH KUMAR GOENKA) PARTNER M. No. 096655 |