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Indowind Energy Ltd.

BSE: 532894 Sector: Infrastructure
NSE: INDOWIND ISIN Code: INE227G01018
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VOLUME 12547
52-Week high 5.85
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P/E
Mkt Cap.(Rs cr) 41
Buy Price 4.44
Buy Qty 100.00
Sell Price 4.56
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OPEN 4.58
CLOSE 4.58
VOLUME 12547
52-Week high 5.85
52-Week low 1.64
P/E
Mkt Cap.(Rs cr) 41
Buy Price 4.44
Buy Qty 100.00
Sell Price 4.56
Sell Qty 200.00

Indowind Energy Ltd. (INDOWIND) - Auditors Report

Company auditors report

TO THE MEMBERS OF INDOWIND ENERGY LIMITED

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

We have audited the standalone financial statements of Indowind Energy Limited("the Company") which comprise the balance sheet as at 31 March 2019 and thestatement of Profit and Loss (including other comprehensive income) statement of changesin equity and statement of cash flows for the year then ended and notes to the financialstatements including a summary of significant accounting policies and other explanatoryinformation (hereinafter referred to as "the standalone financial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion section of our report 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 accounting principlesgenerally accepted in India including Indian Accounting Standards ('Ind AS') specifiedunder Section 133 of the Act of the state of affairs of the Company as at March 312019and loss (including other comprehensive income) changes in equity and its cash flows forthe year ended on that date.

Basis for Qualified Opinion

i) We draw attention regarding impact on the Profit for the year ended March 312019Where the Company has not provided for Penal Interest Additional Interest charged againstthe loan sanctioned of $ 12.89 Million by EXIM Bank on account of revocation ofrephasement due to default in repayment of principal interest and other amounts witheffect from 31.05.2014.Also the Company has provided for Interest against the loan @4.4%as against the rate of interest @LIBOR(6M)+400 Bps for $ 10 million and LIBOR(6M)+450 bpsfor the balance release of $2.89 million as per the bank sanction letter. The Company hasfiled a case against the EXIM bank on non-release of the balance loan of $12.11 million asper the initial agreed terms and the matter is pending before Honourable High Court ofBombay. As the outcome of the case is uncertain the recognition of Contingencies infinancial statements is not in accordance with recognition and measurement principles laiddown in the applicable Indian Accounting Standards prescribed under section 133 of theCompanies Act 2013. Had the interest penal and additional interest been provided in linewith the bank the net profit for the quarter and year ended March 312019 would have beenlower by Rs.573.18 lakhs.

ii) The EXIM bank has recalled the loan vide letter reference No: EXIM: ChRO:408:2018-19 dt: Jan 232019 for total of USD 12.12 million towards Principal outstandingInterest overdue and liquidated damages as on December 312018. In the event of theCompany not able to repay the loan recalled then the bank can recover from the 8 MW WEGsmovable fixed assets on which the bank is having first charge by way of hypothecationagainst the loan sanctioned. These assets are the one which generate the income to servicethe loan and accordingly will have effect on the generation and future income to thecompany.

iii) The EXIM bank has converted the Loan outstanding in to INR as on 12.02.2019 withinterest rate payable @ 16% pa with monthly rests as against the earlier rate of interest@LIBOR(6M) + 4/4.5 with quarterly rests as applicable on USD loan. The Company hascontinued to maintain the loan in USD even after the bank has converted into INR. Theupward revision in the interest rate charged by the bank will increase the interestliability to the company in future years. However the company is litigating the action ofthe bank in converting Dollar loan into rupee loan & Interest rates before theHonourable High Court of Bombay.

iv) Fixed deposits charged against the Loan from EXIM bank has been adjusted by thebank of Rs.365.35 lakhs on February 222019 against the interest overdue. However thecompany has reflected the same under Current Assets in Note No. 12 bank balances showingclosing balance of Rs.401.24 lakhs which is notin accordance with recognition andmeasurement principles laid down in the applicable Indian Accounting Standards. In ouropinion the management has to recognize the provision to adjust the carrying amount ofthe Fixed Deposit. Had the provision been made the net profit for the quarter and yearended March 312019 would have been lower by Rs.35.89 lakhs.

v) We refer to Note No.4 to the financial statements in respect of Capital advanceshown under Property Plant & Equipment under Non-Current Asset of Rs. 2828.11 lakhswhich is related to the compensation claim from Suzlon Energy Ltd for non-performance ofthe machines purchased. The company has won arbitration in its favour against the claimmade. However Suzlon Energy Ltd has filed an appeal before the Honourable High Court ofMadras. Hence recoverability of the claim is based on the outcome of the case.

vi) We refer to Note No. 8 to the financial statements in respect of other non-currentassets of Rs.1002 lakhs relating to 2.50 MW consisting of 7 Machines which are not inworking condition. Hence provision is required. However the management is hopeful ofrepowering these machineries in working condition.

