The Members of Steelco Gujarat Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Steelco Gujarat Limited("the Company") which comprise the Balance Sheet as at 31st March 2017 theStatement of Profit and Loss and the Cash Flow Statement for the year then ended and asummary of the significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's management is responsible for the matters stated in section 134(5) of theCompanies Act 2013 ("the Act") with respect to the preparation of thesefinancial statements that give a true and fair view of the financial position financialperformance and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Accounting Standards specified under Section 133of the Act read with relevant rules issued thereunder. This responsibility also includesthe maintenance of adequate accounting records in accordance with the provision of the Actfor safeguarding of the assets of the Company and for preventing and detecting the fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and design implementationand maintenance of internal financial control that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand 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 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 evidences about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditors'judgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal control relevant to the Company's preparation of the financialstatements that give a true and fair view in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of the accounting estimates made byCompany's Directors as well as evaluating the overall presentation of the financialstatements.
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 standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31st March 2017 and its profit; and its cash flows for the year ended on thatdate.
Emphasis of Matter
We draw attention to the note no. 35 in the financial statements which indicates thatthe Company's financial statements have been prepared on a going concern assumptioninspite of the Company having incurred cash Loss during the year ended March 31 2017 andthe net worth being negative as at 31st March 2017. These conditions along with othermatters set forth in Note No. 35 indicate the existence of a material uncertainty thatmay cast significant doubt about the Company's ability to continue as a going concern.However the financial statements of the Company have been prepared on a going concernbasis in view of the management's efforts of recovery and revival and exploring variouslong-term measures to improve its cash flow and revival of the operations proposedfinancial restructuring and exploration of strategic investor to infuse long-term requiredfinance its critical capex plan and also for revival of its operations notwithstanding thefact that its net worth is eroded and most of the bankers of the company have classifiedas non-performing assets which may have its impact on financial position and cash flowsof the Company. The appropriateness of the said basis is wholly dependent upon thecompany's ability to raise requisite long term finance and/or generate sufficient cashflows and lenders' continuous support in future to meet its commitment of future revivalplans and for continuing operations.
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 2015 ("the Order")issued by the Central Government of India in terms of subsection (11) of Section 143 ofthe Act we give in the "Annexure-1" a statement on the matters specifiedin paragraphs 3 and 4 of the Order.
2. 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 financial statements dealt with by this report are in agreement with the booksof account.
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with relevant rules issuedthereunder;
(e) On the basis of the written representations received from the directors as on 31stMarch 2017 and 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 terms of section164(2) of the Act.
(f) With respect to the adequacy of the internal financial control over financialreporting of the company and operating effectiveness of such controls refer to ourseparate report in "Annexure 2"; and
(g) 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:
a. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements Refer Note 19 to the financialstatements;
b. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
c. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.
d. The company has provided requisite disclosures in its financial statements asregards its holdings and dealings in Specified Bank Notes as defined in the NotificationS.O. 3407(E) dated 8th November 2016 of the Ministry of Finance during the period from8th December 2016 to 30th December 2016. Based on audit procedures performed and therepresentations provided to us by the management we report that the disclosures are inaccordance with the books of accounts maintained by the company and as produced to us bythe Management.
Annexure - 1 to in the Independent Auditors' Report of even date to the members ofSTEELCO GUJARAT LIMITED for the year ended 31st March 2017.
Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit we report that:
1. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets;
(b) Some of the fixed assets were physically verified during the year by the managementin accordance with programme of verification which in our opinion provides for physicalverification of all the fixed assets at reasonable intervals. According to the informationand explanations given to us no material discrepancies were 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 titles deeds of immovable properties areheld in the name of the company.
2. (a) The inventories have been physically verified by the management during the year.In our opinion the frequency of such verification is reasonable having regard to thesize of the Company and nature of its business.
(b) In our opinion and according to the information and explanation given to us thecompany has maintained proper records of inventory.
Discrepancies observed on physical verification of inventory have been appropriatelybeen dealt with in the financial statements.
3. The Company has not granted any loans secured or unsecured to companies firms orother parties covered in the register maintained under section 189 of the Companies Act2013. Accordingly clause (iii)(a) and (iii)(b) of paragraph of the Order are notapplicable to the company for the current year.
4. In our opinion and according to the information and explanations given to us theCompany has not given any loans guarantees or security or made any investments to whichprovisions of section 185 and 186 of the Act is applicable and accordingly paragraph 3(iv) of the Order is not applicable to the Company.
