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Modern Steels Ltd.

BSE: 513303 Sector: Metals & Mining
NSE: N.A. ISIN Code: INE001F01019
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NSE 05:30 | 01 Jan Modern Steels Ltd
OPEN 11.45
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VOLUME 200
52-Week high 30.00
52-Week low 5.65
P/E
Mkt Cap.(Rs cr) 16
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 11.45
CLOSE 11.45
VOLUME 200
52-Week high 30.00
52-Week low 5.65
P/E
Mkt Cap.(Rs cr) 16
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Modern Steels Ltd. (MODERNSTEEL) - Auditors Report

Company auditors report

To

The Members of Modern Steels Limited

Report on the Financial Statements

1. We have audited the accompanying financial statements of Modern Steels Limitedwhich comprise the Balance Sheet as at 31st March 2017 the Statement ofProfit and Loss and Cash Flow Statement for the year ended and a summary of significantaccounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

2. The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 with respect to the preparation and presentation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

Auditors' Responsibility

3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made there under.

4. 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.

5. An audit involves performing procedures to obtain audit evidence about the amountsand the 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 but not for the purpose of expressing anopinion on whether the Company has in place an adequate internal financial controls systemover financial reporting and the operating effectiveness of such controls. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the financial statements.

6. We believe that the audit evidence we have obtained is sufficientand appropriate toprovide a basis for our audit opinion.

Opinion

7. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India subject to Note V (e) & Note XXX of notes toaccounts and the issues enumerated in Emphasis of Matters below:

(a) In the case of the Balance Sheet of the state of affairs of the Company as at 31stMarch 2017;

(b) In the case of the Statement of Profit and Loss of the loss of the Company for theyear ended on that date; and

(c) In the case of the Cash Flow Statement of the cash flows of the Company for theyear ended on that date.

Emphasis of Matter

1. Referring to the Note: XXX of the Notes to Financial Statements The Company'svarious credit facilities have been declared "Non Performing Assets" by itsrespective banks. There is a usual practice that banks discontinue to account for as"income" in respect to the accrued interest on such assets subsequent to thedeclaration of these as "Non performing assets".

The bankers of the company too have not accounted as "income" in respect tothe interest subsequent to NPA declaration date. In order to achieve the desiredcongruency on this issue the management of the company has not provided for such interesti.e. interest on credit facilities subsequent to the date of declaration of theses creditfacilities as non performing. Such interest amounts to Rs. 20.74 Crores. Had the saidinterest been provided in the books in the normal course the present losses of Rs. 2.44Crore would have risen to Rs. 23.18 Crores and the outside liabilities of the companywould have risen by Rs. 20.74 Crores. The Earning per share has also been affected by theabove effect in the profit & loss account.

Statement on Impact of above Auditor's Observation for the Financial Year ended 31stMarch 2017.

S. No. Particulars Audited Figures( as reported before adjusting for Auditor's Observation) Adjusted Figures(audited figures after adjusting for Auditor's Observation)
(Amt in Cr.) (Amt in Cr.)
1 Turnover/ Total Income 317.59 317.59
2 Total Expenditure 320.03 340.77
3 Net Profit/ (Loss) (2.44) (23.18)
4 Earnings Per Share (1.77) (16.84)
5 Total outside Liabilities 247.40 268.14

2. Referring to the Note: V (e) of the Notes to Financial Statements the Company hasapplied and pursuing with its lenders for restructuring its credit facilities includingterm loans. The Company has requested its lenders for deferment of the installments of theterm loan. In light of the above and the expert opinion available with the Company theBoard of Directors of the Company has decided that the installments of the term loansfalling due for repayment within one year from the end of the balance sheet date as perexisting CDR sanctions has not been shown as current liability as otherwise required asper Schedule-III under section 129 of the Companies Act 2013. The detail of suchinstallments of the term loans falling due for repayment within one year from the end ofthe balance sheet date i.e. 31st March 2017 are as follows:

Type of Loan Amount (` Lacs)
(Not Shown As Current Liability)
Term Loan I 546.59
Term Loan II 635.54
Working Capital Term Loan 1252.17
Funded Interest Term Loan 335.71
Total 2770.01

This has resulted in understatement of current liabilities by Rs. 2770.01 lacs andoverstatement of long term liabilities by the same amount.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2015 ("the 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 statement on the matters specified in the paragraph 3and 4 of the Order to the extent applicable.

