To the Members of
MSP Steel & Power Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of MSP Steel &Power Limited ("the Company") which comprise the Balance sheet as at March 312019 the Statement of Profit and Loss (including the Statement of Other ComprehensiveIncome) the Cash Flow Statement and the Statement of Changes in Equity for the year thenended and notes to the financial statements including a summary of significantaccounting policies and other explanatory information.(hereinafter referred to as"the Standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2019 its loss including othercomprehensive income its cash flows and the changes in equity for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Act. Ourresponsibilities 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 (ICAI) of India together with the ethical requirements that arerelevant to our audit of the standalone financial statements under the provisions of theAct and the Rules there under and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the ICAI's Code of Ethics. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion on the standalone financial statements.
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 for the financial yearended March 312019. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. For each matter below our description ofhow our audit addressed the matter is provided in that context.
|Descriptions of Key Audit Matter || |
|Revenue Recognition || |
|(Refer Note No. 1 and 23 and of the standalone Financial Statement): ||How we addressed the matter in our audit Our audit procedures with regard to revenue recognition included testing controls automated and manual around dispatches/deliveries inventory reconciliations and circularization of receivable balances substantive testing for cut-offs and analytical review procedures. Our audit procedures included the following: |
|Revenue is one of the key profit drivers and is therefore susceptible to misstatement. Cut-off is the key assertion in so far as revenue recognition is concerned since an inappropriate cut-off can result in material misstatement of results for the year. || |
|Assessment of carrying value of equity investments in associate || We obtained an understanding from the management assessed and tested the design and operating effectiveness of the Company's key controls over the impairment assessment. |
|(Refer to Note 4 to the Standalone Financial Statements - "Investments in subsidiaries associates and joint ventures"] || We evaluated the Company's process regarding impairment assessment by involving auditor's valuation experts to assist in assessing the appropriateness of the valuation model including the independent assessment of the underlying assumptions. |
|The Company has equity investment in associate. The Company accounts for equity investments in associate at cost (subject to impairment assessment). For investments carried at cost where an indication of impairment exists the carrying value of investment is assessed for impairment and where applicable an impairment provision is recognised if required to its recoverable amount. || We evaluated the adequacy of the disclosures made in the standalone Financial Statements. |
|The accounting for investments in associate is a Key Audit Matter as the determination of recoverable value for impairment assessment/fair valuation involves significant management judgement. The impairment assessment and fair valuation for such investments have been done by the certified valuer on the basis of Net Assets Value method in accordance with Ind AS 36 and Ind AS 113 respectively. ||Based on the above procedures performed we did not identify any significant exceptions in the management's assessment in relation to the carrying value of equity investments associate. |
|Inventory Management ||Our audit procedures included the following: |
|(Refer Note No. 1 and 9 and of the standalone Financial Statement): || Obtained the understanding of the management with regards to internal financial controls relating of Inventory management. |
|The company deals with various types of bulk material such as Coal Iron Ore and sponge iron & pellets etc. The total inventory of such materials amounts to Rs. Rs. 29975.61 lakhs as on March 312019. The measurement of these inventories involved certain estimations/assumption and also involved volumetric measurements. Measurement of some of these inventories also involved consideration of handling loss moisture loss/gain spillage etc. and thus required assistance of technical expertise. || The Company deployed an Independent agency for verification of Bulk Materials. We have reviewed the internal verification process by the management for certain inventory items. |
|We determined this to be a matter of significance to our audit due to quantum of the amount estimation involved. || We have reviewed the report submitted by external agency and obtained reasons/explanation for such differences and also confirmed the adjustment made by the company. |
| ||Based on the above procedures performed we concluded that measurement and valuation of the inventory at year end is appropriate. |
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report CorporateGovernance and Shareholder's Information but does not include the standalone financialstatements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.If based on the work we have performed we conclude that there is a material misstatementof this other information; we are required to report that fact. We have nothing to reportin this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors 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 the Companies (Indian Accounting Standards) Rules 2015 as amended. 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; andthe design implementation and maintenance of adequate internal financial controls thatwere operating 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 charged with governance are also responsible foroverseeing the Company's financial reporting 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 scepticism 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)(l)of the Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
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 misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
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 statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's report) Order 2016 ("the Order")issued by the Central Government of India in terms of 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 obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
(c) The Balance Sheet the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended from time to time;
(e) On the basis of the written representations received from the directors as on March31 2019 taken
on record by the Board of Directors none of the directors is disqualified as on March31 2019 from being appointed as a director in terms of Section 164(2) of the Act;
(f) With respect to the adequacy of the internal financial controls with reference tofinancial statement of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B".
