Ashapura Minechem Ltd Directors Report.

To

The Members of ASHAPURA MINECHEM LIMITED

[Company under Corporate Insolvency Resolution Process (CIRP)]

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

We have audited the accompanying standalone financial statements of Ashapura Minechem Limited [Company under Corporate Insolvency Resolution Process (CIRP)] (the Company) which comprise the Balance Sheet as at 31st March 2019, the statement of profit and loss (including other comprehensive income), the statement of changes in equity and the statement of cash flows for the year then ended and notes to the financial statements, including a summary of the significant accounting policies and other explanatory information in which are included the returns for the year ended on that date audited by the branch auditors of the Companys branches located at Chennai and Kodur (hereinafter referred to as the standalone financial statements).

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph below, the aforesaid standalone 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 Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (Ind AS) and the other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2019, of its loss and total comprehensive income, its changes in equity and its cash flows for the year ended on that date.

Basis for Qualified Opinion

Attention is invited to Note No. 42 regarding non provision of the additional liability aggregating to 18,056.67 lacs towards interest on the shipping claims and along with exchange rate difference thereon (cumulative up to 31st March 2019: 35,415.44 lacs) The loss for the year is, therefore, understated by 18,056.67 lacs and other equity as at the balance sheet date is overstated by 35,415.44 lacs.

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Standalone 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 (ICAI) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.

Emphasis of Matter

The Hon. National Company Law Tribunal - Mumbai Bench, (NCLT) admitted an insolvency and bankruptcy petition filed by the Company vide its order dated 15th March, 2019 under the Insolvency and Bankruptcy Code, 2016 (the Code) and the Company is, therefore, now under Corporate Insolvency Resolution Process (CIRP). Consequently, The Board of the Directors of the Company stands suspended and an Interim Resolution Professional (IRP) has been appointed by the NCLT. Some of the creditors have, however, moved to the Hon. National Company Law Appellate Tribunal (NCLAT) against the aforesaid order passed by the NCLT. The order passed by the Hon. NCLT has been stayed and is pending for disposal by the Hon. NCLAT.

The Company has incurred losses for past few years, its liabilities exceeded total assets and its net worth has been fully eroded. Since the Company is under Corporate Insolvency Resolution Process (CIRP) and also in view of the continuing operations of the Company, the financial statements have been prepared on a going concern basis.

By virtue of a decree execution order passed by the Hon. Bombay High court on 31st October 2018, a shipping company, against its claims, has taken symbolic possession of certain unencumbered assets of the Company.

Our opinion is not modified in respect of these matters.

Key Audit Matters

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

Key Audit Matter How our audit addressed the Key Audit Matter
Corporate Insolvency Resolution Process Our audit procedures included the followings:
As stated above under the paragraph of Emphasis of Matter, the Company is under Corporate Insolvency Resolution Process (CIRP) w.e.f. 15th March 2019. The Board of Directors of the Company stands suspended and Interim Resolution Professional (IRP) is appointed by the Hon. National Company Law Tribunal (the NCLT). We tested the operating effectiveness of the process of the reporting system by the management to the IRP since the date of the Company being under CIRP.
Pending the final outcome of CIRP and in the absence of the supervision by the Board of Directors, the managements reporting system to the IRP becomes critical and therefore, is identified as Key Audit Matter. We assessed the relevant disclosures and Management Information
Assessment of litigations and related disclosure of contingent liabilities System Reports being submitted by the management to the IRP on periodic basis.
The Company is subject to large number of various ongoing legal and tax related claims as stated under note no. 33 - Contingent Liabilities. Our audit procedures included the followings:
We understood, assessed and tested the operating effectiveness of key controls surrounding assessment of litigations and discussed with the management the recent developments and the status of the material litigations;
Significant judgment is required to assess such matters to determine the probability of occurrence of material outflow of economic resources and whether a provision should be recognized or a disclosure should be made. The management judgment is also supported with legal advice in certain cases as considered appropriate. We evaluated managements assessment by understanding precedents set in similar cases and assessed the reliability of the managements past estimates and judgments;
As the ultimate outcomes of the matters are uncertain and material in nature, it is considered to be a Key audit Matter. We reviewed the disclosures made by the Company in the financial statements in this regard; We obtained representation letter from the management on the assessment of these matters.
IT systems and controls over financial reporting Our audit procedures included the followings:
The Company is functioning under SAP environment. The system is fully integrated financial accounting and reporting system. This new Enterprise Resource Planning (ERP) system replaces traditional controls. We assessed the complexity of the IT environment and design and operating effectiveness of IT general controls over program development and changes, access to programs and data;
We, therefore, identified IT system and controls over financial reporting as a Key Audit Matter because its financial accounting and reporting systems are reliant on IT systems and IT controls. We also obtained details of SAP governance framework, tested sample critical transactions and interface controls between SAP environment and other auxiliary systems.

Information Other than the Standalone Financial Statements and Auditors Report Thereon

The Companys Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Boards Report including Annexures to Boards Report, Management Discussion and Analysis, Business Responsibility Report, Corporate Governance Report, Shareholders Information, but does not include the financial statements and auditors report thereon. The Boards Report and other information are expected to be made available to us after the date of this auditors report.

Our opinion on the standalone 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 standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

When we read the aforesaid reports and information, if we conclude that there is material misstatement therein, we are required to communicate the matter to those charged with governance.

Managements Responsibility for the Standalone 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 standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS and accounting principles generally accepted in India. 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 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concerns 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 is also responsible for overseeing the Companys financial reporting process.

Auditors Responsibility for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone 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 high level of assurance, but is not a guarantee that 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 standalone 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 misstatements of the standalone 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 the internal control.

