1. We have audited the attached Balance Sheet of ELECTROTHERM (INDIA)
LIMITED, as at 30th September 2012, the Statement of Profit & Loss and
the Cash Flow Statement for the 18 months period ended on that date
annexed thereto. 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 conducted our audit in accordance with the 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 believe that our audit provides a reasonable basis for
3. As required by the Companies (Auditor''s Report) Order, 2003 as
amended by the Companies (Auditor''s Report) Amended order 2004, issued
by the Central Government of India in terms of sub-section (4A) of
section 227 of the Companies Act, 1956 and on the basis of such checks
as we considered appropriate and according to the information and
explanation given to us, we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order, for the
period under consideration.
4. Further to our report as stated above in para (3) of this report
and subject to notes on account & significant accounting policies, we
further broadly 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 our
(ii) In our opinion, proper books of accounts as required by law have
been kept by the company so far as appears from our examination of
(iii) The Balance Sheet, the Statement of Profit & Loss and Cash Flow
Statement dealt with by this report are in agreement with the books of
(iv) In our opinion, the Balance Sheet, the Statement of Profit & Loss
and Cash Flow Statement dealt with by this report, read with the notes
to accounts and accounting policies, comply with the applicable
accounting standards referred to in sub-section (3C) of section 211 of
the Companies Act, 1956;
(v) On the basis of written representation received from the Directors
of the Company as on September 30, 2012 and taken on record by the
Board of Directors, we report that none of the directors is
disqualified as on September 30, 2012 from being appointed as a
Director in terms of clause (g) of sub-section (1) of section 274 of
the Companies Act, 1956;
(vi) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts, read together with the
significant accounting policies and subject to Note No 2.27 relating to
Winding Up Petitions and recovery cases against the company, Note No
2.28 relating to restructuring of the debts of the company; affecting
the going concern''s concept of the company, Note No. 2.29 relating to
non provision of disputed advances and Claims/Liability and Note No
2.39 relating to third party balance confirmations and its
classification, non provision of interest on NPA Accounts of Banks and
other issues, affecting the financial statements, to the extent stated
therein, 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 30th September , 2012;
(b) in the case of the Statement of Profit & Loss, of the Loss for the
18 months period ended on that date; and
(c) in the case of the cash flow statement, of the cash flows for the
18 months period ended on that date.
ANNEXURE REFERRED TO IN PARAGRAPH (3) OF THE AUDIT REPORT OF EVEN DATE
OF THE MEMBERS OF ELECTROTHERM (INDIA) LIMITED, ON THE ACCOUNTS FOR THE
18 MONTHS PERIOD ENDED ON 30th SEPTEMBER, 2012.
(1) (a) The company is in process of updating the records showing
particulars of quantity and situation of fixed assets.
(b) As informed to us, the company has formulated a programme of
physical verification of all the fixed assets over a period of three
years, which in our opinion is reasonable having regard to the size of
the Company and the nature of its assets. Accordingly, the physical
verification has been carried out by the management during the period
of the fixed assets at Palodia plant and as informed to us, no material
discrepancies were noticed on such physical verification.
(c) None of the substantial part of fixed assets has been disposed off
during the period.
(2) (a) As informed to us, during the period the management has
conducted physical verification of the inventories and in our opinion
the frequency of verification is reasonable.
(b) The procedures of physical verification of inventories followed by
the management is broadly reasonable and adequate having regard to the
size of the Company and the nature of its business.
(c) In our opinion and according to the information and explanation
given to us, the Company has maintained records of inventory. As
informed to us, the discrepancies noticed on verification between the
physical stocks and the book records were not material and have been
properly dealt with in the books of account.
(3) (a) As informed to us, the company has taken unsecured loan from
the Companies, firms and other parties (except foreign associates)
listed in the register maintained under section 301 of the Companies
Act, 1956. The aggregate of loan outstanding from seven such parties as
on the last day of the period is Rs. 67.78 Million. The rate of interest
and the terms of repayment are not stipulated and other terms and
conditions are not prima facie prejudicial to the interest of the
(b) As informed to us, the company has given loans to the companies,
firms and other parties (except foreign associates) listed in the
register maintained under section 301 of the Companies Act, 1956. The
aggregate amount of loan outstanding of ten such parties is Rs. 274.39
Million. The rate of interest and the terms of repayment are not
stipulated and other terms and conditions are not prima facie
prejudicial to the interest of the company.
(4) In our opinion and according to the information and explanations
given to us, there are generally adequate internal control procedures
commensurate with the size of the company and the nature of its
business with regards to purchases of inventory and fixed assets and
for the sale of goods. During the course of our audit, we have not
observed any continuing failure to correct major weaknesses in internal
(5) (a) Based on the audit procedures applied by us and according to
the information and explanations provided by the management, we are of
the opinion that transactions that need to be entered into the register
maintained under section 301 have been so entered.