(g) In our opinion the managerial remuneration for the year ended March 31 2019 hasbeen paid/ provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act; and
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 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-Note 38 to the standalone financialstatements;
II. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
III. There were no amounts which were required to be transferred to the InvestorEducation and Protection fund by the company.
For Singhi & Co.
Firm Registration NO.302049E (Anurag Singhi)
Membership No. 066274
Place: Kolkata Dated: May 302019
Annexure- A to the Independent Auditor's Report
(Referred to in paragraph 1 with the heading 'Report on Other Legal and RegulatoryRequirements' section of our report of even date in respect to statutory audit of MSPSteel & Power Limited for the year ended March 31 2019)
We report that:
i. In respect of its fixed assets:
a. The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
b. All fixed assets have not been physically verified by the management during the yearbut there is a regular programme of verification which in our opinion is reasonablehaving regard to the size of the Company and the nature of its assets. No materialdiscrepancies were noticed on such verification.
c. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company as shown in note no. 3 of the standalone financialstatements except freehold land gross value of INR 6.51 lakh (Net carrying amount INR.6.51 lakh) titles for which is pending registration.
ii. The inventory has been physically verified by the management during the year. Inour opinion the frequency of verification is reasonable. No material discrepancies werenoticed on such physical verification.
iii. According to the information and explanations given to us the Company has notgranted any loan secured/unsecured to companies firms Limited Liability Partnerships orother parties covered in the register maintained under section 189 of the Act.Consequently the provisions of clauses iii (a) iii (b) and iii (c) of the Order are notapplicable to the Company. However we have relied upon register maintained under section189 and management's representation in this regards.
iv. In our opinion and according to the information and explanations given to us theCompany has not advanced loans to directors / to a company in which the Director isinterested to which provisions of section 185 of the Companies Act 2013 apply and hencenot commented upon. In our opinion and according to the information and explanations givento us provision of section 186 of the Companies Act 2013 in respect of loans andadvances given investments made and guarantees and securities given have been compliedwith by the Company.
v. The Company has not accepted any deposits within the meaning of Sections 73 to 76 ofthe Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended). Accordinglythe provisions of clause 3(v) of the Order are not applicable.
vi. We have broadly reviewed the books of accounts maintained by Company in respect ofproduct where pursuant to the rule made by the Central Government of India themaintenance of cost records has been prescribed under section 148 (1) of the Companies Act2013 and are of the opinion that prima facie the prescribed records have beenmaintained. We have not however made a detailed examination of the records with a viewto determine whether they are accurate or complete.
