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MSTC Ltd.

BSE: 542597 Sector: Others
NSE: MSTCLTD ISIN Code: INE255X01014
BSE 00:00 | 07 Aug 159.85 7.70
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NSE 00:00 | 07 Aug 159.75 7.25
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OPEN 153.00
PREVIOUS CLOSE 152.15
VOLUME 74507
52-Week high 235.15
52-Week low 70.40
P/E 14.97
Mkt Cap.(Rs cr) 1,125
Buy Price 159.85
Buy Qty 1019.00
Sell Price 159.85
Sell Qty 268.00
OPEN 153.00
CLOSE 152.15
VOLUME 74507
52-Week high 235.15
52-Week low 70.40
P/E 14.97
Mkt Cap.(Rs cr) 1,125
Buy Price 159.85
Buy Qty 1019.00
Sell Price 159.85
Sell Qty 268.00

MSTC Ltd. (MSTCLTD) - Auditors Report

Company auditors report

FOR THE YEAR ENDED 31st MARCH. 2018

Independent Auditors' Report To the Members of MSTC LIMITED Report on the StandaloneInd AS Financial Statements

We have audited the accompanying Standalone Ind AS Financial Statements of MSTC LIMITED("the Company") which comprise the Balance Sheet as at 31 March 2018 dieStatement of Profit and Loss (Including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year then ended and a summaryof significant accounting policies and other explanatory information (hereinafter referredto as ‘Standalone Ind AS financial statements').

Management's Responsibility for the Standalone Ind AS Financial Statements

The Company's Board of Directors is responsible for die matters stated in Section 134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese Standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance (including other comprehensive income) changesin equity and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards specified undersection 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015as amended. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofStandalone Ind AS financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these Standalone Ind AS financialstatements based on our audit. We have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit of the Standalone Ind AS financial statements in accordance withthe Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the Standalone Ind AS financial statements are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Standalone Ind AS financial statements. The procedures selecteddepend on the auditors' judgment including the assessment of the risks of materialmisstatement of the Standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the Standalone Ind AS financial statements thatgive a true and fair view in order

to design audit procedures that are appropriate in the circumstances. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the Standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Standalone Ind AS financialstatements.

Basis for Qualified Opinion

i) Trade Receivables includes Rs. 19544.01 lakhs due from M/S SPS Steel Rolling MillsLtd for procurement and supply of materials to the party which is now more than five yearsold. Thus with the passage of time quality of materials has deteriorated and as per thevolumetric analysis the net realizable value of pledged raw materials comes to Rs. 6230lakhs. The party has defaulted in making the payment as per the terms of the Arbitrationaward. As per the volumetric analysis done on 01.12.2017 pledged stock worth Rs. 6543lakhs was unauthorisedly lifted by the party inspite of the same being under thejurisdiction of a Custodian. The creditors have filed an application in NCLT forinitiation of Corporate Insolvency Resolution Process against the Company. The Company hassecurity deposit of Rs. 10 lakhs and has also recovered Rs.641 lakhs from the party duringthe financial year 2018-19. An amount of Rs. 1500 lakhs have been provided for in thebooks of accounts. The Company should have provided a further amount of Rs. 17393.01 lakhsagainst this debt during the year. Non-provision of the same has resulted in overstatementof profit and understatement of provision for the year 2017-18 by Rs. 17393.01 lakhs -Refer Note no. 9.4 (a) of notes to the Standalone Ind AS financial statements.

