1. We have audited the attached Balance Sheet of Great Offshore
Limited as at March 31, 2012 and also the Statement of Profit and Loss
and Cash Flow Statement of the Company for the year ended on that date,
both 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 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) Order, 2004, issued by the
Central Government of India in terms of section 227 (4A) of the
Companies Act, 1956, we annex hereto a statement on the matters
specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to in paragraph
(3) above, we report that:
a) We have obtained all the information and explanations which to the
best of our knowledge and belief were necessary for the purposes of our
b) 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 such
c) The Balance Sheet, Statement of Profit and Loss and Cash Flow
Statement dealt with by this report are in agreement with the books of
d) In our opinion, the Balance Sheet, Statement of Profit and Loss 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.
e) We draw attention to Note 32 of the Notes to Account. The Company
has changed its accounting policy with effect from 1st April 2011, for
recognition and measurement of Mark to Market losses in respect of
derivatives instruments like interest rate swaps as per the principals
enunciated in Accounting Standard (AS)30 Financial Instruments:
Recognition and Measurement and in accordance with the recommendation
of the Institute of Chartered Accountants of India. Accordingly Mark to
Market (MTM) losses in respect of derivative instruments like Interest
rate swaps have been accounted in accordance with principal of hedge
accounting and the MTM losses on such derivative instruments is
recorded in the Hedge reserve account instead of recognising the same
to statement of Profit and Loss. Accordingly as at 31st March 2012 MTM
loss on outstanding interest rates swaps'' amounting to Rs. 9,685 lakhs
has been recognised in hedge reserves instead of debiting the same to
statement of Profit and Loss. Accordingly the profit for the year is
higher by Rs. 9,046 lakhs.
f) As on March 31, 2012, the Company has investment in
equity/redeemable preference shares of wholly owned subsidiary KEI-RSOS
Maritime Limited amounting to Rs. 18,863 lakhs and also a loan
outstanding of Rs. 3,100 lakhs. The Company has also issued corporate
guarantee to Indian Bank amounting to Rs.14,585 lakhs. As per the latest
audited financial statements of KEI-RSOS Maritime Limited the net worth
of the company has substantially eroded and the cash flows are under
stress. No provision has been made in the financial statements of the
company for depletion in value of investment and the loans and advances
given by the company amounting to Rs.21,963 lakhs. Had the provision for
the same been made, the profits before tax for the year would have been
lower to that effect.
g) Subject to our comment in para 4(f) above, in our opinion and to the
best of our information and according to the explanations given to us,
the said accounts read 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:
i) in the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2012;
ii) in the case of the Statement of Profit and Loss, of the profit of
the Company for the year ended on that date; and
iii) in the case of the Cash Flow Statement, of the cash flows for the
year ended on that date.
5. On the basis of written representations received from the directors
of the Company as on March 31, 2012, and taken on record by the Board
of Directors, we report that none of the directors of the Company are
disqualified as on March 31, 2012, from being appointed as a director
in terms of clause (g) of sub-section (1) of section 274 of the
Companies Act, 1956.
Referred to in paragraph 3 of our report of even date on the accounts
of Great Offshore Limited for the year ended March 31, 2012:
1. (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
(b) The fixed assets are physically verified by the management as per a
phased programme of verification. In our opinion, the frequency of
verification is reasonable having regard to the size of the Company and
the nature of its assets. To the best of our knowledge no material
discrepancies were reported on such verification.
(c) In our opinion, the fixed assets disposed off during the year were
not substantial and do not affect the going concern assumption.
2. (a) We have been informed by the Management that the physical
verification of inventory is conducted as per the preset cyclical
programme on monthly basis during the year. In our opinion the
frequency of such physical verification of inventory is reasonable.
(b) In our opinion and according to the information and explanations
given to us, 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 has implemented inventory system w.e.f. January 1, 2012
and is in process of strengthening the same. Discrepancies noticed on
the physical verification have been properly dealt in the books of
3. (a) As informed, the company has not granted any loan, secured/
unsecured to any Companies firms or parties covered in the register
maintained under Section 301 of the Companies Act, 1956. Accordingly
the provisions of Para 4 caluse (iii) (a) to (d) of the said order are
(b) The Company has taken loans amounting to Rs. 18,309 lakhs from six
companies covered in the register maintained under Section 301 of the
Companies Act, 1956. In respect of the said loans, the maximum amount
outstanding at any time during the year is Rs. 9,220 lakhs and the
year-end balance is Rs. 2,798 lakhs.
(c) In our opinion and according to the information and explanations
given to us, the rate of interest and other terms and conditions of the
loans taken by the Company, are not prejudicial to the interest of the
(d) The loan and interest is payable on demand and there are no
specific terms of repayment of principal and interest hence whether the
principal and interest has been paid regularly or not cannot be
4. In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business for the
purchase of inventory, fixed assets and for the sale of services.
Further, on the basis of our examination of the books of account and
records of the Company, and according to the information and
explanations given to us, we have neither come across nor we have been
informed of any continuing failure to correct major weaknesses in the
aforesaid internal control system.
