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Surana Industries Ltd.

BSE: 513597 Sector: Metals & Mining
NSE: SURANAIND ISIN Code: INE659D01019
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VOLUME 550
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Surana Industries Ltd. (SURANAIND) - Auditors Report

Company auditors report

TO THE MEMBERS OF SURANA INDUSTRIES LIMITED Report on the Standalone Ind AS FinancialStatements

We have audited the accompanying Standalone Ind AS Financial Statements of SURANAINDUSTRIES LIMITED("the Company") which comprise the Balance Sheet as at31stMarch 2017 the Statement of Profit and Lossand the Statement of Cash Flowsand theStatement of Changes in Equity for the year then ended and a summary of the significantaccounting policies andother explanatory information (hereinafter referred to as‘Standalone Ind AS Financials Statements')

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 CompaniesAct 2013 ("the Act") with respect to the preparation ofthese Standalone Ind AS Financial Statements thatgive a true and fair view of thefinancial position financial performance and cash flows and changes in equity of theCompany inaccordance with the accounting principles generally accepted in India includingthe Indian Accounting Standardsprescribed under section 133 of the Act as applicable.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisionsof the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and otherirregularities; selection and application ofappropriate accounting policies; making judgments and estimatesthat are reasonable andprudent; and design implementation and maintenance of adequate internalfinancialcontrols that were operating effectively for ensuring the accuracy andcompleteness of the accountingrecords relevant to the preparation and presentation of theStandalone Ind AS Financial Statements that give a true and fair viewand are free frommaterial misstatement whether due to fraud or error.

Auditor's Responsibility

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

We have taken into account the provisions of the Act the accounting and auditingstandards and matters whichare required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit of the Standalone Ind AS Financial Statements in accordance withthe Standards on Auditingspecified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirementsand plan and perform the audit to obtainreasonable assurance about whether the Standalone Ind AS Financial Statements are freefrommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthedisclosures in the Standalone Ind AS Financial Statements. The procedures selecteddepend on the auditor's judgment includingthe assessment of the risks of materialmisstatement of theStandaloneInd AS Financial Statements whether due to fraud or error.Inmaking those risk assessments the auditor considers internal financial control relevantto the Company'spreparation of the StandaloneInd AS Financial Statements that give a trueand fair view in order to design audit procedures that areappropriate in thecircumstances. An audit also includes evaluating the appropriateness of theaccountingpolicies used and the reasonableness of the accounting estimates made by theCompany's Directors as wellas evaluating the overall presentation of the Standalone IndAS Financial Statements.

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

Basis for Adverse Opinion

(i) . We refer to the Note No. 4.2 relating to the investment in its subsidiariesSurana Power Limited (SPL).

The carrying value of the investment in the SPL as at March 31 2017 was Rs. 45350.00lakhs (previous year Rs. 41850.00 lakhs). In addition the Company has also issued afinancial guaranteeof Rs. 10000 lakhs to the lenders against the loans taken by thissubsidiary. The net worth of thissubsidiary has fully eroded as at the Balance Sheet dateand its current liabilities exceeded its currentassets as on that date. The independentauditor of the subsidiary has given an adverse audit opinion on itsfinancial statementsfor the year ended March 31 2017 stating that the going concern assumption isnotappropriate and the carrying value of the assets of the subsidiary may also beimpaired.No provision has been considered by the management for the diminution in thevalue of the investmentsin this subsidiary and for the likelihood of the devolvement ofthe guarantee on the Company.

(ii) . Attention is invited to Note No. 4.2 regarding investment in Subsidiary SuranaMines & Minerals

Limited having a carrying value aggregating to Rs.5848.26 lakhsthat were approved fordivestment due to continuing adverse market scenario which was impacting the survival ofthe parent Company. This investment is carried at cost and has not been assessed for anyimpairment to the carrying values.

