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PSL Ltd.

BSE: 526801 Sector: Metals & Mining
NSE: PSL ISIN Code: INE474B01017
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OPEN 2.28
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VOLUME 18821
52-Week high 6.87
52-Week low 2.15
P/E
Mkt Cap.(Rs cr) 27
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

PSL Ltd. (PSL) - Auditors Report

Company auditors report

AUDITORS' REPORT

The Members

PSL Limited

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of PSL Limited (‘theCompany') which comprises of the Balance Sheet as at 31st March 2017 theStatement of Profit and Loss Account and the Cash Flow Statement for the year ended on thesaid date and a summary of significant accounting policies and other explanatoryinformation.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated inSection 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation & presentation of these standalone financial statements that give a trueand fair view of the financial position financial performance and cash flows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Accounting Standards specified under Section 133 of the Act read with Rule7 of the Companies (Accounts) Rules 2014. This responsibility also includes maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial reporting control that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the financial statements that give a true frommaterial misstatements whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovision of the Act and Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with the ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatements. An audit involvesperforming procedures to obtain audit evidence about the amount and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgment includingthe assessment of the risk of material misstatement of the financial statements whetherdue to fraud or error. In making those risk assessments the auditor considers internalcontrol relevant to the Company's preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in the circumstancesbut not for the purpose of expressing an opinion on the effectiveness of the Company'sinternal control. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Managementas well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion.

Opinion

In our opinion and to the best of the information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give true and fair view in conformity with theaccounting principles generally accepted in India.

(i) in the case of the Balance Sheet of the state of affairs of the Companyas at31stMarch 2017.

(ii) in the case of the Statement of Profit and Loss of the Loss of theCompanyfor the year ended on that date and (iii) in the case of the Cash Flow Statementof the cash flows of the Companyfor the year ended on that date.

Emphasis of Matter

We draw attention to:

1. Increase of Paid Up Capital:

In compliance of one of the essential conditions of package of Restructuring ofCompany's Debts approved for the Company by CDR Empowered Group on 23rd September 2013the company in its Board Meeting held on 24th May 2016 allotted 25999232 equity shares ofthe face value of Rs.10/- per share to the seven Promoter Group Entities and one lender ofthe Company at a premium of Rs.16/- per share in accordance with a SEBI formula prescribedfor this purpose. Such allotment of additional equity fair view and are free resulted intoenhancement of paid up capital of the Company from its earlier level of Rs.9893.53 Lacs toRs.12493.45 Lacs.

2. Long Term Borrowings:

Note No. 4 of Balance Sheet and Schedules.

Default In Payment to Banks

Based on our audit procedure and as per the information and explanation given to usthe company has defaulted in repayment of loans and interest to the banks and financial31st March 2017.

2.1 Due to continuous financial stress the Company a restructuring program from thelenders under the CDR guidelines issued by the Reserve Bank of India. The Company filed thMarch 2013 (Cut- an off date is 1st January 2013) along with flashreport. Afterconsidering the proposal the final restructuring package was approved by CDR empoweredgroup on 23rd August 2013 which was duly communicated to the Company by the CDR cell videits letter of Approval dated 23rd September 2013. However CDR Cell vide their letter No.414/2016-17 dated December 29 2016 has informed that Company's CDR Mechanism standsexited on account of failure of CDR approved package.

3. Due to non-implementation CDR package there is a Cash and Capital Crunch and theCompany is under stress due to reduction in turnover slow-down in economic environmentincrease in the cost of production as well as due to idle labour lack of sufficientorders and reduced net realization in comparison to the increase cost of sales.

4. As some of the conditions of the CDR package could not be implemented in letter andspirit various banks which had advanced its facilities to the company have chosen totreat their outstanding dues to the company as Non Performing Assets (NPA). The CDR cellhas exited the company from the CDR mechanism on 28th December 2016 since some of theconditions as stipulated by them in the restructuring package were not satisfied.

5. It is noticed that the business of the Company is at stand still and not muchproduction activity is carried out except negligible production has been carried out inVizag Varsana induction Bend Division and Chennai factories. Hence the turnover is alsovery low.

