THE MEMBERS OF PRAKASH INDUSTRIES LIMITED
Report on the Audit of the Financial Statements Qualified Opinion
We have audited the accompanying financial statements of Prakash Industries Limited("the Company") which comprise the Balance Sheet as at March 31 2021 theStatement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year ended on that date and asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "the financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter(s) described in the Basis for QualifiedOpinion section of our report the aforesaid financial statements give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2021 the profit and total comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
1. Note 37 to the statement of financial statement amounting to Rs.10367 lakhs inrespect of capital expenditure incurred including capital advances given for variousprojects implementation of which is abandoned have been adjusted by withdrawing anequivalent amount from general reserve. Had this adjustment not been made net profitbefore and after tax and total comprehensive income after tax for the year ended on March31 2021 would have been lower by Rs.10367 lakhs.
2. Note 36 and 38 to the statement of financial statement wherein the deferred taxliability of Rs.3133 lakhs for the year ended on March 31 2021 has been adjusted againstSecurities Premium Account in terms of a court order. Further unused MAT CreditEntitlement utilized during the year for the net increased tax liability of previousfinancial year determined at the time of filing of return of income aggregating toRs.804 lakhs have been adjusted against the opening balance of retained earnings. Had thecurrent tax and deferred tax been accounted for pursuant to Ind AS -12 ' Income Taxes'tax expense would have been higher by Rs.3937 lakhs and net profit and total comprehensiveincome after tax for the year ended on March 31 2021 would have been lower by Rs.3937lakhs.
We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under section 143(10) of the Act (SAs). Our responsibilities underthose Standards are further described in the Auditor's Responsibilities for the Audit ofthe Financial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (ICAI) together with the independence requirements that are relevant to our audit ofthe financial statements under the provisions of the Act and the Rules made thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the ICAI's Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our qualified audit opinionon the financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Inaddition to the matter described in the Basis for Qualified Opinion section we havedetermined the matters described below to be the key audit matters to be communicated inour report.
|S No. Key Audit Matters ||Auditor's Response |
|1. Assessment of litigations and related disclosure of contingent liabilities. Refer to Note 33 to the Financial Statements- "Use of estimates and critical accounting judgements - Provisions and contingent liabilities". ||Our audit procedures included the following: |
|As at March 31 2021 the Company has exposures towards litigations relating to various matters as set out in the aforesaid Notes. Significant management judgement is required to assess such matters to determine the probability of occurrence of material outflow of economic resources and whether a ||-Obtained management assessment on the litigation along with the communications made to the Board of Directors and regulators; |
|provision should be recognised or a disclosure should be made. The management judgement is also supported with legal advice in certain cases as considered appropriate. As the ultimate outcome of the matters are uncertain and the positions taken by the management are based on the application of their best judgement related legal advice including those relating to interpretation of laws/regulations it is considered to be a Key Audit Matter. ||We understood assessed of available information and tested the design and operating effectiveness of key controls surrounding assessment of litigations relating to the relevant laws and regulations; |
| ||-We performed our assessment on a test basis on the underlying calculations supporting the contingent liabilities/ other significant litigations made in the Financial Statements; |
| ||-We evaluated management's assessment around those matters that are not disclosed or not considered as contingent liability as the probability of material outflow is considered to be remote by the management; and |
| ||-We assessed the adequacy of the Company's disclosures. Based on the above work performed management's assessment in respect of litigations and related disclosures relating to contingent liabilities/other significant litigations in the Financial Statements are considered to be reasonable. |
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report BusinessResponsibility Report Corporate Governance and Shareholder's Information but does notinclude the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated.
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 Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance total comprehensiveincome changes in equity and cash flows of the Company in accordance with the Ind AS andother accounting principles generally accepted in India. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
In preparing the financial statements management is responsible for assessing theCompany'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 are responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
- Obtain an understanding of internal financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness 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 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'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
- Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
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 Companies Act 2013 we give in the "Annexure A" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
As required by Section 143(3) of the Act based on our audit we report that:
a) We have sought and except for the matters descried under 'Basis for QualifiedOpinion' paragraph have obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) Except for the effects of matters descried under 'Basis for Qualified Opinion'paragraph in our opinion proper books of account as required by law have been kept bythe Company 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 Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.
d) In our opinion except for the effects of matters descried under 'Basis forQualified Opinion' paragraph the aforesaid financial statements comply with the Ind ASspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.
e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 from being appointed as a director in terms of Section 164 (2) of theAct.
f) The qualification relating to the maintenance of account and other matters connectedthere with are as stated in the 'Basis for Qualified Opinion' paragraph.
g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B". Our report expresses a modified opinion on theadequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
h) In our opinion and according to the information and explanation given to us theremuneration paid during the current year by the company to directors is in accordancewith the provision of section 197 of the Act.
i) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements (Refer note no 33).
ii. Except for the effects of matters described under 'Basis for Qualified Opinion'paragraph the Company has made provision as required under the applicable law oraccounting standards for material foreseeable losses if any on long-term contractsincluding derivative contracts.
iii. There has been no delay in transferring amount required to be transferred to theInvestor Education and Protection Fund by the Company during the year.
ANNEXURE 'A' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2 under 'Report on Other Legal and Regulatory Requirements'section of our report to the Members of PRAKASH INDUSTRIES LIMITED of even date)
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets have been physically verified during the year by the management inaccordance with a regular programme of verification which in our opinion is reasonablehaving regard to the size of the company and the nature of its assets. According to theinformation and explanations given to us no material discrepancies were noticed on suchverification.
(c) According to information and explanation given to us the title deeds of theimmovable property have been mortgaged with the Banks/ Financial Institutions etc. forsecuring the borrowings and loan raised by the Company.
