To the Members of Usha Martin Limited
Report on the Audit of the Standalone Ind AS Financial StatementsOpinion
We have audited the accompanying standalone Ind AS financial statementsof Usha Martin Limited ("the Company") which comprise the Balance sheet as atMarch 312019 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 andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information.
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone Ind AS financial statements give theinformation required by the Companies Act 2013 as amended ("the Act") in themanner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March312019 its profit including other comprehensive income its cash flows and the changesin equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements inaccordance with the Standards on Auditing (SAs) as specified under section 143(10) of theAct. Our responsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the 'Code of Ethics'issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements.
Emphasis of Matter
We draw attention to Note 36 (i) (a) regarding recoverability of bookvalues of Rs. 14199 lakhs (net of discounting impact of Rs. 990 lakhs) of moveable andimmoveable assets including advances for land pertaining to Kathautia and Lohari coalblocks that were deallocated during an earlier year. We have been informed that variousmeasures have been initiated by the management for timely realisation of the aforesaidrecoverable amounts. Pending outcome of such measures no adjustments to the financialstatements in this regard have been considered necessary by the management. Our opinion isnot modified in respect of 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 Ind AS financial statements forthe financial year ended March 31 2019. These matters were addressed in the context ofour audit of the standalone Ind AS financial statements as a whole and in forming ouropinion thereon and we do not provide a separate opinion on these matters. For eachmatter below our description of how our audit addressed the matter is provided in thatcontext.
We have determined the matters described below to be the key auditmatters to be communicated in our report. We have fulfilled the responsibilities describedin the Auditor's responsibilities for the audit of the standalone Ind AS financialstatements section of our report including in relation to these matters. Accordingly ouraudit included the performance of procedures designed to respond to our assessment of therisks of material misstatement of the standalone Ind AS financial statements. The resultsof our audit procedures
including the procedures performed to address the matters belowprovide the basis for our audit opinion on the accompanying standalone Ind AS financialstatements.
|Key audit matters ||How our audit addressed the key audit matter |
|Accounting for discontinued operations [as described in note 2A (h) and 36 (ii) of the standalone Ind AS financial statements] |
|In terms of agreement dated September 22 2018 and novation agreement dated October 24 2018 the Company has transferred its Steel and Bright Bar Business (SBB) to Tata Sponge Iron Limited (TSIL) subsequent to the year-end. Necessary Board and Shareholders approval were obtained during the year. |
Consequently the Company's SBB business has been disclosed in these financial statements as discontinued operation in accordance with the relevant provision of the Companies Act 2013 Ind AS 105 and relevant requirement of the SEBI.
The operations from SBB Business have been separately presented from continuing operations in the Statement of Profit & Loss with comparative numbers represented accordingly. Assets and liabilities of SBB Business has been classified as held for sale and shown separately from other assets and liabilities respectively in the Balance Sheet. Accounting for discontinued operations requires judgment and estimates to identify and separate the financial effects from continuing and discontinued operations.
Considering above and the size and complexity of the transaction this has been identified as a key audit matter.
|Our audit procedures included the following:- |
Obtained and reviewed the Business Transfer Agreement (BTA) September 22 2018 and novation agreement dated October 24 2018 to identify assets liabilities contingent liabilities (including net working capital adjustments) that are to be transferred in terms of those agreements. Further we assessed whether the assets / liabilities covered by the BTA have been segregated and classified as assets held for sale.
Reviewed segregation of income/ expenditures of the discontinued business for the year with reference to accounting records maintained by the Company and detailed workings prepared from such accounting records.
Reviewed disclosures pertaining to the operations of the discontinued business in the Notes to these financial statements.
|Provisions and Contingencies [as described in note 2A (p) 16 and 31C of the standalone Ind AS financial statements] |
|The Company has provided in Note 16 Rs. 1675 lakhs for continuing operations and disclosed in Note 31C contingent liabilities of Rs. 51853 lakhs and Rs. 7508 lakhs for continuing operations and discontinued operations respectively as at March 31 2019. ||Our audit procedures included the following:- |
Obtained listing of all disputes pending before various judicial or relevant tax/ regulatory authorities.
Enquired and discussed the above listing with Head of Legal and Heads of relevant Functions to assess the completeness and management position with regard to the probability of unfavorable outcome of disputes and provision recognised towards matter under disputes.
