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Indosolar Ltd.

BSE: 533257 Sector: Engineering
NSE: INDOSOLAR ISIN Code: INE866K01015
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VOLUME 97463
52-Week high 12.05
52-Week low 5.72
P/E
Mkt Cap.(Rs cr) 227
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 6.00
CLOSE 6.01
VOLUME 97463
52-Week high 12.05
52-Week low 5.72
P/E
Mkt Cap.(Rs cr) 227
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Indosolar Ltd. (INDOSOLAR) - Auditors Report

Company auditors report

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 31 March 2016 the statement ofProfit and loss and the cash flow statement for the year then ended and a summary ofsignificant 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 section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement 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. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe 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 ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company’s Directors as well as evaluating theoverall presentation of the financial statements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our qualified auditopinion 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 31 March 2014. Further the Company has not met its liabilities due on the firstcorporate debt restructuring package (Rs. 59444.58 lakhs) and on account of purchase ofmaterials and capital goods (Rs. 6452.78 lakhs). Further an amount of Rs. 10077.50lakhs will become payable by 31 March 2017. Due to continued liquidity issues the Companyapproached the consortium bankers for a second corporate debt restructuring package on thebasis of a techno economic viability study conducted by an external expert. Consortiumbankers in their joint lenders meeting has decided that banks’ are not consideringsecond restructuring proposal as of now and exploring the possibility of sale to AssetRestructuring Company and/or to invoke change in management.

b) As per the Company despite significant downturn in global market as a result ofseveral initiatives by Government of India the domestic market has been showing an upturnof late resulting in the Company getting orders and hence continuation of commercialproduction. Based on the current orders in hand (approx. 71 MW) the Company expects tooperate at the significant level of capacity till July 2016. The note of the Statementalso expands on certain measures taken/expected to be announced by the Government tosupport domestic manufacturers in India including the domestic content requirement etc.

c) The Company’s claim to it being eligible for certain capital incentives isstill under litigation and the outcome will be known upon the conclusion of thelitigation. Also refer note 40 to the financial statement.

d) The dispute with MP Urja regarding the turnkey contract and the likely impact of thecustomers claim is uncertain. Also refer note 41 to the financial statements.

e) The Company has not been able to meet its commitment to Special Economic Zone on thebasis of which the Company imported certain raw material and machinery without payment ofcustom duty. Also refer note 33 to the financial statements. On the basis of the overallevaluation of the above factors and considering the domestic content requirements andother expression of interests issued by certain Public Sector Units procurement of recentorders and resumption of production in the second quarter of year ended 31 March 2016 atechno economic viability conducted by an external expert which forms the basis of theapplication for seeking a second Corporate Debt Restructuring package and favorabledecision of the High Court of Delhi in relation to the Company’s eligibility forcertain capital incentive management believes that there is no impairment in respect ofthe carrying value of its fixed assets including capital work in progress as at 31 March2016 and that it is appropriate to prepare the accounts on a going concern basis..

In our view the full erosion of net worth inability of the Company to meet certainmaterial liabilities and commitments the fact that the impact of the government decisionswould be known only in future the uncertainty of outcome of claims uncertainty regardingthe second corporate debt restructuring and uncertainty on the ability of the Company tomeet its export obligations create material uncertainties. Therefore the quantum ofimpairment in respect of carrying value of fixed assets cannot be determined at presentand material uncertainties exist regarding the use of going concern assumption inpreparing the financial statements.

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 the aforesaid financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at 31 March 2016 its loss and its 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 by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure A a statement on the matters specified in paragraphs 3and 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;

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 March2016 and taken on record by the Board of Directors none of the directors is disqualifiedas on 31 March 2016 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 Rule11of 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 39 and note 40 to the financialstatements;

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.

For B S R & Co. LLP
Chartered Accountants
Firm’s registration number: 101248W/W-100022
Rajiv Goyal
Place: Gurgaon Partner
Date: 30 May 2016 Membership number: 094549

Annexure-A to the Auditors’ report

The Annexure referred to in Independent Auditors’ Report to the members of theCompany on the financial statements for the year ended 31 March 2016. 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 andsituation of fixed assets.

