You are here » Home » Companies » Company Overview » Mercator Ltd

Mercator Ltd.

BSE: 526235 Sector: Infrastructure
NSE: MERCATOR ISIN Code: INE934B01028
BSE 00:00 | 24 Sep 1.86 0.01
(0.54%)
OPEN

1.92

HIGH

1.93

LOW

1.81

NSE 00:00 | 24 Sep 1.85 -0.05
(-2.63%)
OPEN

1.90

HIGH

1.90

LOW

1.85

OPEN 1.92
PREVIOUS CLOSE 1.85
VOLUME 169594
52-Week high 3.66
52-Week low 0.73
P/E
Mkt Cap.(Rs cr) 56
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1.92
CLOSE 1.85
VOLUME 169594
52-Week high 3.66
52-Week low 0.73
P/E
Mkt Cap.(Rs cr) 56
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Mercator Ltd. (MERCATOR) - Auditors Report

Company auditors report

To the Members of Mercator Limited

Report on the Audit of the Standalone Financial Statements

Adverse Opinion

We have audited the accompanying Standalone Financial Statements of Mercator Limited(hereinafter referred as "the Company") which comprise the Balance Sheet as atMarch 31 2020 the Statement of Profit and Loss [including Other Comprehensive Income]the Statement of Cash Flow and the Statement of Changes in Equity for the year then endedand notes to the Standalone Financial Statements including a summary of significantaccounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us because of the significance of the matter(s) described in the 'Basis forAdverse Opinion' section of our report the accompanying Standalone Financial Statementsdo not give a true and fair view in conformity with the accounting principles generallyaccepted in India of the state of affairs of the Company as at March 31 2020 its loss[including other comprehensive income] its cash flows and the statement of changes inequity for the year ended on that date.

Basis for Adverse Opinion

We draw attention to-

a. Note No. 3.23 of the Standalone Financial Statements regarding preparation of theFinancial Statements on a going concern basis. During the year the Company's financingarrangements expired and substantial amounts outstanding were due and payable on March 312020. The Company has been unable to conclude re-negotiations or obtain replacementfinancing against the same. The Company has accumulated losses and has incurredsignificant losses during the current financial year. The Company has substantialinvestments and loans and advances receivable from subsidiary companies and other disputedreceivables which are not readily realizable to service the Company's current liabilitiesand the Company's net worth has also been fully eroded in addition to defaults withlenders and inability to meet its current liabilities which substantially exceeds itscurrent assets. Besides certain cases have been filed by operational creditors andfinancial creditors in National Company Law Tribunal (NCLT) against the Company. TheCompany has disposed off a substantial portion of its Property Plant and Equipment inorder to repay its liabilities. Further the management has not shared a revival plan forthe Company to continue as a going concern and hence in the absence of the same weconclude that the going concern assumption has been vitiated. The Standalone FinancialStatements have however been prepared on a going concern basis by the management.

b. Note No. 3.25 of the Standalone Financial Statements regarding the Company'sinvestments in its wholly owned foreign subsidiary Mercator International Pte Ltd. (MIL)which has been impaired in full amounting to Rs 426.31 crore (excluding investment inequity shares - Rs 0.29 crore). The significant investment of MIL is in its coal mines andrelated infrastructure in Indonesia and the valuation of these assets was conducted onDecember 312019 by an independent valuer and the same has been considered as on March31 2020. Due to the onset of COVID-19 we are unable to comment on the impact on thevaluation and consequently the financial statements had the valuation been done as onMarch 312020.

c. Note No. 3.05(iii) of the Standalone Financial Statements regarding unprovidedcurrent tax demands under dispute to the tune of Rs 63.18 crore pending at variousjudicial forums of the Income Tax department which are treated as contingent liabilities.In the absence of the required supporting documents justifying the stand of the Company weare unable to comment on final outcome of such assessments and the potential financialimpact of the same.

d. Note No. 3.26 of the Standalone Financial Statements regarding termination of SagarSamrat Conversion Project (SSCP) undertaken by a subsidiary Mercator Oil & Gas Ltd.(hereinafter referred as "MOGL" or "subsidiary") by ONGC which iscurrently under arbitration. The Company has investments in equity amounting to Rs 0.15crore which has been fully impaired as on March 31 2020 and loans amounting to Rs 85.70crore (which includes un-serviced interest amounting to Rs 21.62 crore excludingimpairment of Rs 32.16 crore) and the balance as per the financial statements net ofimpairment amounts to Rs 53.54 crore as at March 31 2020 in MOGL which in the view ofthe management is recoverable. In view of the pending outcome of the arbitration and alsobasis the audit report of the auditor of the Subsidiary we are unable to comment on therecoverability of such investment and loan amount.

