1. We have audited the attached Balance Sheet of STEEL EXCHANGE INDIA
LIMITED as at 30.06.2012 and also the Statement of Profit and Loss for
the 15 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 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,
issued by the Central Government of India, in terms of Section 227(4A)
of the Companies Act''1956, we enclose in the Annexure a statement on
the matters specified in paragraph 4 and 5 of the said order.
4. Further to our comments in the annexure referred to above, we
a) We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purpose of our
b) In our opinion, proper books of accounts as required by law have
been kept by the company so for as it appears from our examination of
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 mandatory
Accounting Standards referred to in Sub-Section 3(C) of Section 211 of
the Companies Act'' 1956.
e) On the basis of the written representations received from the
directors, as on 30th June'' 2012 and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
30th June 2012 from being appointed as a director in terms of clause
(g) of sub-section (1) of section 274 of the Companies Act''1956.
f) In our opinion and to the best of our information and according to
the explanations given to us, the said accounts read in conjunction
with the schedule annexed therewith 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 30th June 2012;
ii) In the case of the Statement of Profit and Loss, of the Profit of
the Company for the 15 months period ended on that date; and
iii) In the case of the cash flow statement, of the cash flows for the
15 months period ended on that date.
ANNEXURE TO AUDITORS'' REPORT STEEL EXCHANGE INDIA LIMITED Referred to
in paragraph 3 of our report of even date,
1. (a) The Company has maintained proper records showing full
particulars including quantitative details and situation of fixed
(b) All the assets have not been physically verified by the management
during the year but there is a regular programme of verification which,
in our opinion, is reasonable having regard to the size of the company
and the nature of its business. No material discrepancies were noticed
on such physical verification.
(c) According to the information and explanations furnished to us, the
Company has not disposed of a substantial part of its fixed assets
during the financial period except for the disposal of Wire drawing
unit 1 located at Auto Nagar, Visakhapatnam as per the note refer to at
2.10 of the Notes to Financial Statements.
2. (a) The inventories have been physically verified by the management
during the year at reasonable intervals.
(b) The procedures of physical verification of the inventories 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 maintained proper records of inventories and
discrepancies noticed on physical verification of inventories as
compared to book records were not material.
3. (a) The Company has granted loans to one party covered in the
Register maintained under Section 301 of the Companies Act, 1956. The
maximum amount involved during the period is Rs. 9.09 Crores and the
balance of loan granted to such parties as at 30.06.2012 was Rs. 5.21
(b) In our opinion the rate of interest and other terms and conditions
on which loans have been granted to companies, firms or other parties
listed in the registers maintained under Section 301 are not, prima
facie, prejudicial to the interest of the company.
(c) The parties have been regular in the payment of interest and there
is no stipulation for the repayment of Principal and Interest.
(d) There is no overdue amount of loans granted to companies, firms or
other parties listed in the registers maintained under section 301 of
the Companies Act, 1956.
(e) According to the information and explanation given to us, the
Company has, during the financial period, not taken any loans, secured
or unsecured from companies, firms or other parties covered in the
register maintained under section 301 of the Companies Act, 1956.
Accordingly, paragraph 4 (iii) (e)(f)(g) of the Order is not
4. In our opinion, there are adequate internal control procedures
commensurate with the size of the Company and the nature of its
business with regard to purchase of inventories, fixed assets and for
the sale of goods. During the course of our audit, we have not observed
any continuing failure to correct major weakness in internal control.
5. (a) According to the information and explanation given to us we are
of the opinion, that the transactions that need to be entered into 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 explanation given to us, the transactions made in pursuance of
contracts or arrangements entered in the register maintained under
Section 301 of the Companies Act, 1956 aggregating during the year to
Rs.5,00,000/- or more in respect of any party have been made at prices
which are reasonable having regard to prevailing market prices at the
6. In our opinion and according to the information and explanation
given to us, the Company has not accepted any deposits as defined under
section 58A of the Companies Act''1956.
7. In our opinion, the Company has an adequate internal audit system
commensurate with its size and nature of its business.
