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Orissa Sponge Iron & Steel Ltd.

BSE: 504864 Sector: Metals & Mining
NSE: N.A. ISIN Code: INE228D01013
BSE 00:00 | 04 Mar Orissa Sponge Iron & Steel Ltd
NSE 05:30 | 01 Jan Orissa Sponge Iron & Steel Ltd
OPEN 159.70
PREVIOUS CLOSE 160.00
VOLUME 881
52-Week high 160.00
52-Week low 0.00
P/E
Mkt Cap.(Rs cr) 477
Buy Price 0.00
Buy Qty 0.00
Sell Price 160.00
Sell Qty 64.00
OPEN 159.70
CLOSE 160.00
VOLUME 881
52-Week high 160.00
52-Week low 0.00
P/E
Mkt Cap.(Rs cr) 477
Buy Price 0.00
Buy Qty 0.00
Sell Price 160.00
Sell Qty 64.00

Orissa Sponge Iron & Steel Ltd. (ORISSASPONGE) - Auditors Report

Company auditors report

TO THE MEMBERS OF ORISSA SPONGE IRON & STEEL LIMITED

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying Standalone Financial Statements of Orissa Sponge Iron & Steel Limited(the Company) which comprise the Balance Sheet as at March 31 2019 the Statement of Profit and Loss (including Other Comprehensive Income) the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date and a summary of the significant accounting 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 explanations given to us the aforesaid Standalone Financial Statements give the information required by the Companies Act 2013 ('the Act) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended (Ind AS) and other accounting principles generally accepted in India of the state of affairs of the Company as at March 31 2019 the profit and total comprehensive income 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 the Standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independence requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules made thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Financial Statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of most significance 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 Financial Statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Sl Key Audit MatterHow our audit addressed the Key Audit Matter
1 Waiver gains on One Time Settlement (OTS) with the Lenders included in Capital Reserve (Refer Note 13 C)Pursuant to One Time Settlement (OTS) completed during the year the company has added the entire gains on OTS to the Capital Reserve Account consisting of waiver of principal amounting to Rs. 127.76 crores and waiver of Interest amounting to Rs. 391.04 crores
To the extent of Interest waiver on OTS added to the Capital Reserve account the Income shown in the Statement of Profit and Loss is understated having an equivalent impact on the overall profit/loss for the period under review.
2 De-recognition of deferred tax in the Financial Statements (Refer Note 27 C)The Company's plant is shut down since 2012 and continues to remain so till date. The Company had no income from operations since 2012 as well as for the year under review. There is no certainty of income generation from operations in the near future. The derecognition of deferred tax in the financial statements is in accordance with the significant accounting policy adopted by the Company which also corroborates with our opinion on the subject matter in our earlier reports.
3 Impairment loss of Property Plant & Equipment other than Land Other loss on value erosion (Refer Note 3 & 23)Other than Land fixed assets of the Company mainly consists of plant Machinery Equipment and building in value. These assets are not in use since shut down of plant operations in 2012. The assets have suffered value erosion due to time environment and technological factors. Following the suggestions made by the Internal Auditors the Company engaged Chartered Engineer/Registered valuer for reassessment of the value and determination of impairment loss & loss on value erosion of other fixed assets. Based on the valuation report also seen by us the Company has adjusted impairment loss & loss due to value erosion of other fixed assets in the financial statements.
4 Write off Revenue included in Other Expense (Refer Note 24)The inventory of Raw Materials & Stores items have suffered significant damage due to quality grade and value erosion. Following the suggestion made by the Internal Auditors the Company engaged Chartered Engineer/Registered Valuer to reassess the true value of stock. Based on the Report also seen by us the Company made adjustment for loss in value in the Financial Statements. Since there is no manufacturing activity the Company has included the loss in value under Other Expense.
5 Decrease in Finished Goods Stock (Refer Note 25)The stock of finished goods have suffered extensive damage due to quality grade and value erosion. Following the suggestion made by the Internal Auditors the Company engaged Chartered Engineer/Registered Valuer to reassess the true value of stock. Based on the Report also seen by us the Company made adjustment for decrease in the value of finished goods in the Statement of Profit and Loss.
6 Write off Capital included in Other Expense (Refer Note 24)This consists of write off of capital work in progress on the then ongoing projects which were subsequently suspended and later abandoned since stoppage of plant operations in 2012. We understand that the management has no plans to complete the project. The Report of Chartered Engineer/Registered valuer suggest full write off of CWIP which the Company has done. Since there is no manufacturing activity the loss in value has been included under Other Expense.
7 Write off of Sundry Debtors Advances claims and other receivables included in Other Income (Refer Note 19)The Internal Auditor has reported that the company has been carrying forward the balance of Sundry Debtors Advances claims and other receivables historically year after year and suggested that the Company should take a fresh review of the possibility of recovery of these current assets. Following the suggestion the Company conducted a detailed review and based on the fresh assessment have considered write off of number of items which are not recoverable as per their assessment. We are also in agreement with the Internal auditor on this matter. The amount of write off has been set off against other income in the financial statements
8 Write back of liabilities of operating creditors trade payables and other liabilities (Refer Note 19)The Internal Auditor has reported that the company has been carrying forward the balance of Sundry Creditors Trade payables and other liabilities historically year after year and suggested that the Company should take a fresh review of the liabilities particularly where it is time barred. Following the suggestion the Company conducted a detailed review and based on the fresh assessment have considered write back of number of items which are time barred or otherwise not payable as per their assessment. We are also in agreement with the Internal auditor on this matter. The gains on write back of liabilities no longer required has been taken as other income in the financial statements
9 Presentation of the above items in the Financial StatementThe Company has presented the above Key Audit Matters in different Notes forming part of the Financial Statements which are extraordinary/exceptional in nature. Having adopted Indian Accounting Standards (Ind AS) for preparation and presentation of the Financial Statements and in pursuance thereof adequate disclosure has been made in Note 30 about the nature of the exceptional/extraordinary items which are not directly shown in the Statement of Profit and Loss
10 Restoration of Preference Shares (Refer Note 12)The Company has restored Preference Shares which was cancelled earlier in 2017 based on opinion and suggestion of legal experts on the subject. We are unable to express our opinion on the legality of restoration of Preference Shares.