e. Note No. 3.27 of the Standalone Financial Statements regarding the Company'sinvestments in its Indian subsidiary Mercator Petroleum Ltd. (hereinafter referred to as"MPL") amounting to Rs 47.93 crore (excluding impairment of Rs 16.17 croreduring the year) and loan (including Debentures) given amounting to Rs 104.31 crore(including un-serviced interest of Rs 31.55 crore and excluding impairment of Rs 6.05crore) as on March 31 2020 and the balance as per financial statements includinginvestments and loans amounts to Rs 130.02 crore which are considered recoverable. MPLhas entered into a Farm in Farm out (FIFO) Agreement for sale of its participatinginterest in its Oil Block CB-ONN-205/9 (CB-9) subject to fulfillment of certainconditions and the management is confident of being able to conclude this transaction andhave estimated the impairment for the investment and advances accordingly. As per theinformation and explanations provided to us and also basis the audit report of the auditorof the MPL we are unable to obtain sufficient appropriate evidence about therecoverability of such investment and loan given.

f. Note No. 3.28 of the Standalone Financial Statements regarding balanceconfirmations not been received in respect of certain trade receivables trade and otherpayables and loans and advances as a result of which reconciliation process andconsequential adjustments if any has not been carried out. The Company has adjusted /provided significant amounts basis its internal estimates against which necessarysupporting documentation has not been made available to us.

We conducted our audit of the Standalone Financial Statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Companies Act 2013("the Act"). Our responsibilities under those Standards are further described inthe 'Auditor's Responsibilities for the Audit of the Standalone Financial Statements'section of our report. We are independent of the Company in accordance with the 'Code ofEthics' issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the Standalone Financial Statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our adverse opinion on the Standalone Financial Statements.

Emphasis of Matter

We draw attention to -

a. Note No. 3.29 of the Standalone Financial Statements regarding receivable from aninsurance company amounting to Rs 54.28 crore pertaining to total loss claim on a vesselpertaining to the year 2012-13 which is under litigation and has been considered fullyrecoverable by the management and is supported by a legal opinion.

Our opinion is not modified in respect of the aforementioned 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 Standalone FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. In addition to the matters described in the Basis forAdverse Opinion section we have determined the matters described below to be key auditmatters to be communicated in our report.

