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Steel Authority of India Ltd.

BSE: 500113 Sector: Metals & Mining
NSE: SAIL ISIN Code: INE114A01011
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VOLUME 46
52-Week high 87.95
52-Week low 47.20
P/E
Mkt Cap.(Rs cr) 32,321
Buy Price 77.00
Buy Qty 38.00
Sell Price 78.00
Sell Qty 45.00
OPEN 77.00
CLOSE 78.25
VOLUME 46
52-Week high 87.95
52-Week low 47.20
P/E
Mkt Cap.(Rs cr) 32,321
Buy Price 77.00
Buy Qty 38.00
Sell Price 78.00
Sell Qty 45.00

Steel Authority of India Ltd. (SAIL) - Auditors Report

Company auditors report

To the Members of Steel Authority of India Limited

Report on the Standalone Indian Accounting Standards (Ind AS) Financial Statements

We have audited the accompanying Standalone Ind AS Financial Statements of SteelAuthority of India Limited ("the Company") which comprise the Balance Sheet asat 31st March 2017 the Statement of Profit and Loss (including OtherComprehensive Income) the Cash Flow Statement the Statement of Changes in Equity for theyear then ended and a summary of the significant accounting policies and otherexplanatory information (herein after referred to as "Standalone Ind AS FinancialStatements") in which are incorporated the Returns of 8 branches for the year endedon that date audited by the branch auditors of the Company's branches.

Management's Responsibility for the Standalone Ind AS 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 preparationand presentation of these Standalone Ind AS Financial Statements that give a true and fairview of the financial position financial performance (including other comprehensiveincome) cash flows and changes in equity of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)prescribed under Section 133 of the Act read with Companies(Indian Accounting Standards)Rules 2015 (as amended). This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the Standalone Ind AS Financial Statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these Standalone Ind AS FinancialStatements based on our audit.

In conducting our audit we have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions 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 Standalone Ind AS Financial Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Standalone Ind AS Financial Statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the Standalone Ind AS Financial Statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the Standalone Ind AS Financial Statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the Standalone Ind ASFinancial Statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Standalone Ind AS Financial Statements.

Basis for Qualified Opinion

The Company has not provided for:

(i) Entry tax amounting to Rs.1796.03 crore (Current year Rs.111.04 crore and up tolast year Rs.1684.99 crore) (Refer Note No.39.2(a)(i) & (ii)); and

(ii) amount paid to Damodar Valley Corporation (DVC) against bills raised for supply ofpower and retained as advance to DVC by Bokaro Steel Plant amounting to Rs.587.72 crore(current year Rs.96.45 crore and up to last year Rs.491.27 crore). (Refer Note No. 39.2(b)).

The total impact of above para (i) & (ii) resulted in understatement of loss (netof tax) for the year ended 31st March 2017 by Rs.1558.78 crore overstatementof other equity as on 31st March 2017 by Rs. 1558.78 crore understatement ofcurrent liabilities by Rs. 2383.75 crore and understatement of assets by Rs.824.97 crore.

In respect of item stated at (i) the Company's view is that the Nine Judges Bench ofHon'ble Supreme Court vide its judgment dated 11th November 2016 upheld theconstitutional validity of levy of Entry Tax by the States and has laid downprinciples/tests on levy of Entry Tax Acts in various States. The respective regularbenches of the Apex Court would hear the matters as per laid down principles. Pendingdecision by the regular benches of the Apex Court on levy of entry tax in the States ofChhattisgarh Odisha Uttar Pradesh and in respect of the case pertaining to Calcutta HighCourt the Entry Tax demands under dispute have been treated as contingent liabilities.

In respect of item stated at (ii) the Company's view is that the cases are sub-judiceand pending for adjudication before the various judicial authorities for a long time.