ii) Trade Receivables includes Rs. 22124.13 lakhs due from M/S Concast Steel &Power Ltd. for procurement and supply of materials. With the passage of time quality ofmaterials has deteriorated resulting in lower realisable value. As per the report ofvolumetric analysis conducted on 03.05.2018 part of pledged stock at Bankura unit wasunauthorisedly lifted by the party inspite of the same being under the jurisdiction of aCustodian. Volumetric analysis at Jharsuguda unit of the party' could not be performed byMSTC. Thus the book value of Rs. 108 lakhs of the pledged stock in this unit is doubtful.Pursuant to admission of a case of insolvency filed by creditors in NCLT MSTC has filedits claim before Insolvency Resolution Professional under NCLT. The Company has a securitydeposit of Rs. 40 lakhs and during the year procured materials on behalf of the party forRs. 9206 lakhs against which they realized only Rs.9088 lakhs. As per the volumetricanalysis of the materials the net realizable value of the pledged stock is Rs.2313.81lakhs. The Company has made a provision of Rs. 3000 lakhs during the year. The Companytherefore should have provided a further amount of Rs. 19084.13 lakhs against this debtduring the current year. This non-provision of the shortfall has resulted in overstatementof profit and understatement of provision for the year 2017-18 by Rs. 19084.13 lakhs -Refer Note no. 9.4 (b) of notes to the Standalone Ind AS financial statements.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in paragraph (i) and (ii) ofBasis for Qualified Opinion the overall effect of which is overstatement of profit andunderstatement of provision by Rs. 36477.14 lakhs the aforesaid standalone Ind ASfinancial statements give the information required by the Act in the manner so requiredand give a tiue and fair view in conformity with the accounting principles generallyaccepted in India of the state of affairs of the Company as at 31 March 2018 and itsprofit other comprehensive income its cash flows and changes in equity for the yearended on that date.

Emphasis of matters

We draw attention to the following matters:

i) Reference is invited to Note no. 9.4 (c) of notes to the Standalone Ind AS financialstatements wherein it is stated that Trade Receivables include Rs. 11484.29 lakhs due fromM/S Jai Balaji Industries Ltd for procurement and supply of materials which are more thanthree years old. The party is making payment as per the Arbitration award and in thecurrent year only Rs. 482 lakhs have been adjusted against outstanding opening receivableof Rs. 11937 lakhs. Since as per the Volumetric Analysis Report by an independent valuerthe net realizable value of the pledged stock is higher at Rs. 14185.21 lakhs (Previousyear: Rs. 6870 lakhs) no provision has been considered necessary by the Management in thecurrent year.

ii) Reference is invited to Note no. 9.4 (d) of notes to the Standalone Ind ASfinancial Statements wherein it is stated that Trade Receivables include Rs. 2831.52 lakhsdue from M/S Global Coke Ltd for procurement and supply of materials which are more thanthree years old. In view of the expected liquidation of dues by way of consumption ofpledged materials and also net realizable value of the pledged stock is higher at Rs. 5311lakhs (Previous year: Rs. 1250 lakhs) as per the Volumetric Analysis Report by anindependent valuer no provision has been considered necessary by the Management in thecurrent year.

iii) Reference is invited to Note no. 42 of notes to the Standalone Ind AS financialStatements relating to pending confirmation/reconciliation of balances of TradeReceivables and Trade Payables and its consequential impact that may arise onreconciliation.

iv) The Company had appointed four Independent Directors two on 06.09.2017 and theremaining two on 09.03.2018. Two Audit Committee meetings were held during the year. Inabsence of the Independent Directors no Audit Committee meetings could be held beforeSeptember 2017.

Our opinion is not modified in respect of these matters.

Other Matters

The comparative financial information of the Company for the year ended 31 March 2017included in the Standalone Ind AS financial statements are based on the previously issuedstatutory financial statements prepared in accordance with the Companies (AccountingStandards) Rules 2006 audited by the predecessor auditor M/s Ray & Co. whose reportdated 07 August 2017 for the year ended 31 March 2017 expressed a modified opinion onthose standalone financial statements.

Report on Other Legal and Regulatory Requirements

1. With respect to the other matters to be included in the Auditor's Report in terms ofthe directions of the Comptroller and Auditor General of India (CAG) under Section 143(5)of the Act and on the basis of our examination of the books and records of the Companycarried out in accordance with the generally accepted principles in India and according tothe information and explanations given to us we give in the Annexure A statement on thematters specified in the directions of CAG.

2. 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 B a statement on the matters specified in paragraphs 3and 4 of the said order.

3. 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 Other ComprehensiveIncome) Statement of Changes in Equity and the Cash Flow Statement dealt with by thisreport are in agreement with the books of account

d. In our opinion the aforesaid standalone Ind AS financial statements 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 Qualified Opinion paragraph above in ouropinion may not have an adverse effect on the functioning of the Company.

f. As per notification No. GSR 463(E) dated 5th June 2015 issued by the Ministry ofCorporate Affairs Government of India Section 164(2) of the Act is not applicable to theCompany.

g. With respect to the adequacy of the internal financial control over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in Annexure C.