Sr. No. Key audit matters How our audit addressed the key audit matter
1. Provisions for Impairment of investments Loans and advances Receivables Our Audit Approach Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
Refer Note No. 2.3 2.6 and 2.8 to the Standalone Financial Statements. The Company has provided for an amount of Rs 447.64 crore pertaining to impairment of its investments in its subsidiaries Rs 42.31 crore pertaining to impairment of loans and advances to its subsidiaries Rs 20.94 crore pertaining to its receivables and advances and has written back an amount of Rs 3.85 crore pertaining to its payables during the year. This has been done basis evaluation conducted by the management and developments in its various lines of business during the year of its investments loans and advances receivables and payables. These items are material and non- recurring adjustments carried out in the Standalone Financial Statements basis management judgements and estimates requiring specific audit procedures to be conducted by us. 1. Gained an understanding the key controls operations around testing of recoverability of investments loans and advances and receivables.
2. Obtained the list of investments loans and advances and accounts with amounts that were impaired/ provided or written back along with the rationale for the same and appropriate approvals.
3. Read the audited/ unaudited Financial Statements for these entities.
4. Held discussions with the management about the recoverability of the loans and also significant changes that has took place since last reporting.
5. Read the minutes of the Audit committee and Board of Directors approving the same.
6. Reviewed the work and relied on reports or evaluation by experts wherever applicable.
7. Tested on sample basis the correspondence and documentation relating to these provisions/ write backs wherever available.
We have assessed the appropriateness of provision based on the assumptions considered by the management and above- mentioned audit procedures conducted by us and elaborated our findings in "Basis for Adverse Opinion" and "Emphasis of Matter" section of our report. We have also reviewed whether appropriate disclosures are made in the Standalone Financial Statements.
2. Revenue Recognition Our Audit Approach
The Company has different revenue streams for vessels and dredgers. Each contract contains various clauses which impact the determination of the transaction price of the identified performance obligation of the Company including qualitative factors basis which deductions may be carried by the customers. The estimation of the completion of performance obligations and determination of the revenue to be recognized and deductions to be accounted involves high level of judgments and estimation. Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
1. Evaluation of the design of internal control for recognizing revenue.
2. Selected a sample of the continuing and new contracts and tested the operating effectiveness of the internal controls relating to identification of the distinct performance obligations and the determination of the transaction price.
3. Selected a sample of the continuing and new contracts and performed the following procedures:
• Read analyzed and identified the distinct performance obligations.
• Compared these performance obligations with that identified and recorded by the Company.
• Considered terms of the contract to identify the transaction price.
• Tested sample transactions to assess whether the revenue has been appropriately accounted including any under performance claims for time charters.
• Performed analytical procedures for reasonableness of revenue accounted and disclosed.
3. Impairment of Assets The Company has Vessels and Dredgers with a carrying value of Our Audit Approach Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
Rs 15.81 crore (net of impairment of Rs 41.04 crore done during the year) as on March 31 2020. There are impairment indicators in the Company given the current market conditions in shipping and availability of contracts in dredging business. The Company has carried out independent assessment of value of each of the vessels and dredgers and has also estimated the Value in Use. Assessment of the Value in Use involves making several assumptions pertaining to sales pricing future cost estimation the discount rate to be applied the scrap value at the end of the life and other subjective factors. The Company has estimated a total impairment provision of Rs 41.04 crore for the year which has been provided in the Standalone Financial Statements. 1. Obtained the list of Cash Generating Units (Vessels and Dredgers) and their carryi.ng values
2. We discussed the potential changes in key drivers as compared to previous year / actual performance with management in order to evaluate whether the inputs and assumptions used in the cash flow forecasts were suitable.
3. Considered the case wise scenario of each vessel including its present status.
4. Evaluated the Value in Use calculation prepared by the management and the reasonableness of the key assumptions applied in the impairment calculation.
5. We tested the arithmetical accuracy of the models.
We have assessed the appropriateness of impairment provision based on the assumptions considered by the management and above-mentioned audit procedures conducted by us and elaborated our findings in "Basis for Adverse Opinion". We have also reviewed whether appropriate disclosures are made in the Standalone Financial Statements.

Information Other than the Standalone Financial Statements and Auditor's Report thereon

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe Standalone Financial Statements and our auditor's report thereon. The Annual Report isexpected to be made available to us after the date of this auditor report.

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 in the audit or otherwise appears to be materially misstated.

When we read the Other Information if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance andtake appropriate actions necessitated by the circumstances and the applicable laws andregulations.

Responsibilities of the Management for the Standalone Financial Statements

The Company's Board of Directors is 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 cash flows and changes in equity of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards (IND-AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe 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 the 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.

Those 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 StandaloneFinancial Statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• 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 Act we are also responsible for expressing our opinion on whether the Companyhas adequate internal financial controls system in place and the operating effectivenessof such controls.

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

• Conclude on the appropriateness of management and Board of Director use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. Our conclusions areelaborated in the 'Basis of Adverse Opinion' section of our report and are based on theaudit evidence obtained up to the date of our auditor's report.

• Evaluate the overall presentation structure and content of the StandaloneFinancial Statements including the disclosures and whether the Standalone FinancialStatements represent the underlying transactions and events in a manner that achieves fairpresentation.

Materiality is the magnitude of the misstatement in the statement that individually orin aggregate makes it probable that the economic decisions of a reasonably knowledgeableuser of the statement may be influenced. We consider quantitative materiality andqualitative factors in; (i) planning the scope of our audit work and evaluating theresults of our work; and (ii) to evaluate the effects of any identified misstatements inthe statement.

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 Standalone Financial Statementsfor the financial year ended March 31 2020 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

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 sub-section (11) of section 143 ofthe Act 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 possible effects of the matters described in theBasis for

Adverse Opinion paragraph above obtained all the information and explanations which tothe best of our knowledge and belief were necessary for the purposes of our audit;

(b) Except for the possible effects of the matter described in the Basis for AdverseOpinion paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;

(c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Cash Flow Statement and Statement of Changes in Equity dealt with by thisReport are in agreement with the relevant books of account;

(d) Due to the matters described in the Basis for Adverse Opinion paragraph above inour opinion the aforesaid Standalone Financial Statements do not comply with theAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended;

(e) The matters described in the Basis for Adverse Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company;

(f) On the basis of the written representations received on email (due to nationwidelockdown) by the Company from the directors as on March 31 2020 and basis thecertificate of non - disqualification of directors issued pursuant to Regulation 34(3) andSchedule V Para C Clause (10)(i) of the SEBI Listing Obligations and DisclosureRequirements) Regulations 2015 by Independent Company Secretary taken on record by theBoard of Directors none of the directors is disqualified as on March 312020 from beingappointed as a director in terms of Section 164 (2) of the Act.