5. Based on the audit procedures applied by us and according to the
information and explanations provided by the management, the
particulars of contracts or arrangements referred to in Section 301 of
the Act have been entered in the register required to be maintained
under that section.
In our opinion and according to the information and explanations given
to us, the transactions made in pursuance of such contracts or
arrangements have been made at prices which are reasonable having
regard to the prevailing market prices at the relevant time.
6. In our opinion and according to the information and explanations
given to us, the Company has not accepted any deposits from the public
within the meaning of sections 58A and 58AA of the Act and the rules
framed there under.
7. In our opinion, the Company has an internal audit system, which is
commensurate with the size and nature of its business.
8. As informed to us, the company is maintaining cost records as
prescribed by the Central Government under section 209(1) (d) of the
Companies Act, 1956. We have not, however made a detailed examination
of these records.
9. (a) According to the information and explanations given to us and
according to the books and records as produced and examined by us, in
our opinion, the company is generally regular in depositing undisputed
statutory dues including Shore Staff Provident fund, Investor Education
and Protection Fund, Employees State Insurance, Income tax, Sales tax,
Wealth tax, Service tax, Excise duty, Customs duty, Cess, and other
statutory dues with the appropriate authorities.
(b) According to the books of account and records as produced and
examined by us, there are no dues of Sales tax, Income tax, Custom
duty, Wealth tax, Service tax, Excise duty or cess which have not been
deposited on account of any dispute, other than those stated below:
Name of the
statute Nature of Dues Amount (Rs. Period to Forum where
in lakhs) which the is pending
Nadu Tax u/s 3A of The 100.78 1995-96 and The Sales Tax
Sales Tax Tamil Nadu General 1996-97 Appellate
Act 1959 Sales Tax Act, 1959 Chennai
Sales Tax u/s 5-C of the 170.71 1995-96 to Stay granted
Tax Act ,
1957 Act 2001-02 Supreme Court
Sales Sales Tax 6.03 2007-08 Assistant
Act, 1957 Commissioner
Act, Customs Duty 70.37 2001-02 Customs Excise
1962 and Gold
Act, Customs Duty 235.93 December 99 Commissioner
Act, VAT 96.53 2004-05 APGST / SPVAT
2005 2005-06 Malviya Nine-
right to use
Excise and Service Tax 72.53 2002-03 to Superintendent
Customs Act 2004-05 Central Excise
Sales Sales Tax 41.59 2001-02 The
Tax Act Commercial
10. The Company has no accumulated losses as at the end of the
financial year and it has not incurred any cash losses in the current
year and in the immediately preceding financial year.
11. On the scrutiny of the repayment schedules to banks and financial
institutions and the books of accounts of the company it is observed
that the Company has defaulted in repayment of dues to banks and
financial institutions. The following are the details of the defaults
days for the financial year 2011-12:
(Rs. in lakhs)
Particulars Delay upto
30 Delay Delay Delay Total
Loan 151 4,420 18,043 4,750 27,365
Interest - 2,174 1,690 326 4,190
Total 151 6,594 19,734 5,076 31,555
of the above Rs. 9,120 lakhs in respect of term loan installment and Rs.
3,348 lakhs in respect of interest payment were in arrears as of the
balance sheet date.
12. According to the information and explanations given to us and the
records examined by us, the Company has not granted any loans on the
basis of security by way of pledge of shares, debentures or other
13. In our opinion and according to the information and explanation
given to us, the nature of the activities of the Company does not
attract any special statute applicable to the chit fund and nidhi/
mutual benefit fund/ societies.
14. In our opinion, the Company has maintained proper records of the
transactions and contracts of the investments dealt in by the Company
and timely entries have been made therein. The investments made by the
Company are held in its own name except to the extent of the exemption
under section 49 of the Act.
15. The Company has given guarantees for the loans taken by its
subsidiaries from banks or financial institutions, the terms and
conditions thereof are not prima facie prejudicial to the interests of
16. According to the information and explanations given to us and the
records examined by us, on an overall basis, the term loans were
applied by the Company for the purpose for which they were obtained
except for a term loan amounting to Rs.23,227 lakhs which was disbursed
by a financial institution for acquisition of a vessel and was
temporarily used to repay high cost debt as next stage payment for
acquisition for the said vessel is still not due.
17. On the basis of an overall examination of the balance sheet and
cash flows of the Company and the information and explanation given to
us, we report that the Company has not utilised any funds raised on
short-term basis for long-term investments.
18. The Company has not made any preferential allotment of shares to
parties or companies covered under section 301 of the Act.
19. The Company has not issued any debentures during the year. Hence,
security or charge created in respect of debentures issued is not
20. The Company has not raised any money through a public issue during
21. Based upon the audit procedures performed and the information and
explanations given by the management, we report that no fraud on or by
the Company has been noticed or reported during the year.
For and on behalf of
KALYANIWALLA & MISTRY
Registration No. 104607W
VINAYAK M. PADWAL
M. No. F49639
Mumbai, May 25, 2012