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 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements - Refer Note no. 34 of notes to theStandalone Ind AS financial statements.

ii. The Company did not have any such 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 to theInvestor Education and Protection Fund by the Company.

For D. K. Chhajer & Co.

Chart^xlMrxo uncfriTs-. FRMJoYl38Ej)

Nirark Jhiui jhunwala

Partner

Membership No. 057170

Place: Kolkata Date : 27.07.2018

ANNEXURE A TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 1 under the heading "Report on other Legal andRegulatory Requirements" of our report of even date)

Directions issued by the Comptroller and Auditor General of India under sub section 5of Section 143 of the Companies Act 2013 based on the verification of records of theCompany and according to information and explanations given to us we report as under:

Direction Auditor's Reply
1 . 2 Whether the company has clear title/lease deeds for freehold and leasehold respectively? If not please state the area of freehold and leasehold land for which title/lease deeds are not available. Whether there are any cases of waiver/write off of debts/loans/interest etc. if yes the reasons there for and amount involved. The Company does not have any freehold land and in respect of leasehold land the Company has a clear lease deed. However in respect of 3 flats in Kolkata and 11 flats in Mumbai the Company does not have clear title deeds.

Bad Debt amounting to Rs. 859.39 lakhs was written off during the year based on the Resolution plan finalized by NCLT Mumbai and Claims receivable of Rs. 45081.10 lakhs was written off during the year based on the order of the Arbitrator under PMA whereby proceedings have been adjourned sine die till disposal of CBI case is filed in this regard.

3 Whether proper records are maintained for inventories lying with third parties & assets received as gift/grant(s) from Government or other authorities. There were no inventories lying with third parties and the Company has not received any assets as gift/grant from Government or any other authorities.

For D. K. Chhajer & Co.

Chartered Asco imtants

FKNmjhm (\

Niraj fet Jnunjhunwala

Partner

Membership.No.: 057170

Place: Kolkata Date: 27.07.2018

ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 2 under "Report on Other Legal and RegulatoryRequirements" section of our

report of even date)

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

(b) The Company has physically verified its fixed assets during the year. According tothe information and explanations given to us no material discrepancies were noticed onsuch verification.

(c) The title deeds of the following immovable properties are not held in the name ofthe Company:

Total No. of Cases 14
Whether leasehold/freehold Freehold
Gross Block (as at Balance Sheet date) Rs. 105 lakhs
Net Block (as at Balance Sheet date) Rs. 97.07 lakhs

ii. The Company does not hold any inventory' as at the year end. Therefore theprovisions of Clause 3(ii) of the Order are not applicable to the Company.

iii. The Company has not granted any loan secured or unsecured to companies LimitedLiability Partnerships firms or other parties covered in the register maintained underSection 189 of the Act. Therefore the provisions of Clause 3(iii) [(a) (b) and (c)] ofthe Order are not applicable to the Company.

iv. The Company has not granted any loan provided any guarantee/ security and henceSection 185 of the Act is not applicable. The investment made by the Company is incompliance of section 186 of the Act.

v. The Company has not accepted any deposits from the public within the meaning ofSections 7j to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Therefore the provision of clause 3(v) of the order is not applicable on theCompany.

vi. The Central Government of India has not prescribed the maintenance of cost recordsunder subsection (1) of Section 148 of the Act. Therefore the provision of clause 3(vi)of the order is not applicable on the Company.

vii. (a) The Company is generally regular in depositing the undisputed statutory duesincluding provident fund employees' state insurance income tax goods and service taxcess and any other statutory dues as applicable with the appropriate authorities.According to the information and explanations given to us no undisputed amounts payablein respect of the aforesaid dues were outstanding as at 31 March 2018 for a period of morethan six months from the date of becoming payable.

