To the Members of Narayani Steels Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone Ind AS financial statements of NarayaniSteels Limited ("the Company") which comprise the Balance Sheet as at 31March 2020 the Statement of Profit and Loss (including Other Comprehensive Income)Statement of changes in Equity and Statement of Cash Flows for the year ended and notesto the standalone financial statements including a summary of significant accountingpolicies and other explanatory information. In our opinion and to the best of ourinformation and according to the explanations given to us the aforesaid standalone Ind ASfinancial statements give the information required by the Companies
Act 2013 as amended ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at March 31 2020 its loss total comprehensiveincome the changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those
Standards are further described in the Auditor's Responsibilities for the Auditof the Standalone Financial Statements' section of our report. We are independent of theCompany in accordance with the Code of Ethics' issued by the Institute of CharteredAccountants of India together with the ethical requirements that are relevant to our auditof the standalone Ind AS financial statements under the provisions of the Act and theRules thereunder and we have fulfilled our other ethical responsibilities in accordancewith the requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our audit opinion on thestandalone financial statements.
Emphasis of Matter
We draw attention to the following matters:
1. As stated in Note No. 40 of the audited standalone financial statements for the yearended 31st March 2020 the company has sent letters to customers in respect oftrade receivables for confirming balances outstanding as at March 31 2020 but in most ofthe cases the customers have not sent written confirmation confirming the balanceoutstanding as at March 31 2020. Accordingly we have applied alternative auditprocedure wherever applicable. Further the management is hopeful that other than whathas been provided for there would not be significant variation on account of non-receiptof the confirmations.
2. As stated in Note No. 40 of the audited standalone financial statements for the yearended 31st March 2020 consequent to the account being classified as NPA bycertain banks the management as a member of prudence and in order to account for allprobable interest liability has provided interest whenever banks have not applied or havereversed the interest on loan. Further certain bank guarantees/letters of credit issuedby the Company have been invoked by creditor. Necessary confirmations/reconciliation is inprogress. In the opinion of the management the adjustments if any arising on suchconfirmations/reconciliation of unsecured loans & borrowings bank guarantees certainbalances with banks including certain fixed deposits trade payables and advances tovenders shall not have any material impact on the financial statements.
3. As stated in Note No. 42 of the audited standalone financial statements for the yearended 31st March 2020 the Company has faced various disruptions in 2019-20due to stoppage of supply of materials fall in demand and prices of steel recession iniron and steel industry and stress over Channel finance and other borrowing accounts. Thesituation has become much grimmer on account of global Covid-19 pandemic and due tolockdowns and restrictions imposed in and outside India. Due to high uncertainties infuture business activities and expected major downfall in economic activities in thesector the management has undertaken an assessment of its business and recoverability onits trade receivables and as per the management receivables to the extent of Rs. 500lakhs over and above the provisions required as per Ind AS 109 could be doubtful.
4. As stated in Note No. 44 of the audited standalone financial statements for the yearended 31st
March 2020 regarding the uncertainties and the management's assessment of thefinancial impact due to the COVID-19 pandemic situation and consequential restrictionsfor which a definitive assessment of the impact in the subsequent period is highlydependent upon future developments. The pandemic has caused significant accounting andauditing challenges. One such challenge being inability for the Company to conduct aphysical verification of inventories for the year-end 31st March 2020 due to Governmenthaving imposed restrictions during the lockdown on account of health travel and safetyconcerns.
The Company's management however conducted physical verification of inventories ondates other than the date of financial statement but prior to the date of the boardmeeting to be held for the purpose of adopting the financial statements and has madeavailable the documents in confirmation thereof. Inventories being material to thefinancial statements of the Company the Standard on Auditing (SA) 501 Audit Evidence -Specific Considerations for Selected items cast a duty on us to obtain sufficientappropriate audit evidence regarding the existence and condition of inventories.
We have performed alternate audit procedures based on documents and other informationmade available to us to audit the existence of inventories as per the Guidance providedby the Standard on Auditing (SA) 501 Audit Evidence - Specific Considerations forSelected items and have obtained sufficient appropriate audit evidence to issue ourunmodified opinion on these financial statements.