(iii) . Inventory as at March 312017 aggregated to Rs. 14879.51 lakhs(previous yearRs. 16576.85 lakhs) for

which the quantity quality and realizable value were not assessed and determined by themanagement. In the absence of evidence for physical existence of inventory as at March312017 and net realizable value of inventory we are unable to comment on the adjustmentthat may be required to the carrying value of the inventory.

(iv) . The carrying value of the financials assets as at March 31 2017 are notmeasured in accordance with the

Ind AS- 109 and we are unable to comment on the adjustment that may be required to thecarrying value of the financials assets.

(v) . The financial results for the year ended March 31 2017 have been prepared on agoing concern basis in

spite of negative net worth after considering the impact of the modifications mentionedin paragraph (a) and ( b ) above. The ability of the Company to continue as a goingconcern is significantly dependent on the successful outcome of the ongoing negotiationswith the lenders and therefore we are unable to comment if the going concern assumptionis appropriate and any effect it may have on the financial results for the year endedMarch 2017.

(vi) The Company has considered trade receivables outstanding for more than 1 year ofRs. 11582.16 Lakhs and capital advances of Rs. 6170.88 Lakhs as good and recoverable.However we were unable to confirm or verify by alternative means balances of such tradereceivables and we are unable to comment on the adjustments that may be required as atMarch 31 2017.

(vii) Had the provision been made for the financial liability arising out of theguarantee as referred to in paragraph (a) above had the provision been made for tradereceivables and capital advances as referred to in paragraph (b) the loss would have beenincreased by Rs. 27768.24 Lakhs and consequently net worth would have been reduced by Rs.27768.24 Lakhs respectively.

Adverse Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us dueto the significance of the matters described in the Basis of AdverseOpinion paragraph the aforesaidStandalone Ind AS Financial Statements do not give theinformation required by the Companies Act 2013 in the mannerso required and also do notgive a true and fair view in conformity with the accounting principles generallyacceptedin India including Ind AS of the financial position of the Company as at 31st March2017 and its financial performance including other comprehensive income its cashflowsfor the year ended on that date.

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 in terms of Section 143(11) of the Act we give in "Annexure B" astatement on thematters

specified in 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 except for the effects / possible effects of the mattersdescribed in theBasis for Adverse Opinion paragraph above obtained all the informationand explanationswhich to the best of our knowledge and belief were necessary for thepurpose of our audit.

b) Except for the effects / possible effects of the matters described in the Basis forAdverseOpinion paragraph above in our opinion proper books of account as required by lawhave beenkept by the Company so far as appears from our examination of those books.

c) The Balance Sheet the Statement of Profit and Loss the Statement of Cash Flows andStatement of changes in Equity dealt with bythis Report are in agreement with the books ofaccount.

d) Except for the effects / possible effects of the matter described in the Basis forAdverse Opinionparagraph above in our opinion the aforesaid Standalone Ind AS FinancialStatements comply withthe Accounting Standards prescribed under section 133 of the Act asapplicable.

e) The matter described in the Basis for Adverse Opinion paragraph above in ouropinion may havean adverse effect on the functioning of the Company.

f) On the basis of the written representations received from the directors as on 31stMarch 2017taken 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.

g) The adverse remarks relating to the maintenance of accounts and other mattersconnectedtherewith are as stated in the Basis for Adverse Opinion paragraph above.

h) With respect to the adequacy of the internal financial controls over financialreporting of theCompany and the operating effectiveness of such controls refer to ourseparate Report in"Annexure B". Our report expresses an adverse opinion on theadequacy and operatingeffectiveness of the Company's internal financial controls overfinancial reporting.

i) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of ourinformation and according to the explanations given tous:

i. Except for the effects / possible effects of the matters described in the Basis forAdverse Opinion paragraph above the Company has disclosed the impact of pendinglitigations on itsfinancial position in its Standalone Ind As Financial statements;

ii. Except for the effects / possible effects of the matters described in the Basis forAdverse Opinion paragraph above the Company did not have any long-term contractsincludingderivative contracts for which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

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. However we are unable to obtain sufficient and appropriateaudit evidence to report on whether the disclosures are in accordance with books ofaccount maintained by the Company and as produced to us by the Management - Refer Note35;.

