To the members of DCM Limited
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the accompanying standalone financial statements of DCM Limited ("theCompany") which comprise the balance sheet as at March 31 2021 the statement ofprofit and loss (including other comprehensive income) cash flow statement and thestatement of changes in equity for the year then ended and notes to the standalonefinancial statements including a summary of significant accounting policies and otherexplanatory information (hereinafter referred to as "the standalone financialstatements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards (Ind AS')prescribed under section 133 of the Act and the Rules issued thereunder and otheraccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2021 and its loss (including other comprehensive income) its cash flowsand the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under Section_143(10) of the Act. Ourresponsibilities under those Standards are further described in the 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 Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone financial statements.
Material uncertainty relating to Going Concern
We draw attention to Note: 50 of the standalone financial statements highlighting thatdue to industrial unrest the Company is facing liquidity issues towards clearing of itsstatutory dues vendor payments and borrowings pertaining to its Engineering Division. ishas significantly eroded the Company's net worth and the current liabilities exceed thecurrent assets by_Rs. 7397.85 lakhs_as at March 31 2021. e Company has initiatedrestructuring of its Engineering Division as explained in the Note 4. e management ofCompany believes that with the restructuring of its Engineering Business Undertaking alongwith the debt pertaining to said undertaking and infusing liquidity by focusing /managingof its remaining business undertaking/real estate operation the Company will be able tocontinue its operation on a going concern basis. Accordingly the statement of the Companyhas been prepared on a going concern basis. Our opinion is not modified in respect of thismatter.
Emphasis of Matter
Without qualifying our opinion we draw attention to the following: i. Note 52 of thestandalone financial statements during the previous year in view of continued situationof industrial unrest Company has declared lockout at its engineering business undertaking.On the basis of legal advice Management of the Company is of the view that the presentlockout is legal and justified. erefore the Company has not made any provision for wagespertaining to the lockout period October 22 2019 to March 31 2021 aggregating to Rs.2721.22 lakhs.
ii. Note 54 to the standalone financial Statements which describes the uncertaintiesand the impact of Covid-19 pandemic on the Company's operations and results as assessed bythe management. Further our attendance at the physical verification of inventory done bythe management was impracticable under the current pandemic situation and we havetherefore relied on the related alternate audit procedures to obtain comfort over theexistence and condition of inventory at year end. iii. Note 56 to the standalone financialstatements the Company has received certain recovery notices / petitions from creditorsand a bank. Pursuant to the restructuring scheme approved by the Board of the Company thesettlement of all such creditors and bank has already been provided for in this Scheme. Inaddition the Company is taking other interim measures as explained in the said Note 56 toimprove liquidity including proposed Right Issue of equity shares management action isalso explained in the said note.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements for the financial yearended March 31 2021. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. For each matter below our description ofhow our audit addressed the matter is provided in that context. We have determined thematters described below to be the key audit matters to be communicated in our report. Wehave fulfilled the responsibilities described in the Auditor's responsibilities for theaudit of the standalone financial statements section of our report including in relationto these matters. Accordingly our audit included the performance of procedures designedto respond to our assessment of the risks of material misstatement of the standalonefinancial statements. e results of our audit procedures including the proceduresperformed to address the matters below provide the basis for our audit opinion on theaccompanying these standalone financial statements
|Key audit matters ||How our audit addressed the key audit matters |
|As at March 31 2021 the Company's balance sheet includes property plant and equipment amounting to Rs. 4990.54 lakhs. ||Our procedures in relation to management's impairment assessment included but not limited to the following procedures: |
|Engineering Division has continuous losses and accordingly the management has assessed it for impairment. ||testing the design and implementation of controls in place; |
|assessment of the recoverable value of the assets of the Engineering Division aggregating Rs. 4232.05 lakhs incorporates significant judgement in respect of factors such as valuation of land future production levels sales prices operating/capital costs and economic assumptions such as discount rates inflation rates etc. ||obtaining and reviewing management assessment whether there were any indicators of impairment of property plant and equipment as at March 31 2021; |
|We identified assessing impairment of property plant and equipment of Engineering Division as a key audit matter considering it to be significant to the Company's total assets involving significant judgement and estimation in determining the recoverable amount. ||obtaining valuation report in respect of land and plant & equipment carried out by external valuer; |
| ||assessing appropriateness of impairment assessment and methodologies used; |
| ||evaluating reasonableness of key assumptions used in the valuation; |
| ||assessing the adequacy of disclosures in the standalone financial statements in respect of the property plant and equipment. |
Information Other than the Standalone Financial Statements and Auditor's Report ereon
e Company's Board of Directors is responsible for the preparation of the otherinformation. e other information comprises the information included in the ManagementDiscussion and Analysis Director's Report including Annexures to Director's ReportCorporate Governance and Shareholder's Information but does not include the standalonefinancial statements and our auditor's report thereon. Our opinion on the standalonefinancial statements does not cover the other information and we do not express any formof assurance conclusion thereon. In connection with our audit of the standalone financialstatements our responsibility is to read the other information and in doing so considerwhether the other information is materially inconsistent with the standalone financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
e Company's Board of Directors is responsible for the matters stated in Section 134(5)of the Act with respect to the preparation of these standalone financial statements thatgive a true and fair view of the financial position financial performance including othercomprehensive income cash flows and changes in equity of the Company in accordance withInd AS and other accounting principles generally accepted in India.