6. The financial statements being prepared on a going concern basis notwithstandingthe fact that the Company's net worth is eroded. A reference has been made to the Board ofIndustrial and Financial Restructuring (BIFR). These events cast significant doubt on theability of the Company to continue as a going concern. The appropriateness of the saidbasis is inter-alia dependent on the Company's ability to infuse requisite funds formeeting its obligations (including statutory liabilities and those in respect of contractsentered into for purchase of goods and assets) rescheduling of debt/other liabilities andresuming normal operations.

7. As a consequence to acute financial stress being faced by the Company in recentyears the Company's net worth has been eroded due to accumulated losses. Keeping in viewthe current status of company's operations it is likely that the accumulated losses isfurther enhanced creating a further adverse impact on the net worth. Although as a resultof erosion of said net worth the company had made reference to BIFR under the provisionsof Sick Industrial Companies Act however consequent upon recent development of cominginto force of a new legislation namely Insolvency and Bankruptcy Code the said referencewas abated. Company is now in the process of soon filing the necessary application toNational Company Law Tribunal in accordance with the new provisions brought on the statutebook by way of the aforesaid Insolvency and Bankruptcy Code 2016.

8. The company has not carried out detailed assessment of the useful life of Company'sassets and hence depreciation has not been adjusted accordingly as per the notification toSchedule II of the Companies Act 2013. We are unable to comment on the impact onstatement of Profit & Loss Account.

9. The company has reported a Net Loss of Rs.697.38 Crores for the year ended 31stMarch 2017 against last year net loss of Rs. 1355.98 Crores.

10. Since most of the banks which had extended financial facilities to the company havealready treated the outstandings from the company as "Non Performing Assets"they as a usual practice have discontinued making provisions of interest on such loss asaccrued income in their books. In order to achieve the desired congruency on this issuethe Company has also not provided for any interest amounting to Rs.414.79 Crores on suchoutstanding facilities for the year ended on 31st March 2017 due to various banks. Hadthe said interest been provided in the books in the normal course the present losses ofRs.697.38 Crores would have rised to Rs. 1112.17 Crores.

11. Sometime back Kandla Port Trust had cancelled the lease of different plots atKandla leased by them to the company due to non-payment of their heavy invoices for billsfor compensation and had also taken physical possession of the land. However on thecompany approaching Gujarat High Court and Hon'ble High Court having granted stay ofKandla Port Trust orders the Company has not provided for any liability that may arise onthis account.

12. Inventory: a) The closing inventory as on 31st March 2017 is Rs. 19.52Crores (valued at realizable value) excludes disputed WIP Building of Coimbatore Rs.17.07which is in arbitration stage. b) The Company has done physical inventories at the end ofthe year 31st March 2017 in presence of Chartered engineer checked at various sites andthey have certified the realizable value as on 31/3/2017 on physical / saleable ground.

13. Operations Maintenance and Management Agreement (‘OMMA') with JindalTubular (India) Limited. a) As per the Operations Maintenance and ManagementAgreement with Jindal Tubular (India) Limited (‘JTIL') they had taken overoperations of the following three units of the company mentioned underneath :-

PSL VIZAG 15.06.2015
JAIPUR 16.07.2015
VARSANA 03.08.2015
b) Now JTIL has returned back all Plants on OMMA to
Company on following dates:-
PSL VIZAG 30.11.2016
JAIPUR 17.11.2016
VARSANA 17.09.2016

c) It will not be out of place to mention that Jindal Tubular India Limited has shiftedfrom Varsana a part of Plant

& Machinery to their unit Ambapura Madhya Pradesh for their manufacturingpurpose. This is contrary to the Agreement. d) The Excise Department has issued followingnotices to the company directing to show cause as to why the Cenvat credit taken on thecapital goods and machineries removed from the factory premises of notices under theprovisions of Rule 3(5A)(a) Rule 2 and Rule 4(5)(a)(ii) of Cenvat Credit Rules 2004should not be demanded and recovered under Section 11A with interest u/s 11AA and penaltyu/s 11AC of the Central Excise Act 1944 read with Rule 14 of the Cenvat Credit Rules2004.

