Arcotech Auditors Report


To the Members of Arcotech Limited

Report on the Audit of the Ind AS Financial Statements

Qualified Opinion

We have audited the accompanying Ind AS financial statements of Arcotech Limited ("the Company"), which comprise the Balance sheet as at March 31, 2023, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information. In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the aforesaid financial statements give the information required by the Companies Act, 2013 ("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 Indian Accounting Standards ("Ind AS") prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules as amended and other accounting principles generally accepted in India, of the state of affairs (financial position) of the Company as at March 31, 2023, and its loss (financial performance including other comprehensive income), the changes in equity and it cash flows for the year ended on that date.

Basis for Qualified Opinion

The restructuring of the companys business is under consideration by the lenders. Consequent to the filing of restructuring proposal with lenders, feasible TEV (techno economic viability) study/reports of the operations of the Company was conducted by outside agency where in certain reliefs/ concessions have been envisaged to make the project viable. Included in there is relief in interest rates effective from 01.11.2018. The company has provided interest at the rates mentioned in TEV. This along with other unprovided interest amounts to Rs. 2,582.60 lakhs (net of tax) for the current financial year. The company along with the restructuring is in the process of negotiating for settlement of dues with the lenders towards which an amount of Rs. 630.00 lacs has been deposited with the bankers.

Emphasis of Matter

The Company has incurred net loss after tax of Rs 8,215.73 lacs during the financial year ended March 31, 2023 (Previous year net loss after tax of Rs 6,008.92 lacs). The turnover of Company during the the financial year ended March 31, 2023 is Rs. 3.60 lacs (Previous year Rs 8,559.40 lacs). The current liabilities exceed current assets. Had the company provided for the interest as mentioned in Basis for Qualified Opinion above the net loss would have increased.

The restructuring of the Companys business is under consideration by the lenders. However, certain lenders of the company have filed applications/issued notices including in NCLT, DRT and SARFAESI. In view of the managements expectation of successful outcome of above proposal and revival of its business, the financial statements have been prepared on going concern basis. However, in view of above uncertainties, we are unable to comment on the ability of the company to continue as a "going concern" and the consequential adjustments to the accompanying financial statements, if any, that might have been necessary had the financial statements been prepared under liquidation basis.

Our opinion is not modified in respect of this matter.

The Company is recognizing deferred tax assets on losses. The matters discussed above relating to going concern creates doubt and uncertainty relating to recoverability of deferred tax assets. On the basis of our review as elaborated in key audit matters and as per explanation given to us and according to management assessment Company will be in position to generate future profits against which these losses will be setoff.

Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming 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:

S.No. Key Audit Matter Auditors Response
1.

Material Uncertainty related to Going Conccern

Principal Audit Procedures

The Company has incurred a net loss after tax of Rs 8,215.73 lacs during the financial year ended March 31, 2023 (Previous Year loss of Rs 6,008.92 lacs). The turnover of Company during the financial year ended March 31, 2023 is Rs 3.60 lacs (Previous Year Rs 8,559.40 lacs). The current liabilities exceed current assets. Had the company provided for the interest as discussed in Basis for Qualified Opinion above the net loss would have increased. The restructuring of the Companys business is under consideration by the lenders. However, certain lenders of the company have filed applications/issued notices including in NCLT, DRT and SARFAESI. In view of the managements expectation of successful outcome of above proposal and revival of its business, the financial statements have been prepared on going concern basis.
However, in view of above uncertainties, we are unable to comment on the ability of the company to continue as a "going concern" and the consequential adjustments to the accompanying financial statements, if any, that might have been necessary had the financial statements been prepared under liquidation basis.
Refer Note 43 of the Financial Statements as on March 31, 2023.
2

Impairment of property, plant and equipment

Carrying value of property, plant and equipment as on 31 March 2023 is Rs. 14,827.72 lacs as disclosed in Note: 2 represent significant balances recorded in the financial statement. The evaluation of the recoverable amount of these assets requires significant judgement in determining the key assumptions supporting the expected future cash flows of the business and the utilization of the relevant assets. Our audit procedures to assess the carrying value of PPE and related assets included the following:

. In conjunction with valuation reports of PPE and techno economic viability report of third party specialists given by the company we assessed and verified:

The estimated useful lives and residual values of PPE and related assets with reference to the companys historical experience and future operating plans and retirement of PPE, policies adopted by valuation reports and techno economic viability report given by third party specialists;
Refer Note 2 of the Financial Statements as on March 31, 2023. Discussing indicators of possible impairment of PPE and related assets with management of the company and, where such indications were identified, assessing whether management had performed impairment testing in accordance with the requirements of the prevailing Indian accounting standards;
We also performed sensitivity analysis on recoverable amount for impairment testing and found that recoverable amount is higher than carrying amount of PPE.
3.