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theStandalone Financial Statements section of our report. We are independent of the Companyin accordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our qualified opinion.

Emphasis of Matters:

We draw attention to Note 16 to the financial statements wherein the company is thedefendant in a legal case filed by the Trustees of the Foreign Currency Bond Holders(FCCB) for liquidation before the High court of Madras. The impact of the matter cannot beascertained at this stage Our report is not modified in respect of this matter.

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 financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. We have determined the matters described below to be the key audit mattersto be communicated in our report

Key Audit Matters How our audit addressed the key audit matter
Evaluation of uncertain tax positions Our audit procedures include the following substantive procedures:
The Company has material uncertain tax positions including matters under dispute which involves significant judgement to determine the possible outcome of these disputes. • Obtained understanding of key uncertain tax positions; and
• We along with our internal tax experts -
Refer Note.39 to the standalone financial statements. > Read and analysed select key correspondences consultations by management 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.
Recoverability of Indirect tax receivables
As at March 312019 other non-current financial assets in respect of Cenvat recoverable amounting to Rs.13.17 lakhs which are pending adjudication. We have involved our internal experts to review the nature of the amounts recoverable the sustainability and the likelihood of recoverability upon final resolution.
Refer Note.7 to the Standalone financial statements.

Other Information

The Company's management and Board of directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the standalone financial statements and our auditor'sreport 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 material misstatementof this other information we are required to report that fact. We have nothing to reportin this regard.

Responsibilities of Management and Those charged with Governance for the StandaloneFinancial Statements

The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone financial statements that give a true and fair view of thestate of affairs (including other comprehensive income) changes in equity and cash flowsof the Company in accordance with the accounting principles generally accepted in Indiaincluding the Indian accounting Standards (Ind AS) specified under section 133 of the Act.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing 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 and Board of directors areresponsible 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.

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

Auditor's Responsibilities forthe 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:

• Identify and assess the risks of material misstatement of the 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.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system in place and the operatingeffectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting 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.

• Evaiuatetheoverallpresentation.structureandcontentofthefinancialstatementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under Section 197 read with Schedule V to the Act.

2) 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 section 143 ofthe Act we give in "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

3) As required by Section 143(3) of the Act based on our audit we report to theextent applicable 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)the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis Report are in agreement with the books of account.

(d) In our opinion the aforesaid standalone financial statements comply with the IndAS specified under Section 133 of the Act.

(e) On the basis of the written representations received from the directors as on 31March

2019 taken on record by the Board of Directors none of the directors is disqualifiedas on 31 March 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 with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".

(g) 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 ouropinionand 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 in its standalone financial statements - Refer Note 39 to the financialstatements.

ii. The Company did not have any material foreseeable losses on long term contractsincluding derivative contracts

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

For Sanjiv Shah and Associates
Chartered Accountants
Firm Regn.No-003572S
CA G Ramakrishnan
Place: Chennai Partner
Date: 30-05-2019 M. No.209035

Annexure A to Independent Auditors' Report

The Annexure referred to in Independent Auditors' Report to the members of company onthe standalone Ind AS financial statements for the year ended March 312019 we reportthat:

i. a. The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant & equipment.

b. The Company has a regular programme of physical verification of its property plant& equipment under which property plant & equipment are verified in a phasedmanner over a period of three years. In accordance with this programme certain propertyplant & equipment were verified during the year and no material discrepancies werenoticed on such verification. In our opinion this periodicity of physical verification isreasonable having regard to the size of the company and the nature of its assets.

c. According to there in formation 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.

ii. According to the information and explanation given to us the physical verificationof the inventory has been conducted at the reasonable intervals by the management andthere have been no material discrepancies noticed during such verification.

iii. According to the information and explanation given to us the Company has notgranted any loans to Companies Firms Limited Liability Partnerships or other partiescovered in the register maintained under section 189 of the Companies Act 2013 ('theAct').Accordingly the provisions of Clause 3(iii)(a)(b) and (c) of the 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 section 185 and 186 of the Act with respectto the loans and investments made.

v. The Company has not accepted any deposits from the public and hence the directivesissued by the Reserve Bank of India and the provisions of section 73 to 76 or any otherrelevant provisions of the Act and the Companies (Acceptance of deposits) Rules2015 withregard to the deposits accepted from the public are not applicable.

vi. The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Act for any of the services rendered by the Company.

vii. a. According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/accrued in the books ofaccounting in respect of undisputed statutory dues including Provident fund EmployeesState Insurance Income-tax Goods and Service tax duty of customs cess and othermaterial statutory dues have been regularly deposited during the year by the Company withthe appropriate authorities.