Sl. No. Show Cause Notice Amount (Rs.)
1. Varsana 1 7170823/-
2. Varsana 2 Coating 48628617/-
3. Varsana 2 Pipe Mill 55220906/-
Total Rs. 111020346/-

The Company has submitted that the allegations made in the show cause notices are notcorrect in law as well on facts. The matter is pending before the Excise department of Sr.No. 1 & 3 and for Sr. No. 2 Department has given Show Cause Notice for Rs.48628617/- as well as 100% penalty and interest company has already submitted theappeal to Excise department against the above. e) Jindal Tubular (India) Limited hassubmitted the provisional Balance Sheet and Profit & Loss Account for the period ended31st March 2017 and shown a loss of Rs. 9.39 Crores. Besides this they have claimed NonLegacy & legacy payment from PSL amounting to Rs. 4.37 Crores. However the PSLStatements are showing outstanding of Rs. 2.85 Crores including Rs. 1.52 Crores on accountof Legacy dues. The Company has not accepted their claim and the accounts are underreconciliations. It appears that due to "Net Revenue" being a loss PSL will notbe entitled for any revenues. f) The Company has created pari passu charge with respect toimmovable property at Jaipur in favour of JSW and CDR lenders by way of mortgage bydeposit of title deeds in favour of IDBI Trusteeship Services Limited.

g) Lay off the Company's undertaking at Village Varsana Taluka Anjar Village NaniChirai Taluka Bhachau Gandhidham District Kutch & Closure of PSL Jaipur Unit

Lay-off in terms of Section 2(kkk) of "The Industrial Disputes Act 1947" atCompany's undertaking at Village Varsana Taluka Anjar Village Nani Chirai TalukaBhachau Gandhidham District Kutch has been undertaken. The Company has also done closureof Jaipur facilities due to lack of orders & financial facilities / crisesof the fund.

14. Assignment of entire Financial Assistance granted by ICICI Bank to the Companyto "Edelweiss Assets Reconstructions Co. Ltd."

a) M/s. Edelweiss Assets Reconstruction Co. Ltd. has informed that pursuant to anAssignment Agreement executed by ICICI Bank State Bank of India Axis Bank Ltd. and YesBank Ltd. in favour of Edelweiss Assets Reconstructions Co. Ltd. on various dates thebanks have assigned all its rights title and interest in financial assistances granted byall three banks to PSL Limited in favour of M/s. Edelweiss Asset Reconstruction Co. Ltd.Pursuant to this M/s. Edelweiss Asset Reconstruction Co. Ltd. is now the biggest securedlender of the company. b) M/s. Assets Care & Reconstruction Enterprise Ltd. hasinformed that pursuant to an Assignment Agreement executed by DBS Bank Ltd. in theirfavour on 29th March 2017 DBS Bank Ltd. has assigned all its rights title and interestin financial assistances granted by them to PSL Limited in favour of M/s. Assets Care& Reconstruction Enterprise Ltd.

c) Conversion of Portionof Debt:

Since it was provided for in the restructuring package by the CDR Cell on 23rd August2013 for a portion of debt of each lender would be converted into company's equity almostall the secured creditors had come forward with a request to that effect to the companyand the company allotted the desired number of equity shares at a price of Rs.26/- pershare in accordance with SEBI formula for the purpose in the last financial year howeversince a portion of the debt of Edelweiss Assets Reconstructions Company Ltd. was convertedinto equity alongwith other creditors and made a request to the company in the currentfinancial year. Accordingly a total of 876926 equity shares were allotted by the companyto the said creditors in the Board Meeting held on 24th May 2016 during the FinancialYear in question.

With the said additional allotment the total number of shares 46515367 allotted todifferent lenders amounting to Rs.1209400100/- (Rounded Off).

d) Contribution by Different Entities of Promoters Group:

Since one of the important condition of restructuring scheme was that the differententities of promoter group were also to contribute to the equity capital of the Companyseven different promoter group entities including six associate companies made a totalcontribution of Rs.65.318 Crores for which 25122306 equity shares at a price of Rs.26/-each were required to be allotted to the said seven [promoter group entities].

15. Lender Banks' Balance Confirmation as on 31st March 2017:

We have been informed by the officials of the company that although the company hasrequested its various bankers to issue their confirmation letters confirming the balanceswith respect to various Bank Accounts/Bank Guarantee/Letter of Credit/ Corporate Guaranteegiven by company for its subsidiaries company as on 31st March 2017 but the same have notyet been issued. Pending balance confirmation book balances as on 31st March 2017 havebeen taken in the accounts of the Company.

