Bheema Cements Ltd Auditors Report.

To The Members of Bheema Cements Limited

Report on the Financial Statements

We have audited the accompanying financial statements of Bheema Cements Limited (‘the Company), which comprise the Balance Sheet as at March 31, 2018, 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 a summary of the significant accounting policies and other explanatory information, (herein after referred to as "Ind AS financial statements").

Managements Responsibility for the 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 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 Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other 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 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.

In conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder and the Order issued under Section 143(11) of the Act.

We conducted our audit of the financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Companys preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Companys Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Emphasis:

Note No.25 (2) (a) to the Financial Statements , wherein it is stated that Corporate Insolvency Resolution Process has been Initiated in case of the Company vide an order of the Honble National Company Law Tribunal, Hyderabad ("NCLT") dated 09/07/2018 under the Provisions of the Insolvency and Bankruptcy Code, 2016 ("Code"). Pursuant to the order, the management of the Affairs of the company and powers of the board of directors of the company are now vested with the Resolution Professional, who is appointed by Committee of Creditors and Honble NCLT, Hyderabad.

Accordingly, these Financial Statements have been prepared by the Management of the Company and Considered by Resolution Professional.

Basis for Qualified Opinion:

We draw attention to

a) Note Nos. 25 (2) which explains the circumstances that lead to accumulated losses and the reasons based on which the accounts have been prepared on Going Concern Basis.

The lenders have initiated CIR Proceeding against the company on account of default in payment of their dues under the Insolvency and Bankruptcy Code, 2016 ("Code"), which was admitted by the The Honble National Company Law Tribunal, Hyderabad ("NCLT"). The corporate insolvency resolution process shall be completed within an initial period of One hundred and eighty days, subject to permitted grace period if any required thereafter, falling which, the company will be liquidated. There is a material uncertainty as to ability of the company to continue as going concern, which would depend upon future outcome of the CIR Proceeding.

Notwithstanding the fact that the company has not been operating since 2014, has been incurring losses and has not been able to service its debts including interests during the current year as well as during the previous years, companys negative net worth, the financial statements of the Company have been prepared on Going Concern Basis. In our opinion, this will have an effect on the Going Concern Status of the Company.

b) Note No.25 (2) (b) which explains the role of Resolution Professional in admitting the claims as per the insolvency code, the consequential impact of which on their carrying amounts is yet to be ascertained/determined and hence, has not been considered in the preparation of the Financial Statements.

c) Note No.25 (2) (c) which explains the role of Resolution Professional in determining the realizable value of the Company Assets, the consequential impact of which on their carrying costs is yet to be ascertained/determined and hence, has not been considered in the preparation of the Financial Statements.

d) Note No. 25 3 (a) which explains the circumstances leading to non-provision of the interest on cumulative borrowings (from banks including those assigned to ARC) comprising of term loans and working capital dues. We are of the opinion that the interest on the cumulative bank borrowings should have been provided on accrual basis of accounting till the time a formal communication is received from the lender banks / ARC (the assignor), fixing the final liability agreed for settlement. Based on the information provided to us, the amount of such interest not provided in the accounts works out to Rs.5779.16 Lakhs for the current year (previous year Rs.5,187.53 Lakhs).

We are also of the opinion that the Company should have provided for the interest on the loans assigned to the ARC from the cut-off date till 31st March 2018, as per the terms and conditions provided in the sanction letter issued by ARC. The impact of non-provision of interest on the loans assigned to the ARC (based on the sanction letter issued by ARC) is that the loss for the year is understated by the above referred amount and the Liabilities are lower to that extent.

Based on information provided and explanations offered to us, such liabilities should have been accounted at Rs.46,145.69 lakhs instead of Rs.20,758.09 lakhs. As a result, the loss of the company is understated by Rs.25,387.60 Lakhs (previous year Rs.19,608.53 Lakhs) and the liabilities have been understated on this account by 25,387.60 Lakhs (previous year Rs.19,608.53 Lakhs).

e) Note No.25 3 (b) which explains the circumstances in which Dividend on 6% CRPS Capital of Company has not been provided for the current financial year and the previous financial years. Consequent to transition to Ind AS and its applicability in preparation and presentation of financial statements, Company is obligated under Ind AS 32 to treat any fixed dividend payable on mandatorily redeemable preference shares as a liability. However, the Company has not carried out this treatment. The consequential impact of its non recognition in books of account is that the liability and corresponding loss stands understated for the year by Rs.74.82 lacs and cumulatively by Rs.472.78 lacs.

f) Note No.25 (6) (c) which explains the circumstances in which the Deferred Tax Liability has not been provided for the current financial year and the previous financial year. In the absence of adequate information we are not able to quantify the effect of such non provision for the current year.

g) Note No.25 (14) regarding non-provision of gratuity and provision for leave encashment, the impact of which is not ascertainable in the absence of adequate information.

h) Note No.25 (23) which explains that the balances of Sundry Debtors, Sundry Creditors, Loans including deposits and advances are subject to confirmation from and reconciliation with the relevant parties as on the date of balance sheet date. We are not in a position to certify the amounts at which such balances are receivable and payable.

i) While framing our qualified opinion as above, we were unable to ascertain/determine the consequential impact of outcome of CIR Proceedings on the following aspects/elements of Financial Statements viz.

