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Reliance Naval & Engineering Ltd.

BSE: 533107 Sector: Others
NSE: RNAVAL ISIN Code: INE542F01012
BSE 00:00 | 21 May 8.35 0.07
(0.85%)
OPEN

8.05

HIGH

8.71

LOW

8.05

NSE 00:00 | 21 May 8.40 0.25
(3.07%)
OPEN

8.10

HIGH

8.75

LOW

8.00

OPEN 8.05
PREVIOUS CLOSE 8.28
VOLUME 274332
52-Week high 20.60
52-Week low 7.21
P/E
Mkt Cap.(Rs cr) 616
Buy Price 8.41
Buy Qty 50.00
Sell Price 8.35
Sell Qty 1123.00
OPEN 8.05
CLOSE 8.28
VOLUME 274332
52-Week high 20.60
52-Week low 7.21
P/E
Mkt Cap.(Rs cr) 616
Buy Price 8.41
Buy Qty 50.00
Sell Price 8.35
Sell Qty 1123.00

Reliance Naval & Engineering Ltd. (RNAVAL) - Auditors Report

Company auditors report

TO THE MEMBERS OF RELIANCE NAVAL AND ENGINEERING LIMITED

(FORMERLY KNOWN AS RELIANCE DEFENCE AND ENGINEERING LIMITED)

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of RELIANCENAVAL AND ENGINEERING LIMITED (FORMERLY KNOWN AS RELIANCE DEFENCE AND ENGINEERINGLIMITED) ("the Company") which comprise the Balance sheet as at March31 2018 and the Statement of Profit and Loss (including Other Comprehensive Income) theCash Flow Statement and the Statement of Changes in Equity for the year then ended and asummary of significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with the Accounting PrinciplesGenerally Accepted in India (Indian GAAPs) including Indian Accounting Standards(‘Ind AS') prescribed under Section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalone IndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financialstatements based on our audit.

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

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

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the standalone Ind AS financial statements. The procedures selected dependon the auditor's judgment including the assessment of the risks of material misstatementof the standalone Ind AS financial statements whether due to fraud or error. In makingthose risk assessments the auditor considers internal financial control relevant to theCompany's preparation of the standalone Ind AS financial statements that give a true andfair view in order to design audit procedures that are appropriate in the circumstances.An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of the accounting estimates made by the Company's directors as well asevaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs(financial position) of the Company as at March 31 2018 and its loss (financialperformance including other comprehensive income) its cash flows and the changes inequity for the year ended on that date.

Emphasis of Matters

We draw attention to the:

(i) Material Uncertainty Related to Going Concern

Note no. 36 to the standalone Ind AS financial statements regarding preparation ofstandalone financial statements of the Company on going concern basis and also recognitionof Deferred Tax Assets (DTA) on tax losses notwithstanding the fact that the Company hasbeen incurring cash losses its net worth has been substantially eroded as on March 312018 loans have been called back by secured lenders current liabilities aresubstantially higher than current assets applications have been made to National CompanyLaw Tribunal (NCLT) Ahmedabad under section 9 of the Insolvency Bankruptcy Code 2016 andwinding up petitions been filed before Hon'ble Gujarat High Court for recovery of theirdues by few operating creditors for the reasons stated in the said note. The Company isalso of the view that no impairment of its noncurrent assets is required. These conditionsindicate the existence of a material uncertainty that may cast significant doubt on theCompany's ability to continue as going concern. The appropriateness of assumption of goingconcern recognition of DTA and evaluation of recoverable value of its noncurrent assetsis critically dependent upon the approval of Company's resolution plan by the securedlenders the Company's ability to raise requisite finance / generate cash flows in futureto meet its obligations and to earn profits in future.

(ii) Note no. 33.3 to the standalone Ind AS financial statements regarding applicationsunder section 7 of the Insolvency and Bankruptcy Code 2016 against the Company as acorporate guarantor for the loans taken by Reliance Marine and Offshore Limited (RMOL) awholly owned subsidiary. The Management is of the view that the value of securitiesavailable in RMOL is sufficient to recover the outstanding dues of IFCI Limited.Accordingly no provision against the claim under the invoked corporate guarantee isconsidered necessary.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143 (3) of the Act we report that: a. We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit. b. In our opinion proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books. c. The Balance Sheet the Statement of Profit and Loss(Including other comprehensive income) the Cash Flow Statement and Statement of Changesin Equity dealt with by this Report are in agreement with the books of account. d. In ouropinion the aforesaid standalone Ind AS financial statements comply with the Ind ASprescribed under Section 133 of the Act. e. The going concern and the other matterdescribed under the Emphasis of Matters paragraph above in our opinion may have anadverse effect on the functioning of the Company. f. On the basis of the writtenrepresentations received from the directors as on March 31 2018 and taken on record bythe Board of Directors none of the directors is disqualified as on March 31 2018 frombeing appointed as a director in terms of Section 164 (2) of the Act. g. With respect tothe adequacy of the internal financial controls over financial reporting of the Companyand the operating effectiveness of such controls refer to our separate Report in "AnnexureA".