2. As required by Section 143(3) of the Act we report that:

a. We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit;

b. In our opinion proper books of account as required by law have been kept by theCompany so far as 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. In our opinion the Balance Sheet the Statement of Profit and Loss and the CashFlow Statement comply with Accounting Standards specified under section 133 of the Actread with Rule 7 The Companies (Accounts) Rules 2014.

e. On the basis of the written representations received from the directors as on 31stMarch 2017 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2017 from being appointed as a Directorin terms of Section 164(2) of the Act

f. 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

ii. the Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

3 With respect to the other matters to be included in the Auditor's Report inaccordance with the Rule 11 of the Companies(Audit and Auditors) Rules2014in our opinionand to the best of our information and according to the explanation given to us:

The Company has provided requisite disclosures in the Financial Statements as toholdings as well as dealings in Specified Bank Notes during the period from 8 November2016 to 30 December 2016.Based on audit procedures and relying on the managementrepresentation we report that the disclosures are in accordance with books of accountmaintained by the Company and as produced to us by the Management.

For Aaryaa & Associates
Chartered Accountants
Firm Registration No. 0015935N
Krishan Joshi
Place: Chandigarh Partner
Dated: 27th May 2017 M. No. 094478

ANNEXURE 1

THE AUDITORS' INDEPENDENT REPORT

The Annexure referred to in our report to the members of the Company for the year ended31st March 2017. To the best of our knowledge and belief and information &explanation given to us we further report that:

1. a) The Company has maintained proper records to show full particulars includingquantitative details & situation of its fixed assets.

b) As explained to us the fixed assets have been physically verified by the managementat reasonable intervals which in our opinion is appropriate having regards to size of theCompany and nature of its assets. No material discrepancies have been noticed during theyear.

c) The title deeds of immovable properties are held in the name of the Company.

2. a) The inventory of the Company has been physically verified by the management atreasonable intervals during the year.

b) No material discrepancies were noticed.

3. The Company has granted loans secured or unsecured to Companies Firms or otherparties covered in the register maintained under Section 189 of the Companies Act 2013.The same is mentioned herein as per the information and explanation given to us by themanagement.

a) The Company has granted unsecured loan to Modern Automotives Limited during theyear. The maximum amount involved during the year is Rs. 1.86 crores & year endoutstanding is` 1.86 crores.

b) The rate of interest and other term & conditions of the above loan is in ouropinion not prima facie prejudicial to the interest of the Company.

c) The receipts of principal amounts and interest have been regular as perstipulations. d) There was no overdue amount.

4. In respect of loans investments guarantee and security the provisions of Section185 and 186 of the Companies Act 2013 have been complied with.

5. The Company has accepted deposits from directors amount Rs. 2.89 crores as well asfrom corporate bodies amounting to Rs. 3.89 crores. As per CDR report the amount of Rs.3.50 crores need to be infused & Rs. 2.38 crores needed to be retained separately inform of unsecured loans by the Company the Company has complied with the directivesissued by the Reserve Bank of India & with the provisions of Section 73 to 76 of theCompanies Act 2013 and the rules framed there under with regard to the deposits acceptedfrom the public. No order has been passed by the Company Law Board or National Company LawTribunal or Reserve Bank of India or any court or any other Tribunal.

6. On the basis of records produced to us we are of the opinion that prima facie thecost records prescribed by the Central Government of India under Section 148(1) of theCompanies Act 2013 have been made & maintained & also cost audit will beconducted in due course of time. We have not carried out any detailed examination of suchAccount & records.

7. (a) According to the books and records as produced and examined by us in accordancewith generally accepted auditing practices in India and also based on Managementrepresentations undisputed statutory dues in respect of Provident Fund Employee's StateInsurance dues Investor Education and Protection Fund Income Tax Service Tax Cess andother material statutory dues have generally been regularly deposited by the Companyduring the year with the appropriate authorities in India and there were no arrearoutstanding in respect of above for a period of more than six months as on 31stMarch 2017.

