To The Members of Consolidated Construction Consortium Ltd.
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements ofConsolidated Construction Consortium Limited("the Company") which comprise theBalance Sheet as at March 31 2019 the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Changes in Equity and the Statement of Cash Flowsfor the year then ended on that date and a summary of significant accounting policies andother explanatory information (hereinafter referred to as "the standalone financialstatements").
In our opinion and to the best of our information and according to theexplanations given to us except for the possible effects of the matter described in theBasis for Qualified 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 the Companyas at March 31 2019 the loss and total comprehensive income changes in equity and itscash flows for the year ended on that date.
Basis for Qualified Opinion
Trade receivables include a sum of र 48333.56 lakhs which are underarbitration which according to the Management will be awarded fully in Company'sfavor on the basis of the contractual tenability progress of arbitration and legal adviceand hence no provision for impairment loss has been considered necessary by the managementas disclosed in Note 8(b) to the standalone financial statements. However considering thesignificant time involved in the arbitration process and delays in the realization ofamounts in the recent years for the claims awarded in favor of the Company we are unableto comment on the carrying value of the above referred claims and the shortfall if anyon the amount that would be ultimately realized by the Company.
We conducted our auditof the standalone financial statements inaccordance with the Standards on Auditing specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics.We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified opinion on the standalone financial statements.
Material Uncertainty Related to Going Concern
We draw your attention to Note 46 to the standalone financialstatements which indicate that the company has negative net worth as at March 31 2019.Further it has incurred net cash losses for the year then ended and in the immediatelypreceding financial year and the net working capital of the Company continues to benegative. Further the Company has continuously defaulted in repayment of borrowingsincluding interest from Banks and financial institutions. The Company has obligationspertaining to operations including unpaid creditors and statutory dues these mattersrequire the Company to generate additional cash flows to fund the operations as well asother statutory obligations. These indicate the existence of a material uncertainty thatmay cast significant doubt on the Company's ability to continue as a going concern.However the Company is looking out for potential investors to raise cash by selling thenon-core assets held by its subsidiaries or by issuing debt instruments and has proposeddebt settlement plan with the bankers and further the Company expects improvement in theoverall level of Operations. In view thereof and expecting favorable market conditions infuture the Audited Standalone Financial Statements have been prepared on a "goingconcern basis".
Our Report is not modified in respect of this matter.
Emphasis of Matters
a. Note 18.4 of the standalone financial statements regarding approvalof restructuring package under "Scheme for Sustainable Structuring of StressedAssets" (S4A) by the secured lenders. The Company has not been able to generatesufficient cash flows to service the loan repayments/interest payments which resulted intoCompany's borrowings from Secured lenders becoming "Non-Performing Assets"(NPAs). Such defaults entitle the lenders to revoke the S4A package. Upon exit lendersare entitled to exercise rights and remedies available under the original loan agreements.In the absence of any communication from these lenders and on the basis of an ongoingdiscussion with lenders the Company has not provided for additional interest from S4Acutoff date till 31March 2019 which arises on account of differences between interestrate as approved under S4A package and interest rate approved as per the original sanctionletter and penal interest on overdue amount of interest and instalment. The additionalinterest and penal interest if any could not be quantified as on date.
b. Note 18.5of the standalone financial statements regarding defaultcommitted by the Company in respect of repayment of Optionally Convertible Debentures andrestructured term loans and working capital loans including interest as per the terms ofapproved S4A scheme.
c. Note 47of the standalone financial statements regarding outstandingbalances of Trade Receivables including retention Trade Payables Other DepositsAdvances and Other Current Assets/Liabilities which are subject to external confirmationand reconciliation if any. However in the opinion of the management adjustment if anywill not be material. In the opinion of the Board the value on realisation of TradeReceivables Loans and Advances and Other Current Assets in the ordinary course of thebusiness would not be less than the amount at which they are stated in the Balance Sheetand the provision for all known and determined liabilities is adequate and not in excessof the amount reasonably required.