The above stated disputed demands stated at (i) and (ii) above contested on valid andbonafide grounds have been treated as contingent liabilities as it is not probable thatpresent obligations exist as on 31st March 2017. Therefore there is noadverse impact on loss for the year.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us and based on the consideration of reports of the branch auditors on separateFinancial Statements of the branches referred to in the Other Matters paragraph belowexcept for the possible effects of the matters described in the Basis for QualifiedOpinion paragraph above the aforesaid Standalone Ind AS Financial Statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at 31st March 2017 and its loss (including totalcomprehensive loss) its cash flows and the changes in equity for the year ended on thatdate.

Emphasis of Matter

We draw attention to the following:

I. Sales include sale to the Government Agencies during the year Rs. 3807.78 crore andcumulative up to 31st March 2017 Rs. 18342.41 crore which is recognised onprovisional contract prices. (Refer Note No. 41.1); and

II. Recognition of Deferred Tax Assets of Rs.3352.42 crore (including Rs.1623.16 crorefor the year) on the accumulated business losses as on 31st March 2017 andunused tax credit (MAT Credit Entitlement) of Rs.1051.00 crore as on 31st March 2017.(Refer Note No.12).

Our opinion is not qualified in respect of this matter.

Other Matter a) The comparative financial information of the Company for the year ended31st March 2016 and the transition date opening balance sheet as at 1stApril 2015 included in these Standalone Ind AS Financial Statements are based on thepreviously issued statutory financial statements prepared in accordance with the Companies(Accounting Standards) Rules 2006 (as amended) audited by the auditors for the respectiveyears ended 31st March 2016 and 31st March 2015 whose reportsdated 30th May 2016 and 29th May 2015 respectively expressedmodified opinion on those standalone financial statements as adjusted for the differencesin the accounting principles adopted by the Company on transition to Ind AS which havebeen audited by us.

b) We did not audit the financial statements of 8 branches included in the StandaloneInd AS Financial Statements of the Company whose financial statements reflect total assetsof Rs.45416.36 crore as at 31st March 2017 and total revenues of Rs.16909.93crore for the year ended on that date. The financial statements of these branches havebeen audited by the branch auditors whose reports have been furnished to us and ouropinion in so far as it relates to the amounts and disclosures included in respect ofthese branches is based solely on the report of such branch auditors.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of Section 143(11) of the Act we givein the "Annexure A" a statement on the matters specified in paragraphs 3 and 4of the Order.

2. As required by Section 143(3) of the Act based on our audit and on theconsideration of the reports of the branch auditors on the separate financial statementsof the branches referred to in the Other Matters paragraph abovewe report to the extentapplicable 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) Except for the effects of the matters described in the Basis for Qualified Opinionparagraph above in our opinion proper books of account as required by law have been keptby the Company so far as it appears from our examination of those books.

c) The reports on the accounts of the branch offices of the Company audited underSection 143(8) of the Act by the branch auditors have been sent to us and have beenproperly dealt with by us in preparing this report.

d) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the relevant books of account.

e) Except for the effects of the matters described in the Basis for Qualified Opinionparagraph above in our opinion the aforesaid Standalone Ind AS Financial Statementscomply with the Indian Accounting Standards prescribed under Section 133 of the Act readwith relevant rules issued there under.

f) The matters described in the Basis for Qualified Opinion paragraph above in ouropinion may not have an adverse effect on the functioning of the Company.

g) As per notification No. GSR 463(E) dated 5th June 2015 issued by the Ministry ofCorporate Affairs Government of India Section 164(2) of the Companies Act 2013 is notapplicable to the Company.

h) 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 the

i) 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 (as amended) inour opinion and to the best of our information and according to the explanations given tous: i. The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Ind AS Financial Statements; (Refer Note No.43.5) ii. TheCompany did not have any long term contracts including derivative contracts for whichthere were any material foreseeable losses; iii. There has been a case of delay intransferring Rs. 6485490/- being the amount of unpaid dividend for financial year2008-09 required to be transferred to the Investor Education and Protection Fund by theCompany. However the same has been transferred to the said fund before 31stMarch 2017; and iv. The Company has provided requisite disclosures in Note No. 41.8 toits Standalone Ind AS

Financial Statements as regards its holding and dealings in Specified Bank Notes asdefined in the Notification S.O. 3407(E) dated the 8th November 2016 of the Ministry ofFinance during the period from 8th November 2016 to 30th December2016. Based on audit procedures and relying on the management representation we reportthat the disclosures are in accordance with books of account maintained by the Company andas produced to us by the Management.

