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Shriram EPC Ltd.

BSE: 532945 Sector: Engineering
NSE: SHRIRAMEPC ISIN Code: INE964H01014
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VOLUME 378070
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OPEN 5.50
CLOSE 5.73
VOLUME 378070
52-Week high 7.00
52-Week low 3.38
P/E
Mkt Cap.(Rs cr) 529
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Shriram EPC Ltd. (SHRIRAMEPC) - Auditors Report

Company auditors report

to the Members of Shriram EPC Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

We have audited the standalone financial statements of Shriram EPCLimited ("the Company") which comprise the Balance Sheet as at March 31 2020and the Statement of Profit and Loss Statement of Changes in Equity and Statement of cashflows for the year then ended and notes to the standalone financial statements includinga summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to theexplanations given to us except for the effects of the matters described in the Basis ofQualified Opinion section of our report the aforesaid standalone financial statementsgive the information required by the Companies Act 2013 ("the Act") in themanner so required and give a true and fair view in conformity with the Indian AccountingStandards prescribed under section 133 of the Act read with Companies (Indian AccountingStandards) Rules 2015 as amended and other accounting principles generally accepted inIndia of the state of affairs of the Company as at March 312020 and loss changes inequity and its cash flows for the year ended on that date.

Basis for Qualified Opinion

1. Financial Assets Loans (Non Current) include Rs. 3800.40 Lakhs(March 312019: Rs. 3815.40 Lakhs) and Other Trade Receivables under "Other NonCurrent Financial Assets" include Rs. 310.04 Lakhs (March 31 2019: Rs. 318.75Lakhs) due from related party. Due to unavailability of sufficient appropriate auditevidence to corroborate management's assessment of recoverability of the above saidamounts and as these are outstanding for more than five years we are unable to comment onthe recoverability of the same. No provision with respect to the same is made in the booksof accounts as explained in the Notes 9.2 of standalone financial Statements. The impactif any of the undetermined provision on the financial statements is not ascertainablecurrently.

This matter was also qualified in our report on the standalonefinancial statements for the year ended March 312019.

2. The carrying value of Deferred Tax Asset (DTA) include an amount ofRs. Rs. 43520.00 Lakhs which is recognized on unabsorbed business losses. Due tounavailability of sufficient appropriate audit evidence to corroborate management'sassessment on reasonable certainty of future taxable profits as required by IND AS 12considering the current pandemic situation we are unable to ascertain the extent to whichthe deferred tax asset can be utilized. Refer Note 40 of the standalone financialstatements.

We conducted our audit in accordance with the Standards on Auditing(SAs) specified under section 143(10) of the Act. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit ofthe Standalone Financial Statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India ("ICAI") together with the ethical requirements that arerelevant to our audit of the standalone financial statements under the provisions of theAct and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the ICAI's Code of Ethics. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Emphasis of Matter

We draw attention to Note 54 to the standalone financial statementswhich fully describes that the Company has made an assessment to recognize and impairmentloss of Rs. 2748.97 Lakhs on financial assets to reflect the business impact anduncertainties arising from the COVID 19 pandemic. Further such estimates are based oncurrent facts and circumstances and may not necessarily reflect the future uncertaintiesand events arising from the full impact of the COVID 19 pandemic.

Our opinion is not modified in respect of this matter.

Information Other than the Standalone Financial Statements andAuditors' Report Thereon

The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the ManagementReport Chairman's Statement Director's Report etc but does not include thestandalone financial statements and our auditor's report thereon.

Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. The other informationincluded in Management Report Chairman's Statement

Engineering the future

Director's Report etc. have not been adjusted for the impacts asdescribed in the Basis for Qualified section above. Accordingly we are unable to concludewhether or not the other information is materially misstated with respect to this matter.

Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.

In addition to the matters described in the Basis of Qualified Opinionsection we have determined the matters described below to be key audit matter to becommunicated in our report.

A) Provision for Expected credit loss

Refer to Note 9 1011 & 14 18 in the standalone IND AS Financialstatements of 2019-20.

