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Usha Ispat Ltd.

BSE: 500432 Sector: Metals & Mining
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Usha Ispat Ltd. (USHAISPAT) - Auditors Report

Company auditors report

USHA ISPAT LIMITED ANNUAL REPORT 2004-2005 AUDITORS' REPORT In the member of Usha Ispat Limited 1. We have audited the attached Balance Sheet of Usha Ispat Limited as it 31st March, 2005 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto in which accounts of the branches are incorporated. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on out audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement; are free of material misstatement. An audit includes examining, on a test basis. evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as swell as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditors' Report) Order, 2003, issued by the Central Government in terms of Section 227(4A) of the Act and as per Companies (Auditors' Report) (Amendment) Order, 2004 and on the basis of such checks as we considered appropriate, and according to the information and explanations given to us. we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order to the extent applicable to the Company. 4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: a) we have obtained all the information and explanations which to the best of 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 the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us; c) The Balance Sheet the Profit and Loss Account and the Cash flow statement dealt with by this report are in agreement with the books or account in which the accounts of the branches are incorporated. ii) In our opinion the Balance Sheet Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the mandatory Accounting Standards referred to in Section 211(3C) of the Companies Act. 1956, except in the case of Accounting Standard 28 art 'Impairment of Assets'. e) On the basis of written representation received from the directors and taken on the record by the Board of directors, we report that all the directors are disqualified as on 31st March 2005, front being appointed as directors of the company in terms of section 174(1) (g) of the companies Act, 1956, as the company has failed to redeem its debentures on due dates and as failure continues for more than one year, f) We draw attention to Note No. 13 of Schedule 'T' on Notes to the accounts for preparing financial statements on a going concern bases. The Company has incurred at net loss of Rs. 581515. Thousand during the year ended 31st March, 2005 and as of date the Company's current liabilities exceed 31st current assets by Rs.4972303. Thousands and its total liabilities exceed its total assets by Rs. 10597626 Thousands. These factors alongwith other matter as set forth in above-said note no. 13 raise doubt that the Company will he able to continue is a going concern. g) (i) Non Provision of interest on secured loans/ Debentures and unsecured loans from Financial Institutions for the year amounting to Rs.3143037 thousands on abondoned / Suspended projects of integrated steel plant- Satarda, Sinter Plant Redi and Raw Material handling system Redi and as of Balance Sheet slate accumulated interest of Rs.6311036 thousands resulting into understatement of losses by Rs 3243037 thousands, secured loans by Rs.5517748 Thousands, unsecured Loans by Rs.46803 Thousands and Current Liabilities by Rs.746485 Thousands. (ii) Non confirmation and non reconciliation of Secured Loans / Debentures including interest accrued and due there on from financial institutions and banks and shortfall in security cover amount not determined as on the Balance Sheet date, as such, the impact on the financial statements, if any could not be ascertained. (iii) Non confirmation and non reconciliation of party's Debet and Credit balances and their consequential effect on accounts if any. (iv) Non provision of losses and impairment of Assets arising out of abandonment / suspension / impairment of incomplete projects in the earlier year (a) Rs.6046072 thousands for abandoned projects of Integrated Steel Plant Saturda, Sinter Plant redi and Rs.257664 thousands for suspended project of Raw material Handling System - Redi aggregating to Rs.6303736 thousands under Capital, Work in Progress (including advances of Rs.160362 Thousand) and (b) Net block of fixed assets of Rs.41499 thousands of Integrated Steel Plant, Satarda on account of the difference between the net recoverable value and net book value of these assets, resulting into under statement of losses and over statement of fixed assets and capital work in progress - amount not determinable for want of information of their net realisable value as further explained in Notes to the Accounts. (v) Impairment loss arising out of impairment of assets has not been recognised in the financial statement for abandoned / suspended project as stated above and for other assets. The amount is not determined for want of information with respect to the indication of impairment of assets and the estimated recoverable amount. Therefore we are unable to comment on the impact of the same on the financial statement. Without considering items mentioned in paragraph 4(g)(ii) to (g)(v) hereinabove, the effect of which could not be determined, we further report that had the observations made by us in paragraph 4(g)(i) hereinabove been