On the basis of our examination of the records of the Company and copy of the titledeeds of immovable properties the title deeds of immovable properties are held in thename of the Company except for one case of freehold land having value of Rs.20 lakhs. Inrespect of immovable properties been taken on lease the lease agreements are in the nameof the Company.
ii. According to the information and explanation given to us the management hasconducted physical verification of inventory at reasonable intervals during the year. Thediscrepancies noticed on verification between physical inventory and book records were notmaterial and have been properly dealt with in the book of account.
iii. According the information and explanations given to us the Company has grantedunsecured loans to a body corporate covered in the register maintained under section 189of the Companies Act 2013 in respect of which:
(a) The terms and conditions of the grant of such loans are in our opinion primafacie not prejudicial to the Company's interest.
(b) The schedule of repayment of principal and payment of interest has been stipulatedand repayments of principal amounts and interest have been regular as per stipulations.
(c) There is no overdue amount remaining outstanding as at the year-end.
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 ofgrant of loans and has not made investments and provided guarantees and securities duringthe year.
v. According to the information and explanations given to us the Company has notaccepted any deposits within the meaning of Sections 73 to 76 of the Act and the rulesframed there under during the year. Accordingly the provision of Para 3 (v) of the Orderis not applicable to the Company.
vi. We have broadly reviewed the cost records maintained by the Company pursuant to theRules made by the Central Government under sub-section (1) of Section 148 of the Act andare of the opinion that prima facie the prescribed accounts and records have been madeand maintained. We have however not made a detailed examination of these records with aview to determining whether they are accurate or complete.
vii. (a) According to information and explanations given to us and the records of theCompany examined by us the Company is generally regular in depositing undisputedstatutory dues in respect of provident fund employee's state insurance income tax goodsand service tax duty of customs cess and any other material statutory dues applicable toit with the appropriate authorities. However dividend distribution tax of Rs.499 lakhs ispending to be deposited since more than six months.
(b) According to the information and explanations given to us and the records of theCompany examined by us there were no outstanding dues in respect of provident fundemployee's state insurance income tax goods and service tax duty of customs cess andother material statutory dues which as at March 31 2021 have not been deposited onaccount of any dispute except the following:
|Name of Statue ||Nature of Dues ||Amount ( Rs.in Lakhs) ||Period to which the amount relates ||Forum where the dispute is pending |
|Central Excise Act 1944 ||Excise Duty ||386.15 ||2001-2006 ||CESTAT New Delhi |
| || ||80.22 ||2006-2014 ||Appellate Authority - Asst. Commissioner |
viii. According to the information and explanations given to us there is no loan orborrowing taken from Government and the Company has not defaulted in repayment of loansor borrowing to a financial institution bank or dues to debenture holder except as statedin note 17(c) of the financial statements interest of Rs.1326 lakh as on 30th September2020 and Rs.213 lakh due for half year ended 31st March 2021 could not be remitted by thecompany to the foreign currency convertible bond holders due to non-furnishing of the bankaccount particulars by them.
ix. According to the information and explanations given to us the Company has notraised any money by way of initial public offer or further public offer (including debtinstruments) and term loans during the year. Accordingly the provision of Para 3 (ix) ofthe Order is not applicable to the Company.
x. According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees have been noticed or reported during theyear.
xi. According to the information and explanations given to us and based on the auditprocedures conducted by us the managerial remuneration paid or provided during the yearis in accordance with the provision of section 197 of the Act.
xii. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company.
Accordingly the provision of Para 3 (xii) of the Order is not applicable to theCompany.
xiii. In our opinion and according to the information and explanations given to us andbased on our examination of the records of the Company all transactions with the relatedparties are in compliance with sections 177 and 188 of the Act where applicable and thedetails have been disclosed in the financial statements as required by the applicableaccounting standards.
xiv. According to the information and explanations given to us the Company has duringthe year made allotment of Equity shares to the holder of share warrant and to the FCCBbondholders on excising the option of conversion by them. The requirements of section 42of the Companies Act 2013 have been complied with by the Company to the extentapplicable. The Company has received money against the share warrants during the year. Themoney so raised have been used for the purpose for which funds were raised.
xv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with directors or persons connected with them. Accordingly the provision ofsection 192 of the Companies Act 2013 is not applicable to the Company.
xvi. In our opinion the Company is not required to be registered under section 45 IAof the Reserve Bank of India Act 1934.
Annexure B referred to in Independent Auditor's Report of even date to the members ofPRAKASH INDUSTRIES LIMITED ("the Company") on the financial statements for theyear ended March 31 2021
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 PRAKASHINDUSTRIES LIMITED ("the Company") as of March 31 2021 in conjunction with ouraudit of the 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe 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 deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both issued by the Institute ofChartered Accountants of India and applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness.
Our audit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
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 thattransactions 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
4 8 be detected. Also projections of any evaluation of the internal financial controlsover financial reporting to future periods are subject to the risk that the internalfinancial control over financial reporting may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.
Basis of qualified opinion
The Company did not have appropriate internal financial controls in respect of controlover process of compliance of Ind As-12 "Income Tax" and accounting thereof. Theinadequate internal controls over financial reporting in respect of aforesaid matters haveeffect on the reported profit for the year.
In our opinion and according to the information and explanations given to us exceptfor the effects of matters described in "Basis of qualified opinion" paragraphabove the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2021 based on the internal controlover financial 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.
We have considered matters reported in "Basis of qualified opinion" paragraphin determining the nature timing and extent of audit tests applied in our audit of thefinancial statements of the Company for the March 31 2021.
For Chaturvedi & Co.
Firm Registration No. 302137E
Membership No. 091239
31st May 2021