is 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 standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
e Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. e risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the standalone
financial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant de_ciencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards. From the matters communicated withthose charged with governance we determine those matters that were of most significancein the audit of the standalone financial statements of the current period and aretherefore the key audit matters. We describe these matters in our auditor's report unlesslaw or regulation precludes public disclosure about the matter or when in extremely rarecircumstances we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.
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 section 143(11) of the Act we givein the Annexure A a statement on the matters specified in the paragraph 3 and 4 of theOrder.
2. As required by Section 143(3) of the Act we report that:
a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) e balance sheet the statement of profit and loss (including other comprehensiveincome) the cash flows statement and the statement of changes in equity dealt with bythis Report are in agreement with the books of account;
d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under Section 133 of the Act read with relevant Rules issued thereunder;
e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 from being appointed as a director in terms of Section 164 (2) of theAct;
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting;
g) In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of the Act; and h) With respect to the other matters to beincluded in the Auditor's Report in accordance with Rule 11 of the Companies (Audit andAuditors) Rules 2014 in our opinion and to the best of our information and according tothe explanations given to us:
i. e Company has disclosed the impact of pending litigations as at March 31 2021 onits financial position in its standalone financial statement refer Note 42;
ii. e Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and iii. There had been no delay intransferring amount required to be transferred to the Investor Education and ProtectionFund by the Company.
Annexure A to the Independent Auditor's Report to the members of DCM Limited on itsstandalone financial statements dated June 29 2021. Report on the mattersspecified in paragraph 3 of the Companies (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of section 143(11) of theCompanies Act 2013 ("the Act") as referred to in paragraph 1 of Report onOther Legal and Regulatory Requirements' section.
i. (a) e Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
(b) According to information and explanations given to us the Company has a regularprogram of physical verification of its fixed assets by which all fixed assets areverified in a phased manner over a period of three years. e frequency of which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. No discrepancies were noticed on such verification. In accordance with thisprogramme certain assets have been physically verified by the management during thecurrent year. As informed to us no material discrepancies were noticed on suchverification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company except the registration of an immovable property having agross block of Rs. 345.83 lakh and net block of Rs. 329.89 lakh remained pending as at thebalance sheet date.
ii. e Management of the Company has conducted physical verification of inventory atreasonable intervals during the year. Further due to Covid-19 related lock downrestrictions management was able to perform the verification of inventory subsequent tothe year end. In our opinion the frequency of such verification is reasonable havingregard to size of the Company and nature of business. No material discrepancies werenoticed on such physical verification. In our opinion the procedures of physicalverification of inventory followed by the management are reasonable in relation to thesize of the Company and nature of its business. Further we have performed alternativeprocedures for physical verification done subsequent to the year-end due to Covid-19 toaudit the existence of Inventory as per the guidance provided in SA-501 "AuditEvidence Specific Considerations for Selected Items" and have obtainedsufficient audit evidence and the discrepancies noticed on such physical verification ofinventory as compared to book records were not material.
iii. According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under Section 189 of theAct. Accordingly provisions of paragraph 3 (iii) of the Order is not applicable to theCompany.
iv. In our opinion and according to the information and explanations given to us theCompany has not granted any loans and advances covered under the provisions of section 185and 186 of the Act. erefore provisions of paragraph 3(iv) of the Order is not applicableto 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 directivesissued by the Reserve Bank of India and provisions of sections 73 to 76 or any otherrelevant provisions of the Act and the Rules framed thereunder.
