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Jaiprakash Associates

BSE: 532532|NSE: JPASSOCIAT|ISIN: INE455F01025|SECTOR: Infrastructure - General
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Auditor's Report (Jaiprakash Associates) Year End : Mar '18

Report on the Standalone Indian Accounting Standards (Ind AS) Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Jaiprakash Associates Limited (“the Company”) which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the standalone Ind AS 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 standalone Ind AS financial statements that gives 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 the Companies (Indian Accounting Standards) Rules, 2015. 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 standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

We have taken into account the provisions of the Act and the Rules made there under, including 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 there under. We conducted our audit of the standalone Ind AS financial statements 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 standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the

Company’s preparation of the standalone Ind AS 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 standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Basis of Qualified opinion

Attention is drawn to:

Note No.41 of standalone financial statements regarding the insolvency petition filed by IDBI with the Hon’ble National Company Law Tribunal (‘the NCLT’), Allahabad against the Jaypee Infratech Limited (‘JIL’) “Subsidiary” of the company. The petition has been admitted and Interim Resolution Professional (‘IRP’) personal has been appointed by the NCLT. The Hon’ble Supreme Court of India also admitted the Petition/Intervention filed by certain home buyers of Jaypee Infratech Limited and directed the company to deposit Rs.2000 Crores with its Registry. The said order was modified by the Hon’ble Supreme Court of India and accordingly company has deposited Rs.550 crores upto 31 March 2018.

In view of the pendency /ongoing CIRP/legal proceedings with the NCLT Allahabad and the Hon’ble Supreme Court of India, the impact on the carrying value of the Non Current Investment in the equity of JIL Rs.849.26 Crores, Current Receivables Rs.341.75 Crores, Corporate Guarantees amounting to Rs.232.17 Crores, to the lenders of JIL and deposit with the Hon’ble Supreme Court of India, is not ascertainable.

Qualified opinion:

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the standalone Ind AS 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, of the state of affairs of the Company as at March 31 2018, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Emphasis of matter:

We draw attention to the following matters:

1) As Stated in Note No. 32 [d] of the standalone financial statements,

[i] The Competition Commission of India vide its Order dated 31st August, 2016 held various cement manufacturers liable for alleged contravention of certain provisions of the Competition Act, 2002 during F.Y. 2009-10 & 2010-11 and imposed a penalty of Rs.1,323.60 Crores on the Company. The Company has filed an appeal against the said Order before the Competition Appellate Tribunal wherein the Tribunal vide its order dated 15th November, 2016 read with order dated 7th December, 2016 granted stay in depositing the penalty imposed subject to the condition that the company shall deposit 10% of the penalty calculated on the profit earned by the cement business i.e. Rs.23.77 Crores, which was duly deposited. Thereafter, the matter was heard on various dates by the Hon’ble National Company Law Tribunal (to whom the power in such matters has been transferred) and the Order has been reserved.

[ii] The Competition Commission of India vide its other order dated 19th January, 2017 held various cement manufacturers liable for alleged contravention of certain provisions of the Competition Act, 2002 in the state of Haryana during F.Y. 2012-13 to F.Y. 2014-15 and imposed a penalty of ‘38.02 Crores on the Company. The Company had filed appeal against the Order. The Competition Appellate Tribunal stayed the operation of impugned order and further proceedings will commence after the Order in the matter referred in SL. No. [i] above, is passed.

2) As stated in Note No. 38 of the standalone financial statements, State Bank of India has invoked the pledge of 10,00,00,000 Equity Shares of Jaypee Infratech Limited (JIL) held by the company and had sold 3,18,96,744 Equity Shares in the open market during the quarter ended March 31, 2018. The impact of the above said sale of shares has been taken in the standalone Financial Statements. Balance shares aggregating to 6,81,03,256 are held with trusteeship as at 31.03.2018. Pending disposal of balance shares by the Lender, the balance shares continue to be shown as part of Current Investments at cost.

3) As Stated in Note No. 39 of the standalone financial statement, Non-Current Trade receivables include Rs.2645.45 Crore, outstanding as at 31 March 2018 (Rs.2983.52 Crore, outstanding as at 31st March 2017) which represents various claims raised on the Clients based on the terms and conditions implicit in the Engineering & Construction Contracts in respect of closed/suspended/under construction projects. These claims are mainly in respect of cost over run arising due to suspension of works, client caused delays, changes in the scope of work, deviation in design and other factors for which company is at various stages of negotiation/ discussion with the clients or under Arbitration/ litigation. On the basis of the contractual tenability, progress of negotiations/ discussions/ arbitration/ litigations, the management considers these receivables are fully recoverable.