16. The financial performance had deteriorated substantially in last 12 months. Themanufacturing cost has gone up. There is weakness in demand. The Company continue to dealwith a range of uncertainties. The interest payments exceeded its operating income. TheCompany is not able to service its debts.

17. EOW case on the Complaint - filed by Aditya Birla Finance Limited (ABFL): As ondate approximately Rs. 106.01 million (Rs.106013284.37) is lying in FD account with ICICI(FD Account No. 039313005070). This is on account of receipt from various legacy orderslike ISPRL MT Educare L&T etc. executed post CDR implementation and receipt ofVizag insurance claim amount. Due to EOW order the Company is unable to use it whichotherwise could be used for its operating expenses insurance payments and / or fordistribution to lenders in case of surplus. It may be noted that although ABFL has becometransaction specific member of CDR however it has not acceded to CDR restructuringpackage.

18. Sundry Debtors: Note No. 12 of Balance Sheet and Schedules i) The Companyhas Sundry Debtors of Rs. 9.63 Crores as on 31st March 2017.

Less than Six Months Rs.0.94 Crores
More than Six Months Rs.0.50 Crores
Doubtful Debts Rs.8.19 Crores

ii) The Company has not produced confirmation of balances from sundry debtorsconfirming the amount outstanding as on 31st March 2017. In the absence of adequateevidence and information made available to us supporting the recoverability of thisamount we are further unable to comment on the financial impact of this matter on theprofit / loss for the year ended 31st March 2017. iii) The Arbitration proceeding betweenPSL Limited and Gail India Limited is pending before the Sole Arbitrator. iv) The Companyis in the process of filing Arbitration petition/ Obligations for the dispute against SPMLInfra Limited for recovery of Rs.9880383/- together with interest against the supply ofSaw Pipes.

19. Sundry Creditors & Loans & Advances:

In the absence of pending confirmation of balances from Trade Payables Other Loans& Advances as on 31.03.2017 provision for any adverse variation in the balances isnot quantified .

20. Due to Micro & Small Suppliers:

This information is not provided by the Company.

21. There is an existence of adequate internal financial controls and its operationaleffectiveness in the Company.

22. Based on the audit procedures applied by us and according to the information andexplanations provided by the management we are of the opinion that the particulars ofcontracts or arrangements that need to be entered into the register maintained undersection 189 of the Companies Act 2013 have so been entered.

23. In our opinion and according to the information and explanations given to us thetransactions made in pursuance of contracts or arrangements entered in the registermaintained under Section 189 of the Companies Act 2013 have been made at prices which arereasonable having regard to prevailing market prices at the relevant time.

24. Investment in Subsidiaries

A) Foreign Subsidiaries: i) PSL FZE (Sharjah) (Step down Subsidiary) Pipeline SystemsMauritius

a) The Company had invested Rs. 141.63 Crores in a wholly owned subsidiary namelyPipeline Systems Mauritius. Due to cumulative losses in the subsidiary the value ofinvestment is eroded. The Company has not provided for the diminution in the value ofinvestment as per Accounting Standard (AS) 13 issued by Institute of Chartered Accountantsof India. PSL Limited has also not provided for amounts due from PSL FZE being doubtful ofrecovery on account of losses incurredby PSL FZE.

b) The share certificate of PSL FZE Sharjah held by PSL Ltd. indirectly through theabove said Company amounting to 100% of the Equity Share Capital of the Company have beenpledged in favour of National Bank of Oman S.A.O.G. acting as Security Agent of ICICI BankLimited Bahrain.

c) During the year PSL FZE has incurred loss of AED 30274 Mio. The interest on theloans of Standard Chartered Bank and ICICI Bank Baharin has not been provided. Based onthe audit procedure and the information obtained we have observed some of the loans wererolled over / rescheduled by the bank. Also in some cases company was not able to make thepayment on due date of installment due to the banks. The bank balance confirmations werenot available.

d) PSL FZE has executed a project received from SWCC. Bank of Baroda has givenguarantee in favour of State Bank of India Bahrain to issue performance guarantee infavour of the client to the extent of USD 4.5 million. This is contingent liability of PSLFZE as on 31-3-2017.