1. Recognition of and Provision for Impairment in the value of assets (fixed assets, intangibles, other non-current assets and financial assets), since determination of fair values/liquidation values by approved/register valuers is under process.

2. Recognition of Deferred Tax Assets (DTA), in view of the current non-availability of estimates regarding future realizability of benefits from unabsorbed losses and depreciation and consequent recognition or otherwise of Deferred Tax Assets (DTA).

3. Recognition of claims of operational and financial creditors, since their acceptance and determination of carrying amounts by Resolution Professional is still under process.

4. Accounting for reductions in liabilities (comprising of principle and interest portions) of lenders, on account of impending haircuts and their consequential write backs by way of credits to profit and loss statement.

As a result of the matters specified as above, we are unable to determine whether any adjustments might have been found necessary in respect of recorded or unrecorded assets and liabilities in Balance Sheet and the corresponding elements making up The Statement of Profit and Loss, and Cash Flow Statement.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, consequent to the possible effect of the matters described in the basis for qualified opinion, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2018, and its loss, total comprehensive income, the changes in equity and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit, we report that, Except for the matters as stated in ‘basis of qualification paragraph:

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 other comprehensive income, Statement of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the books of account.

d. In our opinion, the aforesaid financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act. e. On the basis of the written representations received from the directors of the Company as on March 31, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018 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 and the operating effectiveness of such controls, refer to our separate report in ‘Annexure

A. Our report expresses a qualified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting.

g. 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 as referred to in Note 25 (24) to the financial statements;

ii. Based on the information provided to us, The Company has not entered into any long-term contracts including derivative contracts, and accordingly, the requirement of making provision under the applicable law or accounting standards, for material foreseeable losses, is not applicable.

iii. No amount is outstanding/pending and required to be transferred to the Investor Education and Protection Fund by the Company, as on the date of the financial statements.

2.As required by the Companies (Auditors Report) Order, 2016 (‘the Order) issued by the Central Government in terms of Section 143(11) of the Act, we give in ‘Annexure B a statement on the matters specified in paragraphs 3 and 4 of the Order.

For Sastri & Shah

Chartered Accountants FRN: 003642S

Sd/-

(C. Pavan Kumar)

Managing Partner

M.N0.205896

Place: Hyderabad

Date: 05/09/2018

Annexure A to the Independent Auditors Report

(Referred to in paragraph 1(f) under ‘Report on Other Legal and Regulatory Requirements section of our report to the members of Bheema Cements Limited of even date)

Report on the Internal Financial Controls Over Financial Reporting 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 Bheema Cements Limited (‘the Company) as of March 31, 2018 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Board of Directors/Management of the Company 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, 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 internal financial controls over financial reporting of the Company 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) issued by the

Institute of Chartered Accountants of India and the Standards on Auditing 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 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.

Sd/-
(C. Pavan Kumar)
Managing Partner
M.N0.205896
Place: Hyderabad
Date: 05/09/2018

Annexure B to the Independent Auditors Report

(Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements section of our report to the members of Bheema Cements Limited of even date)

On the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of our audit, we report that:

(i) In respect of the Companys fixed assets:

a) Based on the information provided explanations offered to us, the Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets on the basis of available information

b) As explained to us, the physical verification of fixed assets could not be carried out during the year, as the factory and operations of the Company have been suspended since March 2014. Based on the information provided and explanations offered to us, the Company has maintained proper records of fixed assets and we are not in a position to comment whether any material discrepancies noticed as the verification could not be taken up during the year. We have been explained that the physical verification will be taken up afresh after resumption of operations and thereupon the effect, if needed, for any material discrepancies will be given in the books of account;

c) According to the information provided to us and explanations offered to us, as the title deeds of the immovable properties are in the custody of the ARC (JM Financial Asset Reconstruction Company Private Limited) on the takeover of the dues from the Banks and we are unable to verify the same, as the same could not be made available to us.

(ii) As explained to us, physical verification of inventories could not be carried out during the year, as the factory and operations of the company have been suspended since March, 2014. Based on the information provided and explanations offered to us, the Company has maintained proper records of inventories and we are not in a position to comment whether any material discrepancies noticed as the verification could not be taken up during the year. We have been explained that the physical verification will be taken up afresh after resumption of operations and thereupon the effect, if needed, for any material discrepancies will be given in the books of account;

(iii) Based on the information and explanations provided to us, the company has not granted unsecured loans, to the companies, firms, Limited Liability Partnerships or other parties covered in the Register maintained u/s Sec. 189 of the Companies Act, 2013 and hence clauses 3(iii) (a) (b) and (c) are not applicable to the Company for the year.

(iv) Based on the information and explanations provided to us, the Company has not granted / taken loans, investments, guarantees, nor offered security / taken security from parties covered under Section 185 and 186 of the Companies Act, 2013 and hence clauses 3(iv) is not applicable to the Company for the year.