The company has measured Loan and account receivables at amortized costusing the effective interest method.

The company has used the Expected credit loss (ECL) provision inrespect of loan and account receivables represent management's best estimate of theimpairment losses incurred within the loan portfolio at the balance sheet date as per theInd AS - 109 "Financial Instrument". The company's loan portfolio consistsof loans given to related parties trade receivables and unbilled revenue.

For trade receivables and loan assets that are individuallysignificant expected credit losses are measured based on the present value of cashshortfalls over the remaining expected lives of the trade receivables and contract assets.The calculation of the collective credit loss provision is inherently judgmental.

We have identified provisioning for expected credit loss as a key auditmatter as the calculation of credit loss provision is a complex area and requiresmanagement to make significant assumptions on customer payment behavior and estimating thelevel and timing of expected future cash flows.

How the Key Audit Matter was addressed in our audit:

Our audit procedures in respect of this area included:

1. Obtained an understanding and assessed the management'sestimate and related policies used in the credit loss analysis.

2. Performed test of key controls to analyse operating effectivenessrelating to calculation of impairment provisions.

3. Reviewed the data flows from source systems to spreadsheet-basedmodels to test their completeness and accuracy.

4. The management has assessed on individual level trade receivablesand loan assets by Expected credit loss model laid down in Ind AS - 109 on "FinancialInstrument" examined on a test check basis the objective evidence relating to theimpairment of trade receivables and loan assets and the key assumptions used in theestimate of the present value of all cash shortfalls and reviewed whether amounts havebeen recovered after the end of reporting period.

5. Obtained and assessed debtors' credit information on samplebasis to ascertain whether the classification of debtors is in compliance with thecompany's policy.

6. Reviewed the appropriateness of management's ageing analysisbased on days past due by examining the original documents (such as invoices and bankdeposit advices).

7. Recalculated the ECL of each type of trade receivables and loanassets according to the provision matrix.

8. Assessed the accuracy of the disclosures in the financial statementsand ensured that they were in accordance with Ind AS 109 ‘Financial Instruments'

Responsibilities of Management and Those Charged with Governance forthe Standalone Financial Statements

The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these standalonefinancial statements that give a true and fair view of the financial position financialperformance changes in equity and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the accounting Standardsspecified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate implementation and maintenance ofaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.

Auditors' Responsibilities for the Audit of the StandaloneFinancial Statements

Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.

We give in "Annexure A" a detailed description ofAuditor's responsibilities for Audit of the Standalone Financial Statements.

Report on Other Legal and Regulatory Requirements

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 of the Act we give in the "Annexure B" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.

2. As required by Section 143(3) of the Act we report that:

(a) We have sought and except for the possible effect of the matterdescribed in the Basis for Qualified opinion above obtained all the information andexplanations which to the best of our knowledge and belief were necessary for the purposesof our audit of the aforesaid standalone financial statements.

(b) Except for the effects of the matter described in the Basis ofQualified Opinion section above in our opinion proper books of account as required bylaw have been kept by the Company so far as it appears from our examination of those books

(c) The Balance Sheet the Statement of Profit and Loss and the CashFlow Statement and the Statement of Changes in Equity dealt with by this Report are inagreement with the books of account.

(d) Except for the matter described in the Basis of Qualified Opinionsection above in our opinion the aforesaid standalone financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

(e) The matter described in Basis of Qualified Opinion paragraph abovein our opinion may have an adverse effect on the functioning of the Company.

(f) On the basis of the written representations received from thedirectors as on 31st March 2020 taken on record by the Board of Directorsnone of the directors is disqualified as on 31 st March 2020 from beingappointed as a director in terms of Section 164 (2) of the Act.

(g) The qualification relating to the maintenance of accounts and othermatters connected therewith are as stated in the Basis for Qualified Opinion paragraphabove.

(h) With respect to the adequacy of the internal financial controlswith reference to standalone financial statements of the Company and the operatingeffectiveness of such controls refer to our separate Report in "Annexure C".