5. As stated in Note No. 43 of the audited standalone financial statements for the yearended 31st March 2020 regarding non-realization of debtors overallsubstantial decrease in volume of business and sales defaults in repayment of loans andinterest owing to which some banks have classified the account as NPA and have either notcharged any inter est or have reversed the interest so charged. However the management inits best judgment has provided interest on such borrowings.
6. As stated in Note No. 45 of the audited standalone financial statements for the yearended 31st March 2020 regarding impairment on investment in Associate in viewof accumulated share of loss in FY 2019-20 which has led to extinguishment of itsamortised cost and post accumulated profits in the associate the management has providedfor the impairment loss allowance as per Ind AS 36 Impairment of assets'.
Our opinion is not qualified in respect of the aforesaid matters.
Key Audit Matters
Key Audit Matters are those matters that in our professional judgement 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. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|The key audit matter ||How the matter was addressed in our audit |
|1. Related party transactions ||In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence: |
|(Refer Note 37 to the standalone financial statements) ||1. We carried out an assessment of the key controls to identify and disclose related party relationships and transactions in accordance with the relevant Indian accounting standard. |
|The Company has entered into several transactions with related parties during the year 2019-20. We identified related party transactions as a key audit matter because of risks with respect to completeness of disclosures made in the financial statements; non-compliance with statutory regulations governing related party relationships such as the Companies Act 2013 and SEBI Regulations and the judgement involved in assessing whether transactions with related parties are undertaken at arms' length. ||2. We carried out an assessment of compliance with the listing regulations and the regulations under the Companies Act 2013 including checking of approvals/ scrutiny as specified in Sections 177 and 188 of the Companies Act 2013 with respect to the related party transactions. In cases where the matter was subject to interpretation we exercised judgment to rely on opinions provided by legal practitioners. |
| ||3. We considered the adequacy and appropriateness of the disclosures in the financial statements relating to the related party transactions. |
| ||4. For transactions with related parties we inspected relevant ledgers and other information that may indicate the existence of related party relationships or transactions. We also tested completeness of related parties with reference to the various registers maintained by the Company statutorily. |
| ||5. We have tested on a sample basis Management's assessment of related party transactions for arm's length pricing. |
|2. Expected Credit Loss on Trade Receivables ||Our procedures in relation to the Expected Credit Loss on Trade Receivables included: |
|(Refer Note 3(i) 8 and 38(i) of Standalone Financial Statements.) ||1. Testing with regard to trade receivable includes testing controls over billing and collections ageing analysis etc. |
|As on 31.03.2020 trade receivables stand at Rs. 17500.14 lakhs after providing Expected Credit Loss amounting to Rs. 1123.22 lakhs and an ad hoc additional provision of Rs.500 lakhs towards possible bad debts on account of ||2. Test the completeness and accuracy of the data. |
| ||3. Critically assessed and tested the significant |
disruption in supply and impact of pandemic judgments used by management based on pastCOVID 19. experience.
4. Analyzing the key terms of contract with customers to ascertain provision requiredfor expected credit loss. 3. Recoverability of Deferred Tax Assets Our auditprocedures included the following:
(Refer Note 46 of Standalone Financial
1. Our procedures included obtaining an Statements.) understanding of the process andtesting the controls over preparation of the taxable At March 31 2020 net deferred taxassets profit forecast. recognized were Rs.1565.32 Lakhs.
