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Electrosteel Steels | Auditor's Report > Steel - Medium & Small > Auditor's Report from Electrosteel Steels - BSE: 533264, NSE: ESL
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Electrosteel Steels

BSE: 533264|NSE: ESL|ISIN: INE481K01013|SECTOR: Steel - Medium & Small
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Auditor's Report (Electrosteel Steels) Year End : Mar '17

Report on the Financial Statements

We have audited the accompanying financial statements of ELECTROSTEEL STEELS LIMITED (‘the Company’), which comprise the balance sheet as at 31 March 2017, the statement of profit and loss (including other comprehensive income), the statement of cash flows and the statement of changes in equity for the year then ended and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with relevant rules issued thereunder.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

1. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial controls relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidences we have obtained are sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, of the financial position of the Company as at 31 March, 2017, and its financial performance including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Emphasis of Matters

Without qualifying our opinion, we draw attention to the following Notes to the financial statements:

Note no. 18(A)(4), regarding carrying value of securities against the secured loans due being short, consequently the loans being marginally not being fully secured.

Note No. 39, regarding the preparation of these financial statements on a “going concern basis”. The Company incurred an accumulated net loss of Rs. 3,18,925 lakhs up to the year ended March 31, 2017 and, as of that date, the company’s current liabilities exceeded its current assets by Rs. 5,55,233 lakhs. Further the company’s net worth has been eroded as at the balance sheet date. Since the full compliance of the sanctioned CDR package could not be met with, the lenders have since invoked Strategic Debt Restructuring (SDR) pursuant to RBI circulars dated 08.06.2015 & 24.09.2015, the implementation whereof is under progress. Company has positive EBIDTA in F.Ys. 2015-16 & 2016-17. Further, the company as well as the lenders are looking out for potential investors, and the restructuring proposal is under active consideration of the lenders. In view thereof, and expecting favorable market conditions in future, these financial statements have been prepared on a “going concern basis” and no adjustment has been made to the carrying value of the assets and liabilities.

Our opinion is not modified in respect of the matter.

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 Section 143(11) of the Act, we give in the Annexure A, a statement on the matters 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 explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

c. the financial statements dealt with by this report are in agreement with the books of account;

d. in our opinion, the aforesaid financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act read with relevant rule issued thereunder;

e. two matters described under the Emphasis of Matters paragraph, in our opinion may have adverse effect on the functioning of the company;

f. on the basis of the written representations received from the directors as on 31 March 2017 and taken on record by the Board of Directors, none of the directors are disqualified as on 31 March 2017 from being appointed as a director in terms of Section 164(2) of the Act;

g. with respect to the adequacy of the internal financial controls over financial reporting (IFCoFR) of the Company and the operating effectiveness of such controls refer to our separate report in Annexure ‘B’.

h. with respect to the other matters to be included in the Auditor’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 the explanations given to us:

i. the Company does not have any pending litigations, other than those disclosed in the financial statements; which would materially impact its financial position;

ii. the Company, as detailed in Note 40 to the financial statements, has made provision, as required under the applicable laws or Ind AS, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

iv. the Company, as detailed in Note No. 43 to the financial statement, has made requisite disclosures in these standalone financial statement as to holdings as well as dealings in Specified Bank Notes during the period from 8 November 2016 to 30 December 2016. Based on the audit procedure performed and taking into consideration the information and explanation given to us, in our opinion, these are in accordance with the books of accounts maintained by the company.

Annexure A to the Auditor’s Report

The Annexure referred to in Independent Auditor’s Report of even date to the members of Electrosteel Steels Limited, on the financial statements for the year ended 31-March, 2017

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, we report that:

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

(b) As planned, a part of the fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification. In our opinion, the planned frequency of verification of the fixed assets is reasonable having regard to the size of the Company and the nature of its assets.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of all immovable properties are held in the name of the Company except for 226 no’s of cases of Freehold Land comprising of 229.43 acres aggregating to amount of Rs. 1615.99 lakhs- registration pending for requisite approvals.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

(b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory and no material discrepancies between physical inventory and book records were noticed on physical verification.

