1. We have audited the accompanying financial statements of Orissa
Sponge Iron & Steel Limited (the Company) which comprise the Balance
Sheet as at March 31, 201 4, the Statement of Profit and Loss and the
Cash Flow Statement for the year then ended and a summary of the
significant accounting policies and other explanatory information.
MANAGEMENT''S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
2. The Company''s Management is responsible for the preparation of
these financial statements that give a true and fair view of the
financial position, financial performance and cash flows of the Company
in accordance with the Accounting Standards referred to in Section 211
(3C) of the Companies Act, 1956 (the Act) and in accordance with the
accounting principles generally accepted in India. This responsibility
includes the design, implementation and maintenance of internal
controls relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from material
misstatements, whether due to fraud or error.
3. Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with the Standards on Auditing issued by the Institute of Chartered
Accountants of India. Those Standards require that we comply with the
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatements.
4. An audit involves performing procedures to obtain audit evidence
about the amounts and the disclosures in the financial statements. 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. In making those risk
assessments, the auditor considers the internal controls relevant to
the Company''s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in
the circumstances but not for the purpose of expressing an opinion on
the effectiveness of the Company''s internal control. An audit also
includes evaluating the appropriateness of the accounting policies used
and the reasonableness of the accounting estimates made by the
Management, as well as evaluating the overall presentation of the
5. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion. EMPHASIS OF
6. Without qualifying our opinion we draw attention on the following :
(a) The Company has suspended the production in June 2012; incurred a
net loss of? 4,129.25 lacs during the year ended 31st March, 2014 and
the accumulated losses as of that date ? 27,886.70 lacs, the Company''s
current liabilities exceeded its current assets by ? 23,608.83 lacs,
the Company defaulted in repayment of term loan and cash credit
facilities. These conditions indicate the existence of material
uncertainty that may cause significant doubt about the Company to
continue as going concern.
(b) The Company has considered deferred tax assets of ? 11,054.28 lacs,
including? 2,785.19 lacs for the current year, on the assumption that
the Company will be able to earn sufficient profit in future years to
recoup the carry forward of losses, when the raw materials i.e. iron
ore will be available from captive lease mines in future years. We
cannot comment on the certainty.
7. In our opinion and to the best of our information and according to
the explanations given to us, the aforesaid 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.
(a) In the case of the Balance Sheet, of the state of affairs of the
Company as at March 31, 2014.
(b) In the case of the Statement of Profit and Loss, of the Loss of the
Company for the year ended on that date and
(c) In the case of the Cash Flow Statement, of the cash flows of the
Company for the year ended on that date.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
8. As required by the Companies (Auditor''s Report) Order 2003 as
amended by the Companies (Auditors Report), (Amendment) 2004, issued by
the Central Government of India in terms of sub-section (4A) of Section
227 of the Act (here in under referred to as the order), 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 the Annexure a statement on the
matters specified in paragraph 4 and 5 of the order.
9. As required by Section 227(3) of the Act, 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 it appears from our examination of those
c) The Balance Sheet, the Statement of Profit and Loss and the Cash
Flow Statement dealt with by this Report are in agreement with the
books of account,
d) in our opinion, the Balance Sheet, the Statement of Profit and Loss
and the Cash Flow Statement comply with the Accounting Standards
referred to in Section 211 (3C) of the Act,
e) On the basis of the written representations received from the
directors as on March 31, 201 4, taken on the record by the Board of
Directors, none of the directors is disqualified as on March 31, 201 4
from being appointed as a director in terms of Section 274(1 )(g)of the
ANNEXURE TO THE AUDITORS'' REPORT
Referred to in paragraph 8 of the Auditors'' Report of even date to the
members of Orissa Sponge Iron & Steel Limited (the Company) on the
financial statements for the year ended 31 st March, 2014. We report
1. (a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of its fixed
(b) The Company has a regular programme of physical verification of its
fixed assets, by which all fixed assets are verified in a phased manner
over a period of three years. In our opinion this periodicity of
physical verification is reasonable having regard to the size of the
Company and the nature of its assets. Accordingly, certain fixed assets
have been physically verified by the management during the current year
and no material discrepancies were noticed upon such verification.
(c) Fixed assets disposed off during the year were not substantial and
therefore do not affect the going concern assumption.
2. (a) The inventory of the Company has been physically verified by
the management during the year. In our opinion the frequency of such
verification is reasonable.
(b) The procedures of physical verification of inventories followed by
management are reasonable and adequate in relation to the size of the
Company and the nature of its business.
(c) On the basis of our examination of the records of inventory, we are
of the opinion that the Company is maintaining proper records of
inventory. The discrepancies noted on physical verification between the
physical stocks and the book records were not material.
3. According to the information and explanations given to us, the
Company has not granted or taken any loans, secured or unsecured,
to/from Companies, Firms or other parties covered in the register
maintained pursuant to the Section 301 of the Companies Act, 1956.
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 nature of its business with regard to
purchases of inventory and fixed assets and with regard to sale of
goods and services.