2. We performed procedures to test the inputs and
The deferred tax assets recognized includes assumptions used in the taxable profitforecast carryforward losses unabsorbed depreciation of against historical performanceRs. 3134.59 lakhs. The recognition of deferred economic and industry indicators publiclytax assets involves judgement regarding the available information and including strategiclikelihood of the realization of these assets in plans. particular whether there will besufficient taxable profits in future periods that support the 3. We inspected thedisclosures in respect of the recognition of these assets. deferred tax asset balancesincluding those disclosures related to significant accounting judgements and estimates.Given the degree of judgment involved in considering these deferred tax assets asrecoverable or otherwise we considered this to be a key audit matter. 4. Contingentliabilities Our audit procedures included the following
1. Obtained and read the Company's accounting
(Refer Note 34 of Standalone Financial policies in respect of claims provisions andStatements.) contingent liabilities to assess compliance with accounting standards. TheCompany has ongoing litigations with various authorities and third parties which could
2. Assessed the design and implementation of the have a significant impact on theresults if the Company's controls over the assessment of potential exposures were tomaterialise. litigations and completeness of disclosures. The amounts involved aresignificant and the Supporting documentation were tested for the application ofaccounting standards to determine positions taken by the management meetings the amountif any to be provided as a liability or conducted with in-house legal counsel and/ordisclosed as a contingent legal team and minutes of Board and sub- liability is inherentlysubjective. committee meetings were reviewed to test the operating effectiveness of thesecontrols. Claims against the Company not acknowledged as debts are disclosed in theFinancial Statements
3. Involved our tax specialists to assess relevant by the Company after a carefulevaluation of the historical and recent judgements passed by the facts and legal aspectsof the matters involved. appropriate authorities in order to challenge the The outcome ofsuch litigation is uncertain and basis used for the the position taken by managementinvolves accounting treatment and resulting disclosures. significant judgment andestimation to determine the likelihood and/or timing of cash outflows and
4. Additionally considered the effect of new the interpretation of preliminary andpending information in respect of contingencies as at 1st court rulings. April 2019 toevaluate whether any change was required in the management's position on thesecontingencies as at 31st March 2020.
Due to restrictions imposed by the Government of India to restrict the spread ofCOVID-19 and health risks involved the audit finalization process for the year underreport was carried out from remote locations i.e. other than the office of the Companybased on the data / details made available and based on financial information / recordsremitted by the management through digital medium. Our report is not modified in respectof this matter.
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 financial statements and our auditor's report thereon. The information included in theannual report is expected to be made available to us after the date of the auditor'sreport.
Our opinion on the Ind AS standalone financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother infor mation is materially inconsistent with the standalone Ind AS financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. If based on the work we have performed we conclude that there is a materialmisstatement of this other information; we are required to report that fact. We havenothing to report in this regard.
Management's Responsibility for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income thestatement of changes in equity and cash flows of the Company in accordance with the IndianAccounting Standard (Ind AS) and accounting principles generally accepted in Indiaspecified under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate implementation and maintenance ofaccounting 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 Ind AS financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud or error.
In preparing the standalone Ind AS financial statements management is responsible forassessing the
Company's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial 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 Standards on Auditing (SAs) will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone Ind AS financialstatements. As part of an audit in accordance with SAs we exercise professional judgmentand maintain professional skepticism throughout the audit. We also:
? Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
? Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under Section 143(3) (i) ofthe Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
? Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
? Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent 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 standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in
(i) planning the scope of our audit work and in evaluating the results of our work; and
(ii) to evaluate the effect of any identified misstatements in the standalone financialstatements.
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 withthose charged with governance we determine those matters that were of most significancein the audit of the standalone financial statements of the current period and aretherefore the key audit matters. We describe these matters in our auditors' report unlesslaw or regulation precludes public disclosure about the matter or when in extremely rarecircumstances we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest 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 of the Act wegive in the "Annexure 1" 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 Other ComprehensiveIncome) Statement of changes in equity and the Cash Flows dealt with by this Report arein agreement with the books of account;
(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Indian Accounting Standards specified under section 133 of the Act.
(e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct;
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these standalone Ind AS financial statementsand the operating effectiveness of such controls refer to our separate Report in "Annexure2" to this report;
(g) In our opinion the managerial remuneration for the year ended March 31 2020 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 of the Act;
(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 in our opinionand to the best of our information and according to the explanations given to us: i. TheCompany has disclosed the impact of pending litigations on its financial position in itsfinancial statements Refer Note 34 to the financial statements.
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 A.C. Bhuteria & Co.
Firm Registration No.303105E
CA. Mohit Bhuteria
Membership No. 056832
Place of Signature: Kolkata Dated: The 30th day of July 2020
ANNEXURE- 1 TO INDEPENDENT AUDITORS' REPORT
Referred to in paragraph 1 of the Report on Other Legal and Regulatory Requirements of
Independent Auditor's Report of even date to the members of Narayani Steels Limited onthe standalone Ind AS financial statements as of and for the year ended 31 March 2020
i. a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
b) The Company has a regular programme of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of three years. Inour opinion this periodicity of physical verification is reasonable having regard to thesize of the Company and the nature of its assets. Pursuant to the programme certain fixedassets were physically verified during the year. No material discrepancies were observedon such verification.
c) In our opinion and according to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties included in property plant and equipment are held in the name of the Company.