h. With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended 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 standalone Ind AS financial statements as referred to in Note No. 33.1 (c)to the standalone Ind AS financial statements; ii. The Company has made provisions asrequired under the applicable law or Ind AS for material foreseeable losses if any onlong term contracts including derivative contracts; iii. There were no amounts which wererequired to be transferred to the Investor Education and Protection Fund by the Company;

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

For Pathak H. D. & Associates
Chartered Accountants
Firm Reg. No. 107783W
Gyandeo Chaturvedi
Place: Mumbai Partner
Dated: April 23 2018 Membership No.46806

ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT (Referred to in paragraph 1(g) under ‘Report on Other Legal and Regulatory Requirements' of our report of evendate on standalone Ind AS financial statements of RELIANCE NAVAL AND ENGINEERING LIMITEDfor the year ended March 31 2018) Report on the Internal Financial Controls OverFinancial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act2013 ("the Act")

We have audited the internal financial controls over financial reporting of RELIANCENAVAL AND ENGINEERING LIMITED (FORMERLY KNOWN AS RELIANCE DEFENCE AND ENGINEERINGLIMITED) (‘the Company') as of March 31 2018 in conjunction with our audit of thestandalone Ind AS financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(‘the Guidance Note') issued by the Institute of Chartered Accountants of India(ICAI). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note issued by the ICAI and the Standards of Auditing prescribed underSection 143(10) of the Companies Act 2013 to the extent applicable to an audit ofinternal financial controls. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects. Our audit involves performing procedures to obtain audit evidence about theadequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks 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 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 authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

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

Opinion

In our opinion to the best of our information and according to the explanations givento us 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 2018 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note.

For Pathak H. D. & Associates
Chartered Accountants
Firm Reg. No. 107783W
Gyandeo Chaturvedi
Place: Mumbai Partner
Dated: April 23 2018 Membership No.46806

ANNEXURE "B" TO INDEPENDENT AUDITOR'S REPORT (Referred to in paragraph 2under the heading "Report on Other Legal and Regulatory Requirements" of ourreport of even date to the members of RELIANCE NAVAL AND ENGINEERING LIMITED on thestandalone Ind AS financial statements for the year ended March 31 2018) i. Inrespect of its fixed assets: a. The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets on the basis ofavailable information. b. As explained to us the Company has physically verified certainassets in accordance with a phased program of verification which in our opinion isreasonable having regard to the size of the Company and the nature of its assets. Nomaterial discrepancies were noticed on such physical verification as compared with theavailable records. c. According to the information and explanations given to us and on thebasis of our examination of the records of the Company the Company doesn't have anyfreehold immovable properties. As informed to us in respect of leasehold immovableproperties the original title deeds have been deposited with the lenders we have beenproduced the photocopy of the title deeds of these leasehold immovable properties andbased on such documents the title deeds are held in the name of the Company. ii. Asexplained to us inventories have been physically verified during the year by themanagement and in our opinion the frequency of verification is reasonable. Discrepanciesnoticed on physical verification of the inventories between the physical inventories andbook records were not material having regard to the size of the operations of the Companyand the same have been properly dealt with. iii. In respect of loans secured orunsecured granted by the company to companies firms Limited liability partnerships orother parties covered in the register maintained under section 189 of the Act: a. Thecompany has granted unsecured loans to wholly owned subsidiary companies and in ouropinion the rate of interest and other terms and conditions on which the loans had beengranted are not prima facie prejudicial to the interest of the Company b. As per theinformation and explanations given to us the above loans are repayable on demand alongwith the interest accrued thereon. The repayment / receipts if any demanded have beenreceived. c. As the above loans are repayable on demand the question of overdue amountdoes not arise. iv. In our opinion and according to the information and explanations givento us the Company has complied with the provisions of section 185 and 186 of the Act inrespect of grant of loans making investments and providing guarantees and securities. v.According to the information and explanations given to us the Company has not acceptedany deposits from the public. Therefore the provisions of paragraph 3 (v) of the CARO2016 are not applicable to the Company.

