To The Members of Binani Industries Limited
Report on the Standalone Ind AS Financial Statements
We were engaged to audit the accompanying standalone Ind AS financial statements ofBinani Industries Limited (the Company) which comprise the Balance Sheet asat 31st March 2018 the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Cash Flow and the Statement of Changes in Equity for the yearthen ended and a summary of significant accounting policies and other explanatoryinformation.
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 Companies Act 2013 (the Act) with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of the stateof affairs (financial position) profit or loss (financial performance including othercomprehensive income) cash flows and changes in equity of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) prescribed under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 and the Companies (Indian Accounting Standards) Rules2015 as amended and the accounting principles generally accepted in India.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing 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 standalone IndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
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 which are 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 Auditing specified Act. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the standalone Ind AS financial statements are free from material misstatement. Anaudit involves performing procedures to obtain audit evidence about the amounts and thedisclosures in the standalone Ind AS financial statements. The procedures selected dependon the auditor's judgment including the assessment of the risks of material misstatementof the standalone Ind AS financial statements whether due to fraud or error. In makingthoseriskassessmentstheauditorconsidersinternalfinancialcontrol relevant to the Company'spreparation of the standalone Ind AS financial statements that give a true and faircircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the standalone Ind ASfinancial statements.
We believe that the audit evidence we have obtained is not sufficient and appropriateto provide a basis for our audit opinion on the Statement and hence we have issued thisdisclaimer of opinion.
Basis for Disclaimer of Opinion:
a. The Company has not adjusted its Foreign Currency (FC) loan payable for matterscommunicated to it by its lenders which includes designation of FC loan to INR denominatedloan along with a higher coupon rate. Further the lender has demanded repayment of alloutstanding loan amount including interest and penalty interest immediately and has alsoinvoked the Corporate Guarantee issued by the company's subsidiary i.e. Binani CementLimited (BCL). However the Company has continued accounting of the said loan as FC loanwith the then coupon rate and recognized exchange fluctuation / loss in the Statement ofProfit and Loss which is ultimately offset with transfer from / to BusinessRe-organisation Reserve (BRR). The said accounting treatment by the Company is not inaccordance with the revised loan terms and also not in compliance with Ind AS 37 -Provision Contingent Liability and Contingent Assets and Ind AS 1 - Presentationof Financial Statement. Had the Company followed the provisions of Ind AS 37 and IndAS 1 Current liability Business Reorganisation Reserve and ForeignCurrency Monetary Item Translation (FCMIT) would have been higher/ (lower) by Rs7636.56 lakhs Rs (9715.06) lakhs and Rs 2078.50 lakhs as on March 31 2018respectively. Further other expenses (exchange gain/loss)' finance cost' andTransfer from Business Reorganisation Reserve' would have been higher/(lower) by Rs(635.30) lakhs Rs 10350.36 lakhs and Rs 9715.06 lakhs respectively for the year endedMarch 31 2018. (Refer footnote (a)(iii) of 19 to the standalone Financial Statements).
b. The Company has not determined fair value of its investments in Binani CementLimited (BCL) and impairment of loans and advances security deposits and trade receivabledue from BCL and Edayar Zinc Limited (EZL) as required by Ind AS 109 - FinancialInstruments on account of ongoing corporate insolvency resolution process at BCL andpending outcome thereof and financial instability of EZL. In this regard we are unable tocomment on the carrying value of these investments amounting to Rs 341360 lakhs (PY: Rs341240 lakhs) recoverability of loans and advances of Rs 1252.41 lakhs (PY: Rs1073.60) Security Deposits of Rs100 lakhs (PY: Rs 100 lakhs) and trade receivable of Rs1362.10 lakhs (PY: Rs 2962.71 lakhs) as at March 31 2018 and its consequential impactif any on the financial statements of the Company (Refer Note 45 (b) and 48 to thestandalone Financial Statements)
c. The Company has given corporate guarantees aggregating to Rs 590247 lakhs to banksand financial institutions on behalf of various subsidiaries. This includes corporateguarantee of Rs 379792 lakhs on behalf of Binani Cements Ltd which is undergoingcorporate insolvency resolution process under Insolvency and Bankruptcy Code 2016. TheCompany has not determined the loss allowances in respect of corporate guarantee issued byit as required by Ind AS 109 - Financial Instruments on account of ongoingcorporate insolvency resolution process at BCL and pending outcome thereof. In thisregard we are unable to comment on the consequential impact if any on the financialstatements of the Company (Refer note 36(II) to the Financial Statements)
d. statements for the year ended March 31 2018 as required underTheCompanyhasnotpreparedandpresentedtheConsolidated Ind AS financial section 129 (3) ofthe Companies Act 2013 for the reasons as stated in note 45(a) to the statement. In thisregard we are unable to comment on the consequential impact if any of thenon-compliance on the financial statements of the Company. (Refer note 45(a) to thestandalone Financial Statements)
e. The management has represented to us that they are unaware of any matterinvestigation or allegation open or close involving the Company management of theCompany promotors or other group companies which requires adjustment/disclosure in thefinancial statements of the We are unable to comment on the completeness/correctness ofthe above referred details in the absence of all the required information. (Refer note45(c) to the standalone Financial Statements).
