To the Members of Indosolar Limited
1. Report on the Ind AS Financial Statements
We have audited the accompanying Ind as financial statements of Indosolar Limited("the Company") which comprise the balance sheet as at 31st March 2018 thestatement of profit and loss (including other comprehensive income) the cash flowstatement and the Statement of Changes in Equity for the year then ended and a summary ofsignificant accounting policies and other explanatory information.
2. Management's Responsibility for the Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation andpresentation of these Ind AS financial statements that give a true and fair view of thefinancial position financial performance (including other comprehensive income) cashflows and changes in equity of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards specified in theCompanies (Indian Accounting Standards) Rules 2015 (as amended) under Section 133 of theAct. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
3. Auditor's Responsibility
Our responsibility is to express an opinion on these Ind AS financial statements basedon our audit. We have taken into account the provisions of the Act the accounting andauditing standards and matters which are required to be included in the audit report underthe provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified underSection 143 (10) of the Act and other applicable authoritative pronouncements issued bythe Institute of Chartered Accountants of India. Those Standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether the Ind AS financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Ind AS financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of theInd AS financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control relevant to the Company'spreparation of the Ind AS financial statements that give a true and fair view in order todesign audit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company's Directors as well as evaluating theoverall presentation of the Ind AS financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Ind AS financial statements.
4. Basis for Qualification
4.1 Material Uncertainty Related to Going Concern
a) The Company has continued to incur significant losses in the current year resultingin further erosion of its net worth. The Company has a negative net worth amounting to Rs.45652.96 lakhs as on 31st March 2018. The Company's current liabilities exceeds thecurrent assets by Rs. 85105.46 lakhs as on 31st March 2018. The Company's long termshort-term borrowings and other financial current liabilities as at 31st March 2018includes the balances of term loan payable to various lender banks amounting to Rs.33408.44 lakhs and Rs.75452.90 lakhs respectively on becoming non-performing assets.These lender banks have exited from Corporate Debt Restructuring (CDR) Cell vide itsletter dated 4th November 2016. However in absence of requisite information from thebanks we are unable to comment upon the possible impact of such exit on the carryingvalue of aforesaid long term short-term borrowings other financial current liabilitiesas at 31st March 2018 and interest expense (including penal interest if any) for yearended 31st March 2018 and the consequential impact on the accompanying statement.
b) In the matter of Company's claim for eligibility of capital subsidy under SIP schemeof Govt of India the Special Leave petition (SLP) filed by the Department of InformationTechnology (DIT) against the order of the Hon'ble High Court of Delhi has been dismissedby the Hon'ble Supreme court vide its order dated August 25 2017. The uncertainty existswith regard to its quantum and receipt of claim pending its appraisal by Department ofInformation Technology. In the absence of the reasonable assurance the management has notrecognized the claim. (Refer Note No 44(A)(iii)
c) The Company (being an EOU) has not been able to meet its commitment under theForeign Trade Policy on the basis of which the Company imported certain raw materialstores and spares and machineries without payment of custom duty. As on 31st March 2018the Company's NFE is positive by Rs. 23913.25 lakhs without considering the import valueof amortization of Line-C. In case Company also amortizes the value of Line C (Commercialproduction yet to start) NFE as on 31st March 2018 would be negative by Rs.5494.01 lakhs.In case positive NFE not achieved during the stipulated time the company would be liableto duties and penalties payable in accordance with Notification No. 52/2003 Cus. Dated31.03.2003. Presently we are unable to comment upon the possible impact if any on theaccompanying statement. (Refer Note No 44(B)(ii).
d) The Company has plant and machinery under installation disclosed under CWIPaggregating to Rs. 56447.97 lakhs in respect of which management has recognized animpairment loss of Rs. 30700.00 lakhs during the year ended 31st March 2018 based onrecoverable value of the assets determined using value in use method and is thereforedependent on the various factors considered in making projections by the management. Inthe absence of sufficient and appropriate audit evidence with respect to the uncertaintyunderlying the assumptionsparticularly the timing of expected imposition of anti/safeguardduty and installation of Line -C and commencement of its commercial productionused in thelong term projections we are unable to comment on the carrying value of aforesaidProperty Plant and Equipment and adequacy of the impairment loss recognized during theyear ended 31st March 2018 and the consequential impact if any on the accompanyingstatement. ( Refer Note No 44(B)(iii).
e) During the year the Company has received the approval of One Time Settlement ('OTS')Scheme from Union Bank of India ('Bank'). As per the OTS Scheme if the Company is unableto pay as per stipulations the OTS proposal will stand cancelled automatically and thebank will take suitable legal steps for recovery of entire dues (Refer Note No 44(A)(i).