(g) The adverse remarks relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Adverse Opinion paragraph above;

(h) With respect to the adequacy of the internal financial controls with reference tothe financial statements of the Company with reference to these Standalone FinancialStatements and the operating effectiveness of such controls refer to our separate Reportin "Annexure B" to this report; which expresses an adverse opinion on theadequacy of and operating effectiveness of the Company's internal financial controls forthe reasons stated therein.

(i) In our opinion and to the best of our information and according to theexplanations given to us excess remuneration of Rs 1.62 crore (including Rs 0.46 crorefor the current year) was paid to the Managing Director which exceeded the limitsapplicable under section 197 of the Act read with Schedule V thereto. The amount is duefor recovery as at March 31 2020. Refer Note No. 3.21 of the Standalone FinancialStatements.

(j) 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 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Financial Statements - Refer Note No. 3.05 to the StandaloneFinancial Statements;

ii. The Company did not have any material long-term contracts including derivativecontracts for which there were any material foreseeable losses;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For Singhi & Co. Chartered Accountants ICAI Firm Registration Number: 302049E
Place: Mumbai Date: July 15 2020 Nikhil Singhi Partner Membership Number: 061567 UDIN No: 20061567AAAAAF4900

Annexure A to the Independent Auditor's Report

Annexure A referred to in paragraph 1 of the Independent Auditors Report of evendate to the members of Mercator Limited (the "Company") in the StandaloneFinancial Statements as of and for the year ended March 31 2020 under the heading"Report on other Legal and Regulatory requirements".

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

(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) As per the information and explanations provided to us no physical verification offixed assets of the Company has been done during the year. Hence we are unable to commenton the reasonableness on the periodicity of such activity and any impact on the StandaloneFinancial Statements.

(c) According to the information and explanations given to us and on the basis of theexamination of the records of the Company the title deeds of the immovable propertiesincluded in fixed assets are held in the name of the Company.

ii. As per the information and explanations given to us the Company doesn't hold anyinventory as on March 31 2020. Accordingly provisions of the paragraph 3(ii) of theOrder are not applicable to the Company.

iii. The Company has granted loans secured or unsecured to Body Corporate covered inthe register maintained under Section 189 of the Companies Act 2013 ('the Act'):

a. In our opinion the rate of interest and other terms and conditions on which loanshad been granted to the bodies corporate listed in the register maintained u/s 189 of theAct were not prima facie prejudicial to the interest of the Company at the time thesewere granted. The Company has however impaired Rs.37.83 crore during the year towards theloans granted in earlier period and interest thereon.

b. According to the information and explanations given to us in case of the loansgranted to the bodies corporate listed in register maintained u/s 189 of the Act theseloans are repayable on demand which have not been recalled and hence we are unable tocomment on whether the repayment of principal or interest amounts are regular.

c. As the loans granted are repayable on demand and have not been recalled we areunable to comment on whether any amounts are overdue in respect of the loans granted to abody corporate listed in the register maintained u/s 189 of the Act.

iv. In our opinion and according to the information and explanations given to us theCompany has compiled with the provisions of Section 185 and Section 186 of the CompaniesAct 2013 with respect to Loans and Advances made guarantee given and investments made.However since the Company has impaired substantial part of its investments and loans andadvances hence the interest accrued on such loans and advances has been impaired onaccount of threat of recoverability.

v. According to the information and explanations gives to us the Company has notaccepted any deposit from the public within the meaning of section 73 to 76 of the Act andRules framed thereunder to the extent notified. Therefore the provisions of clause (v) ofthe Order is not applicable.

vi. In our opinion and according to the information and explanations given to us theCentral Government has not prescribed the maintenance of Cost Records by the Company u/s148 (1) of the Companies Act 2013.

vii. According to the information and explanations given to us in respect of Statutorydues:

(a) Basis of our examination of the records of the Company amounts deducted/ accruedin the books of account in respect of undisputed statutory dues including Provident FundEmployee's State Insurance Income-tax Goods and Service Tax Cess and other materialstatutory dues have not been regularly deposited with the appropriate authorities andthere have been serious delays in large number of cases.

