The Members of SATHAVAHANA ISPAT LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of SATHAVAHANA ISPAT LIMITED("the Company") which comprise the Balance Sheet as at 31st March2017 the Statement of Profit and Loss and the Cash Flow Statement for the year thenended and a summary of significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) ofthe Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view ofthe financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 ofthe 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 ofthe accounting recordsrelevant to the preparation and presentation of the financial statements that give a trueand fair view and are free from material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit.
We have taken into account the provisions ofthe Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions ofthe Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) ofthe 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 of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevantto theCompany's preparation ofthefinancial 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 ofthe accounting policies used and the reasonableness ofthe 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 audit opinion on the financial statements.
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 ofthe state of affairs ofthe Company as at 31 stMarch 2017 and its loss and its cash flows for the year ended on that date.
Emphasis of Matter
(a) We draw attention to Note No.26 (II) (4)(a) in the financial statements whichindicates that the Company incurred a net loss of Rs. 647694746/during the year endedMarch 312017 resulting into accumulated losses of Rs.1403662467/- and substantialerosion ofits net worth asatMarch 31 2017. The Company's current liabilities exceeded itscurrent assets. In view ofthe above unless the Company raises further finances andimprove the operations there would be an impact on the Company's ability to continue as agoing concern.
(b) We draw attention to Note No.26 (II) (4)(b) in the financial statements whichstates thatthe balances of trade receivables and other receivables loans and advances andtrade payables and other payables of the company are subject to confirmation andconsequential adjustments if any.The Management is confident that such receivables andadvances are fully recoverable and no provision is considered necessary in respect of suchreceivables and advances.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of Sub-section (11) of Section143 oftheAct we give in the"Annexure A" a statement on the matters specified inparagraphs 3 and 4 ofthe Order to the extent applicable.
2. As required by Section 143 (3) ofthe 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 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 aforesaid financial statements comply with the Accountingstandards specified under Section 133 ofthe Act read with Rule 7 ofthe Companies(Accounts) Rules 2014.
e. The going concern matter described in paragraph (a) under the Emphasis of Matterparagraph above in our opinion may have adverse effect on the functioning of theCompany.
f. On the basis of the written representations received from the directors as on 31stMarch 2017 taken on record by the Board of Directors none ofthe directors isdisqualified as on 31st March 2017 from being appointed as a director in termsof Section 164 (2) of the Act.
g. With respect to the adequacy ofthe internal financial controls overfinancialreporting ofthe
Company and the operating effectiveness of such controls refer to our separate reportin "Annexure B".
h. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule
11 ofthe Companies (Audit and Auditors) Rules 2014 in our opinion and to the best ofour 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 No.26 (II) (3) to the financialstatements;
ii. TheCompanydid not have any long-term contracts with material foreseeable losses anddid not have any long-term derivative contracts as at 31st March 2017;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended 31stMarch 2017.
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 books of accountmaintained by the Company and as produced to us by the Management - Refer Note No.27 (II)(22).
Annexure A to Independent Auditor's ReoortReferred to in ParaaraDh 7 under the headinaof'Report on Other Leaal and Reaulatorv Requirements' of our report of even date
1. (a) The company has maintained proper records showing full particulars includingquantitative details and situation of Fixed Assets.
(b) The fixed assets have been physically verified by the management according to thephased programme designed to cover all the fixed assets on rotation basis. In respect offixed assets verified according to this programme which is considered reasonable nomaterial discrepancies were noticed on such verification.
(c) According to the information and explanations given to us and on the basis of ourexamination ofthe records ofthe Company the title deeds of immovable properties are heldin the name ofthe Company.
2. The inventories ofthe company have been physically verified at the year end by theManagement except stocks lying with others which have been verified with reference toconfirmations certificates and other relevant documents where available.The discrepanciesnoticed on physical verification of stocks as compared to book records which in ouropinion were not material have been properly dealt with in the books of account.
3. The Company has not granted any loans secured or unsecured to companies firmslimited liability partnerships or other parties covered in the register maintained underSection 189 ofthe Companies Act 2013 ("the Act"). Therefore the provisions ofClause 3(iii) (iii)(a) (iii)(b) and (iii)(c) ofthe Order are not applicable to theCompany.
4. The Company has not granted any loans or made any investments or provided anyguarantees or security to the parties covered under Section 185 and 186 ofthe Act.Therefore the provisions of Clause 3(iv) ofthe Order are not applicable to the Company.
5. The Company has not accepted any deposits from the public within the meaning ofSections 737475 and 76 ofthe Act and the rules framed there under to the extentnotified.
6. We have broadly reviewed the books of account maintained by the company in respectof products where pursuant to the Rules made by the Central Government of India themaintenance of cost records has been prescribed under Sub-section (1) of Section 148 oftheAct and are ofthe opinion that prima facie the prescribed accounts and records have beenmaintained and are being made up. We have not however made a detailed examination oftherecords with a view to determine whether they are accurate or complete.