On the basis of overall evaluation of the above factors and considering the domesticcontent requirements under various Government schemes proposed anti-dumping/safeguardduty on import of solar cell Company's claim for certain capital incentive fromDepartment of Information Technology (DIT) the Company's continuing efforts to settlewith the remaining banker's and Asset Reconstruction Company (India) Limited themanagement believes that it is appropriate to prepare the accounts on a going concernbasis. Refer Note No 43.
On the basis of overall evaluation of the above factors in our view the full erosionof net worth inability of the Company to meet the financial projections due to operatingand cash losses due to continuing down trend in the solar industry inability of theCompany to meet its certain material liabilities and commitments the fact that the impactof the government decisions would be known only in future the uncertainty of outcome ofclaims uncertainty on the ability of the Company to meet its export obligations & toinstall line C acquired in the financial year 2011-12 (appearing in CWIP)due tonon-fulfillment of its financial obligations towards the supplier of the plant &technology indicate the existence of material uncertainties that may cast significantdoubt about the Company's ability to continue as a going concern and therefore theCompany may not be able to realise its assets and discharge its liabilities in the normalcourse of business. Consequently material uncertainties exist regarding the use of goingconcern assumption in preparing the financial statements.
In view of above uncertainties we are unable to comment on the ability of the Companyto continue as a going concern and consequential classification and adjustment to theaccompanying financial statements if any that might have been necessary had thefinancial statements being prepared under liquidation basis. The extent of the effect onthe resultant adjustments to the accumulated losses assets and liabilities as at theyear-end is presently not ascertainable.
4.2 During the previous year two secured lenders have assigned their outstanding duesto Assets Reconstruction Company (India) Limited (ARCIL). i) Pending finalization of termsof assignment the company has not provided interest Rs. 4934.74 lakhs for the year ended31st March 2018. As a consequence to this interest of Rs. 4934.74 lakhs for the yearended 31st March 2018 has been under provided ii) On the basis of confirmation receivedfrom one of the lending bank namely Corporation Bank in the Non-Performing Assets (NPA)account the Company's liability to the bank is more by Rs. 2323.88 lakhs as on 31.03.2018which prima facie appears to be primarily penal interest. Pending receipts of requisitedetails their verification and reconciliation of the claim and pending OTS proposal ofthe Company with the bank the Company has not provided the same.
As a consequence to this interest of Rs. 7258.62 lakhs for the year ended 31st March2018 has been under provided. Had the Company provided the interest on loans loss for theyear ended 31st March 2018 would have been higher by Rs.7258.62 lakhs and CurrentLiabilities and Reserve & Surplus have been under stated by the same.
5. Qualified opinion
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion paragraph 4.1 which highlight material uncertainties the impact ofwhich is currently not ascertainable including the ability of the company to continue as agoing concern and paragraph 4.2 regarding non provision of interest the aforesaid Ind ASfinancial statements give the information required by the Act in the manner or equired andgive a true and fair of view inconformity with the accounting principles generallyaccepted in India of the state of affairs of the Company as at 31st March 2018 its loss(including other comprehensive income) and other financial information for the year endedon that date.
6. Report on Other Legal and Regulatory Requirements
As required by the Companies(Auditor'sReport) Order 2016 ('Order') issued by theCentral Government of India in terms of sub section(11)of section 143 of the Act (here inafter referred to as the "Order") we give in the Annexure A a statement on thematters specified in paragraphs 3 and 4 of the Order.