• Obtain an understanding of internal financial controls 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 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 standalone 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 standalone financial statements, including the disclosure, and whether the standalone 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.

Other Matters

We did not audit the financial statements of two branches of the Company at Chennai and Kodur included in the standalone financial statements of the Company whose financial statements reflect total assets of 396.39 lacs as at 31st March 2019 and total revenues of 23.34 lacs for the year ended on that date, as considered in the standalone financial statements. The financial statements of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1 As required by the Companies (Auditors Report) Order, 2016 (the Order) issued by the Central Government of India terms of sub-section (11) of section 143 of the Act, we give in the Annexure - A, a statement on the matters specified in clause 3 and 4 of the Order, to the extent applicable.

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 purpose 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 Other Comprehensive Income, Statement of Changes in Equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e) On the basis of written representations received from the directors as on 31st March 2019, and taken on record in the meeting of IRP none of the directors is disqualified as on 31st March 2019, from being appointed as a director in terms section 164(2) of the Act;

f) With respect to the adequacy of internal financial controls over financial reporting of the Company and operating effectiveness of such controls, our separate report in annexure - B may be referred;

g) In our opinion and to the best of our information and according to the explanations given to us, remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of 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, in our opinion and to the best of our 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 standalone financial statements;

ii) The Company did not have any long-term contracts including derivatives contracts for which there were any material foreseeable losses;

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

For P A R K & COMPANY

Chartered Accountants

FRN:116825W

PRASHANT VORA

Partner

Membership No. 034514

Mumbai

May 30, 2019

ANNEXURE - A TO THE INDEPENDENT AUDITORS REPORT

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

On the basis of such checks as we considered appropriate and in terms of information and explanations given to us, we state that:

1. In respect of fixed assets:

a. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b. The fixed assets were physically verified by the management at reasonable intervals in a phased manner in accordance with a programme of physical verification. No material discrepancies were noticed on such verification.

c. The title deeds of immovable properties are held in the name of the Company.

2. The inventories were physically verified by the management at reasonable intervals during the year. No material discrepancies were noticed on such physical verification carried out by the Company.

3. The Company has granted unsecured loans to companies covered in the register maintained under section 189 of the Act. Since no terms and conditions of these loans are stipulated, we cannot offer any comments as to the repayment of principal amount or overdue amounts, if any. The receipts of interest on these loans are regular.

4. The Company has complied with provisions of Section 185 and 186 of the Act in respect of loans, investments, guarantees and securities, to the extent applicable.

5. The Company has not accepted any deposits within the meaning of the provisions of section 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder with regard to the deposits accepted from the public. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal.

6. We have broadly reviewed the cost records maintained by the Company pursuant to Section 148(1) of the Companies Act, 2013 and are of the opinion that, prima facie, the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

7. In respect of statutory and other dues:

a. The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees State Insurance, Income Tax, Cess, Goods & Service Tax and other material statutory dues, to the extent applicable, with the appropriate authorities during the year. There are no undisputed statutory dues outstanding for a period of more than six months from the date they became payable.

b. There are no statutory dues, which have not been deposited on account of dispute except for the followings:

Nature of Dues Statute Rs. in lacs Relevant Year Forum where dispute is pending
Value Added Tax Andhra Pradesh Value Added Tax Act 16.12 2006-07 to 2009-10 The Commercial Tax Officer
Value Added Tax Gujarat Value Added Tax Act 30.57 2009-10 to 2013-14 The Assistant Commissioner of VAT
Service Tax Service Tax Rules 81.38 2008-09, 2009-10 CESTAT- Ahmedabad
Service Tax Service Tax Rules 6.05 2008-09, 2009-10 CESTAT- Ahmedabad
Income Tax Income Tax Act 141.79 2007-08, 2008-09 Gujarat High Court
1,181.92 2010-11 Income Tax Appellate Tribunal

8. The Company has not defaulted in repayment of loans or borrowing to banks except for the dues of certain banks to the extent the amounts stated under note no. 15. The Company has not obtained any borrowings from any financial institutions or government or by way of debentures.

Lender wise details of the defaults are as under:

Bank Balance as on 31st March 2019 Rs. in lacs
HDFC Bank 2,140.00

* excluding interest

9. Terms loans obtained by the Company have been applied for the purpose for which they were obtained. The Company has not raised any money, during the year, by way of public offer (including debt instruments).

10. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company or on the Company by its officers or employees was noticed or reported during the year.

11. Managerial remuneration paid or provided by the Company during the year is in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

12. Since the Company is not a Nidhi Company, the provisions of clause 3 (xii) of the Order are not applicable to the Company.

13. All transactions with the related parties are in compliance with Section 177 and 188 of the Act and the details have been disclosed in the financial statements as required by the applicable accounting standards.

14. The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.

15. The Company has not entered into any non-cash transactions during the year with directors or persons concerned with him.

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

For P A R K & COMPANY Chartered Accountants FRN: 116825W

PRASHANT VORA

Partner

Membership No. 034514

Mumbai May 30, 2019

ANNEXURE - B TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 2(f) under Report on Other Legal and Regulatory Requirements section of our report of even date)

We have audited the internal financial controls over financial reporting of Ashapura Minechem Limited [Company under Corporate Insolvency Resolution Process (CIRP)] (the Company) as of 31st March, 2019 in conjunction with our audit of the standalone 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 (the Guidance Note) issued by the Institute of Chartered Accountants of India (the 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 and the Standards on Auditing, issued by ICAI and prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the 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 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 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 31st March, 2019, 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.

For P A R K & COMPANY Chartered Accountants FRN:116825W

PRASHANT VORA Partner

Membership No. 034514

Mumbai May 30, 2019