vi. We have broadly reviewed the Cost Accounting records maintained by the Companypursuant to the Rules prescribed by the Central Government for the maintenance of costrecords under sub-section (1) of section 148 of the Act and are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We are howevernot required to make a detailed examination of such books and records with a view todetermine whether they are accurate or complete. vii. a. According to the records of theCompany examined by us and the information and explanations given to us the Company isgenerally regular in depositing undisputed statutory dues including Employees' ProvidentFund Employees' State Insurance Investor Education and Protection Fund Income TaxGoods & Service Tax Custom Duty Cess and any other material statutory dues asapplicable with the appropriate authorities during the year and there are no suchundisputed amounts payable which have remained outstanding as at March 31 2021 for aperiod of more than six months from the date they became payable. b. According to therecords of the Company there are no dues in respect of Income-tax Sales-taxService-tax Customs Duty Excise Duty and Value added tax which have not been depositedon account of any dispute except as mentioned below:
|Name of statute ||Nature of dues ||Amount of dispute* (Rs. in lakhs) ||Amount paid under protest ||Financial year to which it relates ||Forum where the dispute is pending |
|Central Excise Act 1944 ||Excise duty ||0.50 ||- ||2002-2003 2003-2004 ||Supreme Court |
|Punjab VAT ||Sales Tax ||218.17 ||15.50 ||2012-2013 ||Punjab VAT |
|Act 2005 || ||146.96 ||36.75 ||2010-2011 ||Appellate |
| || ||130.25 ||35.09 ||2009-2010 ||Tribunal |
| || ||122.65 || ||2012-2013 ||Deputy commissioner (Appeals) |
|Income Tax Act 1961 ||Income Tax ||442.18 || ||1982 -1983 to 1989-1990 ||ITAT refer back to AO |
|Income Tax Act 1961 ||Income Tax ||66.08 || ||2011-2012 ||High Court |
|Income Tax Act 1961 ||Income Tax ||51.37 || ||2012-2013 ||Income Tax Appellate Tribunal |
|Income Tax Act 1961 ||Income Tax ||48.33 || ||2013-2014 ||Income Tax Appellate Tribunal |
|Income Tax Act 1961 ||Income Tax ||36.11 || ||2015-2016 ||Income Tax Appellate Tribunal |
*amount as per demand orders including interest and penalty wherever indicated in thedemand. viii. On the basis of the audit procedures performed by us the information &explanations furnished and representations made by the management the Company has madedefaults in repayment of dues including interest to banks. Term loan availed from StateBank of India ICICI Bank Limited and HDFC Bank Limited aggregating to Rs 404.28 lakhs andInterest of Rs. 83.99 lakhs remaining in default as on March 31 2021 pertaining to theperiod from October 2019 to March 31 2021. Further cash credit facility from the banksare overdrawn by Rs 772.39 lakhs since September 2019. There is no outstanding debentureat year end and the Company has not taken any loan from the financial institution andgovernment (please refer the footnote of note 19 22 and note 51 of the standalonefinancial statements for Further details).
ix. In our opinion and according to the information and explanations given to us theCompany has not raised any money way of initial public offer / further public offer.Further the Company has not taken any term loan during the year. Hence reporting as perprovisions of clause 3(ix) of the Order is not applicable to the Company.
x. In our opinion and according to the information and explanations given to us wereport that no fraud by the Company or on the Company by the officers and employees of theCompany has been noticed or reported during the year.
xi. In our opinion and according to the information and explanations given to us themanagerial remuneration has been paid / provided in accordance with the provisions ofsection 197 of the Act. xii. e Company is not a Nidhi company. erefore the provisions ofclause 3(xii) of the Order are not applicable to the Company.
xiii. According to the information and explanations given by the managementtransactions with the related parties are in compliance with Section 177 and 188 of Actand the details have been disclosed in the notes to the standalone financial statementsas required by the applicable Indian accounting standards.
xiv. According to the information and explanations given to us and on an overallexamination of the books of account the Company has not made any preferential allotmentand private placement of shares or fully & partly convertible debentures during theyear under audit. Accordingly the provisions of clause 3(xiv) of the Order are notapplicable to the Company.
xv. In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transactions with directors or persons connectedwith him as referred in section 192 of the Act. xvi. According to the information andexplanations given to us the provisions of section 45-IA of the Reserve Bank of IndiaAct 1934 are not applicable to the Company.
Annexure B to the Independent Auditor's Report to the Members of DCM Limited on itsstandalone financial statements dated June 29 2021. Report on the InternalFinancial Controls under Clause (i) of Sub-section 3 of Section 143 of the Act as referredto in paragraph 2(f) of Report on Other Legal and Regulatory Requirements' section.
We have audited the internal financial controls over financial reporting of the DCMLimited (the Company') as of March 31 2021 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
e 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". These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated effectively in all material respects. Our audit involves performing procedures toobtain audit evidence about the adequacy of the internal financial controls system overfinancial reporting and their operating effectiveness.
Our audit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. e procedures selected dependon the auditor's judgement including the assessment of the risks of material misstatementof 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 audit opinion on the Company's internal financial controls systemover 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: a) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; b) 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 authorisations ofmanagement and directors of the company; and c) provide reasonable assurance regardingprevention or timely detection of unauthorised 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.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2021 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
| ||For S.S. Kothari Mehta & Company |
| ||Chartered Accountants |
| ||Firm's Registration No. 000756N |
| ||SUNIL WAHAL |
| ||Partner |
|Place: New Delhi ||Membership No. 087294 |
|Date: June 29 2021 ||UDIN: 21087294AAAAIC4481 |