f. We draw attention to the following matters:
1. Note 40 and 41 read with note 2 (13)(a) of the standalone Financial Statements whichstates that pursuant to a separate Scheme of Amalgamation approved by the Hon'ble HighCourt at Calcutta between Wada Industrial Estate Limited (WlEL) and a step down whollyowned subsidiary of the Company being the Company as a successor to WIEL the Company hasapplied AS 30 the Accounting Standard on Financial Instruments: Recognition andMeasurement issued by the Institute of Chartered Accountants of India (ICAI). All equityinvestment including investment in Subsidiaries are categorized as available for sale andmeasured at fair value and corresponding increase on account of fair valuation wascredited to Business Reorganization Reserve (BRR) since March 31 2014. Duringthe year ICAI has withdrawn AS 30. Consequent to this the Company backed by legalopinion has applied principles of notified Ind AS related to Financial Instruments beingnew accounting standards applicable instead of AS 30. All equity investment includinginvestment in Subsidiaries except Investment in Binani Cements Limited are designated asfair value through profit & loss. However to give effect to the accounting policiesapplicable to WIEL and to the Company as a successor to WIEL being accounting policiesadopted as per the Scheme of Amalgamation approved by the Hon'ble High Court at Calcuttathe said treatment has been given BRR. The net increase in restated fair value credited toBRR of Rs 7847.49 lakhs (March 31 2017 decrease Rs 678.07 lakhs). Further inaccordance with the said scheme the Company has offset certain expenses (net) amountingto 5353.17 Lakhs against BRR during year ended March 31 2018.
2. Note 43 of the standalone Financial Statements which states that one of thecreditors of the Company had filed a winding up petition on November 19 2016 against theCompany with the Hon'ble High Court of Calcutta which has been admitted by the court onSeptember 20 2017. The Company is seeking recall of the order. The Company has enteredinto a settlement with such creditor by agreeing to pay its entire dues along withinterest.
3. Note 44 of the standalone Financial Statements where in the management hasexplained the reason for reduction in the operations of the Company with Binani CementLimited (one of the subsidiary of the Company).
Disclaimer of Opinion
Because of the significance of the matters described in the Basis for Disclaimer ofOpinion paragraph we have not been able to obtain sufficient audit evidence to provide abasis for an audit opinion. Accordingly we do not express an opinion on the StandaloneInd AS financial statements.
Material uncertainty related to Going Concern
Management has prepared the Standalone Ind AS Financial Statements on going concernbasis in spite of the following facts and circumstances:
1) The Company has reported comprehensive losses ofRs (499) lakhs for the year endedMarch 31 2018.
2) The guarantees issued by the Company on behalf of subsidiaries are significant inrelation to the net worth of the Company as at March 31 2018.
3) The constant decrease in the operations of the Company.
The management is working towards finding a workable solution to resolve the financialposition by discussion with the lenders and others and to continue its business as goingconcern. Accordingly the management considers it appropriate to prepare these financialstatements on a going concern basis. (Refer note 46 to the standalone FinancialStatements) This situation indicates the existence of a material uncertainty that may castsignificant doubt on the Company's ability to continue as a going concern and thereforethe Company may unable to realise its assets and discharge its liabilities in the normalcourse of business.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143 (3) of the Act we report that:
(a) As described in the Basis for Disclaimer of Opinion paragraph we have sought butwere unable to obtain all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit.
(b) Due to the effect of matter described in para (a) and possible effects of thematters described in para (b) (c) (d) (e) and (f) in the Basis for Disclaimer of Opinionparagraph we are unable to state whether proper books of accounts 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 Other ComprehensiveIncome) the Statement of Cash Flow and the Statement of Changes in Equity dealt with bythis Report are in agreement with the books of account as maintained.
(d) Due to the effect of matter described in para (a) and possible effects of thematters described in para (b) (c) (d) (e) and (f) in the Basis for Disclaimer of Opinionparagraph we are unable to state whether the aforesaid standalone Ind AS financialstatements comply with the Accounting Standards specified under Section133 Compan oftheActread with Rule7 ofthe ies (Accounts) Rules 2014.
(e) The matters described in the basis of disclaimer of opinion paragraph and in themodified report on Internal Financial Controls over financial reporting (Annexure A) inour opinion may have an adverse effect on the functioning of the Company.
