Lanco Infratech Ltd.
|BSE: 532778||Sector: Infrastructure|
|NSE: LITL||ISIN Code: INE785C01048|
|BSE 00:00 | 12 Sep||Lanco Infratech Ltd|
|NSE 05:30 | 01 Jan||Lanco Infratech Ltd|
|BSE: 532778||Sector: Infrastructure|
|NSE: LITL||ISIN Code: INE785C01048|
|BSE 00:00 | 12 Sep||Lanco Infratech Ltd|
|NSE 05:30 | 01 Jan||Lanco Infratech Ltd|
The Members of Lanco Infratech Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Lanco Infratech Limited(the Company) which comprise the Balance Sheet as at March 312016 the Statement of Profit and Loss the Cash Flow Statement for the year then endedand a summary of the significant accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
The Companys Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of 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.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions 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. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditors judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Companyspreparation of the financial statements that give a true and fair view in order to designaudit 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 Companys Directors as well as evaluating theoverall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of Affairs of the Company as at March31 2016 and its loss and its cash flows for the year ended on that date.
Emphasis of Matters
Attention is invited to
a) Note 50 to the financial statements which explain the structuring undertaken by themanagement during the year ended March 31 2012. The Companys investment as of March30 2012 in various subsidiaries and associates was transferred to wholly owned step downsubsidiaries and to an associate of wholly owned step down subsidiary aggregating toRs.6815.51 Crores that require lenders and customer approvals. Management has receivedmany such approvals aggregating to 96% in value of the lenders consenting to thestructuring the management is confident of receiving balance approvals from lenders andcustomer and has taken the effect of these transfers while preparing these financialstatements. In case any of these residual approvals are not granted the management willhave to revisit the structure and the consequential impact would then be recorded in thesefinancial statements.
b) (i) Note 51 to the financial statements regarding the adequacy of disclosureconcerning the Companys ability to meet its financial obligations repayment ofvarious loans and unpaid interest and the ability to fund various obligations pertainingto operations including unpaid/overdue creditors for ensuring/commencing normaloperations and further investments required towards ongoing projects. These mattersessentially require the Company to garner such additional cash flows to fund and meet therequirements.
(ii) The Company incurred a Net Loss of Rs. 445 Crores for the year and has unpaidloans and other unpaid dues aggregating Rs. 1447 Crores falling due over next twelvemonth period which also includes repayment of loans sanctioned under restructuring inrespect of which the Company obtained certain reliefs in relation to repayment timelinesof loans and accumulation of unpaid interest and additional funding for commencing normaloperations.
(iii) Certain variances in sanctioned/contracted terms under CDR scheme in regard todisbursements made and their utilization thereon together with considerable delay inimplementation of CDR scheme eventually did not enable the Company to achieve theanticipated performance levels of operations at EPC. Incurrence of further losses and costoverruns in project companies due to delayed execution have been reported. As explained bythe management the Company commenced operations at EPC as well as at the projects whichare under construction and in our view there may be further delays in time lines agreedwith project companies which may result in further cost overruns which in turn mayrequire the Company to arrange the funding for the additional cost. As further explainedby the management the Company is making efforts to reorganise the funding pattern toensure the completion of under construction projects and disposal of assets to meet thefunding gaps. These submissions and assertions by the management are under evaluation bylenders which envisage that the Company will have the ability to garner the required cashflows which have not been independently assessed by us.
(iv) Notwithstanding the efforts as stated above to meet the funding obligations whichwould involve time to materialise these financial statements have been prepared based onthe assumption and considering the management assessment to get requisite further fundingfrom various sources including additional funding from the lenders disbursement ofsanctioned facilities and the Companys efforts in disposing assets. Relying on theabove no adjustments have been made in these financial statements towards any possibleimpact on account of low key operations and delayed execution of projects underimplementation.
c) Note 52 to the financial statements dealing with cancellation of coal blocks by theHonble Supreme Court which included coal mine jointly allotted to Tamil NaduElectricity Board and Maharashtra State Mining Corporation Limited the Allottees.Mahatamil Mining and Thermal Energy Limited (MMTEL) a subsidiary of the Company enteredinto Coal Mining Services Agreement with the Allottees of the mine pursuant to which theamount invested amounting to Rs. 171.26 Crores the realizability of which is dependent onthe compensation to be awarded under the Ordinance issued by Government of India. TheCompany obtained a legal opinion in this regard based on which the investment isconsidered to be recoverable and hence no adjustments have been made in these financialstatements.
d) Note 53 to the financial statements in relation to the carrying value of assetsheld by step down subsidiaries of Lanco Resources International Pte Limited (LRIPL) asubsidiary of the Company in view of continued losses exceeding net worth of LRIPLconsidering the managements initiatives to be implemented with significant financialresources to be deployed in the mining activity and the development of associatedinfrastructure being the port the management is of the view that the carrying value ofthe assets are realizable at the value stated therein. Accordingly no adjustments havebeen made in these financial statements.
e) Note 54 to the financial statements in relation to Lanco Kanpur Highways Limited(LKHL) a subsidiary of the Company has received a notice of termination to theConcession Agreement from National Highways Authority of India (NHAI) and LKHL has alsoissued a notice of termination to NHAI. Arbitration proceedings have been initiated tosettle the claims and the counter claims associated with the termination as per theConcession Agreement. As on March 31 2016 LKHL has incurred certain costs towards theproject the realizability of these amounts is dependent on the outcome of the arbitrationproceedings.