e) A creditor namely Petromac Abudhabi-UAE has filed a suit for his dues of USD2258175. The matter is sub-judice. ii) PSL has given Corporate Guarantee coveringfacilities sanctioned by lender bankers for working capital outstanding of 111.82 MillionAED against Plant & Machinery assignment of receivable and inventory as the securityand the subordination of unsecured loans advances by PSL Ltd. and assets on pari passubasis with one of the banker. iii) Term Loan 121.61AED

The Term Loan due to ICICI Bank Bahrain is secured by charge on the fixed asset of PSLFZE and Corporate Guarantee issued by PSL Limited. iv) Bank Guarantee given by Banks16570815AED v) PSL USA INC (USA) PSL NA LLC (USA) (Step down Subsidiary) The Companyhad invested Rs. 130.34 Crores in a wholly owned subsidiary namely PSL USA Inc. Due tocumulative losses in the step down subsidiary the value of investment is eroded. vi) Dueto continuous losses suffered by the company's step down subsidiary namely PSL NorthAmerica LLC it was directly affecting the financial position of PSL/USA/Inc. (the holdingCompany of PSL North America LLC).

The Company voluntary petitioned for relief under chapter XI of the Title 11 of UnitedStates code were filed inUnited States Bankruptcy court for the district of Delaware. Allthe assets of PSL North America LLC were put to sale/sold to a company for US 100 Millionand no liabilities (related with non fund base facilities like LC BG etc) is pending ofPSL India in USA. The company has written off Rs. 130.34 Crores invested in USA. vii) Theaudited financial statements have not been received by the Company from foreign subsidiarycompanies and we have relied on the financial statements of the management. Based on ourreview conducted as above and subject to the possible effects of the matter describedabove nothing has come to our attention that causes us to believe that the accompanyingStatement prepared in accordance with applicable accounting standards as specified u/s133 of the Companies Act 2013 reads with Rule 7 of the Companies (Accounts) Rules 2014and other recognized accounting practices and policies has not disclosed the informationrequired to be disclosed in terms of regulation 63 of the SEBI (Listing Obligations andDisclosure Requirements)

Regulations 2015 including the manner in which it is to be disclosed or that itcontains any material misstatement.

B) Indian Subsidiaries:

1) PSL Infrastructure & Ports Pvt. Ltd.

?Total investment in PSL Port & Infrastructure Limited is Rs. 28.21 Crores.

?The company was awarded the construction of Jetty at Kandla Port. Till date thecompany has incurred construction Expenses of Rs.65.11 Crores.

?Due to restrictions imposed by CDR package of PSL Ltd the parent company couldnot inject/ contribute funds for the constructionof the jetty.

?The Kandla Port authorities have given notice for the cancellation of theagreement. The matter is in dispute and under Arbitration. At present project isincomplete.

2) PSL Corossion Control ServicesLtd .

The total Revenue for the year stood at Rs. 68.92 Crores against Rs.72.49 Crores. TheNet Profit is Rs.79.64 Lacs. In our opinion and explanation given to us the Guaranteesgiven by the holding Company for Loan taken by its subsidiaries from banks / financialinstitution and the terms and conditions of such guarantees are not prejudicial to theinterests of the Company.

3) PSL Gas Distribution (P) Ltd.

The company was incorporated on 31st December 2010 and has not commenced anybusinessactivity .

25. Impairmentof Assets:

The Management has not carried out evaluation of impairment of assets and no provisionfor impairment has been recorded as required by Accounting Standard 28.

26. Due to this provision for diminution / impairment in the value of its investmentsin the above subsidiary companies is not provided.

27. According to the information and explanations given to us & based on thedocuments & records produced to us the Company has not granted loans or advances onthe basis of security by way of pledge of shares debentures & other securities.

Report on Other Legal and RegulatoryRequirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure I a statement on the matters specified in paragraphs 3and 4 of the Order.

