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Arcotech Ltd.

BSE: 532914 Sector: Metals & Mining
NSE: ARCOTECH ISIN Code: INE574I01035
BSE 00:00 | 30 Aug Arcotech Ltd
NSE 05:30 | 01 Jan Arcotech Ltd
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VOLUME 59268
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Arcotech Ltd. (ARCOTECH) - Auditors Report

Company auditors report

To the Members of Arcotech Limited

Report on the Audit of the Ind AS Financial Statements

Qualified Opinion

We have audited the accompanying Ind AS financial statements ofArcotech Limited ("the Company") which comprise the Balance sheet as at March31 2022 the Statement of Profit and Loss including the statement of Other ComprehensiveIncome the Cash Flow Statement and the Statement of Changes in Equity for the year thenended and notes to the financial statements including a summary of significantaccounting policies and other explanatory information.

In our opinion and to the best of our information and according to theexplanations given to us except for the effects of the matter described in the Basis forQualified Opinion section of our report the aforesaid financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India including Indian Accounting Standards ("Ind AS")prescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules as amended and other accounting principles generally accepted in Indiaof the state of affairs (financial position) of the Company as at 31 March 2022 and itsloss (financial performance including other comprehensive income) the changes in equityand it cash flows for the year ended on that date.

Basis for Qualified Opinion

The restructuring of the company?s business is under considerationby the lenders. Consequent to the filing of restructuring proposal with lenders feasibleTEV (techno economic viability) study/reports of the operations of the Company wasconducted by outside agency where in certain reliefs/ concessions have been envisaged tomake the project viable. Included in there is relief in interest rates effective from01.11.2018. The company has provided interest at the rates mentioned in TEV. This alongwith other unprovided interest amounts to Rs. 2517.39 lakhs (net of tax) for the currentfinancial year.

Emphasis of Matter

The Company has incurred net loss after tax of Rs 6008.92 lacs duringthe financial year ended March 31 2022(Previous year net loss after tax of Rs 2652.44lacs). The turnover of Company during the the financial year ended March 31 2022 is Rs8559.40 lacs (Previous year Rs 5315.60 lacs). The current liabilities exceed currentassets. Had the company provided for the interest as mentioned in Basis for QualifiedOpinion above the net loss would have increased.

The restructuring of the Company?s business is under considerationby the lenders. However certain lenders of the company have filed applications/issuednotices including in NCLT DRT and SARFAESI. In view of the management?s expectationof successful outcome of above proposal and revival of its business the financialstatements have been prepared on going concern basis. However in view of aboveuncertainties we are unable to comment on the ability of the company to continue as a"going concern" and the consequential adjustments to the accompanying financialstatements if any that might have been necessary had the financial statements beenprepared under liquidation basis.

Our opinion is not modified in respect of this matter.

The Company is recognizing deferred tax assets on losses. The mattersdiscussed above relating to going concern creates doubt and uncertainty relating torecoverability of deferred tax assets. On the basis of our review as elaborated in keyaudit matters and as per explanation given to us and according to management assessmentCompany will be in position to generate future profits against which these losses will besetoff.

Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. We have determined the matters described below to be the key audit mattersto be communicated in our report:

S.No. Key Audit Matter Auditor?s Response
1. Material Uncertainty related to Goins Conccern Principal Audit Procedures
The Company has incurred a net loss after tax of Rs 6008.92 lacs during the financial year ended 31 March 2022 (Previous Year loss of Rs 2652.44 lacs). The turnover of Company during the financial year ended 31 March 2022 is Rs 8559.40. lacs (Previous Year Rs 5315.60 lacs). The current liabilities exceed current assets. Had the company provided for the interest as discussed in Basis for Qualified Opinion above the net loss would have increased. The restructuring of the Company?s business is under consideration by the lenders. However certain lenders of the company have filed applications/issued notices including in NCLT DRT and SARFAESI. In view of the management?s expectation of successful outcome of above proposal and revival of its business the financial statements have been prepared on going concern basis. However in view of above uncertainties we are unable to comment on the ability of the company to continue as a "going concern" and the consequential adjustments to the accompanying financial statements if any that might have been necessary had the financial statements been prepared under liquidation basis.
Refer Note 43 of the Financial Statements as on March 31 2022
2 Impairment of property plant and equipment Carrying value of property plant and equipment as on 31 March 2022 is Rs. 15928.61 lacs as disclosed in Note: 2 represent significant balances recorded in the financial statement. The evaluation of the recoverable amount of these assets requires significant judgement in determining the key assumptions supporting the expected future cash flows of the business and the utilization of the relevant assets. Our audit procedures to assess the carrying value of PPE and related assets included the following:
Refer Note 2 of the Financial Statements as on 31.03.2022. . In conjunction with valuation reports of PPE and techno economic viability report of third party specialists given by the company we assessed and verified:
• The estimated useful lives and residual values of PPE and related assets with reference to the company?s historical experience and future operating plans and retirement of PPE policies adopted by valuation reports and techno economic viability report given by third party specialists;
• Discussing indicators of possible impairment of PPE and related assets with management of the company and where such indications were identified assessing whether management had performed impairment testing in accordance with the requirements of the prevailing Indian accounting standards;
•We also performed sensitivity analysis on recoverable amount for impairment testing and found that recoverable amount is higher than carrying amount of PPE.
3. Judgment in valuation of deferred income tax positions Our audit procedures included amongst others using techno economic viability report of third party specialists given by the management to assist us in evaluating the assumptions and methodologies used for the recoverability of deferred tax assets related to operations of the company by reviewing their future profitability management?s forecasts and local fiscal developments. We also focused on the adequacy of the Company?s disclosures on deferred income tax positions and assumptions used. We also discussed with the senior management and evaluate the discussions with them about the future expected cash flows and expected future market complexity or economic conditions . The Company?s disclosures concerning income taxes are included in note given as per the financial statements.
The company has recognised deferred income tax assets and deferred income tax liabilities of Rs. 13202.02 lacs and Rs 3265.59 lacs respectively as at 31.03.2022. The net deferred tax assets in the balance sheet as at 31.03.2022 is Rs. 9936.42 lacs. Under Ind-AS12 the Company is required to measure annually deferred tax position. This area was significant to our audit because of the related complexity and subjectivity of the assessment process which is based on assumptions taken by the management that are affected by expected future cash flows & expected future market or economic conditions. The Company is still recognizing deferred tax assets on losses. The matters discussed in para 1 of key audit matters creates doubt and uncertainty relating to recoverability of deferred tax assets. As per explanation given to us and according to management assessment Company will be in position to generate future profits against which these losses will be setoff.
Refer Note 16 of the Financial Statements as on 31.03.2022.
4. Evaluation of uncertain tax positions The Company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. Principal Audit Procedures Obtained details of completed tax assessments and demands at the year ended March 31 2022 from management. We involved our team to verify the management?s underlying assumptions in estimating the tax provision and the possible outcome of the disputes. Our team also considered legal precedence and other rulings in evaluating management?s position on these uncertain tax positions. Additionally we considered the effect of new information in respect of uncertain tax positions as at April 1 2021 to evaluate whether any change was required to management?s position on these uncertainties.
Refer Note 33 of the Financial Statements as on 31.03.2022.

Other Information

The Company?s Board of Directors is responsible for the otherinformation. The other information comprises the Directors Report but does not includethe Ind AS financial statements and our auditor?s report thereon.

Our opinion on the Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact.When we will read thedirector?s report if we conclude that there is a material misstatement therein weare required to communicate the matter to those charged with governance and if the otherinformation is not corrected after communicating with those charged with governance seekto have the uncorrected material misstatement appropriately brought to the attention ofusers for whom the audit report is prepared.

Responsibilities of Management for the Ind AS Financial Statements

The Company?s Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these Ind ASfinancial statements that give a true and fair view of the financial position financialperformance including other comprehensive income cash flows and changes in equity of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) specified under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; andthe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Ind AS financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud or error.

In preparing the Ind AS financial statements management is responsiblefor assessing the Company?s 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 theCompany?s financial reporting process.

Auditor?s Responsibilities for the Audit of the Ind AS FinancialStatements

Our objectives are to obtain reasonable assurance about whether the IndAS financial statements as a whole are free from material misstatement whether due tofraud or error and to issue an auditor?s report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these Ind AS financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of theInd AS financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls system in place and theoperating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management?s use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company?s ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor?sreport to the related disclosures in the financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor?s report. However future events or conditionsmay cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of theInd AS financial statements including the disclosures and whether the Ind AS financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor?s report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor?s Report) Order 2020("the Order") issued by the Central Government of India in terms of sub-section(11) of section 143 of the Act we give in "Annexure A" a statement 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 obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;

(b) In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books.