(b) Basis of our examination of the records of the Company there are no undisputedamounts payable which are deducted/accrued in the books of accounts in respect ofProvident Fund Employees' State Insurance Income Tax and any other statutory dues whichwere outstanding at March 31 2020 for a period of more than six months from the datethey become payable except as under:

Name of the Statute Nature of Dues Amount (? in crore) Period to which the amount relates Due Date Date of Payment Remarks if any
Goods and Service Tax (Various States) CGST / SGST 8.92 (excluding Input Tax Credit) May 2018 to March 2019 Various Due dates Not paid until date of signing of Financial Statements

(c) According to the information and explanations given to us the dues of Income TaxService Tax and Cess which have not been deposited on account of any dispute and the forumwhere the dispute is pending as on March 31 2020 are as under:

Name of the Statue Nature of Dues Amount (Rs. in crore) Period to which the amount relates Forum where the disputes are pending
Service Tax under Finance Act 1994 Service Tax 64.03 2006-07 to 2015-16 CESTAT & CCE(A) Mumbai
Income Tax Income Tax 0.44 AY 2003 - 04 Commissioner of Income Tax (A)
4.16 AY 2007 - 08 ITAT
23.63 AY 2008 - 09 ITAT
12.22 AY 2009 - 10 ITAT
0.54 AY 2010 - 11 ITAT
2.74 AY 2011 - 12 ITAT
1.55 AY 2012 - 13 ITAT
4.36 AY 2013 - 14 ITAT
4.29 AY 2014 - 15 ITAT
9.25 AY 2015 - 16 Commissioner of Income Tax (A)

viii. Based on our audit procedures and as per the information and explanationsprovided to us the Company has delayed as well as defaulted in repayment of loans orborrowings to financial institutions banks or government.

A) Delays in repayment of loans or borrowings:

Sr. No. Name of Lender

Borrowings

Interest

Amount (Rs. in crore) Period (in days) Amount (Rs. in crore) Period (in days)
Long Term
1 Axis Bank Limited 15.81 Ranging between 122 to 183 days 1.43 Ranging between 36 to 50 days
2 Export and Import Bank of India 27.69 256 6.92 256
3 ICICI Bank Limited 0.23 30 0.18 30
4 Yes Bank Limited 0.01 30 - -
5 IDBI Bank Limited - - 4.04 50
Short Term
6 ICICI Bank Limited 14.00 235 - -
7 Other Financial Lenders # 10.61 92 - -
8 State Bank of India 181.99 Ranging between 30 to 39 days 0.88 30
9 Yes Bank Limited - - 3.50 335

# Delays w.r.t. loan from various NBFCs / Financial Institutions have been consolidatedunder "Other Financial Lender" and not disclosed case wise.

B) Defaults in repayment of loans or borrowings:

Sr. No. Name of Lender Borrowings Interest
Amount (Rs. in crore) Period (in days) Amount (Rs. in crore) Period (in days)
Long Term
1 Axis Bank Limited 234.32 366 31.51 Ranging between 91 to 366 days
2 Export and Import Bank of India 63.11 19
3 ICICI Bank Limited 183.41 366 19.76 366
4 AION Direct Private Limited - 12.89 301
5 UTI Capital Private Limited - 73.17 399
Short Term
6 ICICI Bank Limited 3.06 131 4.27 366.00
7 Other Financial Lenders # 29.17 366 7.99 366.00
8 State Bank of India 151.29 Ranging between 327 to 336 days 27.78 Ranging between 327 to 336 days
9 Yes Bank Limited 24.12 143 0.36 1

# Defaults w.r.t. loan from various NBFCs / Financial Institutions have beenconsolidated under "Other Financial Lender' and not disclosed case wise.

ix. In our opinion and according to the information and explanations given to us noamounts are raised by way of initial public offer or further public offer and term loanduring the year and thus reporting under paragraph 3 (ix) relating to utilization of thesame is not applicable to the Company.

x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practice in India andaccording to the information and explanations given to us we have neither come across anyinstances of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during year nor have been informed of any such case by the Management.

xi. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act in the previous year. The excess amount paidamounting to Rs. 1.62 crore (including Rs. 0.46 crore in FY 2019-