2. As required by section 143(3) of the Act we report that: a) Except the mattersdescribed in Emphasis of Matter Paragraphs 1 to 13 and Annexure A Para No.7(a) in ouropinion may have an adverse effect on the functioning of the Company aforesaidstandalone financial statements comply with the Accounting Standards specified undersection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014;

b) 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;

c) 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;

d) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account;

e) On the basis of written representations received from the directors as on 31stMarch 2017 taken on record by the Board of Directors none of the directors are as on31st March 2017 from being appointed as director in terms of Section 164(2) of the Act;

f) With respect to the adequacy of the internal financial controls over financialreporting of Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"; and

g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i) the Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements – Refer Note Nos. 2 to 12 andAnnexure to the financial statements;

ii) the Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses.

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

iv) the Company has provided requisite disclosures in its financial statements as toholdings as well as dealings in Specified Bank Notes during the period from 8th November2016 to 30th December 2016 and are in accordance with the books of accounts maintained bythe Company.

For SureshC . Mathur & Co.
Chartered Accountants
(Firm Regn. No. 000891N)
(SureshC . Mathur)
Place : New Delhi PARTNER
Dated: 9thMay 2017 M. No. 1276

ANNEXURE – A TO THE AUDITORS'S REPORT

Referred to in paragraph 1 under the heading ‘Report on Other Legal and RegulatoryRequirements' of our Report of even date on the financial statements for the year ended on31st March 2017of PSL Limited

1. a) The Company has maintained Assets Register. It is to be updated. All the factoryunits have kept details of their fixed assets at their level.

b) During the year physical verification was done by the management of all the factoryunits of the Company. As the Asset Register is not updated the full particulars includingtotal quantitative details could not be ascertained. Pending completion of reconciliationswhich has not been completed discrepancies if any cannot be ascertainable. Pendingupdating of records and reconciliation books balances as at 31-3-2017have been adopted.

c) In our opinion the frequency of is reasonable having regard to the size of theCompany and the nature of its assets.

d) The title deeds of the immovable properties are held in the name of the Company.

2. Subject to our remark in Item No. 1 in "Emphasis of Matter" the physicalverification of inventory has been conducted at reasonable intervals by the management;and the procedures of physical verification of inventory followed by the management isreasonable and adequate in relation to the size of the Company and nature of its business.The stock is maintained on Excel Sheets. On line package is not installed and notintegrated with books of accounts. The Company is maintaining proper records of inventoryand any material discrepancies noticed on physical verification have been properly dealtwith in the books of account.

3. The Company has not granted loans secured/unsecured to companies firms or otherparties covered in the register maintained under section 189 of the Companies Act.

4. The Company has complied in respect of loan investments guarantees and securitiesas required under provision of sections 185 and 186 of the Companies Act 2013.

5. The Company has not accepted any deposits from the public within the meaning ofSection 73 to 76 of the Act and the rules framed there under. Therefore the provisions ofSection 73 and 74 of the Act and any other relevant provisions of the Companies Act 2013and the rules framed there under with regard to deposits accepted from the public are notapplicable to the Company.

6. We have broadly reviewed the books of account maintained by the Company pursuant tothe rules made by the Central Government of India regarding the maintenance of costrecords under subsection (1) of Section 148 of the Act and are of the opinion that primafacie the prescribed accounts and records have been maintained. We have however not madea detailed examination of the records with a view to determine whether they are accurateor complete. The cost audit is completed up to the year ended 31st March 2014. The CostAudit Report is mandatory u/s 148(1) of the Companies Act 2013. a) According to therecords of the Company the Company is regular in depositing undisputed Statutory duesincluding Provident Fund Employees State Insurance Income Tax Sales Tax Service TaxDuty of Excise valued added tax Cess and any other statutory dues with the appropriateauthorities however there is some delay in depositing Govt. dues due to financialdifficulties. According to the information and explanations given to us no undisputedamounts payable in respect of Income Tax Sales Tax Customs Duty Service Tax ExciseDuty and Cess were outstanding at the financial reporting period ending on 31st March2017 for a period of more than six months from the date they became payable.

b) As on 31 st March 2017 according to the records of the Company the following arethe particulars of disputed dues on account of Excise duty Customs/DGFT Service TaxSales Tax and Civil Cases have not been deposited.

