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Modern Steels Ltd.

BSE: 513303 Sector: Metals & Mining
NSE: N.A. ISIN Code: INE001F01019
BSE 00:00 | 06 Mar Modern Steels Ltd
NSE 05:30 | 01 Jan Modern Steels Ltd
OPEN 11.00
PREVIOUS CLOSE 11.00
VOLUME 500
52-Week high 17.40
52-Week low 6.45
P/E
Mkt Cap.(Rs cr) 15
Buy Price 0.00
Buy Qty 0.00
Sell Price 10.95
Sell Qty 7600.00
OPEN 11.00
CLOSE 11.00
VOLUME 500
52-Week high 17.40
52-Week low 6.45
P/E
Mkt Cap.(Rs cr) 15
Buy Price 0.00
Buy Qty 0.00
Sell Price 10.95
Sell Qty 7600.00

Modern Steels Ltd. (MODERNSTEEL) - Auditors Report

Company auditors report

To

The Members of Modern Steels Limited

Report on the Financial Statements

1. We have audited the accompanying financial statements of Modern Steels Limitedwhich comprise the Balance Sheet as at March 31 2018 the Statement of Profit and Loss(including Other

Comprehensive Income) the Statement of Changes in Equity and Statement of Cash Flowsfor the year ended and a summary of significant policies and other explanatoryinformation.

Management's Responsibility for the Financial

Statements

2. The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 with respect to the preparation and presentation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance including other comprehensive income changes in equityand cash flows of the Company in accordance with the Indian Accounting Standards (Ind AS)prescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended and other accounting principles generally accepted inIndia.

3. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets oftheCompanyandforpreventinganddetectingfrauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

Auditors' Responsibility

4. 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.

5. We conducted our audit in accordance with the

Standards on Auditing specified under Section

143(10) of the Act. Those Standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks ofaccounting materialmisstatement of the financial statements whether due to fraud or error. In making thoserisk assessments the auditor considers internal financial control relevant to theCompany's preparation of the financial statements that give a true and fair view in orderto design audit procedures that are appropriate in the circumstances but not for thepurpose of expressing an opinion on whether the Company has in place an adequate internalfinancial controls system over financial reporting and the operating effectiveness of suchcontrols. An audit also includes evaluating the appropriateness of the accounting policiesused and the reasonableness of the accounting estimates made by the Company's Directorsas well as evaluating the overall presentation of the financial statements.

7. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Opinion

8. We have audited the standalone financial statements of Modern Steels Limited("the Company") which comprise the balance sheet as at March 31 2018 and thestatement of Profit and Loss (statement of changes in equity) and the statement of cashflows for the year then ended and notes to the financial statements including a summaryof significant accounting policies and other explanatory information.

9. In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in the Basis for QualifiedOpinion section of our report and Emphasis of Matters the aforesaid financial statementsgive a true and fair view of in conformity with the accounting principles of the state ofaffairs of the Company as at March 31st 2018 and profit/ loss (changes in equity) andits cash flows for the year ended on that date.

Basis for Qualified Opinion

I0. Director's remuneration is not admissible as prescribed in Sec-197 of companiesAct2013 if there are no profits or profits are inadequate except in accordance with theprovision of Schedule V and if it is not able to comply with such provisions the priorapproval of central government is required.

The Company is not eligible to pay director remuneration for non-compliance ofconditions prescribed in schedule V of the companies Act 2013. The company during theyear has given the following director remuneration

Name Designation

Remuneration (Rs)

1. Mr. Krishan Kumar Goyal Managing Director

4014684

2. Mr. Amarjit Goyal Chairman

1354800

3 Mr. R.K. Sinha Director

3863600

*Above figures of director's remuneration are inclusive of perks.

11. Prior approval from central government for inability to comply with the saidconditions has however not been taken. 12. We conducted our audit in accordance with

Standards on Auditing (SAs) specified under section 143(10) of the Companies Act 2013.Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the financial statements under the provisions of the Companies Act 2013and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the ICAI's Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our qualified opinion.

Emphasis of Matter

1. Interest provisioning on facilities from Consortium banks: The Company's variouscredit facilities have been declared "Non-Performing Assets" by its respectivebanks. There is a usual practice that banks discontinue to account for as"income" in respect to the accrued interest on such assets subsequent to thedeclaration of these as "Non-performing assets". The bankers of the company toohave not accounted as "income" in respect to the interest subsequent to NPAdeclaration date. In order to achieve the desired congruency on this issue &uncertainty of the amount liable to be paid the management of the company has notprovided for such interest i.e. interest on credit facilities subsequent to the date ofdeclaration of these credit facilities as non-performing. Such interest amounts toRs.25.18 Crores which has resulted in the understatement of current liabilities and lossesby Rs.25.18 Crores.