4) As stated in Note No. 40 of the standalone financial statements, the company has made an investment of Rs.340 Crores (34 crores Equity Shares of Rs.10/- each, fully paid up) in Prayagraj Power Generation Company limited (‘PPGCL’), an associate company. Lenders of PPGCL has invoked the entire pledged share of PPGCL held by Jaiprakash Power Venture Limited (‘JPVL’) [Holding Company of PPGCL] on 18th December 2017 due to default in payment of interest to Banks/Financial Institutions. Keeping in the view of above facts, the impact on the carrying amount of Equity Shares of PPGCL held by the company is currently unascertainable and considered at Book Value.

5) As Stated in Note No. 42 of the standalone financial statement, the Company has received Termination Notice for the Mandla North Coal Mine allotted by Nominated Authority, Ministry of Coal on account of not meeting eligibility criteria mentioned in the Coal Mines Development and Production Agreement along with instructions for invocation of the Bank Guarantee submitted by JAL in the form of Performance Security. The Hon’ble High Court has granted a stay against the Termination Notice and invocation of Performance Guarantee. Since, the matter is now being sub-judice in High Court, the recoverability of the amount invested aggregating to Rs.293 Crores as on 31.03.2018 in the development of the Coal Block and impact of the invocation of the Performance Guarantee is uncertain, no provision has been considered necessary to be made in the standalone financial statements.

6) As Stated in Note No. 43 of the standalone financial statement, the Confirmations/ Reconciliation of balances of certain secured & unsecured loans, balances with banks, trade receivables, trade and other payables (including capital creditors) (including receivable/ payables from/ to related parties) and loans and advances are pending. The management is confident that on confirmation / reconciliation there will not be any material impact on the standalone financial statements.

7) As stated in Note No. 45 of the standalone financial statement, there are certain Entry tax matters under Appeals aggregating to Rs.510.59 Crores (excluding interest, currently unascertainable) pertaining to the State of Uttar Pradesh, Madhya Pradesh and Himachal Pradesh. The Company has challenged these on account of Constitutional Validity etc. in Hon’ble High Courts/ Supreme Court. No provision has been made of the above in the standalone financial statements and management is of the opinion that the Company will succeed in the appeal. The Company has already deposited Rs.299.93 Crores and also furnished Bank Guarantees of Rs.202.66 Crores against the above.

8) [i] As stated in Note no. 46 of the standalone financial statements, the Lenders of the Company in their Joint Lenders forum (‘JLF’) meeting held on 22nd June, 2017 have approved restructuring/ realignment/ reorganization of debt of the Company & its wholly owned subsidiary, JCCL. The Company has reworked the finance cost pertaining to Financial Year 2016-17 in accordance with the Lenders approved debt restructuring / realignment/ reorganization scheme.

[ii] For the FY 17-18, the Company has provided interest expenses on the debt portion that will remain with the company in accordance with the restructuring Scheme approved and Master Re-structuring Agreement (MRA) signed with the Lenders. Interest aggregating to Rs.796.39 Crores on debt portion of Rs.11,091.27 Crores which will be transferred to Real Estate SPV namely Jaypee Infrastructure Development Limited (JIDL) on order of Hon’ble National Company Law Tribunal (NCLT), Allahabad with appointed date of 1st July, 2017 has been added to the carrying cost of the Inventory/ Projects under Development in respect of SDZ Real Estate Undertaking [SDZ-RE], since the same has to be serviced from the assets/development of Assets of SDZ-RE and as such no further impact in this respect on the financial results is envisaged.

[iii] As a part of restructuring / reorganization / realignment of the debt of the Company, the Scheme of Demerger of the Undertaking (SDZ -RE) comprising identified moveable and immoveable assets and liabilities to be transferred to and vested in the wholly owned subsidiary of the Company, namely, Jaypee Infrastructure Development Limited (JIDL) as a going concern, on a slump exchange basis is pending for sanction with NCLT Allahabad.

Our opinion is not modified in respect of above stated matters.

Other Matter:

The comparative financial information of the Company for the year ended March 31, 2017 prepared in accordance with Indian Accounting Standards, included in these Standalone Financial Statements, have been audited by the predecessor auditors. The report of the predecessor auditors on the comparative financial information dated May 29, 2017 on the comparative financial information expressed an unmodified opinion. Our opinion is not modified in respect of this 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 in terms of Section 143(11) of the Act, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in ‘‘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 except for the possible effects of the matter described in the Basis of Qualified Opinion given above, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) Except for the possible effects of the matter described in the Basis of Qualified Opinion given above, 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 Balance Sheet, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) Except for the possible effects of the matter described in the Basis of Qualified Opinion paragraph above, in our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015.

e) The matter described in the ‘Basis of Qualified Opinion’ and ‘Emphasis of Matter given above, in our opinion may have an adverse effect on the functioning of the Company;

f) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018 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 of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure B”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.