(b) According to the information and explanations given to us the Company has aregular programme of physical verification of its fixed assets by which all fixed assetsare verified annually. In our opinion the frequency of physical verification isreasonable having regard to the size of the Company and nature of its assets. As informedto us no discrepancies have been noticed on such verification.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deed 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 theAct. Accordingly Paragraph 3 (iii) (a) (b) and (c) of the Order are not applicable.

(iv) The Company has not given any loans or made any investments or provided anyguarantee or security as specified under section 185 and 186 of the Act. AccordinglyParagraph 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 Act and are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. We have not however made a detailedexamination of the records with a view to determine whether they are accurate or 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’state insurance sales tax duty of customs duty of excise value added tax cess andother material statutory dues have generally been regularly deposited during the year withthe appropriate authorities. In respect of income tax and service tax the amounts havenot been regularly deposited with the appropriate authorities and there have been delaysin number of cases.

According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees’ state insurance income tax salestax service tax duty of excise duty of custom value added tax cess and other materialstatutory dues were in arrears as at 31 March 2016 for a period of more than six monthsfrom the date they became payable.

(b) 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 ru- pees (lakhs)* Period to which the amount relates Forum where dispute is pending
Finance Act 1994 Service tax 25.60 2010-2011 Commissioner of Service tax
Finance Act 1994 Service tax 161.06 2011-2012 Commissioner of Service tax
Finance Act 1994 Service tax 20.10 2012-2013 Commissioner of Service tax
Finance Act 1994 Service tax 11.52 2013-2014 Commissioner of Service tax

*Subsequent to the year end the Company has paid Rs. 11.61 lakhs as payment underprotest.

(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. The Company did not haveany outstanding dues to financial institutions government and debenture holders duringthe year.

Nature of the lender Nature of dues Amount in rupees Period to which it relates
(lakhs)
Andhra Bank Interest 5969.84 July 2013- March 2016
Andhra Bank Principal 6882.66 October 2013- March 2016
Bank of Baroda Interest 3995.76 July 2013- March 2016
Bank of Baroda Principal 2505.34 October 2013- March 2016
Corporation Bank Interest 5333.64 April 2013- March 2016
Corporation Bank Principal 5267.48 October 2013- March 2016
Indian Bank Interest 3837.44 April 2013- March 2016
Indian Bank Principal 2015.71 October 2013- March 2016
Union Bank of India Interest 11063.21 April 2013- March 2016
Union Bank of India Principal 12573.50 October 2013- March 2016

(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 information and explanations given to us and based on ourexamination of the records of the Company the Company has accrued/paid managerialremuneration which was in excess of the limits specified in Schedule V read with Section197 of the Act. The Company had led applications with the Central Government forregularizing the payments of managerial remuneration. Subsequent to the year end theCompany received letters from Central Government rejecting such applications. Accordinglythe Company has recovered the managerial remuneration paid in year ended 31 March 2016 ofRs. 184.99 lakhs and in previous year of Rs. 147.84 lakhs by adjusting the payablebalances of directors.

(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 Act and the detailshave been disclosed in the Financial Statements as required by the applicable accountingstandards.

(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 enteredinto any non-cash transactions with directors or persons connected with them. AccordinglyParagraph 3(xv) of the Order is not 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 B S R & Co. LLP
Chartered Accountants
Firm’s registration number: 101248W/W-100022
Rajiv Goyal
Place: Gurgaon Partner
Date: 30 May 2016 Membership number: 094549

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 31 March 2016 in conjunction with our audit of thefinancial 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 safeguardingof its 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 Act.

Auditors’ Responsibility

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 Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated 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 controlssystem over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised 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 inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

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 2016 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 B S R & Co. LLP
Chartered Accountants
Firm’s registration number: 101248W/W-100022
Rajiv Goyal
Place: Gurgaon Partner
Date: 30 May 2016 Membership number: 094549