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IVRCL Ltd.

BSE: 530773 Sector: Infrastructure
NSE: IVRCLINFRA ISIN Code: INE875A01025
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0.89

NSE 00:00 | 25 Mar 0.90 -0.05
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OPEN 0.92
PREVIOUS CLOSE 0.91
VOLUME 46679
52-Week high 4.31
52-Week low 0.70
P/E
Mkt Cap.(Rs cr) 70
Buy Price 0.89
Buy Qty 700.00
Sell Price 0.89
Sell Qty 150.00
OPEN 0.92
CLOSE 0.91
VOLUME 46679
52-Week high 4.31
52-Week low 0.70
P/E
Mkt Cap.(Rs cr) 70
Buy Price 0.89
Buy Qty 700.00
Sell Price 0.89
Sell Qty 150.00

IVRCL Ltd. (IVRCLINFRA) - Auditors Report

Company auditors report

To the Members of

IVRCL Limited

1. Corporate Insolvency Proceedings as per Insolvency and Bankruptcy Code 2016 (IBC)

The Hon'ble National Company Law Tribunal Hyderabad Bench ("NCLT") admittedan insolvency and bankruptcy petition filed by a financial creditor against IVRCL Limited("the Company") and appointed Mr. Sutanu Sinha to act as Interim ResolutionProfessional (IRP) with direction to initiate appropriate action contemplated with extentprovisions of the Insolvency and Bankruptcy Code 2016 and other related rules.

2. Report on the Standalone Financial Statements

We have audited the accompanying Standalone Financial Statements of IVRCL Limited("the Company") which comprise the Balance Sheet as at March 31 2018 theStatement of Profit and Loss (including other comprehensive income) the Statement of CashFlows and the Statement of Changes in Equity for the year then ended and a summary ofsignificant accounting policies and other explanatory information for the year then endedin which are incorporated the unaudited branch returns for the year ended on that date ofthe Company's branch at Kingdom of Saudi Arabia (‘the branch').

3. Management's Responsibility for the Standalone 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 preparationand presentation of these standalone financial statements that give a true and fair viewof the financial position financial performance (including other comprehensive income)cash flows and changes in equity of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standardsspecified under Section 133 of the Act read with relevant Rules issued thereunder. 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 financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror. Pursuant to ongoing Corporate Insolvency Resolution Process (CIRP) powers of theboard of Directors have been suspended and these Powers are now vested with ResolutionProfessional (RP).

4. Auditors' Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made there under.

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under Section 143(10) of the Act. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the standalone financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the standalone financial statements. The procedures selected depend onthe auditor's judgment including the assessment of the risks of material misstatement ofthe standalone 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 standalone financial statements that give a true and fair view in orderto design audit procedures that are appropriate in the circumstances. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the standalone 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 standalone financial statements.

5. Basis for Qualified Opinion

We refer to following notes to standalone financial statements: a. Note 38 to thestandalone financial statements in respect of preparation of financial statements of theCompany on going concern basis for the reasons stated therein and expiry of timeline tocomplete the process of CDR/ SDR. During the year the Company has incurred a Net Loss ofRs 19910.93 million resulting into accumulated losses of Rs 41762.43 million and erosionof its Net worth as at March 31 2018. The Company has obligations towards fund basedborrowings aggregating to Rs 77577.28 million and non-fund based exposure aggregating toRs 12831.73 million operational creditors and statutory dues subject toreconciliation/verification as stated in Note 43 that have been demanded/recalled by thefinancial/operating creditors pursuant to ongoing Corporate Insolvency Resolution Process(CIRP). These conditions indicate the existence of a material uncertainty that may castsignificant doubt on the Company's ability to continue as going concern and therefore theCompany may be unable to realize its assets and discharge its liabilities in the normalcourse of business. The ultimate outcome of these matters is at present not ascertainable.Accordingly we are unable to comment on the consequential impact if any on theaccompanying standalone financial statements.

b. Note 39 to the standalone financial statements in respect of recognition ofdeferred tax assets on account of carried forward unused tax losses and other taxabletemporary differences aggregating to Rs 9570.59 million. Based on unexecuted orders onhand the Management of the Company is confident that sufficient future taxable incomewill be available against which such deferred tax assets will be realized. However in ouropinion in absence of convincing evidence that sufficient future taxable income will beavailable against which such deferred tax assets can be realized such recognition is notin accordance with Indian Accounting Standard 12 "Income Taxes" (Ind AS 12). Hadthe aforesaid deferred tax assets not been recognised loss after tax for the year endedon March 31 2018 would have been higher by Rs 9570.59 million and other equity wouldhave been lower by Rs 9570.59 million.