(c) The Balance Sheet the Statement of Profit and Loss including theStatement of Other Comprehensive Income the Cash Flow Statement and Statement of Changesin Equity dealt with by this Report are in agreement with the books of account.

(d) In our opinion the aforesaid Ind AS financial statements complywith the Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended .

(e) On the basis of the written representations received from thedirectors as on March 31 2022 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2022 from being appointed as a director in termsof Section 164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controlsover financial reporting of the Company with reference to these Ind AS financialstatements and the operating effectiveness of such controls refer to our separate Reportin "Annexure B" to this report;

(g) In our opinion the managerial remuneration for the year endedMarch 31 2022 has been paid / provided by the Company to its directors in accordance withthe provisions of section 197 read with Schedule V to the Act;

(h) With respect to the other matters to be included in theAuditor?s Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 as amended in our opinion and to the best of our information and according tothe explanations given to us:

i. The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements- Refer Note 33 to the financial statements.

ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses.

iii. There has been delay in transferring Rs 2.49 lacs required to betransferred to the Investor Education and Protection Fund by the Company.

iv. (a) The Management has represented that to the best of it?sknowledge and belief no funds have been advanced or loaned or invested (either fromborrowed funds or share premium or any other sources or kind of funds) by the Company toor in any other person or entity including foreign entity ("Intermediaries")with the understanding whether recorded in writing or otherwise that the Intermediaryshall directly or indirectly lend or invest in other persons or entities identified inany manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries")or provide any guarantee security or the like on behalf of the Ultimate Beneficiaries.

(b) The Management has represented that to the best of it?sknowledge and belief no funds have been received by the Company from any person orentity including foreign entity ("Funding Parties") with the understandingwhether recorded in writing or otherwise that the Company shall directly or indirectlylend or invest in other persons or entities identified in any manner whatsoever by or onbehalf of the Funding Party ("Ultimate Beneficiaries") or provide any guaranteesecurity or the like on behalf of the Ultimate Beneficiaries

(c) Based on the audit procedures performed that have been consideredreasonable and appropriate in the circumstances nothing has come to our notice that hascaused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e)as provided under (a) & (b) above contain any material mis-statement.

v. The Company has not declared or paid any dividend during the year.

Annexure ?1? to the Auditor?s Report on the accounts ofArcotech Limited for the year ended March 31 2022 as required by the Companies(Auditor?s Report) Order 2020 ("the Order") issued by the CentralGovernment of India in terms of sub-section (11) of section 143 of the Companies Act 2013

i. (a)(A) The company has maintained proper records showing fullparticulars including quantitative details and situation of Property Plant andEquipment.

(a) (B) The company does not have any intangible assets. Consequentlyclause i(a)(B) of paragraph 3 of the order is not applicable to the company.

(b) The company has during the year initiated a program of physicalverification of Property Plant and

Equipment so as to cover all the assets once in every three yearswhich in our opinion is reasonable having regard to the size of the company and nature ofits assets. According to the information and explanations given to us no materialdiscrepancies were noticed on such verification.

(c) The title deeds of all immovable properties (other than propertieswhere the company is the lessee and lease agreements are duly executed in favour of thelessee) disclosed in the financial statements are held in the name of the company.

(d) The Company has not revalued its Property Plant and Equipmentduring the year.

(e) According to the information and explanations given to us andrecords of the company no proceedings have been initiated or are pending against thecompany for holding any benami property under the Benami Transactions (Prohibition) Act1988 and rules made thereunder.

ii. (a) Physical verification of inventory has been conducted by themanagement at reasonable intervals. In our opinion the coverage and procedure of suchverification is appropriate. No discrepancies of 10% or more in aggregate for each classof inventory have been noticed.

(b) The company has been sanctioned working capital limits in excess offive crore rupees in aggregate from banks or financial institutions on the basis ofsecurity of current assets. The company has filed statement for the month of September2021 with such banks or financial institutions . In respect of stocks the said statementcannot be checked as the company is unable to provide the relevant records. The otherinformation contained therein are in agreement with the books of account of the company.

iii. According to the information and explanations given to us andrecords the company has not during the year made any investments in provided anyguarantee or security or granted any loans or advances in the nature of loans secured orunsecured to companies firms limited liability partnerships or any other parties.Consequently clauses (iii)(a) (iii)(b) (iii)(c) (iii)(d) (iii)(e) and (iii)(f) ofparagraph 3 of the order are not applicable.

iv. According to the information and explanation given to us inrespect of loans granted investments made and guarantees and securities providedwherever applicable the provisions of section 185 and 186 of the Companies Act 2013 havebeen complied with by the company.

