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Indowind Energy Ltd.

BSE: 532894 Sector: Infrastructure
NSE: INDOWIND ISIN Code: INE227G01018
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OPEN 13.71
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VOLUME 1309
52-Week high 44.50
52-Week low 6.08
P/E 128.27
Mkt Cap.(Rs cr) 127
Buy Price 14.12
Buy Qty 100.00
Sell Price 14.35
Sell Qty 2497.00
OPEN 13.71
CLOSE 14.14
VOLUME 1309
52-Week high 44.50
52-Week low 6.08
P/E 128.27
Mkt Cap.(Rs cr) 127
Buy Price 14.12
Buy Qty 100.00
Sell Price 14.35
Sell Qty 2497.00

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 2021 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 fnancialstatements including a summary of significant accounting policies and other explanatoryinformation.

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matters 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 Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ('Ind AS') and other accounting principles generallyaccepted in India of the state of affairs of the Company as at March 31 2021 and itsprofit total other comprehensive income the changes in equity and its cash flows for theyear ended on that date.

Basis for Qualified Opinion

1. We refer to Note 25 to the accompanying Statement there is a legal dispute betweenthe Company and the Exim Bank on non-release of the balance loan of $12.11 million as perthe initial agreed terms and the matter is pending before Honourable High Court of Bombay.The Company has not provided for the interest (including penal and additional interest)during the year on the EXIM loan as against the interest charged by the bank. The entireinterest including the penal and additional interest for the year ended March 312021amounts to Rs. 1614 61 lakhs which is determined based on the closing balance confirmationof EXIM bank. Accordingly had the interest including the penal and additional interestbeen provided in line with the bank in the financial statements the profit beforeexceptional items and tax for the year ended March 312021 would have been lower by Rs.1614.61 lakhs. Our opinion dated August 072020 on the standalone financial statements forthe year ended March 312020 and our review report dated February 112021 on thestandalone and consolidated financial results for the quarter ended December 312020respectively were also qualified in respect of this matter.

2. We refer to Note 16 to the accompanying Statement the Company's Long-termborrowings include Rs. 4319.07 lakhs as at March 312021 representing the loan outstanding(principal and interest dues) obtained from EXIM bank. However the closing balanceconfirmation of EXIM bank reflects Rs. 11120.57 lakhs as the total outstanding (principaland interest dues) as at March 312021. The Company has derecognised the outstandingliability of EXIM bank to the tune of Rs. 2797.59 lakhs during the current year which isnot in accordance with the requirements of Ind AS 21 'The effects of changes in ForeignExchange rates'. Moreover the derecognition of financial liability in part is not inaccordance with the requirements of Ind AS 109 'Financial Instruments'. The Long- termborrowings reflected under the Non-Current liabilities has been understated in theStatement to the tune of Rs. 680150 lakhs as at March 312021 Our opinion dated August072020 on the standalone financial statements for the year ended March 312020 was alsoqualified in respect of this matter.

3. The EXIM bank has recalled the loan vide letter reference No: EXIM: ChRO:408:2018-19 dt: Jan 232019 for total of USO 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 Joan sanctioned. These assets are the one which generate the income to servicethe Joan and accordingly will have impact on the company's ability to continue as a goingconcern. Our opinion dated August 072020 on the standalone financial statements for theyear ended March 312020 was also qualified in respect of this matter.

4. We refer to Note 4 to the accompanying Statement the Company's Capital Advancesshown under Property Plant & Equipment of Rs. 3398.99 lakhs which is related to thecompensation claim from Suzlon Energy Ltd for non-performance of the 6 MW machinespurchased by the Company. The Honourable High Court of Madras (Single bench) has passed anorder on 26.11.2019 setting aside the Arbitral Award dated 22.07.2017 which was passed infavour of the Company. The Company has filed an appeal with the Honourable High Court ofMadras (Division bench) against the order referred above. In view of the uncertaintyassociated with the outcome of the case the recognition of the compensation claim as anasset is not in accordance of the provisions of Ind AS 37 'Provisions ContingentLiabilities and Contingent Assets' and Ind AS 109 'Financial Instruments' and we areunable to comment on the recoverability of the compensation claim made by the Company. Ouropinion dated August 072020 on the standalone financial statements for the year endedMarch 312020 was also qualified in respect of this matter.