2020) which represents the remuneration paid after the event of default i.e.repayment of interest and installments to the Banks and Public Financial Institutions wastreated as an advance recoverable from director and still continuing to be reflected insimilar manner as on March 312020.

xii. The Company is not a Nidhi Company hence the provisions of clause 3(xii) of theOrder are not applicable to the Company.

xiii. Based on our audit procedures and as per the information and explanations givenby the management all transactions with related parties are in compliance with sections177 and 188 of the Act where applicable and the details of such related partytransactions have been disclosed in the Standalone Financial Statements as required by theapplicable 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. Accordingly provisions of the paragraph 3(xiv) of the order are not applicableto the Company.

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 noncashtransactions with directors or persons connected with them. Accordingly paragraph 3(xv)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. Accordingly paragraph 3(xvi) of the Order is not applicable tothe Company.

For Singhi & Co. Chartered Accountants ICAI Firm Registration Number: 302049E
Place: Mumbai Date: July 15 2020 Nikhil Singhi Partner Membership Number: 061567 UDIN No: 20061567AAAAAF4900

Annexure - B to the Independent Auditor's Report

(Referred in paragraph 2(h) under 'Report on Other Legal and Regulatory Requirements'section of our report of even date)

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 with reference to the financialstatements of MERCATOR LIMITED ("the Company") as of March 312020in conjunction with our audit of the Standalone Financial Statements of the Company forthe year ended on that date.

MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control with reference to the financialstatements criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India ('ICAI').These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to Company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.

AUDITOR'S RESPONSIBILITY

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to the financial statements based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Act to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the ICAI. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls withreference to the financial statements was established and maintained and if such controlsoperated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to the financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tothe financial statements included obtaining an understanding of internal financialcontrols with reference to the financial statements assessing the risk that a materialweakness exists and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of theStandalone Financial Statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemwith reference to the financial statements.

Meaning of Internal Financial Controls with reference to the financial statements

A Company's internal financial control with reference to the financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Standalone Financial Statements for external purposes inaccordance with generally accepted accounting principles. A Company's internal financialcontrol with reference to the financial statements includes those policies and proceduresthat:

(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of Standalone Financial Statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the Company are being madeonly in accordance with authorizations of management and directors of the Company; and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the Company's assets that could have amaterial effect on the Standalone Financial Statements.

Inherent Limitations of Internal Financial Controls with Reference to The FinancialStatements

Because of the inherent limitations of internal financial controls with reference tothe financial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to the financial statements to future periods are subject to the risk that theinternal financial control with reference to the financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

ADVERSE OPINION

According to the information and explanations given to us and based on our audit thefollowing material weakness has been identified in the operating effectiveness of theCompany's internal financial control with reference to the financial statements as atMarch 31 2020:

a) The Company did not have adequate internal financial controls to test and assess thefundamental going concern assumption basis which the Standalone Financial Statements havebeen prepared. This control deficiency has a pervasive impact on the control framework ofthe Standalone Financial Statements.

b) The Company did not have appropriate internal control systems

• for maintaining documentation review and impairment related to the advancesgiven and outstanding and

• for obtaining confirmations and reconciliation of balances of trade receivablestrade and other payables and loans and advances

• for the documentary evidence with respect to the provision / adjustments createdduring the year on the investments loans advances and receivable balances accounted bythe Company.

which could potentially result in the Company carrying advances/ assets at eitherhigher or lower amounts than what may be appropriate.

c) The Company did not provide any evidence of conducting an operating effectivenesstest of its controls. This control deficiency has a pervasive impact on the financialcontrols of the entity.

A material weakness is a deficiency or a combination of deficiencies in internalfinancial controls with reference to the financial statements such that there is areasonable possibility that a material misstatement of the Company's Standalone FinancialStatements will not be prevented or detected on a timely basis.

In our opinion because of the effects of the material weaknesses described above theCompany has not maintained adequate and effective internal financial controls withreference to the financial statements as of March 31 2020 based on the internal controlwith reference to the financial statements criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of March 31 2020standalone financial statements of the Company and these material weaknesses do notaffect our opinion on the standalone financial statements of the Company.

For Singhi & Co. Chartered Accountants ICAI Firm Registration Number: 302049E
Place: Mumbai Date: July 15 2020 Nikhil Singhi Partner Membership Number: 061567 UDIN No: 20061567AAAAAF4900

.