v. The company according to records and information and explanationsgiven to us has not accepted deposits or amounts which are deemed to be deposits as perdirection issued by the Reserve Bank of India and the provisions of sections 73 to 76 orany other relevant provisions of the Companies Act 2013and the rules framed there under.Consequently clause (v) of paragraph 3 of the order is not applicable.

vi. According to the records & information and explanation given tous the company is required to maintain cost records specified by the Central Govt. undersub section (1) of section 148 of the Companies Act 2013. However we unable to reviewthe cost records due to the inability of the company to provide the records.

vii. (a) According to the records & information and explanationgiven to us the company has been irregular in depositing undisputed statutory duesincluding goods & services tax provident fund employee?s state insuranceincome tax sale tax service tax duty of customs duty of excise value added tax cessand any other statutory dues with the appropriate authorities. There are no arrears ofundisputed statutory dues as at March 31 2022 which were outstanding for a period of morethan six months from the date they became payable except income tax and other statutorydues amounting to Rs. 1209.07 lacs & Rs. 41.21 lacs respectively as at the March 312022.

(b) According to the records and the information and explanations givento us the company has following disputed dues as on March 31 2022 in respect of goods& services tax provident fund employee?s state insurance income tax salestax service tax duty of customs duty of excise value added tax cess and any otherstatutory dues:

s Nature of dues Amount (Rs. in Lacs) Period to which amount relates Forum where dispute is pending
Income Tax Act1961 Income Tax Demand 547.01 AY 2012-13 CIT (Appeals) New Delhi
Income Tax Act1961 Income Tax Demand 519.58 AY 2013-14 CIT (Appeals) New Delhi
Income Tax Act1961 Income Tax Demand 535.78 AY 2014-15 CIT (Appeals) New Delhi
Income Tax Act1961 Income Tax Demand 590.91 AY 2015-16 ITAT New Delhi
Income Tax Act1961 Income Tax Demand 304.95 AY 2016-17 ITAT New Delhi
Income Tax Act1961 Income Tax Demand 2509.29 AY 2017-18 CIT (Appeals) New Delhi
Income Tax Act1961 Income Tax Demand 1.50 AY 2018-19 CIT (Appeals) New Delhi
Income Tax Act1961 Income Tax Demand 202.23 AY 2019-20 CIT (Appeals) New Delhi
Income Tax Act1961 Income Tax Demand 12.00 AY 2019-20 CIT (Appeals) New Delhi

viii. According to the records of the company and the information andexplanations given to us the company does not have any unrecorded transactions that havebeen surrendered or disclosed as income during the year in the tax assessments under theIncome Tax Act 1961. Consequently clause (viii) of paragraph 3 of the order is notapplicable.

ix. According to the information and explanations given to us and onthe basis of our audit procedures we report that the company:

(a) has defaulted in repayment of loans and interest thereon tofollowing lenders:

Nature of Borrowings Name of Lender Amount (Rs in Lacs) Nature Amount Period of delay (Up to date of audit report)
Term loan IFCI Limited 5920.78 Principal 1-1566 days
Term loan IFCI Limited 1671.00 Interest 1-1538 days
Term loan IFCI Venture Capital Fund Limited 975.70 Principal 1-1369 days
Term Loan IFCI Venture Capital Fund Limited 199.68 Interest 1-1339 days
Working Capital Bank of India 3950.74 Principal including interest 1-1306 days
Working Capital Canara Bank 7959.95 Principal including interest 1-1306 days
Working Capital Central Bank of India 10354.36 Principal including interest 1-1306 days
Working Capital Punjab National Bank 17417.15 Principal including interest 1-1306 days

(b) is not a declared willful defaulter by any bank or financialinstitution or other lender.

(c) has not taken any term loans during the year.

(d) has no funds raised on short term basis that have been used forlong term purposes.

(e) has not taken any funds from any entity or person on account of orto meet the obligations of its subsidiaries associates or joint ventures.

(f) has not raised loans during the year on the pledge of securitiesheld in its subsidiaries joint ventures or associate companies.

x. According to the records of the company and the information andexplanations given to us the company has not raised moneys by way of initial public offeror further public offer (including debt instruments) during the year and has not made anypreferential allotment or private placement of shares or convertible debentures (fullypartially or optionally convertible) during the year. Consequently clauses (x)(a) and(x)(b) of paragraph 3 of the order are not applicable.

xi. During the course of our examination of the books and records ofthe company carried out in accordance with the generally accepted auditing practices inIndia we have neither come across any instance of fraud on or by the company noticed orreported during the year.