vii. According to the information and explanations given to us and on the basis of ourexamination of the records of the Company:
The Company is regular in depositing undisputed statutory dues including Providentfund. Employee's state insurance Income tax Duty of Customs Goods and Service tax andOther material statutory dues with the appropriate authorities. According to theinformation and explanations given to us no undisputed amounts payable in respect ofProvident fund. Employee's state insurance Income tax Duty of Customs Goods and Servicetax and Other material statutory dues were in arrears as at March 31 2019 for a period ofmore than six months from the date they became payable except as below:
|Nature of Statute ||Nature of Dues ||Amount (Rs. In Lakhs) ||Period to which the amount relates |
|Income Tax Act 1961 ||Income Tax ||164.65 ||Assessment year -200607 2007-08 2008-09 2009-10 and 2014-15 |
b. According to the information and explanation given to us the dues of Sales taxService tax Income tax Value added tax and duty of excise which have not been depositedon account of any dispute and the forum where the dispute is pending as at March 31 2019are as under:-
|Nature of Statute ||Nature of Dues ||Amount (Rs. In lakhs) ||Period to which the amount relates ||Forum where the Dispute is Pending |
|Central Excise Act 1944 ||Excise Duty ||750.49 ||2006-07 to 201011 ||Supreme Court |
|Excise Duty ||1115.11 ||2006-07 to 201516. ||Chief Commissioner- Raipur |
|Excise Duty ||23.12 ||2009-10 ||Additional Deputy Commissioner |
|The Finance Act 1994 ||Service Tax ||20.29 ||2015-16 ||Commissioner (A) |
|Service Tax ||182.62 ||2014-15 ||ITAT |
|Income Tax Act 1961 ||Income Tax ||5.37 ||Assessment year 2010-11 ||Assessing Officer (rectification) |
|Income Tax ||30.37 ||Assessment year 2011-12 ||Commissioner of Income Tax (Appeals) |
|Income Tax ||289.83 ||Assessment year 2014-15 ||Dy. Commissioner of Income Tax (Appeals) |
|Central Sales Tax ||Central Sales Tax ||52.50 ||2009-10 ||Additional Commissioner of Sales tax |
viii. According to the information and explanations given by the management theCompany has not defaulted in dues to banks subject to Note 47 of the standalone FinancialStatements.
ix. The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) during the year and no term loan has been raisedby the company during the year. Therefore this clause is not applicable for the company.
x. Based upon the audit procedures performed for the purpose of reporting the true andfair view of the standalone financial statements and according to the information andexplanations given by the management we report that no material fraud by the Company orno material fraud on the Company by the officers or employees of the Company has beennoticed or reported during the year.
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.
xii. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable.
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 are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the standalone financial statements as required by theapplicable Indian accounting standards.
xiv. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 3 (xiv) of the Order is not applicable to 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 non-cashtransactions with directors or persons connected with him. Accordingly clause 3(xv) ofthe Order is not applicable.
xvi. According to the information and explanations given to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.
For Singhi & Co.
Chartered Accountants Firm Registration NO.302049E
( Anurag Singhi)
Membership No. 066274
Dated: May 302019
ANNEXURE "B" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2 (f) under 'Report on Other Legal and RegulatoryRequirements' section of our report to the Members of MSP Steel & Power Limited ofeven date)
Report on the Internal Financial Controls with reference to financial statement underClause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls with reference to financial statementof MSP Steel & Power Limited ("the Company") as of March 31 2019 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the company is responsible for establishing and maintaininginternal financial controls based on the internal control with reference to financialstatement 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. 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 respective 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 Companies Act 2013.
Our responsibility is to express an opinion on the internal financial controls withreference to financial statement 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") issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing prescribed under Section 143(10) of the Companies Act 2013to the extent applicable to an audit of internal financial controls. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols with reference to financial statement was established and maintained and if suchcontrols operated 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 financial statement and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statement included obtaining an understanding of internal financial controlswith reference to financial statement assessing the risk that a material weakness existsand testing and evaluating the design and operating effectiveness of internal controlbased on the assessed risk. The procedures selected depend on the auditor's judgementincluding the assessment of the risks of material misstatement of the standalone financialstatements 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 financial statement.
Meaning of Internal Financial Controls with reference to financial statement
A company's internal financial control with reference to financial statement is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control withreference to financial statement includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions 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 thecompany's assets that could have a material effect on the financial statements.
Limitations of Internal Financial Controls with reference to financial statement
Because of the inherent limitations of internal financial controls with reference tofinancial statement 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 financial statement to future periods are subject to the risk that theinternal financial control with reference to financial statement may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem with reference to financial statement and such internal financial controls withreference to financial statement were operating effectively as at March 31 2019 based onthe internal control with reference to financial statement criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.
For Singhi & Co.
Chartered Accountants Firm Registration No.302049E (Anurag Singhi)
Membership No. 066274
Dated: May 30 2019