The Members of IMEC Services Limited
(Formerly known Ruchi Strips & Alloys Limited)
Report on the Audit of Standalone Financial Statements
We have audited the accompanying Standalone Financial Statements of IMEC ServicesLimited(Formerly known Ruchi Strips and Alloys Limited)("the Company") whichcomprise the Balance Sheet as at March 31 2019 the Statement of Profit and Loss(including Other Comprehensive Income) the Statement of Changes in Equity and theStatement of Cash Flows for the year ended on that date and Notes to the StandaloneFinancial Statements including a summary of the 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 theexplanations given to us the aforesaid Standalone 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 Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019the profit and total comprehensive income changes in equity and its cash flows for theyear ended on that date.
Basis of 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 (SAs). 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 (ICAI) together with the independencerequirements that are relevant to our audit of the Standalone Financial Statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Financial Statements of the current period.These matters were addressed in the context of our audit of the Standalone FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report:
Key Audit Matter
1 Assessment of Contingent Liability and Related Disclosures
[Refer to Note B (iii) to the Standalone Financial Statements -"Use of EstimatesJudgements and Assumptions-Provisions and contingent liabilities" Note 19 to theStandalone Financial Statements - "Contingent Liabilities and Commitments"] Asat March 31 2019 the Company has contingent liabilities amounting to Rs 24148 Lacs.
Significant management judgement is required to assess such matters to determine theprobability of occurrence of material outflow of economic resources and whether aprovision should be recognised or a disclosure should be made. The management judgementis also supported with legal advice in certain cases as considered appropriate.
As the ultimate outcome of the matters are uncertain and the positions taken by themanagement are based on the application of their best judgement related legal adviceincluding those relating to interpretation of laws/regulations it is considered to be aKey Audit Matter.
Principle Audit Procedures
Our audit procedures included the following:
We understood assessed and tested the design and operating effectiveness of keycontrols surrounding contingent liability relating to the relevant laws and regulations;
We performed our assessment on a test basis on the underlying calculations supportingthe contingent liabilities made in the Standalone Financial Statements;
We evaluated management's assessments by understanding precedents set in similar casesand assessed the reliability of the management's past estimates/judgements;
We evaluated management's assessment around those matters that are not disclosed or notconsidered as contingent liability as the probability of material outflow is consideredto be remote by the management;
We assessed the adequacy of the Company's disclosures.
Based on the above work performed management's assessment in respect of disclosuresrelating to contingent liabilities in the Standalone Financial Statements is considered tobe reasonable.
2. Key Audit Matter
Assessment of carrying value of equity investments in subsidiaries and fair value ofother investments
[Refer to Note B (iii) to the Standalone Financial Statements -"Use of EstimatesJudgements and Assumptions-Fair Value Measurements of Financial Instruments " Note B(v) to the Standalone Financial Statements-"Investments in subsidiary" Note B(xvii- A) to the Standalone Financial Statements "Financial assets" Note 2 tothe Standalone Financial Statements - "Investments in subsidiary" and Note 34(A) to the Standalone Financial Statements "Fair value hierarchy"]
The Company has equity investments in a subsidiary company.It also has made investmentsin preference shares in subsidiary company.
The Company accounts for equity investments in subsidiary at cost (subject toimpairment assessment) and other investments at fair value.
For investments carried at cost where an indication of impairment exists the carryingvalue of investment is assessed for impairment and where applicable an impairmentprovision is recognised if required to its recoverable amount.
For investments carried at fair values a fair valuation is done at the year-end asrequired by Ind AS 109. In case of certain investments cost is considered as anappropriate estimate of fair value since there is a wide range of possible fair valuemeasurements and cost represents the best estimate of fair value within that range aspermitted under Ind AS 109.
The accounting for investments is a Key Audit Matter as the determination ofrecoverable value for impairment assessment/fair valuation involves significant managementjudgement.
The impairment assessment and fair valuation for such investments have been done by themanagement in accordance with Ind AS 36 and Ind AS 113 respectively.
The key inputs and judgements involved in the impairment/fair valuation assessment ofunquoted investments include:
Forecast cash flows including assumptions on growth rates
Terminal growth rate
Economic and entity specific factors are incorporated in valuation used in theimpairment assessment.