(f) On the basis of the written representations received from the directors as on 31stMarch 2018 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2018 from being appointed as a director in terms of Section164 (2) of the Act.
(g) The reservation relating to the maintenance of accounts and other matters connectedtherewith are as stated in the basis of disclaimer of opinion paragraph above.
(h) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate modified report in Annexure A'
(i) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. In the view of the matter stated in para
(e) in the basis of disclaimer of opinion paragraph we are unable to state whetherNote 36 to the standalone Ind AS financial statements disclose the complete impact ofpending litigations on its financial position in its standalone Ind AS financialstatements (refer note 36 in its standalone Ind AS financial statements)
ii. The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses. iii. There has been no delay intransferring amounts required to be transferred to the Investor Education and ProtectionFund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 (the Order)issued by the Central Government in terms of sub-section 11 of section 143 of the Act wegive in the Annexure B' a statement on the matters specified in paragraphs 3 and 4of the Order.
ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE IND ASFINANCIAL STATEMENTS OF BINANI INDUSTRIES LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting of BinaniIndustries Limited (the Company) as of 31 st March 2018 in conjunction withour audit of the standalone Ind AS financial statements of the Company for the year endedon that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI) (the GuidanceNote). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to Company's policiesthe safeguarding 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 Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit conducted in accordance with theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (theGuidance Note) and the Standards on Auditing issued by ICAI and deemed to beprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that 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 reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our adverse audit opinion on the Company's internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A Company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A Company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures 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 thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
Basis for Adverse opinion
As described in basis of disclaimer opinion paragraph of our main report the Companyhas not established adequate internal financial controls with respect to matters statedtherein and that whatever financial controls have been established were not operatingeffectively. While reference may be made to the aforesaid Paragraph the followingsignificant aspects of material weaknesses in internal control system are particularlynoteworthy: (a) Non-compliance of the requirements of Companies Act 2013 andSecurity and Exchange Board of India (Listing Obligation and Disclosure Requirements)Regulation 2015 with regard to preparation of Consolidated Financial Statements andConsolidated Financial results for the year ended March 31 2018. (Refer note no 45(a) tothe standalone financial statement)
(b) Deficiencies in maintenance of books of accounts and documentation for stand takenby the management for items described in Basis for disclaimer of opinion paragraph (a) to(e) of our main report.
(c) Deficiencies in non-assessment of impact of Indian Accounting Standards (Ind AS)for items described in Basis for disclaimer of opinion paragraph (a) to (c) of our mainreport. A material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such possibility that a materialmisstatement of the company's financial statements will not be prevented or detected on
In our opinion because of the matters described in the basis of adverse opinionparagraph of main report and in view of possible effects of the material weaknessesdescribed above on the achievement of the objectives of the control criteria the Companyhas not maintained adequate internal financial controls over financial reporting and suchinternal financial controls over financial reporting were not operating effectively as ofMarch 31 2018 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note. We have considered the material weaknesses identified and reportedabove in determining the nature timing and extent of audit tests applied in our audit ofthe March 31 2018 Ind AS standalone financial statements of the Company and thesematerial weaknesses have inter-alia affected our opinion on the financial statements ofthe standalone we have issued a disclaimer of opinion on the Ind AS Standalone financialstatements. Company and
ANNEXURE B TO INDEPENDENT AUDITORS' REPORT
[Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements' in the Independent Auditors' Report of even date to the members of BinaniIndustries Limited (the Company') on the standalone Ind AS financial statementsfor the year ended March 31 2018]
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) All the fixed assets have not been physically verified by the management during theyear but there is a regular program of verification which in our opinion is reasonablehaving regard to the size of the company and the nature of its assets. No materialdiscrepancies were noticed on such verification.
(c) According to information and explanations given to us and based on our examinationof the records of the Company the title deeds of immovable properties are held in thename of the Company.
ii. According to the information and explanation provided to us by the managementCompany's business does not involve inventories and accordingly the requirements underparagraph 3 (ii) of the Order are not applicable to the Company.
iii. The Company has granted loans and advances secured or unsecured to 3 Companiescovered in the register maintained under section 189 of the Companies Act 2013.
(a) According to the information and explanations given to us and based on the auditprocedures conducted by us we are of the opinion that the terms and conditions of loansgranted by the company to 2 parties covered in the register maintained under section 189of the Act (total loan amount granted Rs24.48 lakhs and balance outstanding as at balancesheet date Rs 4.68 lakhs) are prejudicial to the company's interest on account of the factthat the loans have been granted at Nil rate of interest rate.