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, as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements - Refer Note 32 to the financial statements;

ii. The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses;

iii. There are no amounts that were due for being transferred to the Investor Education and Protection Fund by the Company.

(Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date)

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. The situation of the moveable assets used in the construction activity keeps on changing from works sites depending upon requirements for a particular contract.

(b) The Company has a regular programme of physical verification of its fixed assets by which substantial fixed assets are verified in a phased manner. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, fixed assets were physically verified by the Management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and the records examined by us, we report that, other than the immovable properties acquired on amalgamations with the Company as per schemes approved by the Hon’ble High Courts in earlier years, the title deeds are held in the name of the Company as at the balance sheet date, except the following:

Description & location of property

Gross Book Value (Rs. Lacs)

Land at Dera Mandi Gaon, New Delhi & building thereon

153

Freehold land at Rangpuri, New Delhi (Compulsorily acquired by the Government)

3

(ii) The inventory, except for goods-in-transit, has been physically verified by the management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable. In respect of goods-in-transit, subsequent goods receipts have been verified or confirmations have been obtained from the parties. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(iii) In our opinion and according to the information and explanations given to us, the Company has not granted any amount in the nature of loans, secured or unsecured, to Companies, Firms, Limited Liability Partnerships or Other Parties covered in the register maintained under Section 189 of the Act. Accordingly, paragraph 3(iii) of the Order is not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, the Company has generally complied with the provisions of Sections 185 and 186 of the Act, with respect to the loans given, investments made, guarantees given and security provided.

(v) In our opinion and according to the information and explanations given to us the Company has not accepted any deposit during the year. The Company has generally complied with the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act, 2013, read with the Orders issued by the Hon’ble National Company Law Tribunal (NCLT) from time to time; however, there have been delays in repayment of matured fixed deposits which had matured for repayment on or before the balance sheet date and were outstanding as at 31st March 2018. However during the year, the company had repaid the deposits within the time extended by honorable NCLT except FD’s amounting to Rs.21 lakhs (including interest) which are pending repayment due to directions by the Government authorities/ courts etc.

(vi) We have broadly reviewed the books of account maintained by the Company as specified under Section 148(1) of the Act, for maintenance of cost records in respect of products manufactured by the Company, 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.

(vii) (a) As per records produced before us and according to the information and explanations given to us the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income-tax, Sales tax, Service tax, Customs Duty, Excise Duty, Value Added Tax, Cess, Goods and Services Tax and other material statutory dues applicable to it to the appropriate authorities, and there were no arrears of such dues at the end of the year which have remained outstanding for a period of more than six months from the date they became payable, except for the following:

Particulars of Dues

Rs. (in Lacs)

Royalty Payable

199.41

District & National Mineral Foundation Payable

651.71

Electricity Duty Payable

3663.18

Service Tax Payable

360.04

TDS/TCS Payable

462.74

Sales Tax/Entry Tax Payable

6.07

(b) As per records produced before us and explanations given to us and on the basis of our examination of the records of the Company, details of dues of Income-tax, Sales-tax, Service tax, Duty of Customs, Duty of Excise and Value added tax which have not been deposited as on 31 March 2018 on account of disputes are given below:

[Figures in Rs. Lacs]

Name of Statute (Nature of dues)

Period to which amount relates

Forum where dispute is pending

Total

Commissionarate

Appellate authorities Tribunal

High Court

Supreme Court

Central Excise

1988-2016

7636.26

7636.26

1996-2018

2498.77

2498.77

1997-2009

780.14

780.14

Electricity Duty & Cess

1991-2002 & 2006-2018

17157.75

17157.75

Sales Tax/VAT

1999-2002 to 2006-2015

7276.57

7276.57

2004 -2013

511.93

511.93

2000-2001,

2005-2018

8431.71

8431.71

2002-2008

9029.24

9029.24

Entry Tax

2000-2001,

2011-2015

2828.13

2828.13

2006-12

646.11

646.11

2001-2002,

2010-2018

21215.46

21215.46

Rural Infrastructure Tax

2005-2018

0.00

0.00

Tax on transportation of goods in Himachal Pradesh

2010-2018

7221.33

7221.33

Service Tax

2005-2013

69607.22

69607.22

Customs

0.00

4509.34

11.77

4521.10

Income Tax

AY 2010-11 to AY 2012-13

1673.50

1673.50

AY 12-13 to 15-16

31833.00

31833.00

Note: Net of Amount deposit under protest

(viii) Based on our audit procedures and on the information and explanations given by the management, we are of the opinion, that during the year, the Company has defaulted in repayment of principal and/or interest to banks, financial institutions, & privately placed debenture-holders wherein the period of delay ranges from 1 day to 925 days.