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 other information. The other information comprises the information included in the Management Discussion and Analysis Board's Report including Annexures to Board's Report Business Responsibility Report Corporate Governance and Shareholder's Information but does not include the Standalone Financial Statements and our auditor's report thereon. Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon

In connection with our audit of the financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the standalone Financial Statements or our knowledge obtained 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 misstatement of this other information we are required to report that fact. We have nothing to report in this regard.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position financial performance total comprehensive income changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.

In preparing the Standalone Financial Statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

The Board of Directors are responsible for overseeing 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 Standalone Financial Statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.

As part of an audit in accordance with SAs we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

i) Identify and assess the risks of material misstatement of the standalone financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.

ii) Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls

iii) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management

iv) Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the Standalone Financial Statements or if such disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However future events or conditions may cause the Company to cease to continue as a going concern

v) Evaluate the overall presentation structure and content of the Standalone Financial Statements including the disclosures and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation

Materiality is the magnitude of misstatements in the Standalone Financial Statements that individually or in aggregate makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be influenced. We consider 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 Financial Statements.

We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the Standalone Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication

Report on Other Legal and Regulatory Requirements

As required by Section 143(3) of the Act based on our audit we report that:

We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit

Except for the financial impact of the matter described in Item 1 of Key Audit Matters in the Statement of Profit and Loss in our opinion proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

The Balance Sheet the Statement of Profit and Loss including Other Comprehensive Income Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books of account

In our opinion the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014

On the basis of the written representations received from the Directors as on March 31 2019 taken on record by the Board of Directors none of the directors is disqualified as on March 31 2019 from being appointed as a director in terms of Section 164 (2) of the Act.

With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls refer to our separate Report in Annexure A. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls with reference to financial statements.

With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act as amended:

In our opinion and to the best of our information and according to the explanations given to us the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended in our opinion and 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 financial position in its Standalone Financial Statements

ii) The Company has made provision as required under the applicable law or accounting standards for material foreseeable losses if any on long-term contracts including derivative contracts

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

As required by the Companies (Auditor's Report) Order 2016 (the Order) issued by the Central Government in terms of Section 143(11) of the Act we give in Annexure B a statement on the matters specified in paragraphs 3 and 4 of the Order.

For A.K.Bhardwaj & Co
Chartered Accountants
FRN 316085E
(A.K.Bhardwaj)
Place: KolkataPartner
Date : 24th September 2019Membership No. 052723

ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 11(f) of even date to the members of Orissa Sponge Iron & Steel Limited on the Standalone Ind AS financial statements for the year ended 31st March 2019)

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

We have audited the internal financial controls over financial reporting of ORISSA SPONGE IRON & STEEL LIMITED (the Company) as of 31 March 2019 in conjunction with our audit of the 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 internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to Company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143 (10) of the Companies Act 2013 to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgment including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone Ind AS financial statements for external purposes in accordance with generally accepted accounting principles. A Company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone Ind AS financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company's assets that could have a material effect on the standalone Ind AS financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

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

Opinion

In our opinion to the best of our information and according to the explanations given to us the Company has in all material respects an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2019 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For A.K.Bhardwaj & Co
Chartered Accountants
FRN 316085E
(A.K.Bhardwaj)
Place: KolkataPartner
Date : 24th September 2019Membership No. 052723

ANNEXURE B TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 10 of the Independent Auditors' Report of even date to the members of Orissa Sponge Iron & Steel Limited on the Standalone Ind AS financial statements as of and for the year ended 31st March 2019)

1. In respect of fixed assets (Property plant and equipment):

(a) The company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets

(b) The Fixed Assets of the Company have been physically verified by the Management during the year and no material discrepancies have been noticed on such verification. In our opinion the frequency of such verification is reasonable