5. (a) In our opinion and according to the information and
explanations given to us, the particulars of contracts or arrangements
referred to in
Section 301 of the Companies Act, 1956 have been entered in the
register required to be maintained under the section. (b) In our
opinion, and according to the information and explanations given to us,
the transactions made in pursuance of contracts and arrangements
referred to in (a) above and exceeding the value of X 5 lacs with any
party during the year have been made at prices which are reasonable
having regard to the prevailing market prices at the relevant time.
6. The Company has not accepted any deposits under the provisions of
section 58(A) and 58(AA) of the Act, and the Rules framed there under.
7. In our opinion the Company has an Internal Audit System
commensurate with the size and nature of the business.
8. We have broadly reviewed the books of accounts maintained by the
Company pursuant to the rules 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 maintained. However we have not made a
detailed examination of such records.
9. (a) According to the information and explanations given to us and
except Central Sales Tax, Orissa Sales Tax and Entry Tax liability
totaling Rs.30.91 lakhs, no undisputed dues payable in respect of
Provident Fund, Investor Education and Protection Fund, Employees State
Insurance, IncomeTax, Wealth Tax, Sales Tax, Service Tax, Customs Duty,
Excise Duty, Cess and other material statutory dues were outstanding at
the year end, for a period of more than six months from the date they
(b) According to the information and explanations given to us, details
of dues of Income Tax, Sales Tax, Service tax, Customs duty, Excise
Duty and Cess which have not been deposited as at 31 st March, 201 4 on
account of any dispute are given below:
Name of the Nature of dues Amount
Staute In Lacs
Income Tax Tax Demand under appeal 3.27
Act 1961 for Assessment Year 2006-07
Tax Demand under appeal 1.00
for Assessment Year 2009-10
Central Sales Non-collection of declaration forms 2,495.87
Tax Act 1956 and enhanced assessment & penalty
Orissa Sales Enhanced Assessment & Penalty 634.79
TAX Act 1947
Central Excise Disputed Central Excise demand 155.33
Name of the Staute Forum Where Dispute is Pending
Income Tax Acy 1961 Petition u/s 154 Before
Appeal u/s 246 before
Central Sales Act 1956 Sales Tax Appelate Authorities
Orissa Sales Tax Act 1947 Sales Tax Appelate Authorities
Central Excise Act 1944 Commissiioner of Appeals,
10. The Company has accumulated losses at the end of the financial
year which are more than fifty percent of its net worth. It has
incurred cash losses in the current financial year and the year
immediately preceding financial year.
11. The Company has defaulted in repayment of dues to its bankers and
financial institutions as on 31st March, 2014 as detailed below : -
Bank / Financia Amount of Default Default has
Insituation Rs in lacs Started since
a) State Bank of India 3,635.00 Principal January 2011
2,417.60 Interest April 2011
b) State Bank of Bikaner& Jaipur 1,323.00 Principal March 2011
846.17 Interest April 2011
c) Punjab National Bank 760.30 Principal October 2011
939.20 Interest August 2011
d) Bankof India - WCTL 12.00 Principal April 2013
23.46 Interest November 2012
e) Indian Renewable Energy
DevelopmentAgencyLtd.(IREDA) 1,968.32 Principal June2011
2,086.03 Interest June 2011
Cash Credit (excluding interest
not charged by Bank)
f) State Bank of India 6,714.14 Balance April 2011
g) State Bank of Bikaner& Jaipur 855.91 Balance July 2011
h) Bank of India 552.85 Balance March 2013
12. According to the information and explanations given to us, 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 and according to the information and explanations
given to us, the Company is not a chit fund/nidhi/mutual benefit
fund/society. Accordingly, the provisions of clause 4(xiii) of the
Order are not applicable to the Company.
14. According to the information and explanations given to us, the
Company is not dealing in or trading in shares, securities, debentures
and other investments. Accordingly, the provisions of paragraph 4(xiv)
of the Order are not applicable to the Company.
15. According to the information and explanations given to us, the
Company has given guarantee for loans taken by associated companies
from banks or financial institutions, terms and conditions whereof are
not prejudicial to the interest of the Company.
16. In our opinion and according to the information and explanation
given to us, the term loan taken by the Company during the year have
been applied for the purpose for which it was raised.
17. According to the information and explanations given to us and on
an overall examination of the balance Sheet of the Company, we are of
the opinion that the funds raised during the year on short term basis
have not been used for long term investment.
18. According to the information and explanations given to us, the
Company has not made any preferential allotment of shares to Parties
and Companies covered in the Register maintained under Section 301 of
the Companies Act, 1956 during the year.
19. The Company has received X 2,000 lakhs during the year as advance
towards issuance of Redeemable Preference Share.
20. According to the information and explanations given to us, the
Company has not issued debentures during the year.
21. During the course of our examination of the books & records of the
Company, carried out in accordance with the generally accepted auditing
practice in India, and according to the information and explanations
given to us, we have neither come across any instance of material fraud
on or by the Company, noticed or reported during the year; nor have we
been informed of any such case by the management.
For L. N. More & Company
L. N. More
Membership No. 011485
Dated: 30th May, 2014