(b) In respect of transactions with parties with whom transactions
exceeding value of Rs. 5 Lacs have been entered into during the financial
period, are at the prices which are reasonable having regard to the
prevailing market prices at the relevant time, except in case of
transactions where we are unable to comment owing to the unique and
specialized nature of the items and absence of any comparable prices,
whether the transactions are made at the prevailing market prices at
the relevant time or not.
(6) In our opinion and according to the information and explanation
given to us, the company has not accepted deposits from the public as
per the directives issued by the Reserve Bank of India and the
provisions of section 58A, section 58AA and any other relevant
provisions of the Act and the rules framed there under.
(7) The Company has an Internal Audit Department system; however, the
same is required to be further strengthened with regard to the scope,
reporting and its compliance so that it can be commensurate with size
and nature of business of the company.
(8) The Central Government of India has prescribed maintenance of cost
records under section 209(1)(d) of the Companies Act, 1956 for the
Steel Products and Vehicles and on the basis of the explanation given
and our broad review of the records maintained, prima facie the company
has maintained cost records for the said Products. The contents of
these accounts and records have not been examined by us.
(9) (a) The Company is generally regular in depositing with appropriate
authorities undisputed statutory dues including provident fund,
investor education and protection fund, employees state insurance,
income tax, wealth tax, custom duty, excise duty, cess and other
material statutory dues applicable to it except Central Sales Tax
Liability of Rs. 18.59 Million for the Period starting from June 2012 to
September 2012 and Value Added Tax of Rs. 22.26 Million for the period
starting from July 2012 to September 2012.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of Income Tax, Sales Tax, Customs
Duty, Excise Duty and cess were in arrears as at 30th September, 2012
for a period of more than six months from the date they become payable.
(c) On the basis of information furnished to us, following are the
details of outstanding dues in respect of Sales tax, Income tax, Custom
duty, Wealth tax, Excise Duty and Cess, which have not been deposited
on account of any dispute. :-
NAME OF THE
DUES FORUM WHERE DISPUTE IS
PENDING AMOUNT (Rs.
Excise Duty Customs Excise and Service Tax Appellate
Excise Duty Dy. Commissioner of Excise and Custom 243.98
Excise Duty Directorate General Of Central Excise
Custom Duty Commissioner of Custom, Kandla 70.00
Vat Sales Tax Department 160.00
(10) The company has accumulated losses at the end of the reporting
period and the said losses has exceeded the fifty percent net worth of
the company and it has incurred cash losses in current period but there
is no cash loss in preceding financial year.
(11) Based on our audit procedures and on the information and
explanations given by the management, we are of the opinion that the
company has defaulted in repayment of dues (including interest) to
financial institution and banks and details relating to extent of
defaults is not readily available with the company.
(12) We are of the opinion that, the company has not granted loans and
advances on the basis of security by way of pledge of shares,
debentures and other securities.
(13) In our opinion, the company is not a chit fund or a nidhi mutual
benefit fund/society and therefore, the provisions of clause 4(xiii) of
the Companies (Auditor''s Report) Order, 2003 are not applicable to the
(14) In our opinion, the company is not dealing in or trading in
shares, securities, debentures and other investments and accordingly,
the provisions of clause 4(xiv) of the Companies (Auditors Report)
Order 2003 are not applicable to the Company.
(15) According to the information and explanations given to us, the
Company has not given any guarantees for loans taken by others from
banks or financial institutions.
(16) According to the Cash Flow Statement and other records examined by
us as well as information and explanations given to us on an overall
basis, term loan taken by the company has been utilized for the purpose
for which they were raised.
(17) According to the Cash Flow Statement and other records examined by
us as well as information and explanations given to us on an overall
basis, we report that funds raised on short term basis have not
prima-facie been used for long term investment.
(18) The Company has not made allotment of shares to parties or
companies covered in the register maintained under section 301 of the
Companies Act, 1956.
(19) The company has not issued any debentures and accordingly, the
provisions of clause 4(xix) of the Companies (Auditor''s Report) Order,
2003 are not applicable to the company.
(20) During the period, the company has not raised any money through a
(21) During the course of our examination of the books and records of
the company, carried out in accordance with generally accepted auditing
practices in India, and according to the information and explanations
given to us, we have neither come across any instances of material
fraud on or by the Company, noticed or reported during the period, nor
we have been informed of such case by the management.
For Mehta Lodha & Co.
Date : November 27, 2012 Partner
Place : Ahmedabad Membership No. 34363