(b) According to the information and explanations given to us and the records of theCompany examined by us the particulars of dues of income-tax sales-tax value added taxcustom duty service tax etc as at 31 March 2018 which have not been deposited on accountof a dispute are as follows:

ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 2 under "Report on Other Legal and RegulatoryRequirements" section of our

i report of even date)

Name of the Statute Nature of Dues Period to which the amount relates (F.Y) Amount (Rs. in Lakhs) Forum where dispute is pending
1 UP VAT Act 2008 Claim by Sales Tax Authority 2001-02 1.93 High Court Allahabad
2004-05 1.67 Commercial Tax Tribunal Bench Ghaziabad.
2 J&K Sales Tax Act 1962 Claim by Sales Tax Authority 2009-10 1.50 Commercial taxes Circle Jammu
2010-11 0.66 Commercial taxes Circle Jammu
3 WB VAT Act 2003 Claim by Sales Tax Authority 2009-10 332.75 Appellate Revision Board Kolkata
2012-13 314.42 Commissioner

Kolkata

AP VAT Act 2005

Claim by Sales Tax Authority

1998-99 22.53 Sales Tax Appellate Tribunal (STAT) Visakhapatnam
AP VAT Act 2005 1999-00 44.42 Assessing Authority i.e Commercial Tax Officer / Surya Bagh Circle Visakhapatnam
4 AP VAT Act 2005 2004-05 9.08 Sales Tax Appellate Tribunal (STAT) Visakhapatnam
AP VAT Act 2005 2005-06 3.70 Sales Tax Appellate Tribunal (STAT) Visakhapatnam
AP VAT Act 2005 Claim by Sales Tax Authority 2006-07 0.76 Sales Tax Appellate Tribunal (STAT) Visakhapatnam
AP VAT Act 2005 Claim by Sales Tax Authority 2008-13 79.35 High Court of Judicature at Hyderabad
AP VAT Act 2005 Claim by Sales Tax Authority 2007-08 27.46 High Court. Andhra Pradesh
Central Sales Tax Act (CST)

Claim by Sales Tax Authority

2009-10 249.00 Sales Tax Appellate Tribunal (STAT) Visakhapatnam
5 Central Sales Tax Act (CST) 2011-12 82.32 Appellate Deputy Commissioner (Appeals) Vijayawada
Central Sales Tax Act (CST) 2015-16 14.28 Appellate Deputy Commissioner (Appeals) Vijayawada
6 Orissa Sales Tax Act Claim by Sales Tax Authority 1986-87 269.00 High Court Orissa
Gujarat VAT Act 2003 Claim by Sales Tax Authority 2002-03 52.25 Pre-Audit Dept. Ahmedabad
7 Gujarat VAT Act 2003 2003-04 369.45 Pre-Audit Dept. Ahmedabad
Gujarat VAT Act 2003 2004-05 217.99 Appeal filed in Tribunal against DC (Appeal Order)
Total of Sales Tax Dues 2094.52
Customs Act 1962 Claim by Custom Department 1995-96 240.00 Commissioner Customs Chennai
Customs Act 1962 2001-02 203.81 High Court Calcutta
8 Customs Act 1962 Claim by Custom Department 2012-13 1542.49 CESTAT

Bangalore

Customs Act 1962 2013-14 83.55 CESTAT

Bangalore

Total of Custom Dues 2069.85
Finance Act 1994 (Service Tax) 2002-05 73.02 High Court Delhi
9 Finance Act 1994 (Service Tax) Service Tax Demand 2005-07 1490.10 CESTAT

Kolkata

Finance Act 1994 (Service Tax) 2003-05 22.02 Commissioner Appeals Kolkata
Total of Service Tax Dues 1585.14
Income Tax Act 1961 Income Tax Demand 2002-03 51.56 High Court Calcutta
Income Tax Act 1961 2004-05 1.06 CIT Appeals Kolkata
Income Tax Act 1961 2006-07 11.64 CIT Appeals Kolkata
10 Income Tax Act 1961 2008-09 67.62 Income tax Appellate tribunal Kolkata
Income Tax Act 1961 2011-12 21.34 Commissioner Appeals Kolkata
Income Tax Act 1961 2012-13 275.73 Commissioner Appeals Kolkata
Income Tax Act 1961 2013-14 100.05 Commissioner Appeals Kolkata
Income Tax Act 1961 2014-15 176.75 Commissioner Appeals Kolkata
Total of Income Tax Dues 705.75
TOTAI.TAX DUES 6455.26

viii. In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of dues to banks except for the loans as mentionedin Note No. 20(a) and 20(b) of the notes to the Standalone Ind AS financial statements anddetailed here under:

Name of Bank Principal Interest
Indian Overseas Bank Rs. 138 lakhs -
Standard Chartered Bank Rs. 14362 lakhs Rs. 7889 lakhs

The Company did not have any loans or borrowings from financial institutions orgovernment and has not issued any debentures.

ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 2 under "Report on Other Legal and RegulatoryRequirements" section of our

report of even date)

ix. The Company has not raised any money by way of initial public offer/further publicoffer (including debt instruments)/term loans. Accordingly the provisions of Clause 3(ix)of the Order are 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 practices in India andaccording to the information and explanations given to us we report that no fraud on theCompany or no fraud by the officers and employees of the Company has been noticed orreported during the year nor have we been informed of any such case by the management.

xi. The managerial remuneration has been paid/provided in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V of the Act.

xii. The Company is not a Nidhi company. Accordingly paragraph 3(xii) of the Order isnot applicable to the Company.

xiii. All the transactions with related parties are in compliance with section 177 and188 of the Act and the details have been disclosed in the notes to the Standalone Ind ASfinancial statements as required by the applicable accounting standards.

xiv. No money was raised through preferential allotment/private placements of shares orfully/partly convertible debentures during the year and hence the provision of Clause3(xiv) of the Order is not applicable to the Company.

xv. According to the information & explanation given to us and the records of theCompany examined by us the Company has not entered into any non-cash transactions withdirectors or persons connected with them as referred to in Section 192 of the Act.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.

For D. K. Chhajer & Co.

Chartered Accountants FRN3fMJ31?E\

Niraj Kjjhun hunwala

Partner

Membership No. 057170

Place: Kolkata Date: 27.07.2018

ANNEXURE C TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 3(g) under "Report on Other Legal and RegulatoryRequirements" section of our report of even date)

Report on the Internal Financial Controls over Financial Reporting under Clause (i) ofsub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of MSTCLIMITED ("the Company") as at 31 March. 2018 in conjunction with our audit ofthe standalone Ind AS financial statements of the Company for the 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 over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (the "Guidance Note").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.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Standards on Auditing prescribed under section 143(10) of the Act and GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting (the "GuidanceNote") to the extent applicable to an audit of internal financial controls bothissued by the Institute of Chartered Accountants of India. Those Standards and GuidanceNote require that we comply with the ethical requirements and plan and perform the auditto obtain reasonable assurance about whether adequate internal financial controls overfinancial reporting was established and maintained and if such controls operatedeffectively in all material aspects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditors' judgment including the assessment of the risks ofmaterial misstatement of the standalone Ind AS financial statements whether due to fraudor 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 systemover financial reporting.

(Referred to in paragraph 3(g) under "Report on Other Legal and RegulatoryRequirements"

section of our report of even date)

Meaning of Internal Financial Controls over Financial Reporting

A company's internal Financial controls over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial controls over financialreporting includes those policies and procedures that:

(a) Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(b) 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 authorizations of management and directors of the company; and

(c) 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 financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlsover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Qualified Opinion

According to the information and explanations given to us and based on our audit thefollowing material weakness have been identified as at 31 March 2018:-

(a) The Company did not have an appropriate internal control system for customeracceptance credit evaluation and establishing credit limits for sales which couldpotentially result in the Company recognizing revenue without establishing reasonablecertainty of ultimate collection. The internal control over follow up with the customersfor recovery of dues is inadequate.

(b) The Company did not have an appropriate internal control system with regard topledged stock of raw materials procured by the Company on behalf of its customers and keptunder the control of the Custodian appointed by the Company resulting in unauthorizedliftment of the materials from the godowns.

A ‘material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company's annual or interim financialstatements will not be prevented or detected on a timely basis.

(Referred to in paragraph 3(g) under "Report on Other Legal and RegulatoryRequirements

section of our report of even date)

In our opinion except for the possible effects of the material weaknesses describedabove on the achievements of the objectives of the control criteria the Company hasmaintained in all material aspects adequate internal financial controls system overfinancial reporting and such internal financial controls over financial reporting wereoperating effectively as at 31 March 2018 based on the internal financial control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

For D. K. Chhajer & Co.

Chartered Accountants

Nir^j\K(Jnunjhunwala

Partner J

Membership No. 057170

Place: Kolkata Date: 27.07.2018