The overdue interest on borrowings amounts to Rs.24,647.50 lacs as reflected in the standalone Ind AS financial statements “Other Financial liabilities” which was outstanding as at 31st March 2018.

The overdue principal repayments of borrowings amounts to Rs.37,247.31 lacs as reflected in the standalone Ind AS financial statements “Other Financial liabilities” which was outstanding as at 31st March 2018.

Lender wise details for overdue interest & overdue principal repayments are given below:

Name of Bank/FI/Debenture holders

Overdue Principal repayments as at 31.3.2018

Period of default for overdue principal repayments

Overdue Interest as at 31.3.2018

Period of default for overdue interest

(Rs. in lacs)

(Rs. in lacs)

Allahabad Bank

4.72

1-60 Days

Axis Bank Limited

188.46

1-547 Days

Bank of Baroda

1.27

1-60 Days

Bank of India

17.82

1-60 Days

Bank of Maharashtra

90.73

1-60 Days

IDBI Bank Ltd.

250.06

1-60 Days

ICICI Bank Ltd.

594.20

1-60 Days

Canara Bank

336.86

1-547 Days

Central Bank of India

1.25

1-60 Days

Corporation Bank

16.98

1-60 Days

HDFC

1250.00

1-60 Days

914.24

1-60 Days

Karnataka Bank

8.43

1-60 Days

KarurVysya Bank

932.35

1-275 Days

3.88

1-60 Days

Lakshmi Vilas Bank

20.90

1-60 Days

Oriental Bank of Commerce

17.17

1-60 Days

Punjab & Sind Bank

0.91

1-60 Days

Indusind Bank Ltd

81.27

1-60 Days

Standard Chartered Bank

79.07

1-60 Days

State Bank of India

3143.84

1-364 Days

Syndicate Bank

0.24

1-60 Days

The South Indian Bank Ltd

13.82

1-60 Days

The Jammu & Kashmir Bank Ltd

5.58

1-60 Days

Uco Bank

17.72

1-60 Days

United Bank of India

9.2

1-60 Days

Yes Bank Ltd

178.32

1-60 Days

IFCI Ltd.

55.10

1-60 Days

LIC Term Loan

64.96

1-60 Days

L&T Infrastructure Finance Co Ltd

10.73

1-60 Days

Deferred Payment of Land

32831.55

13-925 Days

18519.8

13-925 Days

Foreign Currency Loans/Bonds

2233.42

1 Days

Total

37247.32

24647.53

The company has not defaulted in repayment dues to the Government.

(ix) According to the information and explanations given to us, the term loans have been applied by the Company during the year for the purposes for which they were obtained. The Company did not raise money by way of initial public offer or further public offer (including debt instruments) during the year.

(x) According to the information and explanations given to us, no 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 give to us and based on our examination of the records of the Company, the Company has made payment to its Managerial Personnel in terms of their respective appointments and within the limits prescribed under the Companies Act, 2013 during the year. However, in view of default in repayment of principal and / or interest to Banks and Financial Institutions during the year ended 31-3-2015, 31.03.2016 and 31.03.2017, the Central Government has vide its letter dated 27-12-2017 directed the Company to recover the remuneration paid to its Managing and Wholetime Directors. It is understood that the Company is in the process of making application to Central Government for waiver of said recovery. In case such waiver is not approved by the Central Government, the Company intends to seek approval of the Banks / Public Financial Institutions / Secured Creditors and the shareholders for such waiver, in terms of Section 197 of the Companies Act, as amended in due course. The Company’s Nomination and Remuneration Committee & the Board of Directors have already consented for such course of action.

(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 to the Company.

(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 Sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the Standalone Ind AS financial statements as required by the applicable 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. Accordingly, paragraph 3(xiv) of the Order is not applicable to the Company.

(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. Accordingly, paragraph 3(xv) of the Order is not applicable to the Company.

(xvi) According to the information and explanations given to us, the Company is not required to be registered under section 45 IA of the Reserve Bank of India Act, 1934. Accordingly, paragraph 3(xvi) of the Order is not applicable to the Company.

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of JAIPRAKASH ASSOCIATES LTD (“the Company”) as of March 31, 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For Rajendra K. Goel & Co.

Chartered Accountants

Firm Registration Number: 001457N

(R. K. Goel)

Partner

Membership No. 006154

Place : New Delhi

Date : May 19, 2018

Source : Dion Global Solutions Limited
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