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Sathavahana Ispat Ltd.

BSE: 526093 Sector: Metals & Mining
NSE: SATHAISPAT ISIN Code: INE176C01016
BSE 00:00 | 15 Feb 8.62 0.77
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8.84

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NSE 00:00 | 15 Feb 8.50 0.30
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8.15

HIGH

8.60

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OPEN 8.60
PREVIOUS CLOSE 7.85
VOLUME 2400
52-Week high 24.05
52-Week low 7.57
P/E
Mkt Cap.(Rs cr) 44
Buy Price 7.10
Buy Qty 200.00
Sell Price 8.85
Sell Qty 500.00
OPEN 8.60
CLOSE 7.85
VOLUME 2400
52-Week high 24.05
52-Week low 7.57
P/E
Mkt Cap.(Rs cr) 44
Buy Price 7.10
Buy Qty 200.00
Sell Price 8.85
Sell Qty 500.00

Sathavahana Ispat Ltd. (SATHAISPAT) - Auditors Report

Company auditors report

To the Members of SATHAVAHANA ISPAT LIMITED

Report on the Ind AS Financial Statements

We have audited the accompanying Ind AS financial statements of SATHAVAHANA ISPATLIMITED ("the Company") which comprise the Balance Sheet as at March 312018 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 the significant accounting policies and other explanatory information.

Management's Responsibility for the 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 Ind AS financial statements that give a true and fair view of the financialposition financial performance including other comprehensive income cash flows andchanges in equity of the Company in accordance with the Indian Accounting Standards (IndAS) prescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended and other accounting principles generally accepted inIndia.

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 Ind ASfinancial 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 Ind AS financial statements basedon our audit.

In conducting our audit we have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made thereunder and the Orderissued under section 143(11) of the Act. We conducted our audit of the Ind AS financialstatements in accordance with the Standards on Auditing specified under Section 143(10) ofthe Act. Those Standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the Ind AS financialstatements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Ind AS financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of theInd AS financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control relevant to the Company'spreparation of the Ind AS financial statements that give a true and fair view in order todesign audit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company's Directors as well as evaluating theoverall presentation of the Ind AS financial statements.

We believe that the audit evidence obtained by us is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Ind AS financial statements.

Basis for Qualified Opinion

Note no. 38 to the Ind AS financial statements where in management has consideredoutstanding trade receivables Supplier advances and capital advances ofRs.467124493/- Rs.44072265/- and Rs 27023201/- respectively for period more thanone-year as good and fully recoverable as at the balance sheet date. For reasons stated inthe aforesaid note and due to confirmations being not available and pendingreconciliation adjustments we are unable to comment on the recoverability of thesereceivables advances and its consequential effect on these financial statements.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion paragraph above the aforesaid Ind AS financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the Ind AS and other accounting principles generally accepted in India ofthe state of affairs of the Company as at March 31 2018 and its loss totalcomprehensive loss its cash flows and the changes in equity for the year ended on thatdate.

Material uncertainty related to Going Concern

We draw attention to Note no. 35 to the Ind AS financial statements which indicatesthat the Company has incurred a net loss of Rs. 3063643139/- during the year andnegative other equity of Rs.1993187179/- as at the balance sheet date has erodedentire net worth of the Company and as of that date the Company's current liabilitiesexceeded its current assets by Rs.7609419443/-. Defaults in repayment of loans andinterest payments and shut down of the operations at Ferrous division since June 12 2017due to non-availability of working capital funds. These events or conditions along withother matters as set forth in Note 35 indicate that a material uncertainty exists thatmay cast significant doubt on the Company's ability to continue as a going concern.However the Ind AS financial statements of the Company have been prepared on a goingconcern basis for the reasons stated in the said Note.

Our opinion is not modified in respect of this matter.

