To the Members of
ABAN OFFSHORE LIMITED
Report on the Audit Of Ind AS Standalone Financial Statements
We have audited the accompanying Ind AS Standalone Financial Statements of ABANOFFSHORE LIMITED ("the company") which comprise the Balance Sheet as at 31stMarch 2019 the Statement of Profit and Loss (including Other Comprehensive Income) theCash Flow Statement and the Statement of changes in equity for the year then ended andnotes to financial statements including a summary of significant accounting policies andother explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the "Basis forQualified Opinion" section of our report the aforesaid standalone financialstatements give the information required by the Companies Act 2013 ("the Act")in the manner so required and give a true and fair view in conformity with the IndianAccounting Standards prescribed under section 133 of the Act read with the Companies(Indian Accounting Standards) Rules 2015 as amended ("Ind AS") and otheraccounting principles generally accepted in India of the state of affairs of "theCompany" as at March 31 2019 the Loss and total comprehensive income changes inequity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
We draw attention to Note no 4(b) to Standalone Ind AS financial statements in respectof investments of Rs.35317.32 million in wholly owned foreign subsidiary which along withits downstream subsidiary companies that have significant accumulated losses as at 31stMarch 2019.In the absence of any fair valuation assessment of such investments we areunable to comment upon the carrying value of these investments and the consequentialimpact if any on the accompanying standalone financial statements for the year ended31st March 2019.
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the AuditorsResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of "the Company" in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI) together with theethical requirements that are relevant to our audit of the standalone statements under theprovisions of the Act and the Rules made there under and we have fulfilled our otherethical responsibilities financial in accordance with these requirements and theICAIs Code of Ethics. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our qualified opinion on thestandalonefinancial statements.
Emphasis of matter
(a) We draw attention to Note No 8(a) to Standalone Ind AS financialstatements;"the Company" has defaulted in repayment of installments and payment of intereston term loans from banks for an amount of Rs.5495.97 million. The Banks have recalled theentire loan outstanding including interest. As such "the Company" hasre-classified these dues to banks from Non-current Liabilities to Current Liabilities
(b) We draw attention to Note No 31 to Standalone Ind AS financialstatements; TheCompany has given corporate guarantees to banks and customers on behalf of subsidiaries ofcompanys wholly owned foreign subsidiary amounting to Rs.7430.08 million.
Our opinion is not modified in respect of the above matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
We have determined the matters described below to be the key audit matters to becommunicated in our report
i. Valuation and Impairment of Property Plant and equipment: Refer note (19) to theInd AS Standalone Financial statements
An impairment charge of Rs 198.69 million has been recognized for the year 2018-19 inrespect of Jack up rigs as the carrying amounts of such assets exceeded its estimatedrecoverable value in use which is mainly due to slump in the oil and gas industry
How our audit addressed the key audit matter
Our procedures included but were not limited to the following:
Calculation of impairment has been done by management and not by external expertagency.
Obtained an understanding of managements process evaluated design andtested operating effectiveness of controls around identification of indicators ofimpairment under Ind AS
Assessed the appropriateness of methodology and valuation model used by themanagement to estimate the recoverable value of assets
Assessed the reasonableness of assumptions relating to revenue growth rategross margins discount rates etc. based on historical results current developments andfuture plans of business estimated by management
ii. Evaluation of uncertain tax positions:
The company has material uncertain tax positions including matters under dispute asdisclosed under Contingent Liabilities (Note no:31) which involves significant judgementto determine the possible outcome of these disputes.
How our audit addressed the key audit matter
We have obtained from the management the details of the present status ofcompleted/pending disputes and taken into consideration the effect of these in respect ofuncertain tax provisions to evaluate the uncertainties as at the year end.
Information Other than the Standalone Financial Statements and Auditors ReportThereon
The Companys Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Boards Report including Annexure to Boards ReportBusiness Responsibility Report Corporate Governance and Shareholders Informationbut does not include the standalone financial statements and our auditors reportthereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information; we are required to report that fact. We havenothing to report in this regard.
Managements Responsibility for the Standalone Financial Statements
The Companys Board of Directors is responsible for the matters stated in section134(5) of "the Act" with respect to the preparation of these standalonefinancial statements that give a true and fair view of the financial position financialperformance total comprehensive income changes in equity and cash flows of the Companyin accordance with the Ind AS and other accounting principles generally accepted in Indiaincluding the accounting Standards specified under section 133 of "the Act".This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Companys ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Companys financialreporting process.