8. We have broadly reviewed the Books of Account maintained by the
Company as prescribed by the Central Government for maintenance of cost
records under section 209 (1) (d) of the Companies Act, 1956 and are of
the opinion that prima facie the prescribed accounts and records have
been made and maintained. However, we have not carried out a detailed
examination of the accounts and records.
9. (a) According to the books and records of the company, the company
is regular in depositing undisputed statutory dues including Provident
Fund, Investor Education and Protection Fund, Employees'' State
Insurance, Income Tax, Sales Tax, Customs Duty, Excise Duty, Cess and
other statutory dues with appropriate authorities. According to the
information and explanations given to us, there are no undisputed
amounts payable in respect of such statutory dues which have remained
outstanding as at 30th June, 2012 for a period exceeding six months
from the date they became payable.
(b) Disputed Statutory dues such as sales Tax income tax has been
disclosed in Note no:2.28 of notes to accounts
Name of the Nature of Dues Period to which
Statute the amount relates
CST Act Sales Tax 2002-03, 2004-05
APVAT Act Sales tax 2011-12
Customs Act Customs duty 2003-04
Central Excise Act Excise duty 2008-09
Central Excise Act Excise duty 2009-10, 2011-12
Central Excise Act Excise duty 2010-11
Central Excise Act Excise duty 2007-08
Building and Other Cess 2010-11
Welfare Cess Act,1996
Name of the Amount in Deposits/ Forum where the
Rs. Paid pending
CST Act 50,71,067 633,884 Appl. Dy.
APVAT Act 13,94,858 NIL Appl. Dy.
Customs Act 54,35,648 NIL Hon''ble High Court
of Andhra Pradesh
Central Excise Act 1,91,708 NIL Appeal to CESTAT,
Central Excise Act 123,075 NIL Commissioner of
Central Excise Act 14,35,189 NIL Hon''ble High Court
of Andhra Pradesh
Central Excise Act 86,30,228 NIL Appeal to CESTAT,
Building and other 1,27,98,000 NIL Hon''ble High Court
Constrcution Workers'' of Andhra Pradesh
welfare Cess Act,1996
10. The Company has accumulated losses at the end of the financial
period consequent to the absorption of accumulatec losses of GSAL
(India) Limited upon its amalgamation with the Company and has not
incurred cash losses in the current financial period and immediately
preceding financial year.
11. In our opinion and according to the information and explanations
given to us, the Company has not defaulted in repayment of its dues to
banks and financial institutions.
12. The Company has not granted any loans or advances on the basis of
security by way of pledge of shares, debentures or other securities.
13. In our opinion, the company is not a chit fund or a nidhi/mutual
benefit fund/ society. 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 or trading in shares,
securities, debentures or other investments and hence, the requirements
of clause 4(xiv) of the Companies (Auditor''s Report) order, 2003 are
not applicable to the Company.
15. In our opinion and according to the information and explanations
given to us, the terms and conditions which the Company has given a
Guarantee for loan taken others from banks, and financial institutions
are not, prima facie, prejudicial to the interest of the company.
16. In our opinion, the term loans have been applied for the purpose
for which they were raised.
17. In our opinion and according to the information and explanations
given to us and on an overall examination of the balance sheet of the
company, we report that funds raised on short-term basis have not been
used for long-term investments. No long-term funds have been used to
finance short-term assets.
18. The company has made a preferential allotment of shares to a
company covered in the register maintained under Section 301 of the
Companies Act, 1956 during the 15 months period and the price at which
the shares are allotted is not, prima facie, prejudicial to the
interest of the company.
19. No debentures have been issued by the company and hence, the
question of creating securities in respect there of does not arise.
20. The company has not raised any money by way of public issues
during the 15 months period.
21. On the basis of our examination and according to the information
and explanations given to us, no fraud, on or by the Company, has been
noticed or reported during the 15 months period.
For Pavuluri & Co
Firm Registration No: 012194S
Camp: Visakhapatnam Partner
Date: August 27, 2012 M.No.: F-203300