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KSK Energy Ventures

BSE: 532997|NSE: KSK|ISIN: INE143H01015|SECTOR: Power - Generation & Distribution
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Auditor's Report (KSK Energy Ventures) Year End : Mar '18

Report on the Standalone Financial Statements

We have audited the accompanying standalone Ind AS financial statements of KSK Energy Ventures Limited (“the Company”), which comprises the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss (including other Comprehensive income), the statement of Cash Flows and the Statement of Changes in Equity for the year then ended and a summary of significant accounting policies and other explanatory information (hereinafter referred to as ‘Standalone Ind AS financial statements’).

Management’s Responsibility for the Standalone 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 give 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 relevant Rule issued there under.

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, 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 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 for Qualified Opinion

a. We draw attention to note no. 35 of the statement regarding invocation of the pledged shares of KSK Mahanadi Power Company Limited (“KMPCL”) a subsidiary of the company, pledged by the Company in favour of the lenders of KMPCL. The company holds an amount of Rs. 411.22 Crores as Investments and Rs. 2,465.92 crores as receivable consequent to invocation of pledge referred above in the Financial Statements.

Pending disposal/transfer of shares by the Lenders no provision has been considered in these financial statements by the management, as impact, if any is currently unascertainable

b. We draw your attention to note no. 36 of the Statement regarding invocation of the pledged shares of Sai Wardha Power Generation Limited (“SWPGL”), pledged by the Company in favour of the lenders ofSWPGL. The company holds an amount of Rs. 164.90 crores as Investments and Rs. 134.42 crores as receivable consequent to invocation of pledge referred above in the Financial Statements.

Pending disposal/transfer of shares and pending debt restructuring/ change in management by the Lenders no provision has been considered in these financial statements by the management, as impact, if any is currently unascertainable.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effect of the matters described in “basis for qualified opinion” paragraph, the aforesaid 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 including Ind AS:

a. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2018;

b. in the case of the Profit and Loss Statement including other comprehensive income, 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; and

d. in the case of the changes in equity for the year ended on that date.

Emphasis of Matters

We draw your attention towards:

a. Note no. 2.6 of the financial statement, which state that “the company has incurred a net loss during the year ended 31st March, 2018 and during the previous years with resultant defaults in payment of interest and instalments dues to banks and financial institutions. Further as discussed in Note no. 35 and 36 to the financial statements, the company has residual investments and receivables pursuant to invocation of shares. However, the company continues to prepare the financial statements as a going concern as the Company is making appropriate representation and is in discussion with the respective lenders to find an appropriate resolution plan at each of the assets”.

In the absence of any contrary information, our opinion is not modified in this matter.

b. Note no. 16.4 of the statement, stating that “some of the lenders have recalled the loan given to the Company and has issued notice for possession of underlying securities on account of non-payment of overdue amount. The Company would seek to take appropriate steps, for addressing the same. Notwithstanding of above, pending resolution, classification of borrowings into non-current and current is done based on original terms of sanction”.

Our opinion is not modified in this matter.

c. Note no. 37 of the Statement, stating that “the Impairment loss amounting to Rs. 188.88 Crores incurred by the company on account of Impairment of Property, Plant and Equipment (PPE), investments and other assets related to subsidiaries. The same has been disclosed as exceptional item in the Statement of Profit and Loss for the year ended 31st March 2018”. Our opinion is not modified in this matter

Other Matters

The comparative financial information of the company for the year ended March 31, 2017, included in these standalone financial statements, have been audited by the predecessor auditor. The report of the predecessor auditor on comparative financial information dated 27May 2017 expressed an unmodified opinion.

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 of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by section 143(3) ofthe Act, we report that:

a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.;

b. 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, Statement of Profit and Loss, the statement of Cash Flow and the Statement of changes in equity dealt with by this Report are in agreement with the books of account.

d. In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards referred to in section 133 of companies act 2013 , read with relevant Rules issued there under.

e. We have not received written representation from one of the directors of the company for non-disqualification under Section 164(2). As far as other directors are concerned, on the basis of written representations received from such directors as on March 31, 2018, and taken on record by the Board of Directors, none of the remaining directors are disqualified as on March 31, 2018, from being appointed as a director in terms of sub-section (2) of section 164of the Companies Act, 2013.

f. 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’; and

g. 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, 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 27 to the standalone Ind AS financial statements.

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivatives contracts. Refer to Note 17 to the standalone Ind AS financial statements.