Principal Audit Procedures
Our audit procedures included the following:
We obtained an understanding from the management assessed and tested the design andoperating effectiveness of the Company's key controls over the impairment assessment andfair valuation of material investments.
We evaluated the Company's process regarding impairment assessment and fair valuationby involving auditor's valuation experts to assist in assessing the appropriateness of thevaluation model including the independent assessment of the underlying assumptionsrelating to discount rate terminal value etc.
We assessed the carrying value/fair value calculations of all individually materialinvestments where applicable to determine whether the valuations performed by theCompany were within an acceptable range determined by us and the auditor's valuationexperts.
We evaluated the cash flow forecasts (with underlying economic growth rate) bycomparing them to the approved budgets and our understanding of the internal and externalfactors.
We checked the mathematical accuracy of the impairment model and agreed relevant databack to the latest budgets actual past results and other supporting documents.
We assessed the Company's sensitivity analysis and evaluated whether any reasonablyforeseeable change in assumptions could lead to impairment or material change in fairvaluation
We had discussions with management to obtain an understanding of the relevant factorsin respect of certain investments carried at fair value where a wide range of fair valueswere possible due to various factors such as absence of recent observable transactionsrestrictions on transfer of shares existence of multiple valuation techniques investee'svaried nature of portfolio of investments for which significant estimates/judgements arerequired to arrive at fair value.
We evaluated the adequacy of the disclosures made in the Standalone FinancialStatements.
Based on the above procedures performed we did not identify any significant exceptionsin the management's assessment in relation to the carrying value of equity investments insubsidiaries and fair value of other investments.
Emphasis of Matter
The Company has given Corporate guarantee of Rs 24148 Lacs to its subsidiary companyi.e. RSAL Steel Private Limited for loans taken from various banks.Banks have classifiedthese loans as Non-Performing Assets and have taken Symbolic Possession of Factory on 20June 2019 under Securitisation and Reconstruction of Financial Assets and Enforcement ofSecurity Interest Act 2002 and Rule 8(1) of said act. Banks have issued recall noticedemanding outstanding amount to the Company and Subsidiary.
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the Standalone Financial Statements and our auditor's report thereon.
Our opinion on the Standalone Financial Statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone Financial Statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the Standalone Financial Statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Management's Responsibilities for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these Standalone Financial Statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding 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; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Standalone FinancialStatements that give a true and fair view and are free from material misstatement whetherdue 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.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
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 skepticism throughout the audit. We also:
i. Identify and assess the risks of material misstatement of the Standalone FinancialStatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
ii. Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
iii. Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
iv. 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 Standalone Financial Statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
v. Evaluate the overall presentation structure and content of the Standalone FinancialStatements including the disclosures and whether the Standalone Financial Statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the Standalone Financial Statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies 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 with those charged with governance we determine thosematters that were of most significance in the audit of the Standalone Financial Statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements.
1. As required by Section 143(3) of the Act based on our audit we report that :
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.
d) In our opinion the aforesaid Standalone Financial Statements comply with the Ind ASspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 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 A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended : In ouropinion and to the best of our information and according to the explanations given to usthe remuneration paid by the Company to its directors during the year is in accordancewith the provisions of section 197 of the Act. 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 as amended in our opinion and to the best of our information andaccording to the explanations given to us : i. The Company has no pending litigation as onMarch 31 2019 its financial position in its Standalone
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
For M.S. Singhatwadia & Co.
Chartered Accountants (Firm Reg. No. 113954W)
CA Neel Khandelwal (Partner) M. No. 181251
Place : Indore Date: May 30 2019
Annexure - A to the Independent Auditor's Report of even date on the StandaloneFinancial Statements of IMEC Services Limited (Formerly known Ruchi Strips and AlloysLimited)
(Referred to in paragraph 1(f) under 'Report on Other Legal and RegulatoryRequirements' section of our report to the Members of IMEC Services Limited (Formerlyknown Ruchi Strips and Alloys Limited) of even date.
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 IMECServices Limited ("the Company") as of March 31 2019 in conjunction with ouraudit of the Standalone Financial Statements of the Company for the year ended on thatdate.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to respective company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols 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 audit opinion on the internal financial controls system withreference to Standalone Financial Statements.
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 of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the Company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial 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 to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2019 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
For M.S. Singhatwadia & Co.