incorporated, the loss for the year would have been Rs.3824552 thousands (as against the reported loss figure of Rs.581515 thousands) and Current Liabilities would have been Rs.6498451 thousand (as against reported figure of Rs.216866 thousands) and secured loan would have been Rs.18614590 Thousand (as against reported figure of Rs.13096842 Thousands, in our opinion and to the best of our information and according to explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and because of the effects of the matters discussed in the preceding paragraphs, the financial statements do not give a true and fair view in conformity with accounting principles generally accepted in India. In the case of Balance Sheet, of the sate of affairs of the company as at 31st March, 2005; In the case of Profit and Loss Account, of the loss of the company for the year ended on that date; and In the Cash Flow statement, of the cash flows of the company for the year ended on that date. For Bansal & Co. Chartered Accountants S.D.Bansal Partner Membership No. : 14301 Place : New Delhi Date : 25th June 2005 Annexure to Auditors' Report: (Referred to in Paragraph 3 of our Report to the Members of Usha Ispat Limited on the accounts for the year ended March 31, 2005) 1) a. The company has not maintained proper records showing full particulars including quantitative details and situation of the fixed assets in respect of, except of Redi Division. b. The fixed assets have been physically verified by the management except fixed assets and fixed asset not capitalised represents under capital work in progress of the abandoned and suspended projects, as such; discrepancy between book record and physical verification could not be ascertained. c. During the year the company has not disposed off substantial part of the fixed assets and as such do not effect the going concern. However, because of other factors as stated in paragraph 4(f) of our report, it effects the going concern status. 2) a. The physical verification of inventory except inventory of dross slag at Redi Plant has been conducted by the management during the year which in our opinion is reasonable having regard to the nature of the inventory. b. The procedures of the physical verification of the inventory followed by the management are reasonable and adequate in relation to the size of the company and nature of its business. c. According to the information and explanations given to us, the company has maintained proper record of the inventory and no material discrepancies were noticed on physical verification of inventory as compared to book records other than the discrepancy c inventory of dross slay, if any, due to non physical verification. 3) The company has, during the year, neither granted nor taken any loans, secured or unsecured to/from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act 1956. Therefore, sub clause (a), (b), (c), (d). (e), (f) and (g) of clause 4(iii) of the order are not applicable. 4) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and nature of business for the purchase of inventory and fixed assets and for sale of goods. 5) According to the information and explanations given to us and on the basis of our examinations of the books of account of the company there is no contract or arrangement referred to in section 301of the Companies Act, therefore, clause 4(v)(a) and (b) are not applicable. 6) In our opinion and according to information and explanations given to us, the company has complied with the provision of section 58A 58AA or any other relevant provisions of the Act and the companies (acceptance and deposits) Rules, 1975 with regard to the deposits accepted from the Public. 7) In our opinion and according to the explanations given to us the company has an internal audit system commensurate with size and nature of its business. 8) Maintenance of cost records has not been prescribed by the central government under clause (d) of sub section (1) of section 209 of the Companies Act, 1956. 9) a. According to information and explanations given to us and as per records produced before us for verification, the company is regular in depositing statutory dues including Investor Education and Protection Fund, E.S.I. Income tax, Sales Tax, wealth tax, service tax, Custom duty, Excise Duty, Cess and any other statutory dues as applicable with the appropriate authorities except Provident fund, and tax deducted at source. As per information and explanations given to us, no undisputed statutory dues are outstanding as at 31.03.05, for a period exceeding six months from the date they became payable except statutory dues of Custom Duty aggregating to Rs 248457 Thousand outstanding for more than six months which are as follows: STATEMENT OF UNDISPUTED STATUTORY DUES OUT STANDING FOR MORE THAN SIX MONTHS AS ON 31-03-2005 NATURE OF NATURE OF DUES AMOUNT (RS.) PERIOD DUE DATE STATUE IN THOUSANDS) CUSTOM ACT CUSTOM DUTY 3744 97-98 24.10.1997 24012 97-98 15.03.1998 27046 98-99 04.06.1998 20498 98-99 04 06.1998 22011 98-99 29.08.1998 5605 99-00 02.01.2000 1737 00-01 26.09.2000 TOTAL - A 104654 CUSTOM ACT INTEREST ON TILL CUSTOM DUTY 143803 30.09.04 TOTAL - B 143803 GRAND TOTAL 248457 b. As per information and explanations furnished to us and on verification of records produced. there are disputed statutory do outstanding aggregating to Rs342801 Thousand as at 31st March, 2005, which have not been deposited