(v) Based on the information and explanations provided to us, the Company has not accepted deposits from the public during the year and hence, in our opinion, clause 3(v) of the Order is not applicable to the Company for the year.

(vi) The Central Government has prescribed the maintenance of Cost Records under the Companies (Cost Records and Audit) Rules, 2014 under Section148 (1)(d) of the Companies Act, 2013 and the since the operations of the company have been suspended for more than two years, we are unable to verify whether the cost records as prescribed have been have been maintained by the Company.

(vii) In respect of statutory dues:

(a) According to the records of the company, undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, VAT, Wealth Tax, Service Tax, Duty of Customs, Duty of Excise and other statutory dues have not been regularly deposited with the appropriate authorities. According to the information provided and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as of March 31, 2018 for a period of more than six months from the date of they becoming payable except to the extent shown below:

Sl No Name of the Statute Nature of Dues Amount - Rs Period to which it relates
1 Central Excise Act Excise Duty 2,60,20,374 March 2013 and April 2013
2 Central Excise Act Service Tax 90,00,493 From 1.4.2013 onwards
3 Income Tax Act TDS 21,655,455 1/4/2013 to 31/3/2018
4 EPF Act Provident Fund 25,005,831 Oct-13 to 31-03-2018
5 Professional Tax Act Professional Tax 1,055,150 1/12/2013 to 31/3/2018
6 ESI Act ESI 2,268,160 November 2013 to March 2018
7 Mines & Mineral Development Act Royalty on Limestone 4,63,12,194 01/08/2012 to 31/3/2018
8 APVAT Act VAT 15,93,09,830 01/08/2012 to 31/3/2018
9 Central Sales Tax Act CST 2,37,10,534 01/08/2012 to 31/3/2018
10 Karnataka VAT Act VAT 2,68,925 01/08/2012 to 31/3/2018
11 Maharashtra VAT Act VAT 14,77,845 01/08/2012 to 31/3/2018
12 Orissa VAT Act VAT 1,17,487 01/08/2012 to 31/3/2018

(b) Details of dues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Duty of Customs, Duty of Excise, VAT which have not been deposited as on 31st March 2018 on account of disputes are as given below:

Sl No Name of the Statute Nature of Dues Amount Rs Period to which it relates Forum where the dispute is pending
1 Central Excise Act Excise Duty 4,12,88,113/- 04/06 to 9/10 CESTAT Bangalore
2 Customs Act Customs Duty 50,48,700/- 17-3-12 to 28-02-13 Commissioner, C&CE Guntur
3 Income Tax Act Income Tax 31,56,000 AY 1994-95 Honble High Court of Andhra Pradesh

(viii) Based on the information provided and explanation given to us, we are of the opinion that the Company has defaulted in repayment of dues to Banks or Financial Institutions/ARC, as per details given below:

Name of the Bank Total amounts Payable as on 31.03.2018 Period
Rs Lacs
Cumulative outstandings payable on Demand
JMFARC - ICICI Bank 5,543.53
JMFARC - Axis Bank 7,354.31
JMFARC Karnataka Bank 9,150.80
JMFARC - State Bank of Hyderabad 8,547.20 Up to 31.03.2018
JMFARC - United Bank of India 8,455.58
JMFARC - Oriental Bank of Commerce 2,081.91
Corporation Bank 5,012.36
Grand Total 46,145.69

(ix) Based on the information provided and explanations offered to us, the Company has not raised monies by way of Initial Public Officer or Further Public Offer, Including debt instruments, during the current year, and accordingly clause 3(ix) of the Order is not applicable to the Company for the year.

(x) Based on the information provided and explanations offered to us, in our opinion, no material fraud on or by the Company by its Officers or employees has been noticed or reported during the year.

(xi) Based on the information provided and explanations offered to us, in our opinion the Company has provided for managerial remuneration in accordance with provisions of Section 197 of the Companies Act, 2013 read with Schedule V of the Companies Act, 2013.

(xii) Based on the information provided and explanations offered to us,the Company is not Nidhi Company in terms of the Nidhi Rules, 2014 and hence clause 3(xii) of the Order is not applicable to the Company for the year.

(xiii) Based on the information provided and explanations offered to us, the transactions with related parties are in compliance of Section 177 and 188 of the Companies Act, 2013 wherever applicable and the disclosures required under the relevant Accounting Standards have been made in the Financial Statements.

(xiv) Based on the information provided and explanations offered to us, the Company has not made any preferential allotment / private placement of shares or fully / partly convertible debentures during the year under review and hence clause 3(xiv) of the Order is not applicable to the Company for the year.

(xv) Based on the information provided and explanations offered to us, the Company has not entered into any non-cash transactions with directors or persons connected with them during the period under review and hence clause No. 3(xv) of the Order is not applicable to the Company for the year.

(xvi) Based on the information provided and explanations offered to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934 and hence clause 3 (xvi) of the Order is not applicable to the Company for the year.

For Sastri & Shah
Chartered Accountants
FRN: 003642S
Sd/-
(C. Pavan Kumar)
Managing Partner
M.N0.205896
Place: Hyderabad
Date: 05/09/2018