Other Matters

The comparative financial information of the Company for the year ended March 31 2017and the transition date opening balance sheet as at April 01 2016 included in these IndAS financial statements are based on the statutory financial statements prepared inaccordance with the Companies (Accounting Standards) Rules 2006 audited by thepredecessor auditor whose report for the year ended March 31 2017 and March 31 2016dated May 30 2017 and May 30 2016 respectively expressed an unmodified opinion on thosefinancial statements and have been restated to comply with Ind AS. Adjustments made tothe previously issued said financial information prepared in accordance with the Companies(Accounting Standards) Rules 2006 to comply with Ind AS have been audited by us. Ouropinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act based on our audit we report that: a) Wehave sought and except for the matters described in the Basis for Qualified Opinionparagraph above obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit. b) Except for thepossible effects of the matter described in the Basis for Qualified Opinion paragraphabove in our opinion proper books of account as required by law have been kept by theCompany. c) The Balance Sheet the Statement of Profit and Loss including OtherComprehensive Income the Cash Flow Statement and Statement of Changes in Equity dealtwith by this Report are in agreement with the books of account. d) Except for the possibleeffects of the matter described in the Basis for Qualified Opinion paragraph above in ouropinion the aforesaid Ind AS financial statements comply with the Indian AccountingStandards prescribed under section 133 of the Act. e) The matter described in the Basisfor Qualified Opinion paragraph as above in our separate Report in "Annexure A"and in the Material uncertainty related to Going Concern paragraph above in our opinionmay have an adverse effect on the functioning of the Company.

f) On the basis of the written representations received from the directors of theCompany as on March 31 2018 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2018 from being appointed as a director interms of Section 164(2) of the Act. g) The qualification relating to the maintenance ofaccounts and other matters connected therewith are as stated in the Basis for QualifiedOpinion paragraph above. h) With respect to the adequacy of the internal financialcontrols over financial reporting of the Company and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure A". Our report expresses aqualified opinion on the operating effectiveness of the Company's internal financialcontrols over financial reporting. i) With respect to the other matters to be included inthe Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 as amended in our opinion and to the best of our information and accordingto the explanations given to us: i. The Company has disclosed the impact of pendinglitigations on its financial position in its Ind AS financial statements. (Refer NoteNo.30 to the Ind AS Financial Statements) ii. The Company did not have any long-termcontracts including derivative contracts for which there were any material foreseeablelosses. iii. There has been no delay in transferring amounts required to be transferredto the Investor Education and Protection Fund by the Company.

2. As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment of India in terms of sub-section (11) of section 143 of the Act ("theOrder") and on the basis of such checks of the books and records of the Company aswe considered appropriate and according to the information and explanations given to uswe give in the Annexure B a statement on the matters specified in paragraphs 3 and 4 ofthe Order.

For MAJETI & CO
Chartered Accountants
Firm's Registration No: 015975S
Kiran Kumar Majeti
Place: Hyderabad Partner
Date: May 30 2018 Membership No: 220354

ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1 (h) under ‘Report on Other Legal and RegulatoryRequirements' of our report of even date) 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 SATHAVAHANAISPAT LIMITED ("the Company") as of March 31 2018 in conjunction with ouraudit of the 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 Reportingissued by the Institute of Chartered Accountants of India". These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand 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 includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified audit opinion on the Company's internal financial controlssystem over 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.

Basis for Qualified opinion

According to the information and explanations given to us and based on our audit thefollowing material weaknesses have been identified in the operating effectiveness of theCompany's internal financial controls over financial reporting as at March 31 2018: a)Refer note no 38 of the Ind AS financial statements in respect of long outstandingoverdue trade receivables and advances whereby evidences of control over monitoring/assessing recoverability of such over dues including assessment of provision fordoubtful trade receivables and advances were not operating effectively. This couldpotentially result in the Company not recognising a provision for doubtful/old overduetrade receivables and advances. b) The Company's internal financial controls overrecording of period end expenses in timely manner particularly relating service vendorswere not operating effectively which could potentially result in not recognising expensein relevant period results in recognising prior year expense.