Our Report is not modified in respect of the above matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. In addition to the matter described in theBasis for Qualified Opinion' paragraph andMaterial Uncertainty Related toGoing Concern' paragraph we have determined the matter described below to be the keyaudit matters to be communicated in our report.
|S No Key Audit Matter ||How our audit addressed the key audit matter |
|1 Revenue recognition using the percentage-of-completionmethod and Appropriateness of disclosures of revenue and other related balances in view of the Adoption of Ind AS 115 During the year the Company recognized revenue from its construction contracts ("construction projects") based on the percentage-of-completion("POC") method amounting to र 45604.66 lakhs. ||Our procedures included: |
| || Testing of the design and implementation of controls involved for the determination of the estimates used as well as their operating effectiveness |
| || Verification of Company's year-end internal construction progress reports to validate the percentage of construction work completed and compared with the latest certificates issued by the Project owners/project management consultants as the case may be. |
|The POC on construction projects was measured by reference to the surveys of work performed (output method) || |
|We focused on this area because of the significant management judgment required in: || Testing a sample of contracts for appropriate identification of performance obligations |
| the estimation of the physical proportion of the contract work completed for the contracts; and || For the sample selected reviewing for change orders and the management assessment on the estimation of the revenue arising from the variations to the original contract. |
| the estimation of revenue for the work done on the contracts with customers that could arise from variations to original contract terms and claims. Variable consideration is recognized when the recovery of such consideration is highly probable. || Evaluated the design of internal controls relating to collation of data required for making disclosures as per Ind AS 115 |
|Further Ind AS 115 mandates robust disclosures to be made in the financial statements which involves collation of information in respect of disaggregation of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. || Evaluated the appropriateness of the disclosures provided under the new revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures. |
|2 Recoverability assessment of trade receivables and contract assets ||Our procedures included: |
|The Company has net trade receivables of र 10667.18 lakhs (excluding receivables under arbitration after providing for expected credit loss of र11189.51)overdue for more than one year and contract assets in the nature of claims made to clients amounting to र 4276.41 lakhs(afterproviding for expected credit loss of र 21.49 lakhs) as at March 31 2019 as disclosed in Note 8(a) and 8(c) to the standalone financial statements. || Evaluating the ageing report and breakdown of trade receivables and contract assets reviewing their history of repayment and the managements' assessment on the financial capability of the debtors; |
|Trade receivables of the Company comprise mainly receivables in relation to the construction contracts executed by the company. || Assessed the recoverability of the unsettled receivables on a sample basis through our evaluation of management's assessment with reference to the historical payment pattern of customers publicly available information and latest correspondence with customers and to consider if any additional provision should be made; |
|The claims were based on the terms and conditions implicit in the construction contracts in respect of closed/suspended/under construction projects. These claims are mainly in respect of cost over run arising due to suspension of work client caused delays changes in the scope of work deviation in design and other factors for which company is at various stages of negotiation/discussion with the clients. || Evaluating the management assessment on the measurement of ECL(default rate) based on the historical provision rates which are then adjusted to reflect the relevant information about the current conditions and forecasts of future economic conditions. |
|The increasing challenges in the economy and operating environment in the real estate industry during the year have increased the risks of default on receivables from the Company's customers and hence the Company is exposed to potential risk of financial loss when the customers fail to meet their contractual obligations in accordance with the requirements of the agreements. || |
|The company recognizes impairment loss on trade receivables using expected credit loss (ECL) model which involves use of a provision matrix constructed on the basis of historical credit loss experience as permitted under Ind AS 109. For the purpose of impairment assessment significant judgments are made and estimates are used by the management to identify the rates to be adopted for each category of overdue amounts. || |
|3 Evaluation of uncertain tax positions ||Our procedures include: |
|The Company has material uncertain tax positions including matters under dispute (refer Note 44.5 (d) to the Standalone Financial Statements) which involves significant judgment to determine the possible outcome of these disputes. || Obtained understanding of key uncertain tax positions; and |
| || Reviewed the external legal opinions for key uncertain tax positions; |
| || Discussed with appropriate senior management and evaluated management's underlying key assumptions in estimating the tax provisions; and |
| || Assessed management's estimate of the possible outcome of the disputed cases. |
Information Other than the Standalone Financial Statements andAuditor's Report Thereon
The Company's management and Board of Directors are responsiblefor the other information. The other information comprises the information included in theCompany's annual report but does not include the standalone financial statements andour auditor's report thereon.
Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.
Management's Responsibility for the Standalone FinancialStatements
The Company's Board of Directors is responsible for the mattersstated in Section 134(5) of the Act with respect to the preparation and presentation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance total comprehensive income changes in equity and cashflows of the Company in accordance with Ind AS and other accounting principles generallyaccepted in India. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statement that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.
In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting 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 standalone financial reporting process.
Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud 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 standalone 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 thestandalone 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 financial controls relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating 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 standalone financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's 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 thestandalone financial statements including the disclosures and whether the financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable 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 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 standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so 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 2016("the Order") issued by the Central Government of India in terms of sub-section(11) of section 143 of the Act we give in the Annexure A a statement on the mattersspecified in Paragraph 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 have beenkept 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 OtherComprehensive Income the Statement of Change in Equity and the Statement of Cash Flowsdealt with by this Report are in agreement with the relevant books of account;
(d) in our opinion the aforesaid Ind AS financial statements complywith the Indian Accounting Standards specified under Section 133 of the Act;
(e) on the basis of the written representations received from thedirectors as on 31 March 2019 taken on record by the Board of Directors and taking intoaccount the opinion given by the legal advisors after considering the on-going discussionswith the lenders for a compromise settlement are of the opinion that there has been nodefault committed in spirit (in respect of redemption of debentures) by the Company andfurther no order has been received by the Company under Section 71(10) of the CompaniesAct 2013 we report that none of the directors aredisqualified as on 31 March 2019 frombeing appointed as a director in terms of Section 164 (2) of the Act;
(f) with respect to the adequacy of the internal financial controlsover financial reporting of the Company and the operating effectiveness of such controlsrefer to our separate report in "Annexure B"; and
(g) with respect to the other matters to be included in theAuditor's Report in accordance with the requirements of section 197(16) of the Actas amended:
According to the information and explanations given to us and based onthe examination of the records of the Company no managerial remuneration is paid /provided by the Company.
(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 Note44.3 to the standalonefinancial statements;
ii. The Company did not have any material foreseeable losses on anylong-term contracts including derivative contracts; and
iii. There was no delay in transferring the amounts that were due to betransferred to the Investor Education and Protection Fund by the Company during the yearended March 31 2019.
For Sundar Srini & Sridhar
Firm Registration Number : 004201S
Membership Number : 025504
Place : Chennai
Date: May 29 2019
Annexure - A to the Independent Auditor's Report
The Annexure referred to in Independent Auditor's Report to themembers of the Company on the Ind AS financial statements for the year ended 31 March2019 we report that:
(i) (a) The Company is maintaining proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) The fixed assets of the Company have been physically verified bythe management at periodic intervals which in our opinion is reasonable. According to theinformation and explanations given to us no material discrepancies have been noticed onsuch verification.
(c) According to the information and explanations given to us therecords examined by us and based on the examination of the conveyance deeds provided tous we report that the title deeds comprising all the immovable properties of land andbuildings which are freehold are held in the name of the Company as at the balance sheetdate.
(ii) The inventory has been physically verified by the management atreasonable intervals during the year. In our opinion the frequency of such verificationis reasonable. As per the information and explanations given to us no materialdiscrepancies were noticed on physical verification of inventory.
(iii) According to the information and explanations give to us and onthe basis of our examination of records the Company has granted unsecured interest freeloans to companies firms Limited Liability Partnerships or other parties covered in theregister maintained under section 189 of the Companies Act 2013. In our opinion theterms and conditions under which the loans were granted to wholly owned subsidiary andfellow subsidiary were not prejudicial to the interest of the Company. In the absence ofspecific schedule for repayment we could not comment on the regularity of repayment ofloan.