(iii) The Company has not granted any loan, secured or unsecured to companies, firms, LLP or other parties covered in the register maintained under Section 189 of the Act. Accordingly, the provisions of clauses 3(iii)(a),3(iii)(b) and 3(iii)(c)of the Order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, the Company does not have any loan, investment, guarantees and securities. Accordingly, the provisions of clause 3(iv) of the Order is not applicable.

(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act in respect of Company’s products/services and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete. As informed, the cost audit for the year is under progress.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, have generally been regularly deposited to the appropriate authorities. Further, no undisputed amounts payable in respect thereof were outstanding on the year-end fora period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the following dues outstanding in respect of income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax and cess on account of any dispute, are as follows:

Name of the statute

Nature of dues

Amount (Rs.Lacs)

Period to which the amount relates

Forum where dispute is pending

Central Excise Act, 1944

Excise Duty

74.69

2009-10

CESTAT

Central Excise Act, 1944

Excise Duty

36.57

CESTAT

Service Tax under Finance Act,1994

Service Tax

2,214.87

2007-08 & 2008-09

CESTAT

Service Tax under Finance Act,1994

Service Tax

317.72

2009-10

CESTAT

Service Tax under Finance Act,1994

Service Tax

1,071.40

2007-08 to 2011-12

CESTAT

Service Tax under Finance Act,1994

Service Tax

13.34

2014-15

The Joint Commissioner of Service Tax, Kolkata

Service Tax under Finance Act,1994

Service Tax

5.50

2015-16

Commissioner (Appeals)

Custom Act, 1962

Custom duty

5,974.73

2008-09 to 2011-12

Additional Director General, Directorate of Revenue Intelligence, New Delhi

Custom Act, 1962

Custom duty

19,569.38

2009-10 & 2010-11

Principal, Additional Director General, Directorate of Revenue Intelligence, Kolkata Zonal Unit

Custom Act,1962

Custom Duty

10,267.82

2008-09 & 2009-10

Principal, Additional Director General, Directorate of Revenue Intelligence, Kolkata Zonal Unit

Jharkhand VAT Act, 2015

Value Added Tax

24.40

2009-10

Commercial Tax Tribunal Ranchi

Jharkhand VAT Act, 2015

Value Added Tax

137.88

2010-11

Commissioner Commercial taxes, Jharkhand

Jharkhand VAT Act, 2015

Value Added Tax

273.16

2010-11 to 2012-13

Deputy Commissioner of Commercial Taxes, Jharkhand

Jharkhand VAT Act, 2015

Value Added Tax

8,194.13

2011-12

Deputy Commissioner of Commercial Taxes, Jharkhand

Jharkhand VAT Act, 2015

Value Added Tax

3,936.83

2012-13

Deputy Commissioner of Commercial Taxes, Jharkhand

Jharkhand VAT Act, 2015

Value Added Tax

138.94

2013-14

Commissioner Commercial taxes, Jharkhand

Jharkhand VAT Act, 2015

Value Added Tax

194.07

2013-14

Deputy Commissioner of Commercial Taxes, Jharkhand

Jharkhand VAT Act, 2015

Value Added Tax

9.11

2008-09 to 2010-11

Deputy Commissioner of Commercial Taxes, Jharkhand

Jharkhand VAT Act, 2015

Value Added Tax

673.47

2015-16

Commissioner Commercial taxes, Jharkhand

Central Sales Tax, 1956

Central Sales Tax

392.78

2012-13

Commissioner Commercial taxes, Jharkhand

Central Sales Tax, 1956

Central Sales Tax

1,507.64

2014-15

Commissioner Commercial taxes, Jharkhand

Central Sales Tax, 1956

Central Sales Tax

322.58

2015-16

Commissioner Commercial taxes, Jharkhand

(viii) The Company has defaulted in the payment of principal as well as interest dues to the following banks and Financial Institutions:

Amount (in Lakhs)

Name of the Bank

Principal

Period

Interest

Period

Allahabad Bank

4,427.20

December 2015 to March 2017

6,373.54

April 2015 to March 2017

Andhra Bank

1,730.79

December 2015 to March 2017

2,481.13

April 2015 to March 2017

Bank of Baroda

2,594.75

December 2015 to March 2017

3,709.51

April 2015 to March 2017

Bank of India

3,056.03

December 2015 to March 2017

4,382.78

April 2015 to March 2017

Bank of Maharashtra

1,946.89

December 2015 to March 2017

2,789.03

April 2015 to March 2017

Canara Bank

622.92

December 2015 to March 2017

948.78

April 2015 to March 2017

Central Bank of India

7,680.76

December 2015 to March 2017

11,132.02

April 2015 to March 2017

Corporation Bank

2,059.68

December 2015 to March 2017

2,967.80

April 2015 to March 2017

Dena Bank

2,783.95

December 2015 to March 2017

4,008.43

April 2015 to March 2017

ICICI Bank

1,779.25

December 2015 to March 2017

2,544.61

April 2015 to March 2017

Indian Bank

2,553.64

December 2015 to March 2017

3,668.31

April 2015 to March 2017

Indian Overseas Bank

6,430.71

December 2015 to March 2017

9,305.58

April 2015 to March 2017

J&K Bank

920.67

December 2015 to March 2017

1,319.66

April 2015 to March 2017

Oriental Bank of Commerce

6,696.08

December 2015 to March 2017

9,569.29

April 2015 to March 2017

Punjab & Sind Bank

1,838.19

December 2015 to March 2017

2,635.31

April 2015 to March 2017

Punjab National Bank

8,864.24

December 2015 to March 2017

12,594.34

April 2015 to March 2017

State Bank of Hyderabad

7,312.36

December 2015 to March 2017

10,542.74

April 2015 to March 2017

State Bank of India

30,537.94

December 2015 to March 2017

43,796.27

April 2015 to March 2017

State Bank of Mysore

3,562.97

December 2015 to March 2017

5,177.73

April 2015 to March 2017

State Bank of Patiala

5,910.68

December 2015 to March 2017

8,575.04

April 2015 to March 2017

State Bank of Travancore

4,774.30

December 2015 to March 2017

6,942.52

April 2015 to March 2017

Syndicate Bank

2,358.56

December 2015 to March 2017

4,050.19

April 2015 to March 2017

UCO Bank

7,456.94

December 2015 to March 2017

10,810.64

April 2015 to March 2017

Union Bank of India

4,320.63

December 2015 to March 2017

6,247.55

April 2015 to March 2017

United Bank of India

5,038.07

December 2015 to March 2017

7,226.01

April 2015 to March 2017

Vijaya Bank

3,067.54

December 2015 to March 2017

4,462.55

April 2015 to March 2017

Name of the Financial Institution

Principal Defaul

Period

Interest Default

Period

HUDCO

4,305.75

December 2015 to March 2017

6490.24

April 2015 to March 2017

IL&FS

274.44

December 2015 to March 2017

375.97

April 2015 to March 2017

LIC of India

2,479.32

December 2015 to March 2017

3737.17

April 2015 to March 2017

SREI

9,211.32

March 2016 to March 2017

9621.91

April 2015 to March 2017

(ix) The Company did not raise any money by way of initial public offer or further public offer (including debt instrument) during the year. According to the information and explanations given to us, further disbursement of Term loan received during the year were applied for the purpose they were raised.

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

(xi) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has paid /provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with section 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable Indian accounting standards.

(xiv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with them.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For B Chhawchharia & Co.

Chartered Accountants

Firm’s Registration No.: 305123E

S K Chhawchharia

Place : Kolkata Partner

Date : May 15, 2017 Membership No.:008482

Source : Dion Global Solutions Limited
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