(b) In the case of the loans granted to the Companies listed in the register maintainedunder section 189 of the Act schedule of repayment of principal have not been stipulated.Hence clause (iii) (b) and (c) of the Order are not commented on.
iv. In our opinion and according to the information and explanation given to us duringthe year the Company had not given any loans or made investments to parties covered undersection 186 of the Companies Act 2013 hence the provisions stated in paragraph 3 (iv) ofthe Order are not applicable to the Company.
v. In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the meaning of Sections 7374 75 and 76 of the Act and the rules framed there under. vi. The provisions ofsub-section (1) of section 148 of the Act are not applicable to the Company as the CentralGovernment of India has not specified the maintenance of cost records for any of theproducts of the Company. Accordingly the provisions stated in paragraph 3 (vi) of theOrder are not applicable to the Company.
vii. (a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund employees' state insurance incometax sales tax good and service tax service tax duty of custom value added tax cessand other material statutory dues as applicable to it except for slight delay in fewcases. According to the information and explanations given to us no undisputed arrears ofstatutory dues were outstanding as at March 31 2018 for a period of more than six monthsfrom the date they became payable.
(b) According to the information and explanations given to us and examination ofrecords of the Company there are no dues of sales-tax custom duty service tax and valueadded tax which have not been deposited with the appropriate authorities on account ofany dispute expect in cases which is described below:
|Name of the Statute ||Nature of Dues ||Amount ( Rs In lacs) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax Matters ||0.49 ||FY 2002-03 ||A.O |
|Income Tax Act 1961 ||Income Tax Matters ||32.10 ||FY 2009-10 ||A.O. |
|Income Tax Act 1961 ||Income Tax Matters ||3017.25 ||FY 2006-07 ||High Court |
|Income Tax Act 1961 ||Income Tax Matters ||120.38 ||FY 2008-09 ||CIT(Appeals) |
|Income Tax Act 1961 ||Income Tax Matters ||164.56 ||FY 2009-10 ||CIT(Appeals) |
|Income Tax Act 1961 ||Income Tax Matters ||1837.03 ||FY 2011-12 ||CIT(Appeals) |
|Gujrat Value Added Tax 2003 ||Value Added Tax(VAT) ||146.73 ||FY 2013-14 ||A.O. |
viii. According to the records of the Company examined by us and information andexplanation given to us the Company has defaulted in repayment of dues to bank asfollows. The Company does not have any loans or borrowings from any financial institutiongovernment or debenture holders during the year. Also refer para (a) of the Basis forDisclaimer of Opinion paragraph of our main audit report.
|Particulars ||Principal Amount (in lacs) ||Interest Accrued (In lacs) ||Remark if any ||Period of default |
|Export Import Bank of India ||46556.43 ||21361.64 ||Term Loan ||23 months to 38 months |
ix. The Company has not obtained any moneys by way of initial public offer or furtherpublic offer (including debt instrument) and term loans were applied for the purpose forwhich those were raised during the year. x. Except for matter reported in para (e) of thebasis of disclaimer of opinion paragraph in our main audit report according to theinformation and explanation provided by the management and during the course of ourexamination of the books and records of the Company carried out in accordance with thegenerally accepted auditing practices in India and according to the information andexplanations given to us we have neither come across any instance of fraud by the Companyor any instance of fraud on the Company by its officers/employees has been noticed orreported during the year nor have we been informed of such case by the management. xi.Due to the effect and possible effects of the matters described in the Basis forDisclaimer of Opinion paragraph of our main report we are unable to state whether theremuneration paid to its directors is within the limits prescribed under Section 197 ofthe Act and the rules thereunder as required by The Companies (Amendment) Act 2017.
xii. In our opinion and according to information and explanation given to us theCompany is not Nidhi Company. Accordingly the provisions stated in paragraph 3(xii) ofthe Order are not applicable to the company. xiii. According to the information andexplanations given to us and based on our examination of the records of the Companytransactions with the related parties are in compliance with sections 177 and 188 of theAct where applicable and details of such transactions have been disclosed in the financialstatements as required by the applicable accounting standards. Also refer to para (e) inthe Basis for Disclaimer of Opinion paragraph of our main audit report.
xiv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly the provisions stated in paragraph 3 (xiv) of the Order are notapplicable to the Company. xv. According to information and explanations given to us andbased on our examination of the records of the Company the Company has not entered intoany non-cash transactions with directors or persons connected with him. Accordinglyparagraph 3 (xv) of the Order is not applicable.
xvi. In our opinion the Company is not required to be registered under Section 45-IAof the Reserve Bank of India Act 1934 and accordingly the provisions stated inparagraph clause 3 (xvi) of the Order are not applicable to the Company.
| ||For MSKA & Associates |
| ||Chartered Accountants |
| ||ICAI Firm Registration No.105047W |
| ||Anita Somani |
|Place: Mumbai ||Partner |
|Date: May 30 2018 ||Membership No.: 124118 |