According to the information and explanations given to us no undisputed amountspayable in respect of Provident fund Employees State Insurance Income-tax Goods andService tax duty of customs cess and other material statutory dues were in arrears as at31 March2019for a period of more than six months from the date they became payable b.According to the information and explanations given to us there are no dues of income taxor sales tax or service tax or duty of customs or duty of excise or value added tax orgoods or service tax which have not been deposited on account of any dispute except forthe following:

S.No. Particulars Amount (Rs.) in lakhs Period to which the amount relates Forum where dispute is pending
01. Income Tax Act 27.00 A.Y. 1998 -1999 First appellate authority -Commissioner of income tax appeals
02. Income Tax Act 75.11 A.Y. 2004-2005 Third appellate authority - High Court of Madras
03. Income Tax Act 22.39 A.Y. 2005 -2006 Third appellate authority - High Court of Madras
04. Service Tax 218.00 F.Y. 2005-2006 2006 - 20072007 - 2008 2008-2009 2009-2010 Central Excise and Service Tax Appellate Tribunal [CESTAT]
05. Income Tax Act 310.89* (Tax effect-NIL) AY 2013-14 Second appellate authority -Income Tax Appellate tribunal
06. Income Tax Act 617.50** (Tax Effect-NIL) AY 2014-15 First appellate authority -Commissioner of income tax appeals

* Additions amount made in the assessment

**Depreciation amount disallowed

viii. In our Opinion and according to the information and explanations given to us thedetails of defaults as claimed by the EXIM bank in the repayment of borrowings as at 31 stMarch 2019 are given below.

Particulars Amount of default as at the balance sheet date as claimed by the EXIM bank Period of default as claimed by the EXIM bank Remarks
Exim Bank 837145662 crores(INR) On account of recall by bank vide letter dated reference No: EXIM: ChRO: 408:2018-19 dt: Jan 232019 June 2018 to March 2019 As claimed by the company the entire income from the project funded by the bank is remitted towards the loan account as per TRA. The company has also filed an application vide suit No.COMSL 118/2019 before the Honourable High Court of Bombay with prayers which include release of balance undisbursed sanctioned loan amount of USD 12.3 million to declare the bank letter dated 19.11.2018 categorizing the plaintiff loan account as NPA as illegal and bad in law to direct that the terms relating to repayment of part disbursal amounting to USD 12.7 million contained in the loan agreement dated 18.01.2011 are to be restructured /rescheduled/brought in line with receivables being credited in the TRA account created under TRA dated 15.10.2013 to restrain the bank by an Order from recalling the loan and proceeding pursuant to bank's letter dated 19.11.2018 and 23.01.2019.
The matter being sub-judice we are unable to offer any comments.

The company has not availed any loans/borrowings from financial institutionsgovernment and has not issued any debentures during the year.

xiv. According to the information and explanations give 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.

xv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered in to non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv)ofthe Order is not applicable.

xvi. The company is not required to be registered under section 45-IAof the ReserveBankof India Act1934.

For Sanjiv Shah and Associates
Chartered Accountants
Firm Registration No.003572S
CA G Ramakrishnan
Place: Chennai. Partner
Date: 30th May 2019 Membership No.:209035

Annexure B to Independent Auditors Report for Indowind Energy Limited

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSubsection 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of IndowindEnergy 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 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 Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India("the ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence to theCompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required underthe Companies Act 2013.

Auditors' Responsibility

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 and the Standards on Auditing issued by the ICAI and deemed to beprescribed under section 143(10) of the Companies Act 2013 to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. 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 judgment including the assessment of the risks ofmaterial misstatement of the Standalone financial statements whether due to fraud orerror.

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 systemoverfinancial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3)Provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the company has in all material respects an adequate internalfinancial controls system over financial reporting aand such internal financial controlsover financial reporting were operating effectively as at March 31 2019 based on theinternal control over financial reporting criteria established by the company consideringthe essential components of internal control stated in the Guidance Note issued by theInstitute of Chartered Accountants of India (ICAI).

For Sanjiv Shah and Associates
Chartered Accountants
Firm Registration No.003572S
CA G Ramakrishnan
Place: Chennai. Partner
Date: 30th May 2019 Membership No.: 209035

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