Our opinion is not qualified in the respect of the above matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of Sub Section (11) ofSection 143 of the Act we give in the "Annexure A" a statement on the mattersspecified in Paragraphs 3 and 4 of the Order.
2. As required by Section 143 (3) of the Act 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 and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014.
e) The matters described in the Clause (b) and Clause (d) of the Emphasis of MatterParagraph above in our opinion may have an adverse effect on the functioning of theCompany.
f) On the basis of written representations received from the directors as on March 312016 taken on record by the Board of Directors none of the directors is disqualified ason March 31 2016 from being appointed as a director in terms of Section 164 (2) of theAct.
g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and operating effectiveness of such controls refer to ourseparate report "Annexure B" and
h) With respect to the other matters to be included in the Auditors 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 in its financial statements. Refer Note No. 40 to the financial statements.
ii. The Company has made provisions as required under applicable laws or accountingstandards in respect of the material foreseeable losses on the long term contract. TheCompany did not have any long term derivative contracts.
iii. There are no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
ANNEXURETO T HE INDEPENDENT AUDITORS REPORT
Annexure A to the Independent Auditors Report
Referred to in Clause 1 of "Report on Other Legal and RegulatoryRequirements" Paragraph of the Independent Auditors Report of even date to themembers of Lanco Infratech Limited on the financial statements as of and for the yearended March 31 2016
(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of three years. Inaccordance with this programme certain fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification. In our opinion this periodicityof physical verification is reasonable having regard to the size of the Company and thenature of its assets.
(c) According to the information and explanations given to us and on the basis of ourexamination of records of the Company the title deeds of immovable properties are held inthe name of the Company.
(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on physicalverification of inventory. In respect of inventories lying with third parties these havesubstantially been confirmed by them.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to Companies Firms Limited Liability Partnershipor other parties covered in the register maintained under Section 189 of the CompaniesAct 2013. Therefore the provisions of clause (iii) (iii) (a) (iii) (b) and (iii) (c)of Paragraph 3 of the Order are not applicable 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 with respect to the loansadvances and guarantee made. The provisions of Section 186 are not applicable to theCompany.
(v) The Company has not accepted any deposits from the public.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records undersection 148 (1) of the Companies Act 2013 and are of the opinion that prima facie theprescribed accounts and records have been made and maintained.
(vii) (a) The Company is regular in depositing the undisputed statutory dues includingProvident Fund Employees State Insurance Income Tax Sales Tax Service Tax Dutyof Customs Duty of Excise Value Added Tax Cess and other statutory dues with theappropriate authorities though there have been delays in some instances.
According to the information and explanations given to us no undisputed statutory duespayable in respect of Provident Fund Employees State Insurance Income Tax SalesTax Service Tax Duty of Customs Duty of Excise Value Added Tax Cess and otherstatutory dues with the appropriate authorities which were outstanding at the year end fora period of more than six months from the date they became payable except as follows: -
(b) According to the records of the Company and the explanation and information givento us the dues outstanding of income tax or sales tax or service tax or duty of custom orduty of excise or value added tax or cess that have not been deposited on account ofdispute are as follows:
*Case is pending with Dispute Resolution Panel - refer Note 40(A).
**Amount involved is Rs. 16927.
(viii) According to the records of the Company examined by us and the information andexplanation given to us the Company has defaulted in repayment of principal of Rs.42.33Crores to the lenders as on the reporting date. Details of default to the Banks andFinancial Institutions are as follows:
(ix) Based on the information and explanations given to us by the management termloans disbursed including Priority Loan under CDR scheme have been utilized for thepurposes of CDR Scheme cash flows envisaged as approved by the lenders under the CDRpackage.
(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its Officers or employees has been noticed or reported during thecourse of our audit.
(xi) According to the information and explanations given to us and based on ourexamination of records of the Company the Company has paid/provided managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V of the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company. Accordingly the provisions of clause (xii) of theparagraph 3 of the Order is not applicable.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties primafacie are in compliance with sections 177 and 188 of the Act where applicable anddetails of such transactions have been disclosed in the financial statements as requiredby the applicable accounting standards.
(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
(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 into non-cashtransactions with directors or persons connected with directors. Accordingly clause (xv)of the paragraph 3 of the Order is not applicable.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Therefore the provision of clause (xvi) of the paragraph 3 ofthe Order is not applicable to the Company.
Annexure B to the Independent Auditors 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 controls over financial reporting of LancoInfratech Limited ("the Company") as of March 31 2016 in conjunction withour audit of the financial statements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internalfinancial controls based on "Guidance Note on Audit of Internal Financial ControlsOver Financial Reporting as issued by The Institute of Chartered Accountants of India& Standard Operating Procedures as adopted by the Company". Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to companys policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Companys 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 extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate 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 auditors judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Companys internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A companys internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A companys 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 dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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 unauthorised acquisition use or disposition of thecompanys 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.
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 March 31 2016 based on"Guidance Note on Audit of Internal Financial Controls Over Financial Reporting asissued by The Institute of Chartered Accountants of India & Standard OperatingProcedures as adopted by the Company"