with the respect6 authorities in respect of Income Tax, Sales Tax, Custom Duty and Excise Duty which are as follows: NAME OF NATURE OF AMOUNT PERIOD TO FORUM WHERE STATUTE THE DUES (RS. IN WHICH THE DISPUTE IS THOUSANDS) AMOUNT PENDING RELATES CENTRAL Excise Duty 5709 1994-95 HIGHCOURT MUMBAI EXCISE ACT 2426 1995-96 Excise Duty 105 1994-95 CEGAT MUMBAI Excise Duty 6918 2001-2002 CEGAT MUMBAI Excise Duty 120 1998-99 ASSISTANT COMMISSIONER EXCISE RATNAGIRI Excise Duty 18 2000-2001 COMMISSIONER (APPEAL) PUNE Excise Duty 50 1999-20 CEGAT MUMBAI Excise Duty 1500 2000-01, 2001-02 CEGAT MUMBAI Total-A 16846 Custom Act Custom Duty 1189 1998-99 CEGAT MUMBAI Total-B 1189 11175 94-95 MAHARASHTRA SALES 76158 95-96 TAX TRIBUNAL, MUMBAI Central Sales Tax 104890 96-97 Sales Tax Act 40114 97-98 7865 99-2000 116 98-99 Bombay Sales Tax 37539 95-96 Sales Tax 26456 96-97 Act 17725 97-98 1389 99-2000 TOTAL C 323428 - Income Tax Income Tax 1338 1993-94 ITAT Delhi Act TOTAL D 1338 GRAND TOTAL (A+B+C+D) 342801 10) The company has accumulated losses of more than fifty percent of Its net worth as at the end of the financial year 31st March, 2005. The Company has incurred cash losses during the financial year ended on that date and in the immediate preceding financial year. 11) The company has defaulted In repayment of dues to financial institutions, banks and debenture holders as at 31st March, 2005. The period and amount of default are given as follows: DEFAULT OF REPAYMENTS OF LOANS TO FINANCIAL INSTITUTIONS, BANKS AND DEBENTURE HOLDERS: AMOUNT OF DEFAULT PERIOD OF DEFAULT AMOUNT OF PERIOD OF DEFAULT PRINCIPAL FROM THE DUE DATE DEFAULT FROM THE DUE DATE TO 31-03-2005 PRINCIPAL TO 31-03-2005 87500 21-09-99 8650 30-09-99 87500 21-09-00 8650 31-12-99 36250 28-06-01 8650 31-03-00 3750 03-08-01 8650 30-06-00 47500 21-09-01 8650 30-09-00 340000 26-09-99 6450 31-12-00 340000 26-09-00 4286 14-04-99 499327 30-09-99 4286 14-07-99 83333 01-10-99 4286 14-10-99 83333 01-10-00 4286 14-01-00 83333 01-10-01 4286 14-04-00 83333 01-10-02 4286 14-07-00 83333 01-10-03 4286 14-10-00 83334 01-10-04 4286 14-01-01 4043 01-04-03 4278 14-04-01 4043 01-07-03 9375 14-04-99 4043 01-10-83 9375 14-07-99 4043 01-01-04 9375 14-10-99 4043 01-04-04 9375 14-01-00 4043 01-07-04 9375 14-04-00 4043 01-10-04 9375 14-07-00 4043 01-01-05 9375 14-10-00 9000 12-04-99 9375 14-01-01 15000 12-04-00 9375 14-04-01 15000 12-04-01 9375 14-07-01 12000 28-06-01 9375 14.10-01 9000 12-04-02 9375 14-01-02 9000 12-04-03 9375 22-01-02 21945 01-10-99 6813 01-07-04 21945 01-01-00 6813 01-10-04 21945 01-04-00 6813 01-01-05 21945 01-07-00 2880441 01-06-01 21945 01-10-00 1039599 28-06-01 21946 01-01-01 1905638 22-01-02 21946 01-04-01 937307 01-06-01 21946 01-07-01 12241 01-01-02 90800 03-08-01 7929 25-01-02 16271 01-10-01 2781 03-01-05 16271 01-01-02 3000 28-02-05 16271 01-04-02 3000 31-03-05 16271 01-07-02 16271 01-10-02 62425 04-10-02 10596 01-01-03 10596 01-04-03 10596 01-07-03 10596 01-10-03 26483 13-10-03 6813 01-01-04 6813 01-04-04 TOTAL 9648622 DEFAULT OF REPAYMENTS OF LOANS TO FINANCIAL INSTITUTIONS, BANKS AND DEBENTURE HOLDERS' AMOUNT (RS. IN THOUSANDS) AMOUNT OF DEFAULT-INTEREST` PERIOD OF DEFAULT FROM THE PERIOD AS MENTIONED BELOW UP TO 31-03-05 276847 1998-99 482731 1999-00 1800638 2000-01 2254888 2001-02 2617836 2002-03 3268165 2003-04 3616155 2004-05 * It includes Rs. 6311036 thousands against which no provision has been made in the books of account. 12) In our opinion and according to information and explanations given to us, the company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities. 13) In our opinion, the company is not a chit fund or a nidhi or mutual benefit fund or society, therefore, the provision of clause 4(xiii) of the Order is not applicable to the company. 14) In our opinion, Company is not dealing or trading in shares, securities, debentures and other investments, therefore provision of Clause 4(xiv) of the Order is not applicable to the company. 15) As per information and explanations given to us, the company has not given any guarantee during the year for loans taken by others from banks or financial institutions. 16) As per the information and explanations given to us and on the basis of review, the company has not taken any term loan during the year. 17) Based on the information and explanation given to us and on an overall examination of the balance Sheet of the company, in our opinion there are no funds raised on long term basis during the year and the funds raised by short term basis have not been used for long term investment. 18) The company has not made any preferential allotment of shares to parties covered under section 301 of the Companies Act, 1956 during the year. 19) The company has created necessary securities as per the debenture trust deed in respect of debenture issued any outstanding as on 31.3.2005 except in case given herein below: Name of the Institution Period Amount of loan Unit Trust of India 2000-01 145543 Debentures of Rs 1000/- each amounting to Rs 145543 thousands 20) The company has not raised the money by way of public issue during the year hence clause 4(xx) of the order is not applicable to the company. 21) Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the company has been noticed or reported during the year ended March 31, 2005. For Bansal & Co. Chartered Accountants S.K.Bansal Place : New Delhi Partner Date : 25th June, 2005 Membership No: 14301