c. Note 40 to the standalone financial statements in connection with the existence ofmaterial uncertainties over the realisability of bank guarantees encashed by customersunbilled revenue trade receivables and withheld amount aggregating to Rs 19682.35million included in financial and other assets which are past due/ subject matters ofvarious disputes /arbitration proceedings/ negotiations with the customers and contractorsdue to termination / foreclosure of contracts and other disputes. The management is yet toassess the change in risk of default and resultant expected credit loss allowance on suchassets. Had the aforesaid assets been provided for impairment loss after tax for the yearended on March 31 2018 would have been higher by Rs 19682.35 million other equity wouldhave been lower by Rs 19682.35 million.

d. Note 41 to the standalone financial statements in respect of investment of Rs12063.29 million in subsidiaries engaged in BOT and other projects which are underdisputes with the concessionaire and other subsidiaries that have significant accumulatedlosses as at March 31 2018. In absence of fair valuation of these Investments we areunable to comment upon the carrying value these investments and the consequential impactif any on the accompanying standalone financial statements.

e. Note 42 to the standalone financial statements in respect of loans and advances ofRs 7142.20 million given to subsidiary Companies associate net receivable againstdevelopment rights various sub-contractors vendors and other parties. These advanceshaving regard to financial position of such subsidiary companies and age of such advancesin our opinion are doubtful of recovery. The management is yet to assess the change inrisk of default and resultant expected credit loss allowance on such loans and advances.Had the aforesaid assets been provided for impairment loss after tax for the year endedon March 31 2018 would have been higher by Rs 7142.20 million other equity would havebeen lower by Rs 7142.20 million.

f. Note 38 and 43 to the standalone financial statements in respect of various claimssubmitted by the financial creditors (including claims towards fund based and non-fundbased exposure and claims on behalf of subsidiary companies and other parties) operational creditors workmen or employee and authorized representative of workmen andemployees of the Company to Resolution Professional pursuant to the Insolvency andBankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation2016 that are currently under consideration/reconciliation. Pendingreconciliation/admission of such claims by the RP we are unable to comment on theconsequential impact if any on the accompanying statement;

g. Note 44 to the standalone financial statements in respect of non-availability ofconfirmations of bank balances aggregating to Rs 24.84 million trade receivablesincluding retention advances trade payable. In absence of alternative corroborativeevidence we unable to comment on the extent to which such balances are recoverable.

h. Note 45 to the standalone financial statements in respect of non-availability ofphysical verification reports of fixed assets and inventories aggregating to Rs 210.35million as at March 31 2018 and no provision for impairment has been made for the reasonsstated therein. In absence of any alternative corroborative evidence we are unable tocomment on the recoverability of the same.

i. Note 46 to the standalone financial statements in respect of balances availablewith statutory authorities and input credits aggregating to Rs 2003.47 million that aresubject to reconciliation filing of return and admission by the respective statutoryauthorities and no provision has been made thus we are unable to comment whether anyprovision for impairment in the value of advances is required.

j. Note 23 to the standalone financial statement in respect of periods of default inrepayment of borrowing and interest have not been provided to compliance the minimumpresentation and disclosure requirement as per the schedule III of the Companies Act2013.

6. Qualified Opinion

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 para 5(b) 5(c) 5(e){i.e. Had our observation been considered the net loss for the period would have been Rs56307.27 million Net worth as at March 31 2018 would have been Rs (55012.49) millionand Earning per share for the period would have been Rs (71.92)} and possible effects ofmatters described in para 5(a) 5(d) 5(f) 5(g) 5(h) 5(i) & 5(j) in the basis forqualified opinion the aforesaid standalone financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at March 31 2018 and its losses ( including other comprehensive income) itscash flows and the changes in equity for the year ended on that date.

7. Emphasis of matters

Attention is invited to: a. Note 47 to the standalone financial statements in respectof notice received by the company U/s 276 (B) of the Income tax Act 1961 and by certainbanks and customers of the company U/s 226(3) of the Income Tax Act 1961 regardingfailure to deposit the tax deducted at source for the financial year 2016-17 and 2017-18aggregating to Rs 292.52 million. b. Note 48 to the standalone financial statements inrespect of summon received by the company of levy of damages U/s 14 B of the Employees'Provident Funds and Miscellaneous Provisions Act 1952 aggregating to Rs 61.27 million forthe period from 10/1999 to 02/2009 and 07/2009 to 03/2015 and the matter is presentlysub-judice.

8. Other Matters

a. We did not audit the separate financial statements of 28 joint ventures included instandalone financial statements whose financial results reflects company's share in netprofit of joint venture aggregating to Rs 20.59 million for the year ended March 31 2018.Out of the 28 joint ventures financial information/statements of 5 joint ventures havebeen presented solely based on the information compiled by the management.

