orissa sponge iron steel ltd Auditors report


To the Members of

ORISSA SPONGE IRON & STEEL LIMITED

Opinion

We have audited the accompanying IndAS Financial Statements of "M/S. ORISSA SPONGE IRON & STEEL LIMITED" (the "Company"), which comprise of the Balance Sheet as at 31st March, 2023, the related Statement of Profit and Loss (including Other Comprehensive Income), and the Cash Flow Statement for the year ended and the statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory information which we have signed under reference to this report.

In our opinion and to the best of our information and according to the explanations given to us, 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 IndAS and accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, and profit, total comprehensive income, the changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the IndAS financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key Audit Matters are those matters that, in our professional judgment, were of most significance in our audit of the Ind AS financial statements of the current period. These matters were addressed in the context of our audit of the Ind AS financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matters

Principal Audit Procedures

1 Evaluation of uncertain tax positions

Our procedure included, amongst others, assessing the appropriateness of managements assumptions and estimates in relation to uncertain tax positions. We have reviewed managements assessment of the tax positions and we concur with their estimates and the outcome of their procedures to determine the relevant provision/ liability.

The Company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes.

 

2 Secured Loan

Our Procedure included, amongst others, the review of various agreements, preparing calculation as per IND AS, review of implication of statutory TDS liability. We concur with management estimates and the outcome of their procedures to determine the relevant provision/ liability.

In Jan 22, the secured loan from BKM was restructured with following clauses: 1. Principal of Rs 98.74 Cr upto Mar 21, interest upto Mar 21 of Rs 32.58 Crores@ 14%/16% IRR and fresh disbursal of loan Rs 35.05 lacs in 21-22 upto Dec 21 was added to make the New principal amount of Rs 131.68 Cr, outstanding as of 01.01.22,

2. Interest fromApril to Dec 21 was waived off, 3. 17% Interest from Jan 22 was applicable on the total principal. Later, Interest was provided for Jan 22- Mar 22 and interest waiver was again received for the period Apr 23 to Mar 24

 

3 Revamp of DRI 350, DRI 500,Power Plant 12MW and 24MW

Our Procedure included amongst others, the review of all PO, invoices of all Capital expenditures, review of the revenue expenditure during trial run for transfer to project a/c. We concur with the management for the process adopted in treatment of the said expenditure. Our procedure included taking physical stock verification on test basis and taking management certificate on total quantity, verifying the costs and we concur with the management on the same.

The plant was closed since 2012. From 2020, the revamp activity is being undertaken for making the plant operational. Major capital expenditure is incurred in the process in the year 21-22 and 22-23 which are appearing in CWIP as of 31.03.23 and will be capitalized on commissioning and completion of trial run. Out of the total Revamp Project, DRI 500 and Power Plant 24 MW are commissioned in Oct 22 under Trial run. As per the policy of the company, the plant will continue to be in Trial Run until achievement of 50% capacity uitlisation for two continuous months. The said plants are under Trial run as of 31.03.23 and thus all the income and expenses related to production in the trial Run period amounting to Rs 25.41 Crores is transferred to project expense.

 

4. Write Back of Inventory

Our procedure included taking physical stock verification on test basis and taking management certificate on total quantity, verifying the costs and we concur with the management on the same.

During the process of revamp of the plant, various raw materials, spares, consumables, by product etc were located in good usable condition. This inventory was not appearing in books, company has booked miscellaneous income to the tune of Rs 13.81 Crores and updated the inventory records accordingly.

Information Other than the Financial Statements and Auditors Report Thereon

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexure to Boards Report, Business Responsibility Report, Corporate Governance and Shareholders Information, but does not include the financial statements and our auditors report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and those charged with governance for the Ind AS financial statements

The Companys 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 Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, change in equity and cash flows of the Company in accordance with the Indian Accounting Standards (Ind AS) and accounting principles generally accepted in India, specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate implementation and maintenance of accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Ind AS financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Ind AS financial statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the companys financial reporting process.

Auditors Responsibilities for the Audit of Ind AS Financial Statement

Our objectives are to obtain reasonable assurance about whether the Ind AS financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance,but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Ind AS financial statements.

A further description of the auditors responsibilities for the audit of the Ind AS financial statements is included in Annexure A. This description forms part of our auditors report.

