1. We have audited the attached Balance Sheet of ELECTROSTEEL STEELS
LIMITED as at 31st March, 2012 and also the Profit & Loss Account and
the Cash Flow Statement for the year ended on that date annexed thereto
in which are incorporated the accounts of the representative office at
China. These financial statements are the responsibility of the
Company''s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We have conducted our audit in accordance with auditing standards
generally accepted in India. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We bel ieve that our audit provides a reasonable basis
for our opinion.
3. As required by the Companies (Auditor''s Report) Order, 2003 (as
amended) issued by the Central Government of India in terms of
Sub-Section (4A) of Section 227 of the Companies Act, 1956, we enclose
in the Annexure a statement on the matters specified in paragraphs 4
and 5 of the said Order.
4. Further to our comments above and also in the Annexure referred to
above, we report that:
(i) We have obtained all the information and explanations, which to the
best of our knowledge and belief, were necessary for the purposes of
(ii) In our opinion, proper books of account as required by law have
been kept by the company so far as appears from our examination of
those books and proper returns adequate for the purposes of our audit
have been received from the representative office;
(iii) The Balance Sheet, Profit & Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account;
(iv) In our opinion, the Balance Sheet, Profit & Loss Account and Cash
Flow Statement dealt with by this report comply with the accounting
standards referred to in Sub-Section (3C) of section 211 of the
Companies Act, 1956.
(v) On the basis of written representations received from the
Directors, as on 31st March, 2012, and taken on record by the Board of
Directors, we report that none of the Directors is disqualified from
being appointed as a Director in terms of Clause (g) of Sub-Section (1)
of Section 274 of the Companies Act, 1956;
(vi) We have relied upon the management''s representation relating to
the disclosures in the financial statements regarding (a) segment
reporting (Note 26); (b) related party disclosures (Note 27); (c) dues
to Micro, Small & Medium Enterprises (Note 32) and (d) reconciliation
and confirmation of balance of trade payables and loans and advances
(vii) In our opinion, and to the best of our information and according
to the explanations given to us, the said accounts, together with the
notes thereon, give the information required by the Companies Act, 1956
in the manner so required and give a true and fair view in conformity
with the accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2012;
(b) in the case of the Profit & Loss Account, of the loss for the year
ended on that date;
(c) in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
ANNEXURE TO THE AUDITORS'' REPORT
Referred to in paragraph 3 of our report of even date
(i) (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
(b) As explained to us, all the fixed assets have been physically
verified by the management in a phased periodical manner, which in our
opinion is reasonable, having regard to the size of the Company and
nature of its assets. No material discrepancies were noticed on such
(c) As per the information and explanations given to us, the Company
has not disposed off a substantial part of fixed assets during the
period so as to affect its going concern status.
(ii) (a) As informed to us, a part of the inventory has been physically
verified by the management during the year.
In our opinion, the frequency of such verification is reasonable.
(b) As per the information given to us, the procedures of physical
verification of inventories followed by the management, in our opinion,
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. As
explained to us, the discrepancies noticed on verification between the
physical stocks and the book records were not material and the same
have been properly dealt with in the books of account.
(iii) According to the information and explanations given to us, the
Company has neither granted nor taken any loan secured or unsecured
to/from companies, firms or parties covered in the register maintained
under Section 301 of the Companies Act, 1956. Accordingly, paragraph
4(iii) of the Companies (Auditors'' Report) Order, 2003 is not
(iv) In our opinion and according to the information and explanations
given to us, there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business for the purchase of inventory, fixed assets and with regard to
sale of goods. During the course of our audit, we have neither observed
nor have been informed of any major weaknesses in the said internal
(v) (a) According to the information and explanations given to us, we
are of the opinion that the transactions that need to be entered in the
register maintained under Section 301 of the Companies Act, 1956 have
been so entered.
(b) In our opinion and according to the information and explanations
given to us, the transactions made in pursuance of such contracts or
arrangements entered in the register maintained under Section 301 of
the Companies Act, 1956 and exceeding the value of rupees five lacs in
respect of any party during the period under audit, have been made at
prices which are reasonable having regard to the prevailing market
prices at the relevant time.
(vi) No deposits within the meaning of Section 58A, 58AA or any other
relevant provisions of the Companies Act, 1956 and the rules framed
there under have been accepted by the Company.
(vii) The Company has an internal audit system commensurate with the
size and nature of the Company.
(viii) As informed to us, the Company has made and maintained cost
records as prescribed by the Central Government under Section 209(1)(d)
of the Act. We have not made a detailed examination of such records.
However, we have broadly reviewed the records maintained and are of the
opinion, that prima facie, the prescribed accounts and records have
(ix) (a) According to the records of the Company examined by us, in our
opinion, the Company is regular in depositing undisputed statutory dues
including provident fund, investor education protection fund,
employees'' state insurance, income tax, sales tax, wealth tax, service
tax, customs duty, excise duty, cess and other material statutory dues
applicable to it with the appropriate authorities.
According to the information and explanations given to us, no
undisputed amounts payable in respect of statutory dues as aforesaid
were outstanding, as at 31 March 2012 for a period of more than six
months from the date they became payable.
(b) According to the information and explanations given to us, there
are no dues of sales tax, income tax, customs duty, wealth tax, service
tax, excise duty and cess which have not been deposited on account of
any dispute, except
Name of the
statute Nature of Year Amount Forum where dispute
dues (Rs. Lacs) is pending
Sales Tax Sales Tax (*) 2010-11 78.39 Jharkhand Sales Tax
(*) A sum of Rs 35.20 lacs has been deposited by the Company.
(x) In our opinion, the accumulated losses of the Company are not more
than fifty percent of its net worth. The Company has incurred cash loss
during the financial year covered by our audit and also in the
immediately preceding financial year.
(xi) As per our audit procedures and according to the information and
explanations given to us, the Company has not defaulted in repayment of
dues to financial institutions or banks as at the Balance Sheet date.
(xii) According to the information and explanations given to us, the
Company has not granted loans and advances on the basis of security by
way of pledge of shares, debentures and other securities.
(xiii) The Company is not a chit fund or a nidhi/mutual benefit
(xiv) In our opinion and according to the information and explanations
given to us, the Company is not a dealer or trader in shares,
securities, debentures and other investments.
(xv) According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others from
banks or financial institutions during the period under audit.
(xvi) According to the information and explanations given to us, in our
opinion, the term loans raised were, prima facie, either utilized for
the purposes for which they were obtained and repayment of such loans
or pending utilization, been temporarily invested in Mutual Funds and
Term Deposits with Banks.
(xvii) According to the information and explanations given to us and on
an overall examination of the Balance Sheet of the Company, we report
that no funds raised on short-term basis have been used for long-term
(xviii)The Company has not made any preferential allotment of shares
during the year to parties and companies covered in the Register
maintained under Section 301 of the Act.
(xix) The Company has not issued any debentures during the period under
(xx) The Company has not raised any money by public issue during the
period under audit.
(xxi) According to the information and explanations given to us, no
material fraud on or by the Company has been noticed or reported during
B Chhawchharia & Co.
Firm Registration No.: 305123E
Place : Kolkata Partner
Date : May 8, 2012 Membership No. 060568