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Vardhman Special Steels Ltd.

BSE: 534392 Sector: Metals & Mining
NSE: VSSL ISIN Code: INE050M01012
BSE 14:10 | 28 Jan 259.00 2.15
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OPEN 259.10
PREVIOUS CLOSE 256.85
VOLUME 7226
52-Week high 309.30
52-Week low 113.50
P/E 10.49
Mkt Cap.(Rs cr) 1,051
Buy Price 259.00
Buy Qty 214.00
Sell Price 259.60
Sell Qty 8.00
OPEN 259.10
CLOSE 256.85
VOLUME 7226
52-Week high 309.30
52-Week low 113.50
P/E 10.49
Mkt Cap.(Rs cr) 1,051
Buy Price 259.00
Buy Qty 214.00
Sell Price 259.60
Sell Qty 8.00

Vardhman Special Steels Ltd. (VSSL) - Auditors Report

Company auditors report

To the Members of

Vardhman Special Steels Limited

Report on the Audit of the Financial Statements

1. Opinion

We have audited the financial statements of Vardhman Special SteelsLimited ("the Company") which comprise the balance sheet as at 31 March 2020and the statement of profit and loss (including other comprehensive income/ (expense))statement of changes in equity and statement of cash flows for the year then ended andnotes to the financial statements including a summary of the significant accountingpolicies and other explanatory information.

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid financial statements give the information requiredby the Companies Act 2013 ("Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2020 and its profit and othercomprehensive income/ (expense) changes in equity and its cash flows for the year endedon that date.

2. Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing(SAs) specified under section 143(10) of the Act.

Our responsibilities under those SAs are further described in theAuditor's Responsibilities for the Audit of the Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.

3. Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.

Description of Key Audit Matters

The key audit matter How the matter was addressed in our audit
1. Going concern assumption
See note 50 to the financial statements In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
Due to the outbreak of COVID-19 pandemic the Company's operations have been impacted and this necessitates the evaluation of the Company's ability to continue as a Going concern and meeting its obligations to the stakeholders creditors employees and lenders. • We evaluated the Company's ability to meet its obligations and assessed sufficiency of the Company's resources/funds to meet its costs in the foreseeable future.
• We assessed the appropriateness and reasonableness of the cash flow forecasts for the foreseeable future taking into account the adverse effects that could arise from the outbreak of Covid 19 pandemic.
• We also evaluated the sensitivity analysis on the assumptions used based on the current indicators of future economic conditions.
• We evaluated prevailing and estimates of future prices of scrap consumables and other resources assumptions relating to operational performance and future demands.
• We assessed the adequacy of the disclosures included in the financial statements.
2. Impact of Section 115 BAA and recoverability of MAT credit
See note 8 to the financial statements In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
The Company has evaluated the impact of section 115BAA and determined that it will continue to recognize tax expense at the existing income tax rate as applicable to the Company. • We assessed the income taxes recognition accounting policies including those relating to deferred tax and minimum alternate tax (MAT) by comparing with applicable accounting standards.
Accordingly the Company has continued to recognise MAT credits and remeasured the deferred tax assets/liabilities likely to be reversed at the time the Company would opt for new tax regime. • We evaluated the design of internal controls and operating effectiveness of the key internal control relating to taxation.
The possible outcome of the above involves significant judgment hence the same has been considered as key focus area for our audit. • We performed substantive testing by inspecting the minutes of the board meeting dated 04 November 2019 evidencing the decision of the board where in view of the unabsorbed depreciation and MAT Credits they decided to continue to pay tax in the old regime.
• We also obtained and evaluated the future business projections from the management including the impact of section 115 BAA and assessed the recoverability of deferred tax asset and MAT credit as on the balance sheet date.
• We involved our tax specialists to challenge the management's underlying assumptions in estimating the tax provision for the year.
• We also obtained and assessed the allowances and disallowances considered by management in the current tax computation and determined that deferred tax asset/ liability has been duly recognized for all timing differences using the substantively enacted tax rate after considering the impact of Section 115 BAA.
We assessed the adequacy of disclosures made by management in relation to deferred tax assets including movement from prior year current tax computation including effective tax reconciliation.
3. Recognition of Government Grants
See note 49 to the financial statements In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
The Company is eligible for government grants under the fiscal incentives scheme of the Mega project policy of the Punjab State Government's Industrial Promotion Policy 2013 for its expansions completed up to 31 March 2016. Further the Company is also eligible for claiming incentives under the Industrial and Business Development Policy 2017 of the State Government. • We obtained and inspected the government incentive policies along with the various notifications issued.
Though the eligible plant has been commissioned in earlier years but all the benefits have not been considered till date as few of them are pending for sanction/ audit by the state government which is considered as a key event for providing reasonable assurance that the entity has complied with the conditions attached to the recognition of government grant. • We obtained and checked the fillings made by the Company in line with the requirements of the respective incentive policy.
Due to the significance of the amounts and the level of management judgment involved we considered the criteria for recognition of incentives as a key focus for our audit. • We obtained and checked the terms and conditions of the agreements with the government and inspected the interim notification for fiscal incentives along with the corrigendum to the same.
• We assessed the accounting treatment of the government grant approved and received during the current year.
• We assessed the adequacy of the disclosures given by the management in relation to the government grant in the financial statements.