In respect of immovable properties been taken on lease and disclosed as property plantand equipment in the standalone Ind AS financial statements the lease agreements are inthe name of the Company.
ii. As explained to us inventories have been physically verified by the managementduring the year. The Company was however unable to conduct a physical verification ofinventories as at the year-end 31st March 2020 due to Government having imposedrestrictions during the lockdown on account of health travel and safety concerns. TheCompany s management conducted physical verification of inventories on dates other thanthe date offinancial statement but prior to the dale of the board meeting to be held forthe purpose of adopting the financial statements and has made available the documents inconfirmation thereof.
In our opinion the frequency of such verification is reasonable. No materialdiscrepancies were noticed on verification between the physical stocks and the bookrecords. (Refer Note 44 to the standalone financial statements and our observations underparagraph Emphasis of Matter of our main report).
iii. On the basis of examination of records and according to the information andexplanations given to us the Company has during the year not granted any loans securedor unsecured to companies firms Limited Liability Partnerships or other parties coveredin the register maintained under section 189 of the Act. Accordingly clause iii (a) (b)(c) of the Order are not applicable to the Company and hence not commented upon.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Act in respect ofmaking investments and providing guarantees and securities as applicable.
v. The Company has not accepted any deposits from the public within the meaning ofSections
73 to 76 of the Act and the rules framed thereunder and therefore the provisions ofthe clause 3 (v) of the Order are not applicable to the Company.
vi. We have broadly reviewed the books of account maintained by the Company in respectof products where pursuant to the Rules made by the Central Government of Indiamaintenance of cost records has been prescribed under sub-section (1) of Section 148 ofthe Act and are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained. We have not however made a detailed examination of the recordswith a view to determine whether they are accurate or complete.
vii. a) Barring some delays in certain cases the Company has generally been regular indepositing undisputed statutory dues Provident Fund Employees State Insurance IncomeTax Goods and Service Tax Cess and other material statutory dues applicable to it withthe appropriate authorities.
According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees State Insurance Income Tax Goods andService Tax Cess and other material statutory dues were in arrears as at 31stMarch 2020 for a period of more than six months from the date they became payable.
b) According to the information and explanations given to us and the records of theCompany examined by us the dues outstanding of income-tax sales-tax service tax dutyof custom duty of excise value added tax goods and service tax and cess on account ofany dispute are as follows:
|NAME OF STATUTE ||NATURE OF DUES ||AMOUNT (Rs. In lakhs) ||PERIOD TO WHICH THE AMOUNT RELATES ||FORUM WHERE DISPUTE IS PENDING |
|Income Tax Act 1961 ||Income Tax ||6.04 ||F.Y. 2005-06 ||CIT (Appeals)Kolkata |
|Income Tax Act 1961 ||Income Tax ||6.46 ||F.Y. 2009-10 ||ITAT Kolkata |
|Income Tax Act 1961 ||Income Tax ||205.52 ||F.Y. 2011-12 ||CIT (Appeals)Kolkata |
|Income Tax Act 1961 ||Income Tax ||5.97 ||F.Y. 2012-13 ||CIT (Appeals)Kolkata |
|Income Tax Act 1961 ||Income Tax ||14.98 ||F.Y. 2013-14 ||CIT (Appeals)Kolkata |
|Income Tax Act 1961 ||Income Tax ||10.73 ||F.Y. 2015-16 ||CIT (Appeals)Kolkata |
viii. In our opinion and according to the information and explanations given to us thecompany has defaulted / delayed in repayment of dues to banks and a financial institutionduring the year and such dues were in arrear as on the balance sheet date as detailedbelow:
| || || |
Default in Principal repayment as at 31st March 2020
Default in Interest repayment as at 31st March 2020
|Particulars ||Nature of credit facility ||Amount (in Lakhs) ||Period of default (in days) ||Amount (in Lakhs) ||Period of default (in days) |
|1. Yes Bank ||Channel Finance ||229.82 ||90 ||5.36 ||120 |
|2. ICICI Bank ||Channel Finance ||812.76 ||133 ||124.21 ||240 |
|3. Union Bank of India ||Cash Credit* ||- ||- ||913.23 ||120 |
|4. Union Bank of India ||Letters of Credit (Devolved) ||4614.76 ||90 ||284.93 ||90 |
|5. Union Bank of India ||Inland Bank Guarantees ||1808.84 ||41 ||- ||- |
| ||(invoked) || || || || |
|6. Axis Bank ||Channel Finance ||497.05 ||151 ||18.17 ||120 |
|7. Andhra Bank Finance ||Channel Finance ||676.32 ||224 ||30.77 ||224 |
|8. TATA Capital Financial Services ||Term Loan ||33.33 ||90 ||3.59 ||90 |
|9. TATA Capital Financial Services ||Channel Finance ||999.56 ||90 ||28.76 ||90 |
* The Balance is in excess of the sanctioned limits for the period of 90 days sincelast irregularity.