7.c) DGFT:

The Company has taken 5 Advance Licences and one Annual Advance Licence from DGFT. TheCompany has already done the export obligation and submitted the relevant papers to DGFT.However the above Licences are not closed and the matter is pending with DGFT. TheCompany has shown contingent liability of Rs. 253.22 Crores

8. Legal Matters:

a) Initially five complaints were filed by two banks Syndicate

Bank and Kotak Mahindra Bank Ltd. under the relevant provisions of NegotiableInstruments Act but after the order of Addl. Sessions Court of Bombay one complaint hasbeen scrapped with respect to some of the Directors and matters are now pending fordisposal.

b) Five Petitions have been filed before the High Court of Gujarat at Ahmedabadchallenging compensation Bill raised by Kandla Port Trust (KPT) in respect of five plotsof land of PCD-I unit located in East of NHNo. 08A Kandla Road Gandhidham and twopetitions w.r.t. two plots of land of PCD-II in Plot No. 5&6 in Block D Sector 12Gandhidham. Stay has been granted in favour of Company with regard to

5 of the 7 plots. Interim orders earlier passed by the court restraining KPT fromimplement in the compensation bills continue to operate. The matters are still sub-judice.c) TerminationofconcessionagreementexecutedbyKandlaPort Trust in respect of PSLInfrastructure and Ports Private Limited. The matter is pending before arbitrationTribunal.

d) OnthecomplaintofoneofthecreditorsoftheCompanynamely Aditya Birla Finance Limited aFIR has been registered by EOW Delhi accusing the Company Managing Director

Whole Time Directors and an Official.

e) The Economic Offence wing of Crime Branch of Delhi Police on complaint of AdityaBirla Finance Limited (ABFL) – lender of the Company

The action taken by EOW Delhi Police consequent to which some of the Company's BankAccounts at various locations were freezed. The Court of ACMM on 1/7/2016 had allowed thedefreezing of five bank accounts which can now be operated by the company. However themoney freezed earlier shall remain freezed and cannot be utilized by the company tillinvestigation is complete and / or till further orders in this regard. However recentlyEdelweiss Assets

Reconstructions Co. Ltd. (EARC) which has acquired the debts of three lenders of thecompany has filed an application before the court of ACMM with a prayer that the amount ofRs.11.68 Crores FD lying to the credit of three freezed Bank accounts be allowed to beappropriated by all the CDR Lenders on pro-rata basis. The proceedings are in progress.

f) Filing of commercial suit by Bhimji Velji Sorathia Construction (P) Ltd. againstCompany's subsidiary PSL Infrastructure and Ports (P) Ltd.

The aforesaid company had earlier filed a suit for recovery of Rs.87013191/- plusinterest against the above mentioned subsidiary of the Company. However after thecommercial Courts Act 2015 came into force retrospective w.e.f. 23rd October 2015 thesaid suit has been transferred to the commercial court at Rajkot. The subsidiary Companyhas engaged a lawyer and is defending the case

g) Filing of commercial suit by Paresh Constructions & Foundation (P) Ltd.

The aforesaid company had earlierfileda suit for recovery of

Rs.65259744/- plus interest against company's wholly owned subsidiary namely (PSLInfrastructure & Ports Pvt. Ltd). However after the commercial Courts Act 2015 cameinto force retrospective w.e.f. 23rd October 2015 the said suit has been transferred tothe commercial court at Rajkot. The subsidiary company has engaged a lawyer and isdefending the case.

h) winding up Petition filed by Jotun India (P) Ltd. Jotun India (P) Ltd. asupplier of Company had on 10-03-2015 filed a company petition No. 434 of 2015 for windingup of the Company under Section 433(e) & (f) read with Section 434 and 439 ofCompanies Act 1956 before the Bombay High Court.

i) Another supplier of company had on 10-3-2015 filed a company petition No. 434 of2015 against the Company under Section 433(e) and (f) read with Section 434 and 439 ofCompanies Act 1956 before the Bombay High Court. The matter is pending

j) Action taken by the Kotak Mahindra Bank Limited under the provisions ofSARFAESIAct 2002

The Bank has initiated action under SARFAESI Act 2002 U/s 14 of the said Act prayingpossession of property at Mouje Nanicherai Distt. Kutch which property had been earliermortgaged in favour of Kotak Mahindra Bank to secure the repayment of certain loanamounts. The company had filed Special Leave Application before Gujarat High Courtchallenging the action of the Bank. The Court after hearing the parties passed an order on8th September 2016 quashing the order dated 5th March 2016 of District MagistrateKutch Gujarat and directed the District Magistrate to proceed afresh after giving thecompany an opportunity of being heard. The District Magistrate has now issued fresh noticeto the company for its objections. The matter is being defended by the company.

