Orissa Sponge Iron & Steel Ltd.
|BSE: 504864||Sector: Metals & Mining|
|NSE: N.A.||ISIN Code: INE228D01013|
|BSE 14:33 | 12 Sep||Orissa Sponge Iron & Steel Ltd|
|NSE 05:30 | 01 Jan||Orissa Sponge Iron & Steel Ltd|
|BSE: 504864||Sector: Metals & Mining|
|NSE: N.A.||ISIN Code: INE228D01013|
|BSE 14:33 | 12 Sep||Orissa Sponge Iron & Steel Ltd|
|NSE 05:30 | 01 Jan||Orissa Sponge Iron & Steel Ltd|
TO THE MEMBERS OF ORISSA SPONGE IRON & STEEL LIMITED
REPORT ON THE FINANCIAL STATEMENTS
1. We have audited the accompanying financial statements of Orissa Sponge Iron &Steel Limited ("the Company") which comprise the Balance Sheet as at March 312017 the Statement of Profit and Loss and the Cash Flow Statement for the year then endedand a summary of the significant accounting 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 ("The Act") with respect to the preparationand presentation of these financial statements on a going concern basis that give a trueand fair view of the financial position financial performance and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Accounting Standards specified under Section 133 of the Act read with Rule7 of the Companies (Accounts) Rules 2014. This responsibility also include maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies and makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that operate effectively for ensuringthe accuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
3. Our responsibility is to express an opinion on these financial statements based onour audit.
4. 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 there under and the Order under Section 143 (11)of the Act.
5. 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 the ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatements
6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theAuditors judgment including the assessment of the risks of material misstatements 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 operating effectiveness of such controls. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonablenessof the accounting estimates made by company's directors as well as evaluating the overallpresentation of the financial statements.
7. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide the basis for our audit opinion on the financial statements.
8. 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 of the state of affairs of the Company as at 31stMarch 2017 and its loss and its cash flows for the year ended on that date.
EMPHASIS OF MATTER
9. Without qualifying our opinion we draw attention on the following:
a. The company has suspended production in July 2012; incurred a net loss of Rs.9937.98 lacs during the year ended 31st March 2017 and the accumulated lossesas on that date amount to Rs. 52753.57 lacs; the Company's net worth has become negative;the current liabilities exceeded its current assets by Rs. 59807.43 lacs; the companydefaulted in repayment of term loan and cash credit facilities to all the Lenders and SBIBOI and PNB have taken possession of all the assets at the plant under Section 13(4) ofthe Securitization and Reconstruction of Financial Assets and Enforcement of SecurityInterest Act 2002 (SARFAESI).These conditions indicate the existence of materialuncertainty that may cause significant doubt about the company to continue as a goingconcern.
b. Referring to Note No 12 (1) of Notes on Accounts to the financial Statements whereinthe company has considered deferred tax assets of Rs. 12828.30 lakhs after adjustment ofwrite back of Rs.1278.77 lakhs for the current year on the assumption that the Companywill be able to earn sufficient profit in future years to recoup the carry forward oflosses when. Iron ore will be available from captive mines. We cannot comment on thecertainty of the future profits.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
10. 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 bestof our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c) The Balance sheet Statement of Profit & Loss and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account d) In our opinion theaforesaid financial statements comply with the Accounting Standards specified underSection 133 of the Act read with Rule 7 of 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 director in termsof Section 164(2) of the Act
f) 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 A". Our Report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting
g) With respect to the other matters to be included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our knowledge and belief and according to the information andexplanations given to us:
I. The Company has disclosed the impact if any of pending litigations as on 31stMarch 2017 on its financial position in its financial statements as referred to in Note30 (A) of the Notes on Accounts to the Financial Statements
II. The Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses
III. There were no amounts which were required to be transferred during the year tothe Investor Education and Protection Fund by the Company.
IV. The Company has disclosed in its financial statements as to holdings as well asdealings in Specified Bank Notes (SBN) during the period from 08.11.2016 to 30.12.2016 andsuch disclosure is in accordance with the books of account maintained by the Company(Refer Note 36 of the Notes on Accounts to the Financial Statements)
11. As required by the Companies (Auditor's Report) Order 2016 ("the Order"/"CARO 2016") issued by the Central Government in terms of
Section 143 (11) of the Act and on the basis of such checks of the books and recordsof the Company as we considered appropriate and according to the information andexplanations given to us we give in the "Annexure B" a statement on the mattersspecified in paragraphs 3 and 4 of the Order.