Report on Other legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order, 2020("The Order") issued by the Central Government of India in terms of subsection (11) of Section 143 of the Companies Act, 2013 we give in the AnnexureB, a statement on the matters specified in Paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Companies Act, 2013 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 appears from our examination of those books; c) The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement 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 Ind AS financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act. e) On the basis of written representations received from the directors , as on 31st March, 2023, and taken on record by the Board of

Directors, none of the directors is disqualified as on 31st March, 2023 from being appointed as a director in terms of sub–section (2) of Section 164 of 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 included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our knowledge and information and according to the explanation given to us:-i) The Company has disclosed the impact of pending litigations on its financial position in its Ind AS Financial Statements- Refer Note 40A to the Ind AS 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 has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company. h) (a) The Management has represented that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; (b) The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of theFunding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; (c) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement. i. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023

For B D S & Co.
Chartered Accountants
Firm Registration No. 326264E
Sd/-
Place: Kolkata (Shweta BagariaSarawgee)
Date: 29th day of September, 2023 Partner
UDIN: 23063679BGYOKT2643 Membership No.: 063679

Annexure - A to the Auditors Report of Orissa Sponge Iron & Steel Limited

ADDITIONAL INFORMATION ANNEXED TO THE INDEPENDENT AUDITORS REPORT

As required by the Companies (Auditors Report) Order, 2020, issued by the Company Law Board in terms of section 143(11) of the Companies Act, 2013, and on the basis of such checks as we considered appropriate and as per the information and explanations given to us during the course of audit, we further state that: i. In respect of the Companys Property, Plant and Equipment and Intangible Assets: (a) (i) The Company has maintained proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment and relevant details of right-of-use assets.

(ii) The Company has maintained proper records showing full particulars of intangible assets.

(b) The Company has a program of physical verification of Property, Plant and Equipment and right-of-use assets so to cover all the assets in a phased manner everyyears which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us, no material discrepancies were noticed on such verification. (c) Based on our examination of the property tax receipts and lease agreement for land on which building is constructed, registered sale deed / transfer deed/ conveyance deed provided to us, we report that, the title in respect of self-constructed buildings and title deeds of all other immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee), disclosed in the financial statements included under Property, Plant and Equipment are held in the name of the Company as at the balance sheet date.

(d) The Company has not revalued any of its Property, Plant and Equipment (including right- of-use assets) and intangible assets during the year.

(e) No proceedings have been initiated during the year or are pending against the Company as at March 31, 2023 for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder (ii) In respect of the Companys Inventory: (a) The inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. The discrepancies noticed on verification between the physical stocks and the book records were not material.

(b) The Company has not been sanctioned working capital limits in excess of 5 crore, in aggregate, at any points of time during the year, from banks or financial institutions on the basis of security of current assets and hence reporting under clause 3(ii)(b) of the Order is not applicable.

(iii) (a) The Company has not made investments in, companies and firms, and have not granted unsecured loans or advances in the nature of loans or stood guarantee, or provided security to any other entity, during the year, and hence reporting under clause 3(iii)(a) of the Order is not applicable.

(b) In our opinion, the investments made during the earlier years are, prima facie, not prejudicial to the Companys interest.

(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 investments made however no loan made.

(v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from public.

Therefore, the provisions of clause 3 (v) of the Companies (Auditors Report) Order, 2020 are not applicable to the Company.

(vi) Maintenance of cost records has not been specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 and accordingly not appointed cost auditor for the same.

(vii) (a) The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Value Added Tax, Goods and Service Tax, Cess and any other statutory dues applicable to it with the appropriate authorities. No undisputed amounts payable in respect of aforesaid dues were outstanding as at 31st March, 2023 for a period of more than six months from the date they became payable except for the following old liabilities for the period from shut down to beginning of revamp project:

Particulars

Amount Period
(in Lakhs)
Provident Fund 1031.33 2012-2019
Water Tax 401.91 2012-2019
Pension fund 50.48 2012-2019
Contractor PF 10.03 2012-2019
Payable to KIDCO, Orissa 42.03 2012-2019

(b) According to the information and explanations given to us, and on the basis of our examination there are no material disputed dues on account of Sales Tax, Service Tax, Custom Duty, Excise duty, Value Added Tax, Goods and Service Tax and any other statutory dues that have not been deposited with appropriate authorities on account of any dispute except the following:-

Particulars

Amount Period Forum where disputes is pending
(Rs. in Lakhs)

Provident & Pension Fund

1099.12 2007-08 to 2018-19 Regional Provident Fund Commissioner, Keonjhar, Orissa High Court & Tribunal
Central Sales Tax 5243.05 1996-97 to 2012-13 Various Authorities
Orissa Sales Tax & VAT 1619.55 1996-97 to 2011-12 Various Authorities
Income Tax Act 80.80 2020-21 Commissioner (A)

(viii) There were no transactions relating to previously unrecorded income that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (43 of 1961).