4. Other Information

The Company's management and Board of Directors are responsiblefor the other information. The other information comprises the information included in theCompany's annual report but does not include the financial statements and ourauditors' report thereon.

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

In connection with our audit of the financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.

5. Management's and Board of Directors' Responsibilityfor the Financial Statements

The Company's Management and Board of Directors are responsiblefor the matters stated in section 134(5) of the Act with respect to the preparation ofthese financial statements that give a true and fair view of the state of affairs profitand other comprehensive income/ (expense) changes in equity and cash flows of the Companyin accordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting 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 financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

In preparing the financial statements Management and Board ofDirectors are responsible for assessing the Company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless the Board of Directors either intends to liquidate theCompany or to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing theCompany's financial reporting process.

6. Auditor's Responsibilities for the Audit of theFinancial Statements

Our objectives are to obtain reasonable assurance about whether thefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial 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 adequate internal financial controls with reference to financialstatements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures in the financial statementsmade by Management and Board of Directors.

• Conclude on the appropriateness of Management and Board ofDirectors use of the going concern basis of accounting and based on the audit evidenceobtained whether a material uncertainty exists related to events or conditions that maycast significant doubt on the Company's ability to continue as a going concern. If weconclude that a material uncertainty exists we are required to draw attention in ourauditor's report to the related disclosures in the financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may 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 de_ciencies 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 auditors' 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.

7. Report on Other Legal and Regulatory Requirements

(A) As required by the Companies (Auditors' Report) Order 2016("the Order") issued by the Central Government in terms of section 143 (11) ofthe Act we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

(B) As required by Section 143(3) of the Act we report that: a) Wehave sought and obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit. b) In our opinionproper books of account as required by law have been kept by the Company so far as itappears from our examination of those books. c) The balance sheet the statement of profitand loss (including other comprehensive income/ (expense)) the statement of changes inequity and the statement of cash flows dealt with by this report are in agreement with thebooks of account. d) In our opinion the aforesaid financial statements comply with theInd AS specified under section 133 of the Act. e) On the basis of the writtenrepresentations received from the directors as on 31 March 2020 taken on record by theBoard of Directors none of the directors is disqualified as on 31 March 2020 from beingappointed as a director in terms of Section 164(2) of the Act. f ) With respect to theadequacy of the internal financial controls with reference to financial statements of theCompany and the operating effectiveness of such controls refer to our separate Report in"Annexure B". g) With respect to the other matters to be included in theAuditors' 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 litigationsas at 31 March 2020 on its financial position in its financial statements - Refer Note 39ato the financial statements. ii. The Company did not have any long-term contractsincluding derivative contracts for which there were any material foreseeable losses. iii.There were no amounts which were required to be transferred to the Investor Education andProtection Fund by the Company. iv. The disclosures in the financial statements regardingholdings as well as dealings in specified bank notes during the period from 8 November2016 to 30 December 2016 have not been made in these financial statements since they donot pertain to the financial year ended 31 March 2020.