|Claims and exposures relating to litigation have been identified as a key audit matter due to the complexities involved in these matters timescales involved for resolution and the potential financial impact of these on the financial statements. Further significant management judgement is involved in assessing the exposure of each case and thus a risk that such cases may not be adequately provided for or disclosed. || Engaged with our relevant inhouse tax specialists for taxation matters under dispute to assess management's position of outcome of significant cases and provisions recognised. |
| Reviewed opinions obtained by the management from relevant external legal experts to assess management's position of outcome of significant matters under dispute and provisions recognized. |
| Assessed the relevant disclosures made within the financial statements to address whether they reflect the facts and circumstances of the respective tax and legal exposures and the requirements of relevant accounting standards. |
|Recognition of deferred tax assets (net) [as described in note 2A (k) and 6 (ii) of the standalone Ind AS financial statements] |
|As at March 31 2019 the Company has recognized net deferred tax asset (DTA) of Rs. 23846 lakhs in its financial statements. The DTA relates mainly to unabsorbed depreciation and carried forward business losses. |
The valuation and recoverability of DTA depend on:
|Our audit procedures included the following: |
| Assessed the controls supporting the Company's process followed to book deferred tax assets arising from unabsorbed depreciation and carried forward business losses. |
| Assessed the compliance of the methodology applied by the Company with Ind AS 12: Income Taxes. In association with our tax specialists our audit approach also consisted in assessing the business plans used and thus the likelihood that Company would be able to utilize deferred tax assets in the future. |
|-The taxable profits the Company expects to generate in future |
|-Set off against long-term capital gain arising on sale of SBB business |
|As such the valuation and future use of DTA imply significant judgments from the management. These judgments mainly relate to the forecasted taxable income the length of tax loss and available and feasible tax planning strategies. |
| Assessed the underlying projections and assumptions and their consistency with the latest management estimates as calculated and the reliability of the process by which the estimates were calculated by assessing the reasons for differences between projected and actual performances. |
|Therefore considering its significance as well as the fact that its recognition depends on management estimates and various legal frameworks the balance of DTA mainly arising from unabsorbed depreciation and tax losses carried forward is defined as a key audit matter. |
| Assessed the reliability of the process and workings by which the long-term capital gains on disposal of the SBB business were estimated by management by assessing the terms of the BTA and actual consideration receivable. |
Revenue recognition [as described in note 2A (d) and 21 of thestandalone Ind AS financial statements]
|For the year ended March 31 2019 the Company recognized revenue from operations of Rs 466800 lakhs (Including Rs. 169048 lakhs in respect of continuing operation). |
Revenue is measured taking into account discounts and rebates earned by the customers on the sales. The Company also provides a right of return to its customers for certain products. These arrangements result in deductions to gross sales in arriving at turnover and give rise to obligations for the Company to provide customers with rebates discounts allowances and the right of return which for unsettled amounts are recognized as an accrual.
|Our audit procedures included the following:- |
| Obtained an understanding of the policies and procedures applied to revenue recognition including testing the design and operating effectiveness of controls related to revenue recognition processes employed by the Company. |
| Performed procedures by analyzing the cost of sales related to discounts incentives rebates and margins to total revenue recognized as compared with prior year. |
| Assessed the relevant estimates made by the management in connection with discounts incentives and rebates at year's end. |
|The terms of sales arrangements including the timing of transfer of control the nature of discounts and rebate arrangements and delivery specifications create complexity and judgement in determining sales revenue. The risk is therefore that revenue is not recognized in accordance with Ind AS 115 'Revenue from contracts with customers' and accordingly it was determined to be a key audit matter. || Performed procedures for a sample of revenue transactions at year end to assess whether they were recognized at the correct period by corroborating the date of revenue recognition to third party support such as bills of lading lorry receipt etc. |
| Analyzed other adjustments and credit notes issued after the reporting date. |
The Company's Board of Directors is responsible for the OtherInformation. The other information comprises the information included in ManagementDiscussion and Analysis and Board's report including Annexures to Board's Report but doesnot include the standalone Ind AS financial statements and our auditor's report thereon.
Our opinion on the standalone Ind AS financial statements does notcover the other information and we do not express any form of assurance conclusionthereon.
In connection with our audit of the standalone Ind AS financialstatements our responsibility is to read the other information and in doing so considerwhether such other information is materially inconsistent with the 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. We have nothing to report inthis regard.
Responsibilities of Management for the StandaloneInd AS Financial Statements
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone Ind ASfinancial statements that give a true and fair view of the financial position financialperformance including other comprehensive income cash flows and changes in equity of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) specified under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended. Thisresponsibility also includes
maintenance of adequate accounting records in accordance with theprovisions of the Act for safeguarding of the assets of the Company and for preventing anddetecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; andthe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error. In preparing the standalone Ind AS financial statements managementis responsible 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 arealso responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of theStandalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether thestandalone Ind AS financial statements as a whole are free from material misstatementwhether due 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 Ind AS financialstatements.
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 thestandalone Ind AS financial statements whether due to fraud or error design and performaudit procedures responsive to those risks and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
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 adequate internal financial controls system in place and theoperating 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 the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone Ind AS financial statements including the disclosures and whether
the standalone Ind AS financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
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 standalone IndAS financial statements for the financial year ended March 31 2019 and are therefore thekey audit matters. We describe these matters in our auditor's report unless law orregulation precludes public disclosure about the matter or when in extremely rarecircumstances we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.
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 1" a statement on thematters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;
(b) In our opinion proper books of account as required by law havebeen 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 including theStatement of 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 our opinion the aforesaid standalone Ind AS financialstatements comply with the Accounting Standards specified under Section 133 of the Actread with Companies (Indian Accounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from thedirectors as on March 31 2019 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2019 from being appointed as a director in termsof Section 164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controlsover financial reporting of the Company with reference to these standalone Ind ASfinancial statements and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 2" to this report;
(g) In our opinion the managerial remuneration for the year endedMarch 31 2019 has been paid / provided by the Company to its directors in accordance withthe provisions of section 197 read with Schedule V to the Act;
(h) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended 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 Ind AS financial statements - Refer Note 16and Note 31C to the standalone Ind AS financial statements;
ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses;
iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
|For S.R. Batliboi & CO. LLP |
|Chartered Accountants |
|ICAI Firm Registration Number: 301003E/E300005 |
|per Bhaswar Sarkar |
|Membership Number: 055596 |
|Place of Signature: Kolkata |
|Date: May 27 2019 |