(b) According to the records of the Company examined by us and the information andexplanations given to us there are no dues of sales tax income tax customs dutyservice tax excise duty and cess which have not been deposited on account of any disputeother than the following amounting to Rs. 1.81 crores. The details are as under:-

NATURE OF DUES/NAME OF STATUTES EXCISE DUTY FORUM WHERE DISPUTE IS PENDING YEAR DISPUTED AMOUNT
` ( )
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2007-08 256533
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2007-08 to 2008-09 259085
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2004-05 to 2006-07 8956212
CENTRAL EXCISE ACT 1944 CESTAT NEW DELHI 2002-03 to 2004-05 1587580
CENTRAL EXCISE ACT 1944 CESTAT NEW DELHI 2005-06 to 2006-07 1130998
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2007-08 264934
CENTRAL EXCISE ACT 1944 CESTAT NEW DELHI 2004-05 to 2005-06 355235
CENTRAL EXCISE ACT 1944 CESTAT NEW DELHI 2008-09 110550
CENTRAL EXCISE ACT 1944 CESTAT NEW DELHI 2003-04 to 2007-08 2078246
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2004-05 516272
CUSTOMS DUTY
CUSTOMS ACT 1962 CESTAT AHMEDABAD 2004-05 2535450

8. There are dues payable to financial institutions but there are no debenture holders.During the year ended 31st March 2017 the Company has defaulted on timelypayment of principal and payment of interest on term loans and cash credits. The lenderwise delay with respect to interest and principal is as under:

Rs. in Lacs
S. No Particulars Amount in lacs Nature of Due Period of default in repayment
1. State Bank of India 660.87 Interest (Term Loan) 01.10.2015 to 31.03.2017
893.30 Principal 30.12.2015 to 31.03.2017
589.44 Interest (Working Capital) 31.03.2016 to 31.03.2017
2. Punjab National Bank 330 65 Interest (Term Loan) 01.11.15 to 31.03.2017
403.72 Principal 30.03.2016 to 31.03.2017
211.67 Interest (Working Capital) 30.04.2016 to 31.03.2017
3. State Bank of Patiala 84.26 Interest (Term Loan) 31.08.2016 to 31.03.2017
127.82 Principal 30.09.2016 to 31.03.2017
155.67 Interest (Working Capital) 31.08.2016 to 31.03.2017
4. Canara Bank 70.92 Interest (Term Loan) 31.08.2016 to 31.03.2017
90.14 Principal 30.09.2016 to 31.03.2017
91.81 Interest (Working Capital) 31.10.2016 to 31.03.2017

9. The Company did not raise money by way of initial public offer or further publicoffer (including debt instruments and term loans during the year.

10. As per the information and explanation given to us and on the basis of examinationof records no material fraud on or by the Company was noticed during the course of ouraudit.

11. The Company has paid or provided managerial remuneration in accordance with therequisite approval mandated by the provisions of Section 197 read with schedule V to theCompanies Act 2013.

12. In our opinion considering the nature of activities carried on by the Companyduring the year the provisions of any special/statute applicable to Nidhi Company are notapplicable to it.

13. All transactions with related parties are in accordance with Section 177 and 188 ofthe Companies Act

2013 and details have been disclosed in the financial statements as required by theapplicable accounting standards.

14. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review.

15. The Company has not entered into any non cash transactions with directors orpersons connected with him during the year under review.

16. The Company is not required to be registered under section 45-IA of the ReserveBank of India 1934.

For Aaryaa & Associates
Chartered Accountants
Firm Registration No. 015935N
Krishan Joshi
Place: Chandigarh Partner
Dated: 27th May 2017 M. No.094478

ANNEXURE 2

INDEPENDENT AUDITOR'S REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER CLAUSE (I) OFSUB-SECTION 3 OF SECTION 143 OF THE COMPANIES ACT 2013 ("THE ACT")

1. In conjunction with our audit of the financial statements of Modern Steels Limited("the Company") as of and for the year ended 31st March 2017 we haveaudited the internal financial controls over financial reporting (IFCoFR) of the companyof as of that date.

Management's Responsibility for Internal Financial Controls

2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of the company's business including adherence to company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.

Auditors' Responsibility

3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit.

We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India (ICAI) and deemed to be prescribed underSection 143(10) of the Act to the extent applicable to an audit of IFCoFR and theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") issued by the ICAI. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate IFCoFR were established and maintained and ifsuch controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A Company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with Generally Accepted Accounting Principles. A Company'sIFCoFR 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 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

7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.

Opinion

8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at 31st March 2017 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls over Financial Reporting issued by the Institute ofChartered Accountants of India.

For Aaryaa & Associates
Chartered Accountants
Firm Registration No. 015935N
Krishan Joshi
Place: Chandigarh Partner
Dated: 27th May 2017 M. No.094478