2. Statement on Impact of above qualification for the Financial Year ended March312018.

(Amount Rs in Crore)
Particulars Audited Figures (as reported before adjusting for Adjusted Figures (audited figures after adjusting for qualifications)qualifications)
1 Turnover/ Total 397.31 397.31
Income
2 Total Expenditure 427.55 452.73
3 Net Profit/(Loss) (30.24) (55.42)
4 Earnings Per (21.97) (40.27)
Share
5 Total outside 234.66 259.84
Liabilities

*The above calculation is based only after giving effect of

NPA interest.

3. Reclassification of Long Term Loans into current liabilities

The Company's various credit facilities declared as NPA for which one time settlementwas pending have been recalled by the bank and as such the amounts of such term loans andcorporate loans have been reclassified into current liabilities from non-currentliabilities.

4. Going-Concern

The preparation of the financial statements is done on going concern basisconsequently assets and liabilities are being carried at their book value. The company hasaccumulated losses and has incurred losses during the financial year ended 31st March

2018. As on date the Company's current liabilities exceeded its current assets and theCompany's net worth has also been eroded. There are negative operating cash flowsindicated by historical financial statements adverse key financial ratios and inabilityto comply with the term loan agreements.

These conditions indicate the existence of a material uncertainty that may castsignificant company's ability to continue as a going concern.

Our Opinion is not qualified in respect of above matters.

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 of the Act we give inthe Annexure a statement on the matters specified in the paragraph 3 and 4 of the Orderto the extent applicable.

2. As required by Section 143(3) of the Act we report that: a. We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit; b. In our opinion proper books ofaccount as required by law have been kept by the Company so far as appears from ourexamination of those books. c. The Balance Sheet the Statement of Profit and Lossincluding Other Comprehensive Income

Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Reportare in agreement with the books of account. d. In our opinion the aforesaid standalonefinancial statements comply with the Indian Accounting Standards prescribed under section133 of the Act. e. On the basis of the written representations received from the directorsas on March 31

2018 taken on record by the Board of Directors none of the directors is disqualifiedas on March doubtaboutthe

31 2018 from being appointed as a director in terms of Section 164(2) of the Act. f.With respect to the other matters to be included in the Auditor's Report in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to thebest of our information and according to the explanations given to us:

• The Company has disclosed the impact of pending litigations on its financialposition in its financial statements;

• The Company has made provision as required under the applicable law or Indianaccounting standards for material foreseeable losses if any on long-term contractsincluding derivative contracts;

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

For Aaryaa & Associates
Chartered Accountants
Firm Registration No. 0015935N
CA Harsharanjit Singh Chahal
Place: Chandigarh Partner
Dated: 3rd July 2018 M. No. 091689

ANNEXURE 1

THE AUDITORS' INDEPENDENT REPORT

The Annexure referred to in our report to the members of the company for the year ended31 March 2018. To the best of our knowledge and belief and information & explanationgiven to us we further report that:-

1. a) The company has maintained proper records to show full particulars includingquantitative details & situation of its fixed assets. b) As explained to us the fixedassets have been physically verified by the management at reasonable intervals which inour opinion is appropriate having regards to size of the company and nature of its assets.No material discrepancies have been noticed during the year. c) The title deeds ofimmovable properties are held in the name of the Company.

2. a) The inventory of the company has been physically verified by the management atreasonable intervals during the year. b) No material discrepancies were noticed.

3. The company has not granted loans secured or unsecured to Companies Firms or otherparties covered in the Register maintained u/s 189 of the Company Act 2013 during theyear.

4. In respect of loans investments guarantee and security the provisions of section185 and 186 of the Companies Act 2013 have been complied with.

5. The company has accepted loans from directors amount Rs 0.50 crore as well as fromcorporate bodies amounting to Rs 1.20 crores. The company has not accepted any publicdeposits hence the directives issued by the Reserve Bank of India & the provisions ofSection 73 to 76 of the Companies Act 2013 are not applicable. No order has been passedby the Company Law Board or National Company Law Tribunal or Reserve Bank of India or anycourt or any other Tribunal.

6. On the basis of records produced to us we are of the opinion that prima facie thecost records prescribed by the Central Government of India under section 148(1) of the Acthave been made

& maintained & also cost audit will be conducted in due course of time. We havenot carried out any detailed examination of such Account & records.

7. (a) According to the books and records as produced and examined by us in accordancewith generally accepted auditing practices in India and also based on Managementrepresentations undisputed statutory dues in respect of

Provident Fund Employee's State Insurance dues Investor Education and ProtectionFund

Income Tax Service Tax Cess Goods and Services Tax and other material statutory dueshave generally been regularly deposited by the Company during the year with theappropriate authorities in India and there were no arrear outstanding in respect of abovefor a period of more than six month as on 31.03.2018.