(i) With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according to theexplanations given to us:

i. The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements - Refer Note 53 to thestandalone financial statements;

ii. Except for the possible effect of the matters described in theBasis of Qualified Opinion paragraph above the Company has made provision as requiredunder the applicable law or accounting standards for material foreseeable losses if anyon long-term contracts including derivative contracts

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

3. As required by The Companies (Amendment) Act 2017 in our opinionaccording to information explanations given to us the remuneration paid by the Companyto its directors is within the limits laid prescribed under Section 197 of the Act and therules thereunder.

For MSKA & Associates

Chartered Accountants

ICAI Firm Registration No.105047W

Geetha Jeyakumar
Partner
Place: Chennai Membership No. : 029409
Date: June 24 2020 UDIN: 20029409AAAAFB2361

Engineering the future

Annexure "A" to the Independent Auditor's Report on even dateon the Standalone Financial Statements of Shriram EPC Limited

Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements

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

• Identify and assess the risks of material misstatement of thefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3) (i) of the Act we are also responsible for expressing our opinion onwhether the company has internal financial controls with reference to financial statementsin place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditionsmay cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

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

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

For MSKA & Associates

Chartered Accountants

ICAI Firm Registration No.105047W

Geetha Jeyakumar
Partner
Place: Chennai Membership No. : 029409
Date: June 24 2020 UDIN: 20029409AAAAFB2361

Annexure "B" to the Independent Auditors' Report of evendate on the Standalone Financial Statements of Shriram EPC Limited for the year endedMarch 312020

[Referred to in paragraph 1 under ‘Report on Other Legal andRegulatory Requirements' in the Independent Auditors' Report]

i. (a) The company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets (Property Plantand Equipment).

(b) All the fixed assets (Property Plant and Equipment) have not beenphysically verified by the management during the year but there is a regular program ofverification which in our opinion is reasonable having regard to the size of the Companyand the nature of its assets. No material discrepancies were noticed on such verification.

(c) In respect of immovable properties of land and building that havebeen taken on lease and disclosed as Fixed Assets in the financial statements the leaseagreements are in the name of the Company where the Company is the lessee in theagreement.

(d) Immovable properties of land and buildings whose title deeds havebeen pledged with a bank as security for term loans are held in the name of the Companybased on the Mortgage deed executed between the bank and the Company for whichconfirmation has been obtained from the bank.

ii. The Company does not have any inventory and hence reporting underclause (ii) of the CARO 2016 is not applicable.

iii. According to the information and explanation given to us theCompany has granted loans secured or unsecured Companies covered in the registermaintained under section 189 of the Act in respect of which:

(a) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the terms and conditions onwhich the loans have been granted by the Company are in our opinion prima facie notprejudicial to the interest of the Company.

(b) The schedule of repayment of principal and payment of interest havenot been stipulated and in the absence of stipulation of repayment terms we are unable tocomment on the regularity of repayment of principal and payment of interest.

(c) There are no overdue amounts remaining outstanding as at theBalance Sheet date except for an amount of Rs. 4110.44 Lakhs as referred to in Basis ofQualified opinion paragraph in the Independent Auditors' Report which have beenoutstanding for a considerable period of time and as explained to us the Management hastaken reasonable steps for recovery of the principal amounts and interest.

iv. In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of section 185 and 186 of theAct in respect of loans investments guarantees and securities as applicable.

v. In our opinion and according to the information and explanationsgiven to us the Company has not accepted any deposits from the public within the meaningof Sections 73 74 75 and 76 of the Act and the rules framed there under.

vi. We have broadly reviewed the books of account relating tomaterials labour and other items of cost maintained by the Company pursuant as specifiedby the Central Government for the maintenance of cost records under sub-section (1) ofsection 148 of the Act and we are of the opinion that prima facie the prescribed accountsand records have been made and maintained. We have not however made a detailedexamination of the records with a view to determine whether they are accurate or complete

vii. (a) According to the information and explanations given to us andthe records of the Company examined by us in our opinion the Company has generally beenregular in depositing with appropriate authorities undisputed statutory dues includingprovident fund employees' state insurance income-tax goods and service tax dutyof customs cess and any other statutory dues applicable to it. There were no undisputedstatutory dues in arrears as at March 312020 for a period of more than six months fromthe date they became payable.