5. The Company has not accepted any deposits from the Public within the meaning of theprovisions of section 73 to 76 or any other relevant provisions of the Act and the rulesframes thereunder. Further according to the information and explanations given to us noorder has been passed by the Company Law Board or National Company Law Tribunal or ReserveBank of India or any court or any other Tribunal in this regard.
6. We have broadly reviewed the books of accounts maintained by the Company pursuant tothe rules made by the Central Government for maintenance of cost records under sub-section(1) of section 148 of the Company Act 2013 and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. However we have not made adetailed examination of the cost records with a view to determine whether they areaccurate or complete.
7. (a) According to the information and explanations given to us and on the basis ofour examination of the books of account the company has been generally regular indepositing undisputed statutory dues including Provident Fund Employees' State InsuranceIncome-tax Sales-tax Service tax Custom duty Excise duty Value added Tax Cess andany other material statutory dues during the year with the appropriate authorities.Moreover as at 31st March 2017 there are no such undisputed dues payable for a periodof more than six months from the date they became payable except stamp duty amounting toRs 53.32 lacs which is still not deposited and Service Tax under reverse charge basisamounting to Rs 1.77 lacs which has since now been deposited.
(b) According to the information and explanations given to us the particulars of duesof Income tax Sales tax Excise duty and Service tax and other material statutory dues asat 31st March 2017 which have not been deposited on account of any dispute are asfollows:
|Name of the Statute ||Nature of dues ||Amounts involved (Rs in Lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|The Income Tax Act 1961 ||Income TaxPenalty ||268.02 ||2007-08 ||Commissioner of Income Tax Appeal Baroda |
| ||Income TaxPenalty ||142.42 ||2008-09 ||Commissioner of Income Tax Appeal Baroda |
| ||Income Tax ||393.53 ||2010-11 ||Commissioner of Income Tax Appeal Baroda |
| ||Income Tax ||240.50 ||2012-13 ||Commissioner of Income Tax Appeal Baroda |
|Custom Act ||Custom Duty ||32.66 ||2008-09 ||CESTAT Ahmedabad |
|Gujarat Stamp Act 1958 ||Stamp Duty ||45.44 ||2008-12 || |
8. According to the information and explanations given to us and on the basis of ourexamination of the books of account the Company has delayed in repayment of dues to banksand financial institution during the year aggregating to of Rs 372.15 lacs (the delay insuch repayments being for less than 45 days in each individual case) and Rs 364.20 lacs ofsuch dues were in arrears as on the balance sheet date.
9. The Company did not raise any money by way of initial public offer or further publicoffer (including debt instruments) and term loans during the year. Accordingly paragraph3 (ix) of the Order is not applicable to the Company.
10. According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during thecourse of our audit.
11. According to the information and explanations given to us and on the basis of ourexamination of the books of account due to inadequacy of profits the Company had filedan application for approval of Managerial Remuneration as approved by the CompanyShareholders vide special resolution dated 11th May 2015. The said applicationis under approval and has yet not been granted by the Central Government. Pending approvalof Central Government the remuneration paid and expensed in the financial results offinancial year 2016-17 is in excess of the applicable limits of Schedule V of theCompanies Act 2013 by Rs 43.16 lacs.
12. In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable to the Company.
13. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with section 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
14. According to the information and explanations give to us and based on 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.
15. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable to the Company.
16. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
Annexure - 2 to in the Independent Auditors' Report of even date to the members ofSTEELCO GUJARAT LIMITED for the year ended 31st March 2017.
Report on the Internal Financial Control Clause (I) Of Sub-Section 3 of Section 143 ofthe Companies Act 2013 ("The Act")
We have audited the internal financial controls over financial reporting of SteelcoGujarat Limited ("the company") as of March 31 2017 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.
Management Responsibility for Internal Financial Controls
The company's management is responsible for establishing and maintaining internalfinancial control 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 act.
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 Controls and bothissued by the Institute of Chartered Accountants of India. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial control 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 Judgement including the assessment of the risk 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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial 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 detectedAlso projections 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 the Company has in all material respects internal financial controlssystem over financial reporting which is required to be strengthened so as to make thesame commensurate with the size and nature of business of the Company and operativeeffectiveness of such internal financial controls over financial reporting requiresimprovement and need to be made effective as at March 31 2017 based on 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.
| ||For MUKESH M. SHAH & CO. |
| ||CHARTERED ACCOUNTANTS |
| ||Firm Registration No. 106625W |
| ||PARTNER |
|Place : Mumbai ||Mukesh M. Shah |
|Date : 24th May 2017 ||Membership No. 030190 |