Auditors Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditors report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basisof these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the ope ratingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of managements use of the going concernbasis of accounting and based on the audit evidence obtained whether a materialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubt on theCompanys ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditors report to therelated disclosures in the standalone financial conclusions are based on the auditevidence obtained up to the date of our auditors report. However future events orconditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial the standalone financial stateme nts represent the underlying transactions andevents in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial that theeconomic decisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficienciesin internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors report unless law or regulation precludes public disclosure aboutthe matter or when in extremely rare circumstances we determine that a matter should notbe communicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government in terms of Section 143(11) of the Act wegive in "Annexure A" a statement on the matters specified in paragraphs 3 and 4of the Order.
As required by Section 143(3) of the Act based on our audit 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 including Other ComprehensiveIncome Statement of Changes in Equity and Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified with Rule 7 of the Companies (Accounts) Rules2014.
e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 frombeing appointed as a director in terms of Section 164 (2) of theAct.
f) With respect to the adequacy of the internal financial controls over financialreporting of the effectivenessof such controls refer to our separate Report in"Annexure B". Our report expresses an unmodified opinion on the adequacy andoperating effectiveness of the Companys internal financial controls over financialreporting.
g) With respect to the other matters to be included in the Auditors Report inaccordance with the requirements of section 197(16) of the Act as amended:
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to two of its directors during the yearis in excess of the remuneration payable as per provisions of section 197 of "theAct"- Refer to note 30 to the Standalone financial statements.
h) With respect to the other matters to be included in the Auditors 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 itsstandalone financial statements.
ii. The Company does not have any long term contracts including derivative contractsfor 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.
For P. Murali & Co.
Firm Registration No: 007257S
P. Murali Mohana Rao
Membership No. 023412
Annexure A to the Independent Auditors Report
(Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements section of our report to the Members of ABAN OFFSHORE LIMITED of evendate)
i. In respect of the Companys fixed assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of available information.
(b) As explained to us all the fixed assets have been physically verified by themanagement in a phased periodic manner which in our opinion is reasonable having regardto the size of the company and natures of its assets. No physical discrepancies werenoticed on such physical verification.
(c) According to the information and explanations given to us and on verification ofdocuments provided to us we are of the opinion that the title deeds immovable propertiesare in the name of the Company.
ii. In our opinion the inventories have been physically verified during the year by theManagement at reasonable intervals. The material discrepancies noticed on verificationbetween the physical stocks and the book records have been dealt within the books ofaccount.
iii. The company has not granted any loans secured unsecured to companies firmslimited liability partnerships covered in the register maintained under section 189 ofthe Companies Act2013
iv. The company has provided guarantees and invested in its wholly owned foreignsubsidiary and Indian subsidiaries the company has also invested in other companies. Basedon the information and explanations given to us we are of the opinion that the Companyhas complied with the provisions of Sections 185 and 186 of the Companies Act 2013 whereever applicable with respect to said transactions.
v. The Company has not accepted any deposits during the year from the public within themeaning of the provisions of section 73 of "the Act" and hence directives issuedby the reserve bank of India and the provisions of section 73 to 76 or any other relevantprovisions of "the Act" the Rules framed there under are not applicable to theCompany at present.
vi. The maintenance of cost records has not been specified by the Central Governmentunder section 148(1) of the Companies Act 2013 for the business activities carried out bythe Company. Thus reporting under clause 3(vi) of the order is not applicable to theCompany.
vii. According to the information and explanations given to us in respect of statutorydues:
(a) The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employees State Insurance Income Tax Goods and ServiceTax Customs Duty Cess and other material statutory dues applicable to it with theappropriate authorities.
(b) There were no undisputed amounts payable in respect of Provident FundEmployees State Insurance Income Tax Goods and Service Tax Customs Duty Cess andother material statutory dues in arrears as at March 31 2019 for a period of more thansix months from the date they became payable.