7. (a) According to the records ofthe Company and as per the information andexplanations given to us the
Company is generally not regular in depositing undisputed statutory dues includingprovident fund employees state insurance income tax and service tax and the Company isgenerally regular in depositing sales tax duty of customs duty of excise value addedtax cess and any other statutory dues applicable to it with appropriate authorities inrespect of these statutory dues there are no outstanding dues as on 31.03.2017 which areoutstanding for a period of more than six months from the date they became payable.
(b) According to the records ofthe Company and as per the information and explanationsgiven to us there are no dues of service tax value added tax and cess which have notbeen deposited on account of any dispute as on 31.03.2017 except income tax sales taxduty of customs and duty of excise the details of which are as given below:
|S.No. ||Name of the Statute ||Nature of the dues ||Period to which it relates ||Amount Rs. ||Forum where dispute is pending |
|1. ||Central Excise Act 1944 ||Excise duty and penalty ||September 2011 to March 2015 ||25399502 ||The Commissioner of Central Excise and Customs Belgaum |
|2. ||Central SalesTax Act 1956 ||Sales tax ||2005-06 ||2329595 ||Sales Tax AppellateTribunal Hyderabad. |
|3. ||Customs Act 1962 ||Customduty and penalty ||2012-13 ||104795907 ||The Customs Excise and Service TaxAppellateTribunal Hyderabad. |
|4. ||lncomeTaxAct1961 ||Interest on Dividend Distribution Tax ||2009-10 ||1379100 ||Rectification of mistake filed with Deputy Commissioner of Income Tax Circle 3(1) Hyderabad. |
|5. ||Central Excise Act 1944 ||Excise duty and penalty ||September2011 to May 2015 ||6680087 ||The Commissioner (Vizag Appeal-ll) Guntur. |
8. Based on our audit procedures and as per the information and explanations given bythe management the Company has delayed in repayment of principal and interest to CanaraBank Rs.416495242/- State Bank of Hyderabad Rs.27166381 1/- AndhraBankRs.263789762/-and IFCI Limited Rs.66778767/-during the year aggregating toRs.1018727582/- and dues amounting to Rs.78203431 were in arrears as on the BalanceSheet date. There was no amount raised by the Company through the issue of Debentures.
9. The Company has not raised any moneys by way of initial public offer and furtherpublic offer (including debt instruments). In our opinion and according to theinformation and explanations given to us the term loans have been applied for thepurposes for which they were obtained.
10. During the course of our examination ofthe books and records ofthe Company carriedout in accordance with the generally accepted auditing practices in India and accordingto the information and explanations given to us we have neither come across any instanceof material fraud by the Company or on the Company by its officers or employees noticedor reported during the year nor have we been informed of any such case by the Management.
11. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct.
12. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) ofthe Order are not applicable to the Company.
13. The Company has entered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 ofthe Act. The details of such related partytransactions have been disclosed in the financial statements as required under AccountingStandard (AS) 18 Related Party Disclosures specified under Section 133 of the Act readwith Rule 7 ofthe Companies (Accounts) Rules 2014.
14 The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of Clause 3(xiv) of the Order are not applicable to the Company.
15 The Company has not entered into any non-cash transactions with its directors orpersons connected with him. Accordingly the provisions of Clause 3(xv) ofthe Order arenot applicable to the Company.
16 The Company is not required to be registered under Section 45-IA of the Reserve Bankof India Act 1934. Accordingly the provisions of Clause 3(xvi) ofthe Order are notapplicable to the Company.
Annexure B to Independent Auditor's Report
Referred to in ParaaraDh 2(f) under the headina of'Report on Other Leaal and ReaulatorvReauirements' of our report of even date
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 ofSATHAVAHANAISPAT LIMITED ("the Company") as of 31st March 2017 in conjunctionwith our audit ofthe standalone financial statements ofthe Company for the year ended onthat 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 offrauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired 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 deemed tobe prescribed under section 143(10) ofthe Companies Act 2013 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacyofthe 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 ofthe risks ofmaterial misstatement ofthe 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 qualified audit opinion on the Company's internal financialcontrols system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reportingis a process designed toprovide 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 ofthe assets ofthe 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 ofthe company are being made only in accordance with authorisations ofmanagement and directors ofthe company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition ofthecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because ofthe 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 ofthe 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.
According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified as at March 312017:
a) The Company's internal financial controls over reconciliation of account balances ofreceivables and payables on periodic basis which could potentially result in the Companynot recognizing related income and expenses correctly and in accurate disclosure ofreceivables and payables in financial statements.
A'material weakness'is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement ofthe company's annual or interim financial statements willnot be prevented or detected on a timely basis.
In our opinion the Company has in all material respects maintained adequate internalfinancial controls over financial reporting as of March 312017 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India and except for the possible effects ofthe material weaknessdescribed above on the achievement ofthe objectives ofthe control criteria the Company'sinternal financial controls over financial reporting were operating effectively as ofMarch 312017.
We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit ofthe March 31 2017financial statements ofthe Company and these material weaknesses do not affect ouropinion on the financial statements ofthe Company.
| ||For P.V.R.K. NAGESWARA RAO & CO. |
| ||Chartered Accountants |
| ||Firm's Registration Number: 002283S |
| ||P.V.R.K. NAGESWARA RAO |
|HYDERABAD ||Partner |
|30.05.2017 ||Membership Number: 18840 |