vi. According to the information and explanations given to us the Central Governmenthas not prescribed the cost records to be maintained under sub-Section (1) of Section 148of the Act in respect of activities carried on by the Company. Therefore the provisions ofparagraph 3(vi) of the CARO 2016 are not applicable to the Company. vii. According to theinformation and explanations given to us in respect of statutory dues: a. The company hasbeen generally regular in depositing undisputed statutory dues including provident fundincome tax service tax duty of customs duty of excise cess sales tax value addedtax Goods and Service Tax and any other statutory dues as applicable with theappropriate authorities during the year however delays have been noticed in respect ofincome tax. According to the information and explanations given to us no undisputedamounts payable in respect of such statutory dues were outstanding as at March 31 2018for a period of more than six months from the date they became payable. b. Details of duesof Income tax and dues to Excise Department aggregating to Rs. 2110.28 Lacs that have notbeen deposited on account of disputed matters pending before appropriate authorities areas under.

Name of the Statutes Nature of the Dues Period to which it relates Amounts (Rs in Lacs) (*) Forum where the dispute is pending
Income Tax Act1961 Income Tax 2007-08 to 2017- 18 104.27 Commissioner of Income Tax
CENVAT Credit Rules2004 Penalty under Central Excise Act1944 2010-11 to 2017- 18 2006.01 Commissioner of Central Excise
Total 2110.28

(*) Net of amount deposited under protest viii. Based on our audit procedures andinformation and explanations given by the management and considering the recall noticesreceived by the company from lender banks we are of the opinion that as on March 31 2018the Company has defaulted in repayment of loans (including payment of interest on loansand Non Convertible Debentures (NCD)) to banks and financial institutions aggregating toRs. 699465.44 Lacs. Lender wise details of such defaults are as under:

(Rs in Lacs)
Bank / Financial Institution Amount of Default Period of Default
HUDCO 15839.21 More than 90 Days
IL & FS 666.97 More than 90 Days
Bank of India 26661.18 Less than 90 Days
Bank of Maharashtra 8309.65 Less than 90 Days
Central Bank 53528.20 Less than 90 Days
Corporation Bank 24285.38 Less than 90 Days

 

(Rs in Lacs)
Bank / Financial Institution Amount of Default Period of Default
Dena Bank 25025.64 Less than 90 Days
EXIM Bank 45689.48 Less than 90 Days
IDBI Bank 90001.75 Less than 90 Days
IFCI Ltd 20264.84 Less than 90 Days
IIFC UK 345.56 Less than 90 Days
Jammu & Kashmir 24239.76 Less than 90 Days
Karnataka Bank 3243.98 Less than 90 Days
Karur Vyasa Bank 3364.85 Less than 90 Days
Life Insurance
8535.17 Less than 90 Days
Corporation
Oriental Bank of
24079.15 Less than 90 Days
Commerce
Punjab & Sind Bank 6687.94 Less than 90 Days
Punjab National Bank 40890.97 Less than 90 Days
State Bank of India 87091.04 Less than 90 Days
UCO Bank 33750.60 Less than 90 Days
Union Bank Of India 109372.39 Less than 90 Days
United Bank of India 30397.88 Less than 90 Days
Vijaya Bank 16415.62 Less than 90 Days
Yes Bank 778.23 Less than 90 Days
TOTAL 699465.44

ix. According to the information and explanations given to us the term loans raisedduring the year were prima facie been applied for the purpose for which those areraised. The Company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments). x. Based on our audit procedures performed forthe purpose of reporting the true and fair view of the standalone Ind AS financialstatements and on the basis of information and explanations given by the management nofraud by the Company or on the Company by its officers or employees has been noticed orreported during the year.

xi. In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013. xii. In our opinion and according to the information and explanations given tous the Company is not a nidhi company. Therefore the provisions of paragraph 3 (xii) ofthe CARO 2016 are not applicable to the Company. xiii. According to the information andexplanations given to us and based on our examination of the records of the Companytransactions with the related parties are in compliance with sections 177 and 188 of theAct where applicable and details of such transactions have been disclosed in the financialstatements etc. as required by the applicable accounting standards. xiv. During the yearthe Company has made preferential allotment of equity shares and preference shares to oneof its lender against the partial conversion of its outstanding debts. The provisions ofsection 42 of the Act to the extent applicable have been complied with. xv. According tothe information and explanations given to us the Company has not entered into non-cashtransactions with directors or persons connected with him. Therefore the provisions ofparagraph 3 (xv) of the CARO 2016 are not applicable to the Company. xvi. In our opinionand according to information and explanations provided to us the Company is not requiredto be registered under section 45-IA of the Reserve Bank of India Act 1934.

For Pathak H. D. & Associates
Chartered Accountants
Firm Reg. No. 107783W
Gyandeo Chaturvedi
Place: Mumbai Partner
Dated: April 23 2018 Membership No.46806