The Final Unclaimed Dividend for 2008-09 was due for transfer to IEPF account on 16thNovember 2016. The Ministry of Corporate Affairs notified the Investor Education andProtection Fund (IEPF) Authority (Accounting Audit Transfer and Refund) Rules 2016("the Rules") along with detailed procedure effective from 7th September 2016.The Rules required that all shares in respect of which dividend has not been claimed orpaid for seven consecutive years or more shall be transferred to IEPF Suspense Account.The Rules further provided that where 7 years are completed or being completed within 3months of coming into force of the Rules the company shall initiate the aforesaidprocedure immediately and transfer the shares after completion of 3 months. As perprocedure prescribed in the Rules the Company sent individual notices as well as throughpublication in newspapers to 11346 shareholders having unclaimed dividend of Rs.64.85lakh providing them time up to 15.12.2016 to claim the dividend. Meanwhile theimplementation of Rules was deferred in December 2016. However the Company deposited theUnclaimed Dividend on 3rd February 2017 after processing the cases ofclaimants for the Final Unclaimed Dividend.

3. As required by Section 143(5) of the Act we give in the "Annexure C" astatement on the matters specified in the Directions issued by the Comptroller and AuditorGeneral of India for the Company.

For Singhi & Co. For V.K. Dhingra & Co. For and on behalf of Board of Directors
Chartered Accountants Chartered Accountants
Firm Registration No.: 302049E Firm Registration No.: 000250N
Sd/-
Sd/- Sd/- (P.K. Singh)
Chairman
[ Shrenik Mehta ] [ Lalit Ahuja ]
Partner Partner
(M. No. 063769) (M. No. 085842)
For A.K. Sabat & Co. For Chatterjee & Co.
Chartered Accountants Chartered Accountants
Firm Registration No.: 0321012E Firm Registration No.: 302114E
Sd/- Sd/-
[ A.K. Sabat] [ R.N. Basu ]
Partner Partner
(M. No. 30310) (M. No. 50430)
Place : New Delhi Place : New Delhi
Dated : 30th May 2017 Date : 30th June 2017

(Annexure-B to the Independent Auditors' Report)

Referred to in paragraph 2 under the heading "Report on other legal and regulatoryrequirements" of our report of even date to the members of Steel Authority of IndiaLimited on the Standalone Ind AS Financial Statements for the year ended 31st March 2017

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 STEELAUTHORITY OF INDIA LIMITED ("the Company") as of 31st March 2017 inconjunction with our audit of the Standalone Ind AS Financial Statements of the Companyfor 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'). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

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 Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate 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 Standalone Ind AS FinancialStatements.

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 financial reporting wereoperating effectively as at 31 March 2017 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India.

For Singhi & Co. For V.K. Dhingra & Co.
Chartered Accountants Chartered Accountants
Firm Registration No.: 302049E Firm Registration No.: 000250N
Sd/- Sd/-
[ Shrenik Mehta ] [ Lalit Ahuja ]
Partner Partner
(M. No. 063769) (M. No. 085842)
For A.K. Sabat & Co. For Chatterjee & Co.
Chartered Accountants Chartered Accountants
Firm Registration No.: 0321012E Firm Registration No.: 302114E
Sd/- Sd/-
[ A.K. Sabat] [ R.N. Basu ]
Partner Partner
(M. No. 30310) (M. No. 50430)
Place : New Delhi
Dated : 30th May 2017