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

Referred to in paragraph 1 of “Report on Other Legal and Regulatory Requirements “ in our report of even date:

According to the information and explanations given to us:

i. (a) The company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has a fixed programme of Physical verification of its fixed assets which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Management has physically verified the fixed assets during the year. No material discrepancies were noticed on such verification.

(c) According to the information and explanation given to us and on the basis of our examination of the records of the Company, the title deeds of the immovable properties are held in the name of the Company. In respect of immovable properties of land and building that have been taken on lease and disclosed as fixed assets in the standalone financial statements, the lease agreements are in the name of the company

ii. The Company is primarily engaged in the development of private sector power projects. The Company does not have any inventory and accordingly reporting under Clause 3 (ii) of the Order is not applicable.

iii. According to the information and explanations given to us, the Company has granted unsecured loans to ten companies covered in the register maintained under section 189 of the Companies Act, 2013.

(a) In our opinion, terms and conditions on which the Loans had been granted to the bodies corporate listed in the register maintained under section 189 of the Act were not, prima facie, prejudicial to the interest of the Company.

(b) The terms of arrangement do not stipulate any repayment schedule and loans are repayable on demand. Accordingly, paragraph 3(iii)(b) & (c) of the order is not applicable to the company in respect of repayment of principal amount.

iv. In our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 185 and 186 of the Act, with respect to the loans, investments made and providing guarantees and securities, as applicable

v. The Company has not accepted any deposits from the public and consequently the directives issued by Reserve Bank of India; the provisions of Section 73 to 76 of the Companies Act, 2013 and the rules framed there under are not applicable.

vi. The maintenance of cost records under Section 148(1) of the Act, has not been specified by the Central Government for the business activity carried out by the Company. Thus, reporting under Clause 3(vi) of the Order is not applicable to the Company.

vii. According to the information and explanations given to us, in respect of statutory dues:

(a) the Company has generally been regular in depositing undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income tax, Sales Tax, Excise duty, Value Added Tax, Service Tax, Custom Duty, Cess and other material statutory dues applicable to it with the appropriate authorities.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees’ State Insurance, Income tax, Sales Tax, Excise duty, Value Added Tax, Service Tax, Custom Duty, Cess and other material statutory dues were in arrears as at 31 March 2018 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of duty of customs, Sales Tax, Income Tax, Service Tax, duty of excise and Value Added Tax which have not been deposited with the appropriate authorities on account of any dispute accept disclosed below.

S.no

Name of the Statue

Nature of Dues

Amount (in Crores)

Period to which it relates

Forum where the dispute is pending

1.

Finance Act, 1994-

Availment of

50.56

April 2008-

CESTAT

Service Tax

Cenvat Credit

September 2010

(Hyderabad)

2.

Income Tax Act 1961

Income tax

24.90

AY 2014-15

CIT (Appeals)

3.

Income Tax Act 1961

Income tax

20.45

AY 2015-16

CIT (Appeals)

*in respect of S.no. 1 above, an amount of Rs 2.68 Crores has been deposited for grant of stay.

*in respect of S.no. 2 above, entire demand amount has been adjusted from refund relating to subsequent years.

*in respect of S.no. 3 above, an amount of Rs 5.15 Crores has been adjusted from refund relating to subsequent years.

viii. In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of loans or borrowings to financial institutions and banks as per the details given below:

Name of the Lender

Amount of Default in Principal (Rs. In Crores)

Amount of Default in Interest (Rs. In Crores)

Period of Default

IFCI

5.00

2.99

September 2017 to March 2018

LIC

90.03

136.66

October 2015 to March 2018

L&T

-

2.01

October 2017 to March 2018

Axis Bank

-

12.52

March 2018

ix. The company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3(ix) of the Order is not applicable.

x. According to the information and explanations given to us, no material 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 paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

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.

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 financial statements as required by the applicable accounting standards.

xiv. The company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, paragraph 3(xiv) of the Order is not applicable.

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 him. Accordingly, paragraph 3(xv) ofthe Order is not applicable.

xvi. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

Report on the Internal Financial Controls 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 KSK Energy Ventures Limited (“the Company”) as of March 31, 2018 in conjunction with our audit of the standalone 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 (‘ICAI’). 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 and presentation of reliable financial information, as required under the Companies Act, 2013.

Auditors’ 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”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. 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 judgment, 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 authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised 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, 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 Jawahar and Associates.,

Chartered Accountants

Firm Registration No: 001281S

Sd/-

M. Chandramouleswara Rao

Place: Hyderabad Partner

Date: 14 June , 2018 Membership No: 024608

Source : Dion Global Solutions Limited
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