(iv) The Company has not granted any loans or provided any guaranteesor security to the parties covered under section 185 of the Act. The Company beingengaged in the business of providing infrastructural facilities Section 186 of the Act isnot applicable in respect of investments made loans given / guarantees provided to otherbody corporate to by virtue of exemption provided under sub-section (11) of the saidsection of the Act.
(v) According to the information and explanation given to us theCompany has not accepted any deposit during the year and there are no unclaimed depositsas at March 31 2019 to which the provisions of sections 73 to 76 of the Act or any otherrelevant provisions of the Companies Act 2013 are applicable. Hence paragraph 3(v) of theorder is not applicable to the Company.
(vi) The maintenance of cost records has been specified by the CentralGovernment under Section 148(1) of the Companies Act 2013 for the product produced by theCompany. We have broadly reviewed the cost records maintained by the Company pursuant tothe Companies (Cost Records and Audit) Rules 2014 as amended and prescribed by theCentral Government under Subsection (1) of Section 148 of the Companies Act 2013 and areof the opinion that prima facie the prescribed cost records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.
(vii) (a) According to the information and explanations given to us andon the basis of our examination of the records of the Companyin our opinion the Companyis not regular in depositing the undisputed statutory dues in respect of Provident fundsIncome Tax goods and service tax cess and other material statutory dues as applicablewith the appropriate authorities. There have been significant delays in a large number ofcases in depositing these dues with the appropriate authorities. Further there were noundisputed amounts payable in respect of the statutory dues outstanding as on March 312019 for a period of more than six months from the date they became payable except for thefollowing:
|Name of the Statute ||Nature of the due ||Period to which relates to ||र in Lakhs |
|The Jammu and Kashmir Value Added Tax 2005 ||Tax on Sales u/s 13 ||Jun-17 ||22.17 |
|Income Tax Act 1961 ||Tax Deducted at Source ||Apr-18 to Sep-18 ||255.62 |
|Employees' Provident Funds & Miscellaneous Provisions Act 1952 ||Provident Fund Contribution payable ||Apr-18 to Sep-18 ||79.62 |
(b) According to the information and explanations given to us thereare no dues of sales tax (erstwhile) service tax (erstwhile) duty of customs(erstwhile) duty of excise (erstwhile) value added tax (erstwhile) which have not beendeposited with the appropriate authorities on account of any dispute except for the duesattached in Appendix 1 to this report.
(viii) According to the information and explanations given to us thecompany has defaulted in repayment of loans taken from banks and financial institutions asat the year-end as per details attached in Appendix 2 to this report
(ix) The Company did not raise any money by way of initial public offeror further public offer (including debt instruments) and term loans during the year.Accordingly paragraph 3 (ix) of the Order is not applicable.
(x) According to the information and explanations given to us nomaterial fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the course of our audit.
(xi) According to the information and explanations given to us andbased on the examination of the records of the Company no managerial remuneration is paid/ provided by the Company.Accordingly paragraph 3 (xi) of the Order is not applicable tothe Company.
(xii) In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi Company. Thus paragraph 3(xii) of the Order isnot applicable.
(xiii) In our opinion and according to the information and explanationsgiven to us the Company is in compliance with Section 177 and 188 of the Companies Act2013 where applicable for all transactions with the related parties and the details ofrelated party transactions have been disclosed in the Ind AS standalone financialstatements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us andbased on our examination of the records the Company has not made preferential allotmentor private placement of shares or fully or partly convertible debentures during the yearunder review and thus paragraph 3(xiv) of the Order is not applicable.
(xv) In our opinion and according to the information and explanationsgiven to us during the year the Company has not entered into any non-cash transactionswith its Directors or persons connected to its directors and hence provisions of section192 of the Companies Act 2013 are not applicable to the Company.
(xvi) The Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934. Accordingly the Paragraph 3(xvi) of the Order isnot applicable.
For Sundar Srini & Sridhar
Firm Registration Number : 004201S
Membership Number : 025504
Place : Chennai
Date: May 29 2019