A ‘material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the Company's annual or interim financialstatements will not be prevented or detected on a timely basis.

Qualified Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects maintained adequate internal financialcontrols over financial reporting as of March 31 2018 based on "the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India" and except for the possible effects of the material weaknessesdescribed in Basis for Qualified Opinion paragraph above on the achievement of theobjectives of the control criteria the Company's internal financial controls overfinancial reporting were operating effectively as of March 31 2018.

We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the Ind AS financialstatements of the Company for the year ended March 31 2018 and these material weaknessesdo not affect our qualified opinion on the said Ind AS financial statements of theCompany.

For MAJETI & CO
Chartered Accountants
Firm's Registration No: 015975S
Kiran Kumar Majeti
Place: Hyderabad Partner
Date: May 30 2018 Membership No: 220354

ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 2 under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

I. (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the Management according to a phasedprogramme designed to cover all the items on rotation basis which in our opinion isreasonable having regard to the size of the Company and the nature of its assets. Pursuantto the programme a portion of the fixed assets has been physically verified by theManagement during the year and no material discrepancies have been noticed on suchverification.

(c) The title deeds of immovable properties as disclosed in Note 3 on fixed assets tothe financial statements are held in the name of the Company. ii. The physicalverification of inventory excluding stocks with third parties have been conducted atreasonable intervals by the Management during the year. In respect of inventory lying withthird parties these have substantially been confirmed by them. The discrepancies noticedon physical verification of inventory as compared to book records were not material. iii.The Company has not granted any loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under Section189 of the Act. Therefore the provisions of Clause 3(iii) (iii)(a) (iii)(b) and(iii)(c) of the said Order are not applicable to the Company. iv. The Company has notgranted any loans or made any investments or provided any guarantees or security to theparties covered under Section 185 and 186. Therefore the provisions of Clause 3(iv) ofthe said Order are not applicable to the Company. v. The Company has not accepted anydeposits from the public within the meaning of Sections 73 74 75 and 76 of the Act andthe Rules framed there under to the extent notified. vi. Pursuant to the rules made by theCentral Government of India the Company is required to maintain cost records as specifiedunder Section 148(1) of the Act in respect of its products.

We have broadly reviewed the same and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have not however madea detailed examination of the records with a view to determine whether they are accurateor complete. vii. (a) According to the information and explanations given to us and therecords of the Company examined by us in our opinion the Company is not regular indepositing undisputed statutory dues including provident fund employees' stateinsurance income tax sales tax service tax duty of customs duty of excise valueadded tax and cess and other material statutory dues as applicable except Goods andService tax with the appropriate authorities. The extent of the arrears of statutory duesoutstanding as at March 312018 are as follows:

Name of the statute Nature of dues Amount(Rs.) Period to which it relates Due date Date of Payment
Income Tax Act 1961 Tax Deducted at source 14077565 July 2017 to March 2018 on 7th day of next month Not Yet Paid
Income Tax Act 1961 Tax Collected at source 3952011 July 2017 to March 2018 on 7th day of next month Not Yet Paid
Employees' Provident Funds & Miscellaneous Provisions Act 1952 Provident Fund 8919070 September 2017 to March 2018 on 15th of next month Not Yet Paid
Employee state Insurance Act Employees State Insurance 1398534 Feb2018 to March 2018 on 15th of next month Not Yet Paid
Andhra Pradesh Tax on Professions Trades Callings and Employments Act 1987 Professional Tax 478080 July 2017 to March 2018 on 10th of next Month Not Yet Paid
Karnataka Tax on Professions Trades Callings and Employments Act 1976 Professional Tax 184600 July 2017 to March 2018 on 10th of next Month Not Yet Paid
Telangana Tax on Profession Trades Callings and employment Act 1987 Professional Tax 78400 July 2017 to March 2018 on 10th of next Month Not Yet Paid