In our opinion and according to the information and explanations given to us by theManagement these financial statements /financials information in aggregate are notmaterial to the Company and have not been subjected to audit hence we are unable tocomment on the consequential impact if any on the accompanying statements.

b. We did not audit the financial statements/ information of a branch at Kingdom ofSaudi Arabia included in the Standalone financial statements of the company whosefinancial statements/financial information reflects total assets of Rs 0.01 Million as atMarch 31 2018 and total revenue is NIL for the year ended on that date as considered instandalone financial statements.

Our opinion is not qualified in respect of these matters

9. Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")as amended issued by the Central Government of India in terms of section 143 (11) of theAct we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order.

2. As required by section 143 (3) of the Act we report that:

a. We have sought and except for the effects/possible effects of the matters describedunder "Basis for qualified opinion" paragraph have obtained all the informationand explanations which to the best of our knowledge and belief were necessary for thepurpose of our audit;

b. Except for the effects/possible effects of matters described in the "Basis forqualified opinion" paragraph in our opinion proper books of account as required bylaw have been kept by the Company so far as it appears from our examination of those booksand unaudited accounts/returns adequate for the purpose of our audit have been receivedfrom the branch not visited by us.

c. The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Cash Flow Statement and the Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account and the unaudited accounts/returns ofthe branches not visited by us.

d. in our opinion except for the effects/ possible effects of the matters described inthe "Basis for qualified opinion" paragraph the aforesaid standalone financialstatements comply with the Indian Accounting Standards specified under section 133 of theAct.

e. The matters described under "Basis for Qualified Opinion" and"Emphasis of Matters" paragraph in our opinion may have an adverse effect onthe functioning of the Company;

f. In the term of section 17 (1) (b) of the Insolvency and Bankruptcy Code 2016("the Code") the powers of the board of directors have been suspended and beexercised by the interim resolution professional. Hence written representation fromdirectors have not been taken on record by the Board of Directors. Accordingly we areunable to comment whether none of the director is disqualified as on March 31 2018 frombeing appointed as a director in the terms of Section 164 (2) of the Act.

g. The quali cation relating to the maintenance of accounts and other matters connectedthere with are as stated in the Basis for Quali ed Opinion paragraph;

h. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B". Our report expresses a qualified opinion on theadequacy and operating effectiveness of the Company's internal financial control overfinancial reporting.

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 information and explanations givento us:

i. The Company has disclosed the impact of pending litigations on its financialposition to the extent ascertained in its standalone financial statements (Refer note35);

ii. Except for the effects/possible effects of matters described under basis ofqualified opinion paragraph the Company has made provision as required under theapplicable law or accounting standards for material foreseeable losses if any onlong-term contracts. The Company did not have any derivative contracts;

iii. There has been no delay in transferring the amounts that were due to betransferred to the Investor Education and Protection Fund by the Company during the yearended March 31 2018;

For CHATURVEDI & CO.

Chartered Accountant

Firm Registration No. 302137E

PANKAJ CHATURVEDI

Partner

Membership No. 091239

Hyderabad

June 29 2018

"Annexure A" to the Independent Auditors' Report

Referred to in paragraph 1 under the heading ‘Report on Other Legal &Regulatory Requirement' of our report of even date to the standalone financial statementsof the Company for the year ended March 31 2018:

i. (a) Subject to our comments in para i (b) below the Company has maintained properrecords showing full particulars including quantitative details and situation of fixedassets;

(b) Except for certain locations (including locations where physical access to thefixed assets is restricted by the contractee/clients) the fixed Assets were physicallyverified during the year by the Management in accordance with a regular program ofverification. Further wherever physical verification of fixed assets was performed themanagement is in process of reconciliation of quantities as per verification reports withfixed assets records. Pending such reconciliation and physical verification of certainlocations we are unable to comment on the reasonableness of the physical verificationprogram and discrepancies that may arise on such reconciliation and physical verificationof fixed assets that are lying on those locations where physical verification could not beperformed.

(c) According to the information and explanation given to us title deeds of theimmovable properties have been mortgaged as security with lenders i.e. banks financialinstitutions and others for security of the borrowings raised by the Company. On the basisof our examination of the records of the Company and the copies of the title deedsavailable with the Company the title deeds of immovable properties are held in the nameof the Company except for the details given in Appendix -1;

ii According to the information and explanations given to us Except for certainlocations (including locations where physical access to the fixed assets is restricted bythe contractee/clients) the management has conducted physical verification of inventoryat reasonable intervals during the year. We are unable to comment on the discrepanciesthat may arise on the physical verification of inventories that are lying on thoselocations where physical verification could not be performed.

iii The company has granted interest free unsecured loans to Companies covered in theregister maintained under section 189 of the Act in respect of such loans;

(a) In our opinion the terms and conditions of the loans granted by the Company to 8subsidiaries aggregating to Rs. 6113.32 million as at March 312018 having regard tothe cost of funds to the company are prejudicial to the interest of the company.