Judgment in valuation of deferred income tax positions

The company has recognised deferred income tax assets and deferred income tax liabilities of Rs. 16,934.42 lacs and Rs 3,198.93 lacs respectively as at March 31, 2023. The net deferred tax assets in the balance sheet as at March 31, 2023 is Rs. 13,735.49 lacs. Under Ind-AS,12 the Company is required to measure annually deferred tax position. This area was significant to our audit because of the related complexity and subjectivity of the assessment process, which is based on assumptions taken by the management that are affected by expected future cash flows & expected future market or economic conditions. Our audit procedures included, amongst others, using techno economic viability report of third party specialists given by the management to assist us in evaluating the assumptions and methodologies used for the recoverability of deferred tax assets related to operations of the company by reviewing their future profitability, managements forecasts and local fiscal developments. We also focused on the adequacy of the Companys disclosures on deferred income tax positions and assumptions used. We also discussed with the senior management and evaluate the discussions with them about the future expected cash flows and expected future market complexity or economic conditions. The Companys disclosures concerning income taxes are included in note given as per the financial statements.
Refer Note 16 of the Financial Statements as on March 31, 2023. The Company is still recognizing deferred tax assets on losses. The matters discussed in para 1 of key audit matters creates doubt and uncertainty relating to recoverability of deferred tax assets. As per explanation given to us and according to management assessment Company will be in position to generate future profits against which these losses will be setoff.
4.

Evaluation of uncertain tax positions

The Company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. Obtained details of completed tax assessments and demands at the year ended March 31, 2023 from management. We involved our team to verify the managements underlying assumptions in estimating the tax provision and the possible outcome of the disputes.
Refer Note 33 of the Financial Statements as on March 31, 2023. Our team also considered legal precedence and other rulings in evaluating managements position on these uncertain tax positions. Additionally, we considered the effect of new information in respect of uncertain tax positions as at April 1, 2022 to evaluate whether any change was required to managements position on these uncertainties.

Other Information

The Companys Board of Directors is responsible for the other information. The other information comprises the Directors Report, but does not include the Ind AS financial statements and our auditors report thereon.

Our opinion on the Ind AS 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 Ind AS 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. When we will read the directors report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and if the other information is not corrected after communicating with those charged with governance, seek to have the uncorrected material misstatement appropriately brought to the attention of users for whom the audit report is prepared.

Responsibilities of Management for the Ind AS Financial Statements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of 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, 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) 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 accounting policies; making judgments and estimates that are reasonable and prudent; and the 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 Ind AS financial statements 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.

The Board of Directors are also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Ind AS Financial Statements

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.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the Ind AS financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report.

However, future events or conditions may cause the Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the Ind AS financial statements, including the disclosures, and whether the Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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 sub-section (11) of section 143 of the Act, 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 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, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and 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 Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended .

(e) On the basis of the written representations received from the directors as on March 31, 2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023 from being appointed as a director in terms of Section 164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company with reference to these Ind AS financial statements and the operating effectiveness of such controls, refer to our separate Report in

"Annexure B" to this report;

(g) In our opinion, the managerial remuneration for the year ended March 31, 2023 has been paid / provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act;

(h) With respect to the other matters to be included in the Auditors 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 financial statements-

Refer Note 33 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 has been delay in transferring Rs 5.12 lacs, required to be transferred, to the Investor Education and

Protection Fund by the Company.

iv. (a) The Management has represented that, to the best of its knowledge and belief, no funds 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, 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 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, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries

(c) Based on the audit procedures performed 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 subclause (i) and (ii) of Rule 11(e) as provided under (a) & (b) above contain any material mis-statement.

v. The Company has not declared or paid any dividend during the year.

For Amit Joshi & Associates Chartered Accountants FRN No. 004898N Sd/- (Amit Joshi) Partner M. No. 083617 Place: New Delhi Date: 08.06.2023 UDIN: 23083617BGZHQK1595

Annexure 1 to the Auditors Report on the accounts of Arcotech Limited for the year ended March 31, 2023 as required by the Companies (Auditors Report) Order, 2020 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013

i. (a)(A) The company has maintained proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment.

(a)(B) The company does not have any intangible assets. Consequently, clause i(a)(B) of paragraph 3 of the order is not applicable to the company.