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 10(f) under 'Report on Other Legal and RegulatoryRequirements' of our report of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of ORISSASPONGE IRON & STEEL LIMITED ("the Company") as of 31 March 2017 inconjunction with our audit of the standalone financial statements of the Company for theyear 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to Company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe 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") issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing prescribed under Section 143(10) of the Companies Act 2013to the extent applicable to an audit of internal financial controls. 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 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 inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31 March 2017 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 11 under 'Report on Other Legal and Regulatory Requirements'of our report of even date)
1. (a) The company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets
(b) The company has regular programme of physical verification of its Fixed Assets bywhich all Fixed Assets are verified in a phased manner over a period 3 years. In ouropinion this periodicity of physical verification is reasonable having regard to the sizeof the Company and nature of its assets. Accordingly certain Fixed Assets have beenphysically verified by the management during the year and no material discrepancies havebeen noticed on such verification.
(c) According to the information and explanation given to us and the records examinedby us and based on the examination of the registered sale deed/transfer deed/conveyancedeed provided to us we report that the title deed comprising all the immovable propertiesof land and building which are freehold are held on the name of the Company as at theBalance Sheet date. In respect of immovable properties of land and building that have beentaken on lease and disclosed as fixed assets in the financial statements the leaseagreements are in the name of the Company where the Company is the lessee in theagreement
2. (a) The inventory of the Company has been physically verified by the managementduring the year. In our opinion the frequency of such verification is reasonable.
(b) The procedures of physical verification of the inventories followed by themanagement are reasonable and adequate in relation to the size of the company and thenature of the business.
(c) On the basis of our examination of the records of inventory we are of the opinionthat the company is maintaining proper records of inventories. The discrepancies noted onphysical verification between the physical stocks and the book records were not material.
3. The company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnership or other parties covered in the register maintained underSection 189 of the Companies Act 2013. Therefore the provisions of Clause (3) (iii) (a)(b) and (c) of the said Order are not applicable to the Company.
4. In our opinion and according to the information and explanation given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of making investments. guarantee and security. The Company has not given anyloan but has provided guarantee for loans taken by an associate company from banks orfinancial institutions terms and conditions whereof are not prejudicial to the interestof the company.
5. According to the information and explanation given to us the Company has notaccepted any deposit from the public and hence reporting under Clause (v) of the CARO 2016is not applicable
6. The maintenance of cost records has been specified by the Central Government underSection 148(1) of the Companies Act 2013. We have broadly reviewed the books of accountmaintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014as amended prescribed by the Central Government under Section 148 (1) of the CompaniesAct 2013 and are of the opinion that prima facie the prescribed accounts and recordshave been maintained. However we have not made a detailed examination of such records.
7. (a) According to the information and explanation given to us except Central SalesTax Orissa Sales Tax and Entry Tax Liability totaling
Rs.30.91 lakhs and Provident Fund dues to the extent of Rs. 444.13 lakhs no undisputeddues payable in respect of Provident Fund Employees State Insurance Income Tax SalesTax Service Tax Customs duty Excise duty value added tax cess and other materialstatutory dues were outstanding at the year end for a period of more than six months fromthe date they became payable.
(b) There are no disputed dues which have remained unpaid as on 31st March2017 on account of Provident Fund Employees State Insurance Income Tax Sales TaxWealth Tax Service Tax Customs duty Excise duty value added tax cess except asfollows:
8. The company has defaulted in repayment of dues to the Bankers and FinancialInstitutions as on 31st March 2017 as detailed below
Note: All the Lenders have issued notice under Section 13(2) of the Securitization andReconstruction of Financial Assets and Enforcement of Security Interest Act 2002 forrecall of their outstanding dues.
9. In our opinion and according to the information and explanation given to us moneyraised by the Company by way of initial public offer or further public offer (includingdebt instruments) and term loans have been applied for the purpose for which it wasraised.
10. To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no fraud on the
Company by its officer or employees has been noticed or reported during the year
11. In our opinion and according to the information and explanations given to us theCompany has paid/provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the CompaniesAct 2013
12. The Company is not a Nidhi Company and hence reporting under Clause (xii) of theCARO 2016 is not applicable
13. In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the
Companies Act 201 where applicable for all transactions with the related parties andthe details of the related party transactions have been disclosed in the financialstatements etc. as required by the applicable accounting standards.
14. During the year the Company has not made any preferential allotment or privateplacement of the shares or fully or party convertible debentures and hence reporting underClause (xiv) of CARO 2016 is not applicable to the Company. However the company has issuedand allotted 2790000 equity shares during the year by conversion of share warrantsissued in the year 2007. The amount so raised has been used for the purpose it wasintended.
15. In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transactions during the year with its Directorsor associate companies as applicable or persons connected with them and hence theprovisions of Section 192 of the Companies Act 2013 are not applicable. The Company hasno Subsidiary on the reporting date.
16. The company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
17. During the year the company has cancelled 20000000 10% Non ConvertibleCumulative Redeemable Preference Shares of Rs. 10 each amounting to Rs. 20 crores at theBoard Meeting held on 18.02.2017and restored it to its original position prior toallotment on 14.08.2014.