(c) Details of dues of Income Tax Sales Tax Service Tax Excise Duty and Value AddedTax which have not been deposited as at March 31 2019 on account of dispute are givenbelow:
(i) In respect of Income tax Service tax and Custom duty matters:
|Name of the Statute ||Nature of dispute ||Disputed demand in Rs in millions ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Regular Assessment ||556.43 ||2002-2006 ||High court of Madras |
|Income Tax Act 1961 ||Regular Assessment ||97.48 ||2008-2009 ||Commissioner of Income Tax |
|Income Tax Act 1961 ||Regular Assessment ||396.17 ||2006-2008 ||Commissioner of Income Tax |
|Income Tax Act 1961 ||Regular Assessment ||418.38 ||2008-2009 ||High court of Madras |
|Income Tax Act 1961 ||Regular Assessment ||812.00 ||2009-2010 ||High court of Madras |
|Income Tax Act 1961 ||Regular Assessment ||702.40 ||2009-2010 ||Commissioner of Income Tax |
|Income Tax Act 1961 ||Regular Assessment ||1907.93 ||2010-2011 ||High court of Madras |
|Income Tax Act 1961 ||Regular Assessment ||298.88 ||2010-2011 ||Commissioner of Income Tax |
|Income Tax Act 1961 ||Regular Assessment ||854.33 ||2011-2012 ||High court of Madras |
|Income Tax Act 1961 ||Regular Assessment ||108.12 ||2013-2014 ||Income Tax Appellate Tribunal Chennai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||17.36 ||2007 ||Supreme Court |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||78.72 ||2011 ||CESTAT Chennai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||18.94 ||2011-2012 ||CESTAT Chennai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||36.78 ||2012-2014 ||CESTAT Chennai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||79.80 ||2014-2015 ||CESTAT Chennai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||37.31 ||2005-2011 ||CESTAT Chennai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||236.49 ||2012-2014 ||CESTAT Chennai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||0.79 ||2014-2015 ||CESTAT Chennai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||0.60 ||2015-2016 ||CESTAT Chennai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||605.75 ||2008-2010 ||CESTAT Mumbai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||166.89 ||2009-2012 ||CESTAT Mumbai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||1.54 ||2013-2015 ||CESTAT Mumbai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||0.23 ||2015-2016 ||CESTAT Mumbai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||0.57 ||2016-2017 ||CESTAT Mumbai |
|Finance Act 1994 (Service Tax dues) ||Regular Assessment ||46.01 ||2015-2017 ||CESTAT Mumbai |
|Customs Act 1962 ||Regular Assessment ||107.90 ||2015-2016 ||CESTAT Mumbai |
|Customs Act 1962 ||Regular Assessment ||916.00 ||2016-2017 ||Mumbai High Court |
|Sales Tax Act of various states ||Regular Assessment ||984.90 ||2010-2011 ||Tribunal |
|Sales Tax Act of various states ||Regular Assessment ||459.75 ||2012-2013 ||Tribunal |
|Sales Tax Act of various states ||Regular Assessment ||587.29 ||2013-2014 ||Appellate Authority |
|Sales Tax Act of various states ||Regular Assessment ||667.03 ||2014-2015 ||Company is intending to prefer an appeal with the Appellate Authority |
(ii) In respect of civil suits against the company Rs. 115.27 Millions
viii. Based on our audit procedures and according to the information and explanationsgiven to us we have noted default in repayment of term loan installments and payment ofinterest to banks during the year. The unpaid overdue loan installments and interest as at31st March 2019 are as given below:
|Name of the Lender ||Amount of default including interest payable as at the Balance Sheet Date In INR Million ||Period of Default |
|Punjab National Bank ||3694.11 ||April 2017 to March 2019 |
|Central Bank of India ||1580.78 ||June 2017 to March2019 |
|IndusInd Bank ||221.08 ||May 2017 to March2019 |
The banks have issued notices recalling the dues. As such the company hasclassifiedthese dues from Non-current Liability to current liability during theyear refer note no 8(a)
The Company has no dues to Government during the year and has no dues to financialinstitutions and does not have any debentures
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 3 (ix)of the Order is not applicable to the Company.
x. To the best of our knowledge and according to the information and explanations givento us no fraud by the Company or no material fraud on the Company by its officers oremployees has been noticed or reporteduring the year.
xi. In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to two of its directors during the yearis in excess of the remuneration payable as per provisions of section 197 of "theAct"-refer note 30 to Standalone financial statements.
xii. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of theOrder is not applicable to the Company.
xiii. In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.
xiv. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 3 (xiv) of the Order is not applicable to the Company.
xv. In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsDirectors or persons connected to its directors and hence provisions of section 192 of"the Act" are not applicable to the Company.
xvi. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act1934.
For P. Murali & Co.
Firm Registration No: 007257S
P. Murali Mohana Rao
ANNEXURE "B" TO THE INDEPENDENT AUDITORS REPORT
(Referred to in paragraph 1(f) under Report on Other Legal and RegulatoryRequirements section of our report to the Members of ABAN OFFSHORE LIMITED of evendate)
Report on the Internal Financial Controls over Financial Reporting under Clause
(i)of Sub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of ABANOFFSHORE LIMITED("the Company") as of March 31 2019 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
Managements Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that wereoperatingeffectivelyfor ensuring the orderly and efficientconduct of its business including adherence to respective companys policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act2013.
Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section143(10)of the CompaniesAct2013to the extent applicable to an audit of internal financial 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 and operating Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion on the internal financial controls system over financialreporting of the Company.
Meaning of Internal Financial Controls over Financial Reporting
A companys internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A companys internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance e of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2)provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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 thecompanys assets that could have a material effect on the financial statements.
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 internalfinancialcontrols 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 to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating over financial reporting criteria established by the Companyconsidering the effectively essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India.
For P. Murali & Co.
Firm Registration No: 007257S
P. Murali Mohana Rao