(C) With respect to the matter to be included in the Auditors'Report under section 197(16):

In our opinion and according to the information and explanations givento us the remuneration paid by the company to its directors during the current year is inaccordance with the provisions of Section 197 of the Act. The remuneration paid todirector is in excess of the limit laid down under Section 197 of the Act. Accordinglythe Company has taken shareholder's approval by way of special resolution for suchpayment. The Ministry of Corporate Affairs has not prescribed other details under Section197(16) which are required to be commented upon by us.

Annexure A to the Independent Auditors' report on the financialstatements of Vardhman Special Steels Limited for the period ended 31 March 2020.

(Referred to in paragraph 7 (A) under ‘Report on Other Legal andRegulatory Requirements' section of our report of even date)

We report that:

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

(b) According to the information and explanations given to us theCompany has a regular programme of physical verification of its fixed assets by which allfixed assets are verified in a phased manner over a period of three years. In accordancewith this programme certain fixed assets were verified during the year. In our opinionthis periodicity of physical verification is reasonable having regard to the size of theCompany and the nature of its assets. As informed to us no discrepancies were noticed onsuch verification.

(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of theimmovable property are held in the name of the Company.

(ii) The inventory except materials-in-transit and stocks lying withthird parties have been physically verified by the management during the year. In ouropinion the frequency of such verification is reasonable having regard to the size of theCompany and the nature of its business. For stocks lying with third parties writtenconfirmations have been obtained. The discrepancies noticed on verification between thephysical stocks and the book records were not material and have been appropriatelyadjusted in books of account.

(iii) The Company has not granted any loans secured or unsecured tocompanies firms or limited liability partnerships or other parties covered in theregister required under section 189 of the Companies Act 2013 (‘the Act').Accordingly paragraph 3(iii) of the Order is not applicable.

(iv) The Company has not given any loans provided any guarantee orsecurity as specified under Section 185 of the Act. Further in respect of investmentsmade by the Company the provisions of Section 186 of the Act have been complied with.

(v) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the Company has not acceptedany deposits within the meaning of Sections 73 to 76 of the Act and the Companies(Acceptance of Deposits) Rules 2014 (as amended). Accordingly paragraph 3(v) of theorder is not applicable.

(vi) We have broadly reviewed the books of account maintained by theCompany in respect of products covered where pursuant to the rules prescribed by theCentral Government for maintenance of cost records under Section 148(1) of the Act inrespect of products covered and are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. However we have not made a detailedexamination of the records with a view to ensuring whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us andon the basis of our examination of the records of the Company amounts deducted/ accruedin the books of account in respect of undisputed statutory dues including Provident FundEmployees' State Insurance Income tax Goods and Services Tax (‘GST')Duty of customs and other material statutory dues have generally been regularly depositedduring the year by the Company with the appropriate authorities though there have beenslight delays in few cases of deposit of income tax.

According to the information and explanations given to us noundisputed amounts payable in respect of Provident Fund Employees' State InsuranceIncome tax GST Duty of customs and other material statutory dues were in arrears as at31 March 2020 for a period of more than six months from the date they became payable.

The Company does not have liability in respect of Service tax Duty ofexcise Sales tax and Value added tax since effective 1 July 2017 these statutory dueshas been subsumed into Goods and Services Tax.

(b) According to the information and explanations given to us thereare no dues of Income tax GST Sales tax

Service tax Duty of excise Duty of customs and Value added tax whichhave not been deposited with the appropriate authorities on account of any dispute exceptas mentioned below: (Amounts are in Rs. lakhs)