(c) According to the information and explanation given to us and the records examined by us and based on the examination of the registered sale deed/transfer deed/conveyance deed provided to us we report that the title deed comprising all the immovable properties of land and building which are freehold are held on the name of the Company as at the Balance Sheet date. In respect of immovable properties of land and building that have been taken on lease and disclosed as fixed assets in the Standalone Ind AS financial statements the lease agreements are in the name of the Company where the Company is the lessee in the agreement

2 In respect of Inventories

a) The inventory of the Company has been physically verified by the management during the year. In our opinion the frequency of such verification is reasonable.

b) The procedures of physical verification of the inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of the business.

c) On the basis of our examination of the records of inventory we are of the opinion that the company is maintaining proper records of inventories. The discrepancies noted on physical verification between the physical stocks and the book records were not material.

3. The company has not granted any loans secured or unsecured to companies firms Limited Liability Partnership or other parties covered in the register maintained under Section 189 of the Companies Act 2013. Therefore the provisions of Clause (3) (iii) (a) (b) and (c) of the said Order are not applicable to the Company.

4. In our opinion and according to the information and explanation given to us the Company has complied with the provisions of Section 185 and 186 of the Companies Act 2013 in respect of investments made Guarantee and Security provided by it. The Company has not given any loan but has provided guarantee for loans taken by a related party from banks or financial institutions terms and conditions whereof are not prejudicial to the interest of the company.

5. According to the information and explanation given to us the Company has not accepted any deposit from the public and hence reporting under Clause (v) of the CARO 2016 is not applicable

6. The maintenance of cost records has been specified by the Central Government under Section 148(1) of the Companies Act 2013. We have broadly reviewed the books of account maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014 as amended prescribed by the Central Government under Section 148 (1) of the Companies Act 2013 and are of the opinion that prima facie the prescribed accounts and records have been maintained. However we have not made a detailed examination of such records.

7. (a) According to the information and explanation given to us except Central Sales Tax Orissa Sales Tax and Entry Tax Liability 26otalling Rs. 30.91 lakhs and Provident Fund dues to the extent of Rs. 555.06 lakhs no undisputed dues payable in respect of Provident Fund Employees State Insurance Income Tax Sales Tax Service Tax Customs duty Excise duty value added tax cess and other material statutory dues were outstanding at the year end for a period of more than six months from the date they became payable.

(b) There are no disputed dues which have remained unpaid as on 31st March 2019 on account of Provident Fund Employees State Insurance Income Tax Sales Tax Wealth Tax Service Tax Customs duty Excise duty value added tax cess except as follows:

Nature of DuesAmount (Rs in Lakh)Period to which the amount relatesForum where dispute is pending
Income Tax22.222007-08 to 2013-14Show cause u/s 276 B issued by TDS assessing authority
Central Excise96.082005-06 to 2010-11Commissioner of Appeals Central Excise
Central Excise59.252004-05 to 2007-08Additional Commissioner Central Excise
Orissa Sales Tax & VAT817.441985-86 to 2006-07Various Authorities
Central Sales Tax2495.871985-86 to 2006-07Various Authorities
Provident Fund & Pension Fund830.702007-08 to 2018-19Regional Provident Fund Commissioner Keonjhar Orissa High Court &Tribunal

8. In our opinion and according to the information and explanation given to us money raised by the Company by way of initial public offer or further public offer (including debt instruments) and term loans have been applied for the purpose for which it was raised.

9. To the best of our knowledge and according to the information and explanations given to us no fraud by the Company and no fraud on the Company by its officer or employees has been noticed or reported during the year

10. In our opinion and according to the information and explanations given to us the Company has paid/provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act 2013

11. The Company is not a Nidhi Company and hence reporting under Clause (xii) of the CARO 2016 is not applicable

12. In our opinion and according to the information and explanations given to us the Company is in compliance with Section 177 and 188 of the Companies Act 2013 where applicable for all transactions with the related parties and the details of the related party transactions have been disclosed in the Standalone Ind AS financial statements etc. as required under Ind AS 24 Related party disclosures specified under Section 133 of the Act.

13. During the year the Company has not made any preferential allotment or private placement of the shares or fully or party convertible debentures and hence reporting under Clause (xiv) of CARO 2016 is not applicable to the Company.

14. In our opinion and according to the information and explanations given to us the Company has not entered into any non-cash transactions during the year with its Directors or associate companies as applicable or persons connected with them and hence the provisions of Section 192 of the Companies Act 2013 and Clause 3 (xv) of the Order are not applicable. The Company has no Subsidiary on the reporting date.

15. The company is not required to be registered under Section 45-IA of the Reserve bank of India Act 1934.

For A.K.Bhardwaj & Co
Chartered Accountants
FRN 316085E
(A.K.Bhardwaj)
Place: KolkataPartner
Date : 24th September 2019Membership No. 052723