No report under sub section (12) of section 143 of the Companies Act2013 has been filed in Form ADT-4 as prescribed under Rule 13 of Companies (Audit andAuditors) Rules2013 with the Central Government during the year and upto the date of thisreport.

We have considered whistle blower complaints if any received duringthe year and upto the date of this report.

xii. The company is not a Nidhi Company. Consequently clause (xii) ofparagraph 3 of the order is not applicable.

xiii. According to the records of the company and the information andexplanations given to us all transactions with related parties during the year are incompliance with the provisions of section 177 and 188 of the Companies Act 2013 whereapplicable and the details have been disclosed in the financial statements as required bythe applicable accounting standards.

xiv. In our opinion and based on our examination the company has aninternal audit system commensurate with the size and nature of its business.

We have considered the internal audit reports of the company issuedtill date for the period under audit.

xv. According to the records of the company and the information andexplanations given to us the company has not entered into any non-cash transactions withits directors or persons connected with them. Consequently clause (xv) of paragraph 3 ofthe order is not applicable.

xvi. According to the records of the company and the information andexplanations given to us the company is not required to be registered under section 45IAof the Reserve Bank of India Act 1934. The company has not conducted any Non Bankingfinancial of Housing Finance activities and the company is not a Core Investment Company(CIC) as defined in the regulation made by Reserve Bank of India. The group does not havemore than one core investment company. Consequently clauses (xvi)(a) (xvi)(b) (xvi)(c)and (xvi)(d) of paragraph 3 of the order are not applicable.

xvii. The company has incurred cash losses during the current financialyear and in the immediately preceding financial year of Rs.8005.93 lacs and Rs 6404.11lacs respectively after taking into account the effect of qualifications.

xviii. During the year there has been no resignation of the statutoryauditors of the company.

xix. According to the information and explanations given to us and onthe basis of the financial ratios ageing and expected dates of realization of financialassets and payment of financial liabilities other information accompanying the financialstatements our knowledge of the Board of Directors and management plans and based on ourexamination of the evidence supporting the assumptions there exist material uncertaintyas on the date of the audit report of the company being capable of meeting its liabilitiesexisting at the date of balance sheet as and when they fall due within a period of oneyear from the balance sheet date.

xx. (a) According to the information and explanations given to us thecompany does not have any amount remaining unspent in respect of other than ongoingprojects. Consequently clause (xx)(a) of paragraph 3 of the order is not applicable.

(b) The company does not have any ongoing projects. Consequentlyclause (xx)(b) of paragraph 3 of the order is not applicable .

xxi. This clause of the order is applicable to consolidated financialstatements. The audit report under reference is on the standalone financial statements ofthe company. Consequently clause (xxi) of paragraph 3 of the order is not applicable tothe company.

ANNEXURE ‘B? TO THE INDEPENDENT AUDITOR?S REPORT OF EVENDATE ON THE FINANCIAL STATEMENTS OF ARCOTECH LIMITED

Report on the Internal Financial Controls under Clause (i) ofSub-Section 3 of Section 143 of the Companies Act 2013("the Act")

We have audited the internal financial controls over financialreporting of Arcotech Limited ("the Company") as of March 31 2022 inconjunction with our audit of the Ind AS financial statements of the Company for the yearended on that date.

Management?s Responsibility for Internal Financial Controls

The Company?s management is responsible for establishing andmaintaining internal financial controls based on the Internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company?s policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditor?s Responsibility

Our responsibility is to express an opinion on the Company?sinternal financial controls over financial reporting based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143 (10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls both applicable to anaudit of internal financial controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operate effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportinginclude obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor?s judgment including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company?s internalfinancial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company?s internal financial control over financial reporting isa process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Ind AS financial statements for external purposes inaccordance with generally accepted accounting principles. A company?s internalfinancial control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation ofInd AS financial statements in accordance with generally accepted accounting principlesand that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the company?s assets that could have a material effect on the Ind ASfinancial statements.

Inherent Limitations of Internal Financial Controls Over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 31 2022 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of internal Financial Controls over Financial Reporting issued by the Institute ofChartered Accountants of India.

For Amit Joshi & Associates
Chartered Accountants
FRN : 004898N
Sd
Amit Joshi
(Partner)
M. No. 083617
Date: 30th May 2022
UDIN: 22083617AJXRKG8650

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