The Company has initiated a suitable legal action against the order of the DistrictMagistrate and Executive Magistrate in connection of handing over of physical possessionof the land at Varsana Kutchin favour of Kotak Mahindra Bank.

k) Indian Bank Nariman Point Mumbai

Issued Notice to the Company and Directors to pay Rs.645790389/- and Bank GuaranteeRs.32190190/- due to them and threatened to initiate legal proceedings. However nolegal action has been initiated by the said Bank.

l) Federal Bank

The Federal Bank has given a show cause notice in pursuance of the proceedings fordeclaring the Company as Willful defaulter. This is objected by the Company as unwarrantedand non-tenable. The matter is under dispute.

m) Standard Chartered Bank

Given Notice u/s 433 and 434 of the Companies Act to pay outstanding dues and toinitiate winding up proceedings against the Company. However no action has been taken bythe said Bank.

n) writ Petition filed by Swamy Vivekanand Navyuk Mandal against the Company inRajasthan High Court at Jaipur

Civil Writ Petition No. 13780 of 2011 filed by the above mentioned petitioner againstthe state of Rajasthan and the Company challenging the allotment of land by the RajasthanGovernment to the Company came up for hearing before the court on 5th December 2016 whenthe petitioner's counsel made a request to the court for permission to withdraw and saidpetition. The Court allowed his request and permitted to withdraw the petition. Thepetition now stands dismissed as withdrawn.

o) Filing of Criminal Miscellaneous Petition by the Company in Delhi High Courtchallenging the order passed by Additional Sessions Judge on 22-7-2015

The Company has challenged the Criminal Miscellaneous Petition being Cr. M.C. No. 5072of 2015 in the Delhi High Court challenging the order dated 22-7-2015 of AS) dismissingour Revision Petition. The matter is pending.

p) M/s. Harjivandas Hathi Patel Partnership concern has filed a Suit No. 4460 of 2016against the company small causes at Ahmedabadagainst their dues. The matter is sub-judice.

9. Based on our review conducted as above nothing has come to our attention thatcauses us to believe that the accompanying statement of audited financial results preparedin accordance with applicable accounting standards and other recognized accountingpractices and policies has not disclosed the information required to be disclosed in termsof Reg. 33 of SEBI (LODR) Reg. 2015 including the manner in which it is to be disclosedor that it contains any material misstatement.

10. The Company has defaulted in repayment of loan and borrowings to financialinstitution bank and Govt. The lenders balance confirmations were not available.

11. The Company has not raised money by way of initial public offer (including debtinstruments) and term loans were applied for the purposes for whichthose are raised.

12. Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and as per the information and explanations given bythe management we report that no fraud on or by the Company has been noticed or reportedduring the course of our audit.

13. The Company is not a Nidhi Company and Nidhi rules 2015 is not applicable.

14. The Company has disclosed all transaction with the related parties are incompliance with section 177 and 188 of Companies Act 2013 were applicable and the detailshave been disclosed in the Financial Statements etc. as required by the applicableaccounting standards.

15. The Company has not entered into any non-cash transactions with directors orpersons connected with him.

16. The Company is not required to be registered u/s 45-IA of the

Reserve Bank of India Act 1934. This is not applicable to the Company.

Reasons for Unfavourable Report

1. As some of the conditions of the CDR package could not be implemented in letter andspirit various banks which had advanced its facilities to the company have chosen totreat their outstanding dues to the company as Non Performing Assets (NPA). The CDR cellas delisted the company from the CDR on 28th December 2016 since some of the conditionsas stipulated by them were not satisfied.

2. The production has fallen resulting in heavy losses. Due to financial crunch and nonavailability of funds there are some delays in depositing the government dues. . Thereare defaults in repayment of bank loans. The debtors have stopped payment of their dues.The creditors have started filing legal suits for their recovery and winding upproceedings. The net worth has eroded.

For SureshC . Mathur & Co.
Chartered Accountants
(Firm Regn. No. 000891N)
(Suresh C. Mathur)
Place : New Delhi PARTNER
Dated: 9th May 2017 M. No. 1276