(b) According to the information and explanation given to us andexamination of records of the Company the outstanding dues of income-tax goods andservice tax customs duty cess and any other statutory dues on account of any disputeare as follows:

Name of the statute Nature of dues Period to which the amount relates Forum where dispute is pending Amount involved (Rs. In Lakhs) Amount Unpaid (Rs. In Lakhs)
Income Tax Act 1961 Income Tax Interest and Penalty 2012-13 Income Tax Appellate Tribunal 1800.58 1800.58
Service Tax (Chapter V of the Finance Act 1994) Service Tax and Penalty 2010-11 to 201213 Customs Excise and Service Tax Appellate Tribunal 408.00 408.00
Service Tax (Chapter V of the Finance Act 1994) Service Tax and Penalty 2006-07 to 200809 Commissioner of Service Tax (Appeals) 133.00 133.00
Andhra Pradesh Value Added Tax Act Value Added Tax 2008- 09 and 2009- 10 Supreme Court 223.33 223.33
Tamil Nadu Value Added Tax Act Value Added Tax 2008-09 to 201415 High Court 57.16 57.00
West Bengal Value Added Tax Act Value Added Tax 2007-08 to 201415 Revisional Board 1860.00 527.00
Orissa Value Added Tax Act Value Added Tax 2011- 12 and 2012- 13 High Court 6700.75 6700.75
Jharkhand Value added tax act Interest VAT Tax Amount 2013-14 to 201516 Dy. Commissioner of commercial tax 44.00 44.00
Kerala Value added tax act Disputed on Penalty 2013-14 to 201617 Sales tax Officer 127.00 127.00
Kerala Value added tax act Disputed on Tax & Interest 2009-10 Assistant commissioner 79.00 79.00
West Bengal Value Added Tax Act Value Added Tax 2016-17 Revisional Board 25.00 25.00

viii. In our opinion and according to the information and explanationsgiven to us the company has not defaulted in repayment of dues to the financialinstitutions & Banks except for in the following cases:

Particulars Amount of default for the year ended March 31 2020 (Rs. In Lakhs) Period of default Remarks
Central Bank of India 773.76 Ranging from 3- 90 days Principal amount subsequently cleared
386.88 Ranging from 91- 180 days Principal amount subsequently cleared
1285.20 Range from 3-90 days Interest amount subsequently cleared
57.89 Ranging from 91- 180 days Interest amount subsequently cleared
238.18 Range from 3-90 days Interest amount subsequently not cleared
IFCI 46.21 Ranging from 3- 90 days Principal amount subsequently cleared
23.02 Ranging from 91- 180 days Principal amount subsequently cleared
19.12 Range from 3-180 days Principal amount subsequently not cleared
22.39 Range from 3-90 days Interest amount subsequently cleared
35.60 Range from 91-180 days Interest amount subsequently cleared
19.33 Range from 3-90 days Interest amount subsequently Not cleared

ix. The Company did not raise any money by way of initial public offeror further public offer (including debt instruments) and term loans during the year.Accordingly the provisions stated in paragraph 3 (ix) of the Order are not applicable tothe Company.

x. During the course of our audit examination of the books and recordsof the Company carried out in accordance with the generally accepted auditing practicesin India and according to the information and explanations given to us we have neithercome across any instance of material fraud by the Company or on the Company by itsofficers or employees.

xi. According to the information and explanations given to us and basedon our examination of the records of the Company the Company has paid/ provided formanagerial remuneration in accordance with the requisite approvals mandated by theprovisions of section 197 read with Schedule V to the Act.

xii. In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi Company. Accordingly the provisions stated inparagraph 3(xii) of the Order are not applicable to the Company.

xiii. According to the information and explanations given to us andbased on our examination of the records of the Company transactions with the relatedparties are in compliance with sections 177 and 188 of the Act where applicable anddetails of such transactions have been disclosed in the financial statements as requiredby the applicable accounting standards.