Name of the Statute Nature of the Dues Amount* (I) Amount paid under protest* (I) Period to which the amount relates Forum where dispute is pending
UP VAT Act 2008 VAT 7.32 5.12 2014-15 Assistant Commissioner Sale Tax
6.20 3.10 2013-14 Assistant Commissioner Sale Tax
5.65 2.82 2014-15 Deputy Commissioner of Sale Tax
4.27 2.14 2015-16 Deputy Commissioner of Sale Tax
The Central Sales Tax Act 1956 Sale tax 0.25 0.13 2014-15 Deputy Commissioner of Sale Tax
1900.00 1900.00 2011-12 2012-13 & 2013-14 High Court Punjab & Haryana- Chandigarh
6.70 3.35 2013-14 Assistant Commissioner Sale Tax
UP Entry Sale Tax Act 2007 Entry tax 13.18 6.59 2013-14 Assistant Commissioner Sale Tax
0.64 0.32 2014-15 Deputy Commissioner of Sale Tax
0.28 0.14 2015-16 Deputy Commissioner of Sale Tax
The Customs Act 1962 Custom duty 14.93 14.93 2014-16 Commissioner of Central Excise (Appeals) Chandigarh

*amount as per demand orders including interest and penalty whereverindicated in the order.

Note: The above table includes only those amounts on which demandorders have been served and are under dispute.

(viii)According to the information and explanations given to us theCompany has not defaulted in repayment of dues to banks. The Company did not have anyoutstanding dues to any government financial institution or debenture holders during theyear.

(ix) According to the information and explanations given to us theterm loan taken by the Company have been applied for the purposes for which they wereraised. As informed to us Company has not raised any moneys by way of initial publicoffer or further public offer (including debt instruments).

(x) According to the information and explanations given to us no fraudby the Company and no fraud on the Company by its officers or employees has been noticedor reported during the course of our audit for the year.

(xi) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the managerial remunerationhas been paid or provided by the Company in accordance with the provision of section 197read with Schedule V of the Act.

(xii) According to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable.

(xiii)According to the information and explanations given to us and onthe basis of our examination of the records of the Company transactions with the relatedparties are in compliance with section 177 and 188 of the Act where applicable and detailsof such transactions have been disclosed in the Ind AS financial statements as required bythe applicable accounting standards.

(xiv)According to the information and explanations given to us inrespect of preferential allotment of shares made during the year the Company has dulycomplied with the requirements of section 42 of the Act. The Company has neither made anyprivate placement of shares nor issued any fully or partly convertible debentures duringthe year. However proceeds from issue of equity shares amounting to RS. 5000 lakhs whichhas been received during the year remaining unutilised as at 31 March 2020 and isincluded in Other non-current financial assets. Also refer to Note 7 to the financialstatements.

(xv) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the Company has not enteredinto any non-cash transactions with directors or persons connected with him. Accordinglyparagraph 3(xv) of the Order is not applicable.

(xvi)According to the information and explanations given to us theCompany is not required to be registered under section 45-IA of the Reserve Bank of IndiaAct 1934.

Annexure B to the Independent Auditors' report on the financialstatements of Vardhman Special Steels Limited for the period ended 31 March 2020.

Report on the internal financial controls with reference to theaforesaid financial statements under Clause (i) of Sub-section 3 of Section 143 of theCompanies Act 2013

(Referred to in paragraph 7(B)(f ) under ‘Report on Other Legaland Regulatory Requirements' section of our report of even date)

Opinion

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

In our opinion the Company has in all material respects adequateinternal financial controls with reference to financial statements and such internalfinancial controls were operating effectively as at 31 March 2020 based on the internalfinancial controls with reference to financial statements criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India (the "Guidance Note").

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors areresponsible for establishing and maintaining internal financial controls based on theinternal financial controls with reference to financial statements criteria established bythe Company considering the essential components of internal control stated in theGuidance Note. These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013(hereinafter referred to as "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 Auditingprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to financial statements. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols with reference to financial statements were established and maintained andwhether such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls with reference to financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of such internal financialcontrols 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 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 audit opinion on the Company's internalfinancial controls with reference to financial statements.

Meaning of Internal Financial controls with Reference to FinancialStatements

A company's internal financial controls with reference tofinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. Acompany's internal financial controls with reference to financial statements includethose policies and procedures that (1) pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could havea material effect 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 controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

ForB S R & Co. LLP
Chartered Accountants
Firm Registration No.: 101248W/W-100022
Gaurav Mahajan
Partner
Place: Chandigarh Membership No.: 507857
Date: 15 June 2020 ICAI UDIN : 20507857AAAAAT3027

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