(b) In respect of one company the schedule of repayment of the principal amountaggregating to Rs. 537.60 million has been stipulated and the repayment commences in theyear 2026-27. In case of interest free unsecured loan to 7 companies aggregating to Rs.5575.72 million the schedule of repayment is not stipulated and considered by theCompany as repayable on demand hence we are unable to comment as to whether repaymentsare regular.

(c) In case of interest free unsecured loan to one company aggregating to Rs. 537.60million no amount is overdue. In case of interest free unsecured loan to 7 companiesaggregating to Rs. 5575.72 million the schedule of repayment is not stipulated andconsidered by the Company as repayable on demand we are unable to comment whether anyamount is overdue and whether reasonable steps have been taken by the company for recoveryof the principal.

iv According to information and explanation given to us and having regard to the legalopinion obtained by the company in an earlier year that the company being a companyengaged in the business of providing infrastructure facilities in terms of Section 186the company has complied with the provisions of section 185 and 186 of the Companies Act2013 in respect of grant of loans making investments and providing guarantees andsecurity as applicable. v According to the information and explanations given to us theCompany has not accepted any deposits during the year within the meaning of Sections 73 to76 of the Companies Act 2013 and the rules framed there under to the extent notified.

vi We have broadly reviewed the cost records maintained by the Company pursuant to theRules made by the Central Government under sub-section (1) of Section 148 of the CompaniesAct 2013 and are of the opinion that prima facie the prescribed accounts and recordshave been made and maintained. We have however not made a detailed examination of theserecords with a view to determining whether they are accurate or complete.

vii (a) According to information and explanations given to us and records of theCompany examined by us the Company has not been regular in depositing undisputedstatutory dues in respect of provident fund employee's state insurance income-tax salestax service tax duty of excise value added tax and cess and any other statutory dueswith the appropriate authorities. There have been significant delays in a large number ofcases in depositing these dues with the appropriate authorities. Further no undisputedamounts payable in respect of these statutory dues were outstanding as on March 312018for a period of more than six months from the date they became payable except as given inAppendix -2 to this report.

(b) According to the information and explanations given to us and records of theCompany examined by us particulars of dues outstanding in respect of income tax salestax service tax duty of excise and value added tax which have not been deposited onaccount of any dispute are given in Appendix-3 to this report. viii As matters describedin Note 36 and 37 to the financial statement and pursuance of repayment schedulestipulated in the sanction letter the entire amount of borrowing including interest areoverdue and continuing default as on March 31 2018 therefore we are unable to providedperiods of default. Details of defaults in repayment of borrowing and interest are givenbelow;

(Rs. in Million)
Particulars Principal Interest
Cash Credit 32992.10 4082.73
Working Capital Term Loan 14676.37 5781.19
Priority Debt 1226.48 647.45
Term Loan 5906.01 2634.86
Project Specific Loan 434.50 48.86
Funded Interest on Term Loan 51.95 226.16
12.15% Redeemable Non Convertible Debentures 2000 1667.01
Others 1645.20 -
Working Capital Demand Loan & Other Facilities from Bank 3246.34 310.07

ix According to the information and explanations given to us the Company has notraised moneys by way of initial public offer or further public offer (including debtinstruments) and term loans have been applied by the Company during the year for thepurposes for which they were obtained.

x According to the information and explanations given to us no fraud by the Company oron the Company by its officers or employees have been noticed or reported during the year.

xi According to the information and explanations given to us and based on the auditprocedures conducted by us Managerial Remuneration paid or provided was in accordancewith the requisite approvals mandated by the provisions of section 197 read with ScheduleV to the Companies Act 2013.

xii In our opinion and according to the information and explanation given to us theCompany is not a Nidhi Company. Therefore the provisions of Para 3 (xii) of the Order arenot applicable to the Company.

xiii In our opinion and according to the information and explanations given to us weare unable to obtain sufficient and appropriate audit evidence to comment whether alltransactions with the related parties as disclosed in Note 64 to the financial statementsare in compliance with section 177 and 188 of Companies Act 2013. Further whereapplicable the details have been disclosed in the Financial Statements as required by theapplicable accounting standards.

xiv According to the information and explanations given to us the Company has not madeany preferential allotment. Accordingly provisions of para 3 (xiv) of the order are notapplicable to the Company.

xv According to the information and explanations given to us the company has notentered into any non-cash transactions with directors or persons connected with them. Theprovisions of clause 3 (XV) of the Order are not applicable to the company.

xvi In our opinion the Company is not required to be registered under section 45 IA ofthe Reserve Bank of India Act 1934.

For CHATURVEDI & CO.

Chartered Accountant

Firm Registration No. 302137E

PANKAJ CHATURVEDI

Partner

Membership No. 091239

Hyderabad

June 29 2018