For V D S R & Co.

Chartered Accountants

Firm‘s Registration No.001626S

Sathish Kumar RK

Partner

Membership No. 220263

Place: Chennai

Date : May 18 2017

ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT

The Annexure referred to in Independent Auditors' Report to the members of the Companyon the Standalone Ind AS Financial Statements for the year ended 31 March 2017 we reportthat:

(i) (a) The Company has maintained proper records showing full particulars includingquantitativedetails

and situation of fixed assets.

(b) During the year the Company has not carried out a physical verification of itsfixed assets.The company does not have a regular programme for verification of its fixedassets.

(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the Memorandum of Entry executed by the Company inrespect of immovable properties of land that have been taken on lease and pledged assecurity for loans and disclosed as fixed asset in the financial statements the leaseagreements are in the name of the Company where the Company is the lessee in theagreement. However we have not received any direct confirmations from the lenders in thisregard.

(ii) As explained to us and read with our observation in paragraph (iii) ofthe BasisforAdverse Opinionparagraph of our report of even date the inventories at the Raichur andthe trading stocks at all locationswere not physically weighed / measured during the yearby the management. Consequently we are unable tocomment on the discrepancies noticed onphysical verification of inventories.

(iii) 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 of the Companies Act2013.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Companies Act2013 in respect of grant of loans making investments and providing guarantees andsecurities as applicable.

(v) According to the information and explanations given to us the Company has notaccepted any depositduring the year. In respect of unclaimed deposits the Company hascomplied with the provisions of Sections 73 to 76 or any other relevant provisions of theCompanies Act 2013.

(vi) 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 cost recordsmaintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014as amended prescribed by the CentralGovernment under sub-section (1) of Section 148 of theCompanies Act 2013 and are of the opinionthat prima facie the prescribed cost recordshave been made and maintained We have however notmade a detailed examination of the costrecords with a view to determine whether they are accurate orcomplete.

(vii) According to the information and explanations given to us in respect ofstatutory dues:

(a) The Company has not been regular in depositing undisputed statutory dues includingProvident Fund Employees' State Insurance Income-tax Sales Tax Service TaxCustomsDuty Excise Duty

Value Added Tax cess and other material statutory dues applicable to it to theappropriate authorities and there were inordinate delays in a number of cases in respectof of Provident Fund Tax deducted at Source Value Added Tax and Service Tax.

(b) There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income-tax Sales Tax Service TaxCustoms Duty Excise Duty Value AddedTaxcess and other material statutory dues in arrears as at March 31 2017 for a period ofmore thansix months from the date they became payable other than those disclosed below;

Name of Statue Nature of Dues Amount

(Lakhs)

Period to which amount relates Due Date Date of Subsequent payment
Before March Before March
Employees Provident Fund & Provident Fund 34.30 31 2015 31 2015 Unpaid
Miscellaneous Provision Act 1952 18.35 October'15 to August 2016 November 15 to

September16

Unpaid
Income Tax Act 1961 Tax Deducted at Source 18.21 Before March 31 2016 Before May 2016 Unpaid
Tamilnadu Value Before March Before March
Added Tax 2006 VAT 1213.03 31 2016 2016 Unpaid
Before March Before March
67.43 31 2016 2016 Unpaid
Finance Act 1994 Service Tax 3.22 April 16 to August 2016 May 16 to September 2016 Unpaid
The Tamil Nadu Town Panchayats Municipalities and Municipal Corporations (Collection of Arrears of Tax on Profession Trades Calling and Employment's) Rules 1998 Professional tax 0.81 Before March 2016 Before March 2016 Unpaid

(c) Details of dues of Income-tax Sales Tax Service Tax Customs Duty Excise Dutyand Value Added Tax which have not been deposited as on March 31 2017 on account ofdisputes are given below:

Name of Statute Nature of Dues Forum where Dispute is Pending Period to which the Amount Relates Amount Involved (Lakhs) Amount Unpaid (Lakhs)
Employees' State Insurance Act 1948 Employee State Insurance Honorable High Court of Chennai 2010-11 61.12 61.12
Central Excise Act 1944 Central Excise Commissioner of Central Excise Commissioner II Chennai 2006 138.33 138.33
Central Excise Act 1944 Central Excise Honorable High Court of Chennai 1999-2000 28.69 28.69
Central Excise Act 1944 Central Excise Appeal will be filed before CESTAT Bangalore 2013 28.00 28.00
Central Excise Act 1944 Central Excise Honorable High Court of Chennai 1997-2000 93.89 93.89
Central Excise Act 1944 Central Excise Commissioner of Central Excise Commissioner II Chennai 2010 503.60 503.60
Central Excise Act 1944 Central Excise Commissioner of Central Excise Commissioner I Chennai 2010 150.00 150.00
Central Excise Act 1944 Central Excise CESTAT Bangalore 2011 2352.66 2352.66
Central Excise Act 1944 Customs Duty Commissioner ( Appeals) 2012-13 622.14 622.14
Customs Act 1962 Customs Duty Honorable High Court of Chennai 1999-2000 20.86 20.86
Customs Act 1962 Customs Duty Honorable High Court of Chennai 1998-1999 7.82 7.82
Customs Act 1962 Customs Duty Honorable High Court of Chennai 2000-03 100.00 100.00
Customs Act 1962 Customs Duty Honorable Supreme court 2005-06 138.29 138.29
Various states ( Sales Tax Acts) Value Added Tax Pending before Sales Tax Tribunal Gulbarga 2007- 08 & 2008- 09 145.88 108.88
Various states ( Sales Tax Acts) Value Added Tax Pending before Sales Tax Tribunal Gulbarga 2010-11 8.58 8.58
Various states ( Sales Tax Acts) Central Sales Tax Honorable High Court of Chennai 2008-09 2.09 2.35
Various states ( Sales Tax Acts) Central Sales Tax Honorable High Court of Chennai 2008-09 - VIL 12.54 19.61
Various states ( Sales Tax Acts) Central Sales Tax Honorable High Court of Chennai 2009-10 227.72 226.28
Various states ( Sales Tax Acts) Central Sales Tax Honorable High Court of Chennai 2010-11 238.27 91.72
Various states ( Sales Tax Acts) Central Sales Tax Honorable High Court of Chennai 2005-06 89.13 88.48
Various states ( Sales Tax Acts) TNVAT Honorable High Court of Chennai 2006-07 664.35 141.53
Various states ( Sales Tax Acts) TNVAT Honorable High Court of Chennai 2007-08 3059.54 214.91
Various states ( Sales Tax Acts) TNVAT Honorable High Court of Chennai 2008-09 - VIL 20.79 31.19
Various states ( Sales Tax Acts) TNVAT Honorable High Court of Chennai 2009-10 198.02 230.13
Various states ( Sales Tax Acts) TNVAT Honorable High Court of Chennai 2010-11 271.17 284.54
Various states ( Sales Tax Acts) TNVAT Honorable High Court of Chennai 2011-12 29.86 59.50
Various states ( Sales Tax Acts) TNVAT Honorable High Court of Chennai 2012-13 57.96 75.35
Various states ( Sales Tax Acts) TNVAT Honorable High Court of Chennai 2014-15 189.50 152.92
Various states ( Sales Tax Acts) TNVAT Honorable High Court of Chennai 2009-10 2.42 3.63
Various states ( Sales Tax Acts) TNVAT Honorable High Court of Chennai 2010-11 2.66 3.98
Central Excise Act 1944 CENTRAL EXCISE OIO NO BEL/ EXCUS/000/ COM/ BKK/038/16- 17(cx) Commissioner of Central Excise Customs and Service Tax Belgaum May 2011- July 2013 1155.61 1155.61
Central Excise Act 1944 CENTRAL EXCISE OIO NO BEL/ EXCUS/000/ DIVB/JTC/ SKM/021/16- 17(cx) Commissioner of Central Excise Customs and Service Tax Belgaum 04/2006- 07/2009 36.48 36.48
Central Excise Act 1944 CENTRAL EXCISE OIO NO BEL/ EXCUS/000/ DIVB/ASC/ Dr.A/45/16- 17(cx) Assistant Commissioner of Central Excise Customs and Service Tax Bellary 08/2011- 12/2012 1.09 1.09
Central Excise Act 1944 CENTRAL EXCISE OIO NO BEL/ EXCUS/000/ COM/ BKK/024/16- 17(cx) Commissioner of Central Excise Customs and Service Tax Belgaum 2009-10 97.54 97.54
Central Excise Act 1944 CENTRAL EXCISE OIO NO BEL/ EXCUS/000/ DIVB/ASC/ Dr.A/63/16- 17(ST) Assistant Commissioner of Central Excise Customs and Service Tax Bellary 2013-2014 11.87 11.87