(b) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of service-tax value added tax which have notbeen deposited on account of any dispute. The particulars of dues of income tax salestax duty of excise duty of customs as at March 31 2018 which have not been depositedon account of a dispute are as follows:

Name of the statute Nature of dues Amount(Rs.) Period to which the amount relates Forum where the dispute is pending
Central Sales Tax 1956 Sales Tax 2329595 2005-06 Sales Tax Appellate Tribunal Hyderabad
Income Tax Act 1961 Interest on Dividend Distribution Tax 1379100 2009-10 Deputy Commissioner of Income Tax Hyderabad
Central Excise Act 1944 Excise duty and penalty 25399502 September 2011-March 2015 The commissioner of central excise and customs Belgaum
Central Excise Act 1944 Excise duty and penalty 6680087 September 2011- May 2015 The Commissioner (Vizag Appeal-II) Guntur
Customs Act 1962 Customs duty and penalty 104795907 2012-13 The Customs Excise and Service Tax Appellate Tribunal Hyderabad

viii. According to the records of the Company examined by us and the information andexplanations given to us The Company has delayed in repayment of principle and interestas mentioned below for the period from March 2017 to March 2018 aggregating Rs.1459007059/-

Term Loans (Refer note 13 to the financial statements) Nature of dues Amount of default (Rs.) Period of default and remains unpaid as at balance sheet date
From Banks
Canara Bank Principal 266847148 59-365 Days
Canara Bank Interest 167463510 59-424 Days
State Bank of India Principal 227900000 1-366 Days
State Bank of India Interest 149935974 1-365 Days
Andhra Bank Principal 202369830 1-366 Days
Andhra Bank Interest 127711904 1-365 Days
From Non-Banking Finance Company
Industrial Finance Corporation of India Principal 198368877 60-335 Days
Industrial Finance Corporation of India Interest 118409815 60-335 Days

 

Working capital Borrowings (Refer note 13 to the financial statements) Fund based limit (Sanctioned) (Rs.) Balance outstanding as at March 31 2018 (Rs.) Overdrawn balance (Rs.) Interest overdue (Rs.)
From Canara Bank 264000000 2243350949 1979350949 -
From State Bank of India 402000000 1706581675 1304581675 233969022
From Andhra Bank 264000000 1742158006 1478158006 133725306
Total 930000000 5692090630 4762090630 367694328

ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans. Accordingly the provisions ofClause 3(ix) of the Order are not applicable to the Company. x. During the course of ourexamination of the books and records of the Company carried out in accordance with thegenerally accepted auditing practices in India and according to the information andexplanations given to us we have neither come across any instance of material fraud bythe Company or on the Company by its officers or employees noticed or reported during theyear nor have we been informed of any such case by the Management. xi. The Company haspaid/ provided for managerial remuneration in accordance with the requisite approvalsmandated by the provisions of Section 197 read with Schedule V to the Act. xii. As theCompany is not a Nidhi Company and the Nidhi Rules 2014 are not applicable to it theprovisions of Clause 3(xii) of the Order are not applicable to the Company. xiii. TheCompany has entered into transactions with related parties in compliance with theprovisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required under AccountingStandard (AS) 18 Related Party Disclosures specified under Section 133 of the Act readwith Rule 7 of the Companies (Accounts) Rules 2014. xiv. The Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year under review. Accordingly the provisions of Clause 3(xiv) ofthe Order are not applicable to the Company. xv. The Company has not entered into anynon-cash transactions with its directors or persons connected with him.

Accordingly the provisions of Clause 3(xv) of the Order are not applicable to theCompany. xvi. The Company is not required to be registered under Section 45-IA of theReserve Bank of India Act 1934.

Accordingly the provisions of Clause 3(xvi) of the Order are not applicable to theCompany.

For MAJETI & CO
Chartered Accountants
Firm's Registration No: 015975S
Kiran Kumar Majeti
Place: Hyderabad Partner
Date: May 30 2018 Membership No: 220354