5. We refer to Note 8 & 21 to the accompanying Statement the Company had earlierderecognised the advance paid as bad debts since there was uncertainty of recoverabilityof the same which has been recognised as income under bad debts recovered during the yearto the tune of Rs.102 lakhs including interest of Rs. 2 lakhs in respect of the bankguarantee issued by Dena bank (merged with Bank of Baroda) for advance payment by thecompany to Mis. Cicon Environment Technology Ltd and reflected the same as receivable fromBank of Baroda under Other Non-Current Assets. The Company has filed a suit bearingno.5 of2007 and the matter is pending before Honourable High Court of Bombay. In view of theuncertainty associated with the outcome of the case the recognition of the claim as anasset is not in accordance of the provisions of Ind AS 37 'Provisions ContingentLiabilities and Contingent Assets' and Ind AS 109 'Financial Instruments' and we areunable to comment on the recoverability of the aforementioned amount. Accordingly had thebad debts recovered not been recognised as income and correspondingly reflected asreceivable the profit before exceptional items and tax for the year ended March 312021would have been lower by Rs. 102 lakhs and the Other Non-Current assets has beenoverstated in the Statement to the tune of Rs. 102 lakhs as at March 312021.

6. We refer to Note 10 to the accompanying Statement the Company has trade receivablesto the tune of Rs. 667.57 lakhs out of which Rs. 228.96 lakhs relates to Interestrecoverable from TNEB Thirunelveli and BESCOM. The amount is lying as receivable for morethan 3 years. As both are the Government entities the collection of the said amount wasexpected to be certain. In our opinion the financial asset is credit impaired andaccordingly the loss allowance for expected credit losses to be recognised. Accordinglyhad the recognition of loss allowance for expected credit losses been made in line withthe provisions of Ind AS 109 ‘Financial instruments' in the financial statements theprofit before exceptional items and tax for the year ended March 312021 would have beenlower by Rs. 228.96 lakhs and the trade receivables is overstated by Rs. 228.96 lakhs. Ouropinion dated August 072020 on the standalone financial statements for the year endedMarch 312020 was also qualified in respect of this matter.

7. We refer to Note 6 to the accompanying Statement the Company's Non-currentInvestments includes Investments in Revati Commercial Ltd to the extent of Rs. 200.5 lakhsas at March 312021. As per the share certificate provided to us the company is holding24 lakh shares of Rs.10 each totaling to the investment value of Rs. 240 lakhs. Howeverthe company has derecognised the value of investment on receipt of the amounts from theoriginal transferor without reduction in the number of shares transferred. Thederecognition of financial asset in part is not in accordance with the requirements of IndAS 109 'Financial Instruments'. Accordingly the Non-Current Investments has beenunderstated in the Statement to the tune of Rs. 39.5 lakhs as at March 312021.

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 Act and the rules thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our qualified opinion.

Material Uncertainty related to Going Concern

We draw attention to the Note 15 of the accompanying Statement which reflects the FCCBEquity portion. The company is the defendant in a legal case filed vide C.P.No.172 of 2011by the Trustees of the Foreign Currency Bond Holders (FCCB) for winding up of the Companybefore the Honourable High court of Madras. It is pertinent to note that the HonourableHigh Court of Madras has passed an order dated 20.05.2020 admitting the winding uppetition and also the Company is restrained from transferring alienating encumbering ordealing with its immovable assets. The Company has filed an appeal with the Division Benchof the Honourable High Court of Madras with the Prayer for order of Interim Stay of allfurther proceedings in pursuance to the Judgment passed on 20.05.2020.

The above indicates that a material uncertainty exists that may cast significant doubton the Company's ability to continue as a going concern. Pending resolution of the aboveuncertainty the Company has prepared the aforesaid Statement on a going concern basis.

Our opinion 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 Auditor's Response
Evaluation of key tax matters Principal Audit Procedures
The Company has material uncertain tax positions including matters under dispute which involves significant judgement to determine the possible outcome of these disputes. Our audit procedures include the following substantive procedures:
• Obtained an understanding of key tax matters; and
Refer Note.36 to the financial statements. • The audit team along with our internal tax experts -
> Read and analysed select key correspondences consultations obtained by the management for key tax matters;
> Discussed with appropriate senior management and evaluated management's underlying key assumptions in estimating the tax provisions; and
> Assessed the management's estimate of the possible outcome of the disputed cases by considering legal precedence and other judicial rulings.
Recoverability of Indirect tax receivables
As at March 312021 other non-current financial assets in respect of cenvat credit recoverable amounting to Rs. 14.6 lakhs. We have involved our internal experts to review the nature of the amounts recoverable the sustainability and the likelihood of recoverability of the same.
Refer Note.7 to the Standalone financial statements.