(b) The company had in the previous year initiated a program of physical verification of Property, Plant and Equipment so as to cover all the assets once in every three years, which in our opinion is reasonable having regard to the size of the company and nature of its assets. According to the information and explanations given to us physical verification of property, plant & equipment has not been conducted during the year. We are therefore unable to comment whether there are any material discrepancies.

(c) The title deeds of all immovable properties (other than properties where the company is the lessee and lease agreements are duly executed in favour of the lessee) disclosed in the financial statements are held in the name of the company.

(d) The Company has not revalued its Property, Plant and Equipment during the year.

(e) According to the information and explanations given to us and records of the company no proceedings have been initiated or are pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder.

ii. (a) Physical verification of inventory has not been conducted by the management during the year. We are therefore unable to give our opinion on the coverage and procedure of such verification and also whether there are any discrepancies of 10% or more in aggregate for each class of inventory.

(b) The company has been sanctioned working capital limits in excess of five crore rupees in aggregate from banks or financial institutions on the basis of security of current assets. The company has not filed any statement during the year with such banks or financial institutions. Stock records cannot be checked as the company is unable to provide the relevant records.

iii. According to the information and explanations given to us and records, the company has not during the year, made any investments in, provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms, limited liability partnerships or any other parties. Consequently, clauses (iii)(a), (iii)(b), (iii)(c), (iii)(d), (iii)(e) and (iii)(f) of paragraph 3 of the order are not applicable.

iv. According to the information and explanation given to us, in respect of loans granted, investments made and guarantees and securities provided, wherever applicable, the provisions of section 185 and 186 of the Companies Act, 2013 have been complied with by the company.

v. The company, according to records and information and explanations given to us, has not accepted deposits or amounts which are deemed to be deposits, as per direction issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed there under. Consequently, clause (v) of paragraph 3 of the order is not applicable.

vi. According to the records & information and explanation given to us, the company is required to maintain cost records specified by the Central Govt. under sub section (1) of section 148 of the Companies Act, 2013. The Company has however not made and maintained cost records during the year.

vii. (a) According to the records & information and explanation given to us, the company has been irregular in depositing undisputed statutory dues including goods & services tax, provident fund, employees state insurance, income tax, sale tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities. There are no arrears of undisputed statutory dues as at March 31, 2023 which were outstanding for a period of more than six months from the date they became payable except income tax and other statutory dues amounting to Rs. 1209.07 lacs & Rs. 50.03 lacs respectively as at March 31, 2023.

(b) According to the records and the information and explanations given to us, the company has following disputed dues as on March 31, 2023 in respect of goods & services tax, provident fund, employees state insurance, income tax, sales tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues:

Name of the Statue

Nature of dues

Amount (Rs. in Lacs) Period to which amount relates

Forum where dispute is pending

Income Tax Act,1961

Income Tax Demand

547.01 AY 2012-13

CIT (Appeals), New Delhi

Income Tax Act,1961

Income Tax Demand

519.58 AY 2013-14

CIT (Appeals), New Delhi

Income Tax Act,1961

Income Tax Demand

1681.63 AY 2013-14

Assessment order dated 17.05.2023 pending filing of appeal before CIT(A)

Income Tax Act,1961

Income Tax Demand

535.78 AY 2014-15

CIT (Appeals), New Delhi

Income Tax Act,1961

Income Tax Demand

590.91 AY 2015-16

ITAT, New Delhi

Income Tax Act,1961

Income Tax Demand

304.95 AY 2016-17

ITAT, New Delhi

Income Tax Act,1961

Income Tax Demand

2509.29 AY 2017-18

CIT (Appeals), New Delhi

Income Tax Act,1961

Income Tax Demand

1.50 AY 2018-19

CIT (Appeals), New Delhi

Income Tax Act,1961

Income Tax Demand

18631.06 AY 2018-19

CIT (Appeals), New Delhi

Income Tax Act,1961

Income Tax Demand

202.23 AY 2019-20

CIT (Appeals), New Delhi

Income Tax Act,1961

Income Tax Demand

12.00 AY 2019-20

CIT (Appeals), New Delhi

viii. According to the records of the company and the information and explanations given to us, the company does not have any unrecorded transactions that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961. Consequently, clause (viii) of paragraph 3 of the order is not applicable.

ix. According to the information and explanations given to us and on the basis of our audit procedures, we report that the company:

(a) has defaulted in repayment of loans and interest thereon to following lenders:

Nature of Borrowings

Name of Lender

Amount (Rs in Lacs) Nature Amount of Period of delay (Up to date of audit report)
Term loan IFCI Limited 5920.78 Principal 1-1940 days
Term loan IFCI Limited 1984.46 Interest 1-1912 days

Term loan

IFCI Venture Capital Fund Limited

975.70 Principal 1-1743 days

Term Loan

IFCI Venture Capital Fund Limited

251.78 Interest 1-1713 days

Working Capital

Bank of India

4095.03 Principal including interest 1-1680 days

Working Capital

Canara Bank

8255.85 Principal including interest 1-1680 days

Working Capital

Central Bank of India

10712.61 Principal including interest 1-1680 days

Working Capital

Punjab National Bank

18057.84 Principal including interest 1-1680 days

(b) is not a declared willful defaulter by any bank or financial institution or other lender. (c) has not taken any term loans during the year. (d) has no funds raised on short term basis that have been used for long term purposes.

(e) 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.

(f) has not raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies.

x. According to the records of the company and the information and explanations given to us, the company has not raised moneys by way of initial public offer or further public offer (including debt instruments) during the year and has not made any preferential allotment or private placement of shares or convertible debentures (fully, partially or optionally convertible) during the year. Consequently, clauses (x)(a) and (x)(b) of paragraph 3 of the order are not applicable.

xi. During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of fraud on or by the company noticed or reported during the year.

No report under sub section (12) of section 143 of the Companies Act, 2013 has been filed in Form ADT-4 as prescribed under Rule 13 of Companies (Audit and Auditors) Rules,2013 with the Central Government during the year and upto the date of this report.

We have considered whistle blower complaints, if any, received during the year and upto the date of this report.

xii. The company is not a Nidhi Company. Consequently, clause (xii) of paragraph 3 of the order is not applicable.

xiii. According to the records of the company and the information and explanations given to us, all transactions with related parties during the year are in compliance with the provisions of section 177 and 188 of the Companies Act, 2013 where applicable and the details have been disclosed in the financial statements as required by the applicable accounting standards.

xiv. In our opinion and based on our examination, the company has an internal audit system commensurate with the size and nature of its business.

We have considered the internal audit reports of the company issued till date for the period under audit.

xv. According to the records of the company and the information and explanations given to us, the company has not entered into any non-cash transactions with its directors or persons connected with them. Consequently, clause (xv) of paragraph 3 of the order is not applicable.

xvi. According to the records of the company and the information and explanations given to us, the company is not required to be registered under section 45IA of the Reserve Bank of India Act, 1934. The company has not conducted any Non-Banking financial or Housing Finance activities and the company is not a Core Investment Company (CIC) as defined in the regulation made by Reserve Bank of India. The group does not have more than one core investment company. Consequently, clauses (xvi)(a), (xvi)(b), (xvi)(c) and (xvi)(d) of paragraph 3 of the order are not applicable.

xvii. The company has incurred cash losses during the current financial year and in the immediately preceding financial year of Rs. 6,177.45 lacs and Rs 8,005.93 lacs respectively after taking into account the effect of qualifications.

xviii. During the year, there has been no resignation of the statutory auditors of the company.

xix. According to the information and explanations given to us and on the basis of the financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements, our knowledge of the Board of Directors and management plans and based on our examination of the evidence supporting the assumptions, there exist material uncertainty as on the date of the audit report of the company being 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.

xx. (a) According to the information and explanations given to us the company does not have any amount remaining unspent in respect of other than ongoing projects. Consequently, clause (xx)(a) of paragraph 3 of the order is not applicable.

(b) The company does not have any ongoing projects. Consequently, clause (xx)(b) of paragraph 3 of the order is not applicable.

xxi. This clause of the order is applicable to consolidated financial statements. The audit report under reference is on the standalone financial statements of the company. Consequently, clause (xxi) of paragraph 3 of the order is not applicable to the company.

For Amit Joshi & Associates Chartered Accountants FRN No. 004898N

Sd/-

(Amit Joshi) Partner M. No. 083617 Place: New Delhi Date: 08.06.2023

UDIN: 23083617BGZHQK1595

ANNEXURE ‘B TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE ON THE FINANCIAL

STATEMENTS OF ARCOTECH LIMITED

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 Arcotech Limited ("the Company") as of March 31, 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. 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 operate 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 include 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 Ind AS 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 Ind AS 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 Ind AS 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, 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 Amit Joshi & Associates Chartered Accountants FRN : 004898N Sd/- Amit Joshi (Partner) M. No. 083617 Place: New Delhi

Date: 08.06.2023

UDIN: 23083617BGZHQK1595