The Company has not taken any loans or borrowings from government and has not issuedany debentures.
ix. The Company has not raised moneys by way of initial public offer or further publicoffer
(including debt instruments) during the year. According to the information andexplanations given to us the Company has applied the term loan for the purpose for whichthey were obtained.
x. Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the company or on the company by theofficers and employees of the Company has been noticed or reported during the year.
xi. According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
xii. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly clause 3(xii) of the Order is not applicable.
xiii. According to the information and explanations given to us and the records of theCompany examined by us all transactions with related parties are in compliance withSection 177 and 188 of the Companies Act 2013 and the details have been disclosed in thefinancial statements as required by the applicable accounting standards.
xiv. According to the information and explanations given to us and the records of thecompany examined by us the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year. xv.According to the information and explanations given to us and the records of the companyexamined by us the Company has not entered into non-cash transactions with directors orpersons connected with him. Accordingly clause 3(xv) of the Order is not applicable.
xvi. The company is not required to be registered under section 45-IA of Reserve Bankof India
For A. C. Bhuteria & Co.
Firm Registration No.303105E
CA. Mohit Bhuteria
Membership No. 056832
Place of Signature: Kolkata Date: The 30th day of July 2020
ANNEXURE- 2 TO THE INDEPENDENT AUDITOR'S REPORT
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the
Companies Act 2013 ("the Act")
We have audited the internal financial controls with reference to financial statementsof Narayani Steels Limited ("the Company") as of 31st March2020 in conjunction with our audit of the standalone Ind AS financial statements of theCompany for the year ended on that date.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects adequate internal financial controlswith reference to financial statements as on 31st March2020 based on theinternal financial controls with reference to financial statements 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 and except for the possible effects of thematerial weakness described in Basis for Qualified Opinion paragraph below on theachievement of the objectives of the control criteria the Company's internal financialcontrols with reference to financial statements were operating effectively as of 31stMarch 2020.
We have considered the material weakness identified and reported above in determiningthe nature timing and extent ofaudit tests applied in our audit ofthe standalonefinancial statements for the year ended 31" March 2020 and the material weaknessdoes not affect our opinion on the said standalone financial statements of the Company.
Basis for Qualified Opinion
According to the information and explanations given to us and based on our audit amaterial weakness has been identified in the Company's internal financial controls withreference to financial statements as of 31" March 2020 relating to certain operatingineffectiveness in controls in respect of obtaining balance confirmations from tradereceivables and payables and bank balances at regular intervals.
The inadequate supervisory and review control over Company's process in respect of itsaforesaid assessment in accordance with the accounting principles generally accepted inIndia could potentially result in a material misstatement in preparation and presentationof financial statement including the profit after tax.
A 'material weakness' is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the company's annual or interim financial statements willnot be prevented or detected on a timely basis.
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 Audi t of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). 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 company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on
Auditing issued by ICAI and deemed to be prescribed under section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controlsboth applicable to an audit of Internal Financial Controls and both issued by theInstitute of Chartered Accountants of India. Those Standards and the Guidance Note requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting was established and maintained and if such controls operated effectively in allmaterial respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls with reference financialstatements included obtaining an understanding of internal financial controls withreference to financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgment including theassessment of the risks of material misstatement of the AS financial statements whetherdue 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 statements of the Company.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control 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 control over financialreporting 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 th attransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
For A. C. Bhuteria & Co.
Firm Registration No.303105E
CA. Mohit Bhuteria
Membership No. 056832
Place of Signature: Kolkata Date: The 30th day of July 2020