Emphasis of Matter We draw attention to:

1. Note 11 to the accompanying Statement in the absence of confirmations from theconcerned banks we are unable to comment about the correctness of balances grouped underbalance with banks to the extent of Rs. 3.75 lakhs.

2. Note 3 to the accompanying Statement which describes the uncertainties and theimpact of Covid-19 pandemic on the Company's operations and results as assessed by themanagement.

Our opinion is not modified in respect of the above matters.

Information other than the financial statements and auditor's report thereon

The Company's Board of directors are responsible for the preparation of otherinformation. The other information comprises Board s Report Report on Corporategovernance and Business responsibility report but does not include the standalonefinancial 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 material misstatementof this other information we are required to report that fact. We have nothing to reportin this regard.

Management's responsibility for the Standalone financial statements

The Company's Board of Directors are 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 includingother comprehensive income changes in equity and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the Indianaccounting Standards (Ind AS) prescribed under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation 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 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 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 the 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.

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions 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 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 ‘Annexure A' a statement on the matters specified in paragraphs 3 and 4 of theOrder.

2) 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 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 financial statements comply with the Ind AS specifiedunder section 133 of the Act except as stated in the Basis for Qualified Opinion sectionof our report.

(e) On the basis of the written representations received from the directors as on 31March 2021 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2021 from being appointed as a director in terms of Section164(2) of the Act.

(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".

(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 our opinionand according to information and explanations given to us the remuneration paid by theCompany to its directors during the year is in accordance with the provisions of section197 of the Act; and

(h) 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 litigation on its financial positionin its standalone financial statements- Refer Note 36 to the financial statements.

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and

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

Annexure "A" to Independent Auditors' Report

(Referred to in paragraph 1 under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the members of Indowind Energy Limited ofeven date)

1. In respect of the Company's Property Plant & Equipment:

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 the information and explanations given to us the records examined byus and based on the examination of the conveyance deeds provided to us we report thatthe title deeds comprising all the immovable properties of land and buildings which arefree hold are held in the name of the Company as at the balance sheet date.

2. According to the information and explanation given to us the physical verificationof the inventory other than energy stock has been conducted at the reasonable intervals bythe management and there have been no material discrepancies noticed during suchverification.

3. According to the information and explanation given to us the company has notgranted any loan secured or unsecured to companies firms limited liability partnershipor other parties covered under in the register under section 189 of the CompaniesAct2013. Accordingly the provisions of Clause 3(iii)(a)(b) and (c) of the order are notapplicable.

4. In our opinion and according to the information and explanations given to usthe Company has not granted any loans or provided any guarantees or given any security towhich the provision of section 185 of the Companies Act are applicable.

In respect of investments made by the Company and loans given to parties other thanthose covered in Section 185 of the Act the Company had complied with the provisions ofthe section 186 of the Companies Act2013.

5. In our opinion and according to the information and explanations given to usthe Company has not accepted any deposits during the year and accordingly paragraph 3(v)of the Order is not applicable.

6. The Central Government has not prescribed the maintenance of cost records undersection 148(1) of the Act for any of the business activities of the Company.

7. According to the information and explanations given to us in respect of statutorydues:

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 books ofaccount in respect of undisputed statutory dues including Provident fund Employees StateInsurance Income-tax Goods and Service tax Customs Duty cess and other materialstatutory dues have been generally 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 Customs Duty cess and other material statutory dues were in arrears as at 31March 2021 for a period of more than six months from the date they became payable.

b. Details of dues of Income Tax which have not been deposited as on 31stMarch 2021 on account of disputes are given below:

Statute Nature of dues Amount (Rs.) in Lakhs Period to which the amount relates Forum where the dispute is pending
Income Tax Act 1961 IT Matters under dispute 27.00 A.Y. 1998-1999 First appellate authority -Commissioner of income tax appeals
449.62' (Tax effect-NIL) A Y. 2008 - 2009 Third appellate authority - High Court of Madras
31.33 (S.14A-under regular and mat) A.Y. 2009-2010 First appellate authority -Commissioner of income tax appeals
310.89* (Tax effect-NIL) A.Y. 2013 - 2014 Second appellate authority -Income Tax Appellate tribunal

* Additions amount made in the assessment

There are no dues of Sales Tax Service Tax Excise Duty Customs Duty Value Added Taxand Goods and Service Tax which have not been deposited on account of disputes.

8. According to the information and explanations given to us and records examinedby us the details of default as claimed by the EXIM bank in repayment of borrowings as atMarch 312021 are given below.

.