(b) According to the records of the Company examined by us and the information andexplanations given to us there are no dues of sales tax income tax customs dutyservice tax excise duty and cess which have not been deposited on account of any disputeother than the following amounting to 1.67 crore. The details are as under:-

NATURE OF DUES/NAME OF STATUTES EXCISE DUTY FORUM WHERE DISPUTE IS PENDING YEAR DISPUTED AMOUNT (Rs)
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2007-08 256533
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2007-08 to 2008-09 259085
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2004-05 to 2006-07 8956212
CENTRAL EXCISE ACT 1944 CESTAT NEW DELHI 2002-03 to 2004-05 1587580
CENTRAL EXCISE ACT 1944 CESTAT NEW DELHI 2004-05 to 2005-06 355235
CENTRAL EXCISE ACT 1944 CESTAE NEW DELHI 2008-09 110550
CENTRAL EXCISE ACT 1944 CESTAT NEW DELHI 2003-04 to 2007-08 2078246
CENTRAL EXCISE ACT 1944 COMMISSIONER (APPEALS) CHANDIGARH 2004-05 516272
CUSTOMS DUTY
CUSTOMS ACT 1962 CESTAT AHMEDABAD 2004-05 2535450

8. During the year ended 31 March 2018 the Company has defaulted on timely payment ofprincipal and payment of interest on term loans and cash credits. The lender wise detailswith respect to interest and principal in default as on 31.03.2018 is as under:

Rs in lakhs
Particulars Amount Nature of in lacs Due Date of Default
1. State Bank of India 12171 Principal 01/02/2016
2. Punjab National Bank 31 Interest 4778 Principal 81 Interest 01/04/2016
3. Canara Bank 1890 Principal 24 Interest 30/09/2016

*Interest amounting to Rs.4592 lacs has not been provided in books

9. The Company did not raise money by way of initial public offer or further publicoffer (including debt instruments and term loans during the year).

10. As per the information and explanation given to us and on the basis of examinationof records no material fraud on or by the Company was noticed during the course of ouraudit.

11. The Company has not obtained the requisite approval as mandated by the provisionsof section 197 read with schedule V of the Companies Act for the payment of managerialremuneration. The details of the same have been mentioned in the

"Basis of Qualified Opinion" section of Audit Report.

12. In our opinion considering the nature of activities carried on by the Companyduring the year the provisions of any special/statute applicable to Nidhi Company are notapplicable to it.

13. All transactions with related parties are in accordance with section 177 and 188 ofthe Companies Act 2013 and details have been disclosed in the financial statements asrequired by the applicable Ind-AS.

14. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review.

15. The Company has not entered into any non-cash transactions with directors orpersons connected with him during the year under review.

16. The Company is not required to be registered under section 45-IA of the ReserveBank of India 1934.

For Aaryaa & Associates
Chartered Accountants
Firm Registration No. 015935N
CA Harsharanjit Singh Chahal
Place: Chandigarh Partner
Dated: 3rd July 2018 M. No. 091689

ANNEXURE 2

Annexure to the Independent Auditor's Report of even date to the members of ModernSteels Limited on the financial statements for the year ended 31st March

2018

Independent Auditor's report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section

143 of the Companies Act 2013 ("the Act")

1. In conjunction with our audit of the financial statements of Modern Steels Limited("the Company") as of and for the year ended 31stMarch 2018 we have audited theinternal financial controls over financial reporting (IFCoFR) of the company as of thatdate.

MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (IFCoFR) issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of the company's 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.

AUDITORS' RESPONSIBILITY

3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India (ICAI) and deemed to be prescribed underSection 143(10) of the Act to the extent applicable to an audit of IFCoFR and theGuidance Note on Audit of Internal Financial

Controls Over Financial Reporting (the "Guidance

Note") issued by the ICAI. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate IFCoFR were established and maintained and if suchcontrols operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5. We believe that the audit evidence we have obtained is sufficientand appropriate toprovide basis for our audit opinion on the Company's IFCoFR.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

6. A Company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with Generally Accepted Accounting Principles. A Company'sIFCoFR includes those policies and procedures that (1) Pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company;

(2) Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with authorisations of management and directors of the company; and

(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the

Company's assets that could have a material effect on the financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.

OPINION

8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at 31st March 2018 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls over Financial Reporting issued by the Institute ofChartered Accountants of India.

For AARYAA & ASSOCIATES
Chartered Accountants
(Firm Registration No. 015935N)
CA Harsharanjit Singh Chahal
Place: Chandigarh Partner
Dated: 3rd July 2018 M. No. 091689