(Firm Reg. No. 113954W)
CA Neel Khandelwal
M. No. 181251
Place : Indore
Date: May 30 2019
Annexure - B to Independent Auditor's Report
Referred to in paragraph 2 under "Report on Other Legal and RegulatoryRequirements" section of our report of even date to the members of IMEC ServicesLimited(Formerly known Ruchi Strips& Alloys Limited)
i. In respect of the Company's Fixed Assets :
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. As explained to us the fixed assets of the Company have been physically verified bythe management during the year which in our opinion is reasonable having regard to thesize of the Company and the nature of its assets. No material discrepancies between thebook records and the physical inventory have been noticed. In our opinion the frequencyof verification is reasonable.
c. There are no immovable property held in the name of the Company.
ii. The Company is in the business of providing consultancy services and does not haveany physical inventories.
Accordingly reporting under clause 3 (ii) of the Order is not applicable to theCompany.
iii. According to the information and explanations given to us the Company has notgranted any loan secured or unsecured to companies firms limited liability partnershipor other parties covered in the register maintained under section 189 of the CompaniesAct 2013. Hence the provisions of para 3 clauses (iii) of the said Order are notapplicable to the company.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of sections 185 and 186 of the Act with respectto the investments made and guarantee given / issued. However the company has not grantedloan to any party. Company has provided Corporate Guarantee amounting to Rs 24148 Lacs tobanks for loans taken by its subsidiary- RSAL Steel Private Limited as on March 31 2019.
v. In our opinion and according to the information and explanations given to us theCompany has not accepted deposits from the public within the meaning of Section 73 to 76or any other relevant provisions of the Companies Act 2013 and the Rules framed thereunder. As informed to us no Order has been passed by the Company Law Board or NationalCompany Law Tribunal or Reserve Bank of India or any court or any other Tribunal.
vi. The maintenance of cost records has not been specified by the Central Governmentunder Section 148 (1) of the Companies Act 2013 for the business activities carried outby the company. Thus reporting under clause 3 (vi) of the Order is not applicable to theCompany.
vii. According to the information and explanations given to us in respect of Statutorydues :
a) The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employee's State Insurance Income Tax Goods and Service TaxCustoms Duty Cess and other material statutory dues applicable to it with the appropriateauthorities.
b) There were no undisputed amounts payable in respect of Provident Fund Employee'sState Insurance Income Tax Goods and Service Tax Customs Duty Cess and other and othermaterial statutory dues in arrears as at March 31 2019 for a period of more than sixmonths from the date they became payable.
c) There are no dues of Provident Fund Employee's State Insurance Income Tax Goodsand Service Tax Customs Duty Cess which have not been deposited with appropriateauthorities on account of any dispute.
viii. According to the records of the Company examined by us and as per the informationand explanations given to us the Company has not defaulted in repayment of dues tofinancial institution bank or government as on the balance sheet date. The Company hasnot issued any debenture.
ix. In our opinion and according to the information and explanations given to us theCompany has not raised money by way of initial public offer or further public offer(including debt instruments). In our opinion and according to the information andexplanations given to us the Company has not raised any term loans during the periodunder audit.
x. During the course of our examination of the books of account and records of theCompany carried out in accordance with the generally accepted auditing practices in Indiaand according to the information and explanations given to us we have neither come acrossany instance of material fraud on or by the Company noticed or reported during the yearnor have we been informed of such case by the management.
xi. According to the information and explanations give to us and based on ourexamination of the records of the
Company the Company has paid / provided for managerial remuneration in accordance withthe requisite approvals mandated by the provisions of section 197 read with Schedule V tothe Act.
xii. In our opinion and according to information and explanation given to us thecompany is not a Nidhi
Company therefore the provision of para 3 (xii) of the Order is not applicable to theCompany.
xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the Standalone Financial Statements as required by theapplicable accounting standards.
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 therefore the provision of para 3 (xiv) of the Order is not applicable to theCompany.
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 during the year hence the provision of para 3 (xv) of the Order is notapplicable to the Company.
xiv. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934 therefore the provision of para 3 (xvi) of the Order is notapplicable to the Company for the year under audit.
For M.S. Singhatwadia & Co.
Chartered Accountants (Firm Reg. No. 113954W)
CA Neel Khandelwal (Partner) M. No. 181251
Place : Indore
Date: May 30 2019