(viii) In our opinion and according to the information and explanations given to usthe Company hasnot defaulted in the repayment of loans or borrowings to financialinstitutions and banks exceptas under.

Defaulted in the repayment of loans and borrowings to financial institutions banks:

i. Principal portion due:period of default to be bring

The balances due in respect of principal outstanding as per books of accounts are asbelow:

Particulars Amount of default of repayment (Lakhs) Period of default
Due to Financial Institutions
IFCI 21121 For FY 2014-15 & 2015-16 & 2016-17
Due to Banks
Allahabad Bank 4773.00
Bank of Baroda 2396.28
Bank of India 4755.00
Bank of Maharashtra 5208.00
Canara Bank 2320.00
Central Bank of India 10050.97
Dena Bank 10394.00 For FY 2015-16 &
IDBI 17371.72 2016-17
Indian Overseas Bank 2432.00
Oriental Bank of Commerce 7150.93
Punjab National Bank 21717.24
State Bank of India 4638.68
Syndicate Bank 3716.13
UCO Bank 3686.40

Note - The balance due in respect of principal outstanding is as per the repaymentterms in the Recall Notice given by the lead bank the Monitoring Institution (IDBI Bank)and the CDR Lenders on 24th March 2014. The above balance also includes devolved Lettersof Credit which were outstanding as at March 31 2017.

ii. Interest Due

Particulars Amount of default of repayment (Lakhs) Period of default
Due to Financial Institutions
IFCI 2650.57 Refer Note (a) below
Due to Banks
Allahabad Bank 5575.55
Bank of Baroda 964.98
Bank of India 2559.14
Bank of Maharashtra 3063.54
Canara Bank 3382.96
Central Bank of India 1775.25
Dena Bank 7608.65
IDBI Bank Limited 7986.22 Refer Note (b) below
Indian Overseas Bank 1159.45
Oriental Bank of Commerce 2186.00
Punjab National Bank 4467.85
State Bank of India 1212.23
Syndicate Bank 793.38
UCO Bank 601.13

Note (a) - The interest disclosed above has been computed by the company based on theborrowing rates which prevailed before the signing of MRA

Note (b) - All the consortium banks had classified the account of the Company as a NonPerforming Asset (NPA) during the current year and consequently stopped charging intereston the loans extended to the Company. The interest disclosed above for the year endedMarch 31 2017 has therefore been computed based on the terms specified in the MRA and hasbeen provided for in the financial statements

(ix) The Company has not raised moneys by way of initial public offer or further publicoffer(including debt instruments) or term loans and hence reporting under clause (ix) ofthe CARO2016 Order is not applicable.

(x) To the best of our knowledge and according to the information and explanationsgiven to us nofraud by the Company and no fraud on the Company by its officers oremployees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us theCompany has paid managerial remuneration in accordance with the requisite approvalsmandated by theprovisions of section 197 read with Schedule V to the Companies Act 2013.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of theCARO 2016Order is not applicable.