(ix) (a) In our opinion and as per information and explanations given to us, the Company has not defaulted in repayment of Loans and borrowings or in the payment of interest thereon on any dues to any lender except the following:

Lender

Amount (In lacs) Particulars

BKM Mining Pvt Ltd

496.79 Interest for the period Apr-Dec 21 was not paid post which the loan agreement was restructured in Jan 1, 22.The interest for Jan 22- Mar 22 is due as per restructured terms but the same is not paid timely. Interest from Apr 22 -Mar 23 is waived off by the lender

(b) In our opinion and as per information and explanations given to us the company is not declared wilful defaulter by any bank or financial institution or other lender (c) In our opinion and as per information and explanations given to us the term loans were applied for the purpose for which the loans were obtained.

(d) In our opinion and as per information and explanations given to us, the funds raised on the short term basis have not been utilized for the long term basis.

(e) The company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures and hence reporting under Clause 3(ix)(e) of the Order is not applicable.

(f) The Company has not raised any loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies and hence reporting under Clause 3(ix)(f) of the Order is not applicable.

(x) (a) The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) during the year and hence reporting under clause 3(x)(a) of the Order is not applicable.

(b) During the year, the Company has not made any preferential allotment or private placement of shares or convertible debentures (fully or partly or optionally) and hence reporting under clause 3(x)(b) of the Order is not applicable.

(xi) (a) No fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

(b) No report under sub-section (12) of section 143 of the Companies Act has been filed in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government, during the year and upto the date of this report. (c) No whistle blower complaints received by the Company during the year (and upto the date of this report), hence not applicable.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of the Order is not applicable.

(xiii) In our opinion, the Company is in compliance with Section 177 and 188 of the Companies Act, 2013 with respect to applicable transactions with the related parties and the details of related party transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards.

(xiv) (a) In our opinion the Company has an adequate internal audit system commensurate with the size and the nature of its business.

(b) We have considered, the internal audit reports for the year under audit, issued to the Company during the year and till date, in determining the nature, timing and extent of our audit procedures.

(xv) In our opinion during the year the Company has not entered into any non-cash transactions with its Directors or persons connected with its directors. and hence provisions of section 192 of the Companies Act, 2013 are not applicable to the Company.

(xvi) (a) In our opinion, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Hence, reporting under clause 3(xvi)(a), (b) and (c) of the Order is not applicable.

(b) In our opinion, there is no core investment company within the Group (as defined in the Core Investment Companies (Reserve Bank) Directions, 2016) and accordingly reporting under clause 3(xvi)(d) of the Order is not applicable. xvii) The Company has incurred following cash losses during the financial year covered by our audit and the immediately preceding financial year.

Financial Year

Cash Losses (Rs. In Lacs.)
2022-23 7.64
2021-22 1193.68

xviii)There has been no resignation of the statutory auditors of the Company during the year. xix) On the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the financial statements and our knowledge of the Board of Directors and Management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report indicating that Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one year from the balance sheet date, will get discharged by the Company as and when they fall due xx) The Company is not eligible for any Corporate Social Responsibility undersection 135 of the Companies Act 2013 hence reporting under clause

(xx) of the Order is not applicable. xxi) The Company does not have any Subsidiary or associate and Consolidated Audit report is not applicable hence reporting under clause

(xxi) of the Order is not applicable

For B D S & Co.
Chartered Accountants
Firm Registration No. 326264E
Sd/-
Place: Kolkata (Shweta BagariaSarawgee)
Date: 29th day of September, 2023 Partner
UDIN: 23063679BGYOKT2643 Membership No.: 063679

Annexure –B to the Auditors Report

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 M/s. ORISSA SPONGE IRON & STEEL LIMITED ("the Company") as of 31 March 2023 in conjunction with our audit of the Ind AS financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Companys 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 companys 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.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys 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 auditors 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 Companys internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A companys 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 companys 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 companys 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 31 March 2023, 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 B D S & Co.
Chartered Accountants
Firm Registration No. 326264E
Sd/-
Place: Kolkata (Shweta BagariaSarawgee)
Date: 29th day of September, 2023 Partner
UDIN: 23063679BGYOKT2643 Membership No.: 063679