As required by section 143(3) of the Act we report that:
a. We have sought andexcept for the matters described in the Basis for QualifiedOpinion paragraphobtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit;
b. Except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph above in our opinionproper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;
c. The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Cash Flow Statement and the Changes in Equity dealt with by this Report arein agreement with the books of account;
d. Except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph in our opinion the Ind AS financial statements comply with the theIndian Accounting Standards specified under Section 133 of the Act;
e. The matter described in the Basis for Qualified Opinion paragraph abovein ouropinionmay have an adverse effect on the functioning of the Company;
f. On the basis of written representations received from the directors as on 31st March2018 and taken on record by the Board of Directors none of the directors is disqualifiedas on 31st March 2018 from being appointed as a director in terms of Section 164 (2) ofthe Act;
g. The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above.
h. With respect to the adequacy of the internal financial control sover financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in Annexure B;and.
i. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigations on its financialposition initslnd AS financial statements - Refer note 38 to the Ind AS financialstatements;
(ii) The Company did not have any long term contracts including derivative contractsfor which there were any foreseeable losses; and
(i) The Company did not have any dues on account of Investor Education and ProtectionFund.
(iv) The reporting on disclosure relating to specified Bank Notes is not applicable tothe company for the year ended March 31 2018.
Annexure-A to the Auditor's Report
The Annexure referred to in Independent Auditors' Report to the members of the Companyon the Ind AS financial statements for the year ended 31st March 2018.We report that:
1. (a) According to the information and explanations given to us the Company hasmaintained proper records showing full particulars including quantitative details andsituation of fixed assets.
(b) According to the information and explanations given to us the fixed assets havebeen physically verified by the management during the year in a phased manner and nomaterial discrepancies have been noticed on such verification. In our opinion thefrequency of physical verification of fixed assets is reasonable having regard to the sizeof the Company and the nature of its assets.
(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 the immovable properties areheld in the name of the Company.
2. According to the information and explanations given to us the inventories have beenphysically verified by the management during the year. In our opinion the frequency ofsuch verification is reasonable and no material discrepancies were noticed.
3. According to the information and explanations given tous 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 theCompanies Act 2013. Accordingly Paragraph 3 (iii) (a) (b) and (c) of the Order are notapplicable.
4. The Company has not given any loans or made any investments or provided anyguarantee or security asspecified under section 185 and 186 of the Companies Act 2013.Accordingly Paragraph 3(iv) of the Order is not applicable.
5. According to the information and explanations given to us the company has notaccepted any deposits from the public during the year.
6. We have broadly reviewed the books of account maintained by the Company pursuant tothe rules prescribed by Central government for maintenance of cost records under section148(1)of the Companies Act 2013 and are of the opinion that prima facie the prescribedaccounts and records have been made and maintained.We have not however made a detailedexamination of the records with a view to determine whether they are accurate or complete.
7. a) According to the information and explanations given to us and on the basis of ourexamination of the records of the
Company amounts deducted/accrued in the book sof account in respect of undisputedstatutory dues including provident fund employees' state insurance income tax salestax service tax duty of customsduty of excise valueadded tax goods & service taxcess and other material statutory dues have generally been regularly deposited during theyear with the appropriate authorities.
b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income tax sales taxservice tax duty of excise duty of custom value added tax goods & service taxcess and other material statutory dues were in arrears as at 31 March 2018 for a period ofmore than six months from the date they became payable.
c) According to the information and explanations given to us and on the basis of therecords of the Company examined by us there are no dues of income tax sales tax duty ofcustoms duty of excise value added tax goods & service tax which have not beendeposited with the appropriate authorities on account of any dispute except as mentionedbelow :
|Name of the statute ||Nature of the dues ||Amount in Rupees (lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|Finance Act 1994 ||Service tax ||299.77 ||June 15 to March 16 ||Commissioner of Service tax |
|Finance Act 1994 ||Service tax ||1193.42 ||April 16 to June 17 ||Commissioner Central Tax |
|Value Added Tax Act (UP) 2015 ||VAT Demand ||4.35 ||2014-2015 ||The Additional Commissioner (Appeals) Noida |
8 In our opinion and according to the information and explanations given to us andbased on our examination of the books of account and related records the Company hasdefaulted in repayment of dues to its bankers as disclosed below. In view of default longterm borrowings become current liabilities and disclosed in Balance Sheet accordingly. TheCompany did not have any outstanding dues to financial institutions government anddebenture holders during the year.