(xiii) In our opinion and according to the information and explanations given to us theCompany is incompliance with Section 188 and 177 of the Companies Act 2013 whereapplicable for all transactions with the

related parties and the details of related party transactions have been disclosed inthe financial statements etc. as required by the applicable accounting standards.

(xiv) During the year under review in compliance of Corporate Debt Restructure (CDR)terms and conditions equity shares were allotted to promoters which is preferentialallotment. The referred preferential allotment in our view is not prejudicial to theinterest of the Company as the same is part of Debt restructure terms and conditions.

(xv) According to the information and explanations given to us the Company has notentered into noncashtransactions with one of the directors/ person connected with thedirector during the year and in our opinion provisions of Section 192 of the CompaniesAct 2013 have been complied with to the extent applicable.

(xvi) The Company is not required to be registered under section 45-I of the ReserveBank of IndiaAct 1934.

For V D S R & Co.

Chartered Accountants

Firm‘s Registration No.001626S

Sathish Kumar RK

Partner

Membership No. 220263

Place: Chennai

Date : May 18 2017

ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT

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 SuranaIndustries 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's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls basedon 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 overFinancial 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.

Auditor's 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") 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 financialcontrols system over financial reporting and their operatingeffectiveness. Our audit of internal financialcontrols over financial reporting includedobtaining an understanding of internal financial controls overfinancial reportingassessing the risk that a material weakness exists and testing and evaluating the designandoperating effectiveness of internal control based on the assessed risk. The proceduresselected depend on theauditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statementswhether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for ouradverse audit opinion on the Company's internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

Acompany's internal financial control over financial reporting is a process designed toprovide reasonableassurance regarding the reliability of financial reporting and thepreparation of financial statements for externalpurposes in accordance with generallyaccepted accounting principles. A company's internal financial controlover financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecordsthat in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of thecompany; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparationof financial statements inaccordance with generally accepted accounting principles and that receiptsandexpenditures

of the company are being made only in accordance with authorisations of managementanddirectors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection ofunauthorised acquisition use or disposition of the company's assetsthat could have a material effect on the AS 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 erroror fraud may occur and not be detected. Alsoprojections of any evaluation of the internal financial controls over financial reportingto future periods are subject to the risk that the internal financial control overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.

Adverse Opinion

According to the information and explanations given to us and based on our auditmaterial weaknesses havebeen identified as at March 31 2017 with respect to the Companynot establishing an internal control framework relating to all components of internalcontrol and consequently controls have not been designed to evaluate appropriateness ofthe going concern assumption determination of provisions for diminution in the value ofinvestments and accrual for liability arising out of financial guarantee evaluation ofexistence and valuation of inventory and determination of completeness of interestliability to banks and financial institutions and determination of prior period expenses.

A ‘material weakness' is a deficiency or a combination of deficiencies ininternal financial control overfinancial reporting such that there is a reasonablepossibility that a material misstatement of the company'sannual or interim financialstatements will not be prevented or detected on a timely basis.In our opinion to the bestof our information and according to the explanations given to us because of theeffects ofthe material weaknesses described above on the achievement of the objectives of thecontrol criteriathe Company has not maintained adequate and effective internal financialcontrols over financial reporting asof March 31 2017 based on the internal control overfinancial reporting criteria established by the Companyconsidering the essentialcomponents of internal control stated in the Guidance Note on Audit of InternalFinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

We have considered the material weaknesses identified and reported above in determiningthe nature timingand extent of audit tests applied in our audit of the financialstatements of the Company for the year endedMarch 31 2017 and these material weaknesseshave affected our opinion on the said Standalone financialstatements of the Company and wehave issued an adverse opinion on the Standalone financial statements ofthe Company.

For V D S R & Co.

Chartered Accountants Firm‘s Registration No.001626S

Sathish Kumar RK Partner

Membership No. 220263

Place: Chennai

Date : May 18 2017