xiv. According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year. Accordingly the provisions stated in paragraph 3 (xiv) of theOrder are not applicable to the Company.

xv. According to the information and explanations given to us and basedon our examination of the records of the Company the Company has not entered intonon-cash transactions with directors or persons connected with him. Accordinglyprovisions stated in paragraph 3(xv) of the Order are not applicable to the Company.

xvi. In our opinion the Company is not required to be registered undersection 45 IA of the Reserve Bank of India Act 1934 and accordingly the provisionsstated in paragraph clause 3 (xvi) of the Order are not applicable to the Company.

For MSKA & Associates Chartered Accountants

ICAI Firm Registration No.105047W

Geetha Jeyakumar
Partner
Place: Chennai Membership No. : 029409
Date: June 24 2020 UDIN: 20029409AAAAFB2361

Engineering the future

Annexure "C" to the Independent Auditor's Report of evendate on the Standalone Financial Statements of Shriram EPC Limited

[Referred to in paragraph 2(h) under ‘Report on Other Legal andRegulatory Requirements' in the Independent Auditors' Report]

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

We have audited the internal financial controls with reference tofinancial statements of Shriram EPC Limited ("the Company") as of March 31 2020in conjunction with our audit of the standalone financial statements of the Company forthe year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's Management is responsible for establishing andmaintaining internal financial controls based on the internal control with reference tofinancial statements criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls over Financial Reporting issued by the Institute of Chartered Accountants ofIndia (ICAI) (the "Guidance Note"). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to Company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under the Act.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company'sinternal financial controls with reference to financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingissued by ICAI and deemed to be prescribed under section 143(10) of the Act to the extentapplicable to an audit of internal financial controls. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether internal financial controls with reference tofinancial statements was established and maintained and if such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of internal financial controls withreference to financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating

effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment ofthe risks of material misstatement of the financial statements whether due to fraud orerror.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our qualified audit opinion on the Company'sinternal financial controls with reference to financial statements.

Meaning of Internal Financial Controls with reference to FinancialStatements

A Company's internal financial control with reference to financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A Company's internalfinancial control with reference to financial statements includes those policies andprocedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition use or disposition of the company's assets that could have a materialeffect on the financial statements.

Inherent Limitations of Internal Financial Controls with reference tofinancial statements

Because of the inherent limitations of internal financial controls withreference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial control with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

Qualified Opinion

According to the information and explanations given to us and based onour audit material weaknesses have been identified in the operating effectiveness of theCompany's internal financial controls over financial reporting as at March 312020 inrespect of the following:

i. Provisioning of overdue receivables and provisioning of advanceswhich have been outstanding for a period of more than five years which could potentiallyresult in the Company not recognizing a provision for the said receivables and advances.

ii. Assessment of future taxable profits which could enable the Companyto realise the deferred tax asset recognised on carry forward business losses.

A ‘material weakness' is a deficiency or a combination ofdeficiencies in internal financial control with reference to financial statements suchthat there is a reasonable possibility that a material misstatement of the company'sannual or interim financial statements will not be prevented or detected on a timelybasis.

In our opinion the Company has in all material respects maintainedinternal financial controls with reference to financial statements as of March 31 2020based on the internal control with reference to financial statements criteria establishedby the Company considering the essential components of internal control stated in theGuidance Note and except for the possible effects of the material weakness describedabove on the achievement of the objectives of the control criteria the Company'sinternal financial controls with reference to financial statements were operatingeffectively as of March 312020.

We have considered the material weakness identified and reported abovein determining the nature timing and extent of audit tests applied in our audit of theMarch 31 2020 financial statements of the Company and the material weakness affects ouropinion on the standalone financial statements of the Company.

For MSKA & Associates Chartered Accountants

ICAI Firm Registration No.105047W

Geetha Jeyakumar
Partner
Place: Chennai Membership No. : 029409
Date: June 24 2020 UDIN: 20029409AAAAFB2361

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