|Name of the lender ||Nature of dues ||Amount in rupees (lakhs) ||Period to which it relates |
|Andhra Bank ||Interest ||5875.24 ||July 2013- March 2018 |
|Andhra Bank ||Principal ||15746.97 ||October 2013- March 2018 |
|Bank of Baroda ||Interest ||7656.63 ||July 2013- March 2018 |
|Bank of Baroda ||Principal ||10497.92 ||October 2013- March 2018 |
|Corporation Bank ||Interest ||10178.89 ||April 2013- March 2018 |
|Corporation Bank ||Principal ||15281.72 ||October 2013- March 2018 |
|Indian Bank ||Interest ||3753.73 ||April 2013- March 2018 |
|Indian Bank ||Principal ||9179.22 ||October 2013- March 2018 |
(B) During the year the Company has received the approval of One Time Settlement('OTS') Scheme from Union Bank of India ('Bank') vide sanction letters dated 20.10.2017which were duly approved by the Board of Directors in their meeting held on 20th December2017. The OTS proposal contains: (a) the waiver of interest till March 2018 which includesinterest of Rs. 20707.50 lakhs recognized in the books of account till September 2017(b) restructuring of loan liability amounting to Rs. 20866.44 lakhs (c) conversion ofpart of the loan amounting to Rs. 20700.00 lakhs into 1% Optionally ConvertibleCumulative Redeemable Preference Shares (OCCRPS).
9. According to the information and explanations given to us the Company did not raiseany money by way of initial public offer or further public offer (including debtinstruments) and the term loans during the year. Accordingly Paragraph 3(ix) is notapplicable.
10. According to the information and explanations given to us no material fraud by oron the Company by its officers or employees has been noticed or reported during the courseof our audit.
11. According to the records of the Company examined by us and the information andexplanation given to us the Company has paid and provided managerial remuneration inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V of the Companies Act 2013.
12. According to the information and explanations given to us the Company is not anidhi company. Accordingly Paragraph 3(xii) of the Order is not applicable.
13. According to the information and explanations given to us and based on ourexamination of the records of the Company there are no transactions with the relatedparties which are not incompliance with Section 177 and 188 of the Companies Act 2013 andthe details have been disclosed in the Ind AS financial statements as required by theapplicable accounting standards.
14. The Company has made preferential allotment of fully paid up equity shares by wayof conversion of the amount outstanding in loan account of the applicant during the yearunder review & the requirements of Section 42 of the Companies Act 2013 have beencomplied with subject to the fact that no fresh money was received against the saidallotment as stated herein above. Since preferential allotment has been made by conversionof existing loan and no fresh money has been received the utilization of the same couldnot be commented upon. The Company has not made any preferential allotment of fully orpartly convertible debentures during the year.
15. According to information and explanations given to us the Company has not enteredinto any non-cash transactions with directors or persons connected with them as referredto in section 192 of the Companies Act 2013.Accordingly Paragraph 3(xv) of the Order isnot applicable.
16. According to the information and explanations given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.
Annexure-B to the Independent Auditor's Report
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 control sover financial reporting of IndosolarLimited ("theCompany") as on 31st March 2018 in conjunction with our audit ofthe Ind AS financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India ('ICAI'). 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 a 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 Companies Act 2013.
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 Companies Act 2013 to the extent applicableto an audit of internal financial controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls 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 judgment including the assessment of the risks ofmaterial misstatement of the Ind AS 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 Ind AS Financial Statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dis positions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of Ind ASFinancial Statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the company's assets that could have a material effect on the Ind ASFinancial Statements.
In herent Limitations of Internal Financial Controls over Financial Reporting
Because of the in herent limitations of internal financial control sover financialreporting including the possibility of collusion or improper management over-ride 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 in adequate 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 31 March 2018 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 ARUN K GUPTA & ASSOCIATES |
| ||Firm Registration No. 000605N |
| ||Chartered Accountants |
|Place: Greater Noida ||(SACHIN KUMAR) |
|Date: 25-05-2018 ||PARTNER |
| ||M. No. 503204 |