BS Ltd Auditor Reports

To the Members of M/s BS LIMITED

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying Standalone Ind AS Financial Statements of M/s BS 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 Cash Flows and the statement of changes in equity for the year then ended and a summary of significant accounting policies and other explanatory information.

Managements Responsibility for the Standalone Ind AS Financial Statements

The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (‘the act) with respect to the preparation of these standalone Ind AS Financial Statements that give a true and fair view of the state of affairs, 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 relevant rules issued there under.

This responsibility 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; design, implementation and maintenance of adequate internal financial controls, that are operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS 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 Standalone Ind AS Financial Statements based on 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 there under.

We conducted our audit 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 Standalone Ind AS Financial Statements are free from material misstatement. doubt on An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Standalone Ind AS Financial Statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the Standalone Ind AS 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 Standalone Ind AS 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 accounting policies used and the reasonableness of the accounting estimates made by the Companys Directors, as well as evaluating the overall presentation of the Standalone Ind AS Financial Statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Ind AS Financial Statements:

Basis for Qualified Opinion:

a) The Company has defaulted in repayment of dues to Banks/Financial Institutions during the current financial year. All loans outstanding were classified as NPA by the banks during the preceding financial year. Provision for interest (excluding penal interest) amounting to Rs. 169.67 Cr. and Rs. 28.60 Cr. on its Working Capital Loan and Term Loan respectively has not been made in the books by the Company, as those Loan Accounts were classified as NPA by the Lending Banks and Financial Institutions. The loss of the Company has been understated by Rs.198.27 Cr. in view of non provision of Interest amount. If the accrued interest on outstanding bank facilities debited to P&L account then the company will incur loss of Rs. 997.98 Cr. (Refer Note No.29 & 30).

b) The Company is not regular in payment of undisputed statutory dues during the current financial year amounting to Rs. 10,20,44,204 which includes TDS, TCS, Dividend Distribution Tax, Service Tax, Provident Fund, Employees State Insurance and Professional Tax.

c) Since the Company has not obtained any technical/ market/commercial evaluation for the inventory, we are unable to comment on the realizable value of the same, which may be lower than the amount at which it has been reflected in the balance sheet.

d) In absence of technical and costing evaluation of current and noncurrent assets, impact of impairments, if any, on their economic value, we cant comment on the realizable value of same.

e) The trade receivables could not be verified as confirmation of balances have not been received. The company has written off trade receivables amounting to Rs. 694.96 Crores in the current financial year. The realisability of remaining trade receivables amounting to Rs.500.84 Crores is in doubt and company has not made any provision for Bad and Doubtful debts in respect of these receivables.

f) This situation indicates the existence of a material the uncertainty that may cast significant Companys ability to meet its financial obligation including repayment of various loans and unpaid interest and the ability to fund various obligations pertaining to operations including unpaid/overdue creditors, for ensuring/ commencing normal operations.

g) The financial statements for the FY 2015-16 were not adopted by the shareholders at the AGM conducted on 29-12-2017. The companys ongoing petition u/s 131 of the Companies Act, 2013 and rules prescribed there under for the Financial Years 2014-15 and 2015-16 for getting approval for revision of its financial Statements to write-off outstanding trade receivables and Loan & Advances given by company over 2 Financial Years aggregating to 214.16 Crores i.e. 110.55 Crores in F.Y. 2014-15 and remaining balance of Rs.103.61 Crores in F.Y. 2015-16 had been dismissed by the Honorable NCLT, Hyderabad bench vide order dated 27.02.2018. Aggrieved by the above decision of NCLT, the company has filed an appeal before Honble NCLAT on 19-05-2018 which is pending as on date. (Refer note No. 46)

h) Attention is invited to note No.52, company has given bank guarantees to customers for the contracts entered during preceding financial years. The projects were abandoned midway due to some technical reasons and during the current financial year, the customers have invoked those bank guarantees. This made the company to claim the respective invoked amounts from the customers.

i) Attention is invited to note no.48, which states that the company did not file the returns of Income Tax for the assessment years of 2015-16 and 2016-17 and self-assessment tax amounting to Rs. 26,79,98,355 and Rs. 35,35,45,760/- respectively were not paid and such status of payment will not hold good afterwards as due to account of application for revision of financials for these two years (F.Y.2014-15 and F.Y.2015-16) by the company under Sec. 131 of the Companies Act 2013 and which is pending for disposal with NCLAT.

j) The companys net worth has been eroded on account of losses of the company in current financial year and immediately preceding financial year and the Net worth of the company is negative. The current liabilities of the company exceeded its current assets as at the balance sheet date by Rs. 7,17,64,25,721 /-. It would cast doubt on the Companys ability to continue as a going concern basis. The financials has not been with such adjustments for the F Y- 2017-18.

Qualified Opinion:

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 above, the aforesaid Standalone Ind AS Financial Statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, of the financial position of the Company as at 31st March 2018, and its financial performance including other comprehensive income, its cash flows and changes in equity for the year ended on that date.

Emphasis of Matters:

a) Attention is invited to note no.31, that SBI along with other banks which are in consortium for granting loans to the company has issued notices on 14-09-2017 & 20-09-2017 under section 3(4), Rule 8(1), 8(2) of SARFAESI Act advising to take symbolic possession and later issued a notice on 07.12.2017 & 29.12.2017 under Rule 8(6) of the Security Interest (Enforcement) Rules under the SARFAESI Act advising for the proposed sale of the said properties, which are mortgaged to banks, by public E-Auction.

b) Attention is invited to note no.32, regarding the application made by State Bank of India and 7 other banks with Debts Recovery Tribunal (DRT) on 13.07.2017 for recovery of outstanding dues to the banks from BS Limited which have become irregular and overdue. The Honble DRT has passed an interim order on 21.07.2017, mentioning to the company that they should file the objections/Counters against the application as on 08-08-2017.

c) Attention is invited to note no.33, that the company and its promoters have been declared as "Willful Defaulter" by IFCI Limited, one of the term lenders, as per guidelines of Reserve Bank of Indias Circular dated 1.7.2015.

d) Attention is invited to note no.34, regarding the show cause notice received by the company from State Bank of India, SAM II Branch, Hyderabad, vide their letter No. SAMB/HYD/KSJ/1871 dated 5.3.2018 seeking companys replies as to why the company should not be declared as a willful defaulter.

e) Attention is invited to note No.45, which indicates with respect to the realization of the Outstanding Trade Receivables and the Advances given by the Company which have been outstanding for more than 365 days as on 31-03-2018 and that the financial statements of the Company did not include any adjustment relating to the certainty of the recovery of such balances to the extent of Rs. 232.33 Crores.

f) Attention is invited to note no.47, regarding application made by State Bank of India SAM-II Branch, with National Company Law Tribunal (NCLT) Hyderabad for resolution of companys bank accounts with State Bank of India and its associate banks (since merged with SBI w.e.f. 1.4.2017).

g) Attention is invited to note no.49, regarding suspension of trading of companys securities in both Bombay Stock Exchange & National Stock Exchange for Non-Filing of annual reports with Stock Exchanges for two years i.e., F.Y. 2015-16 & F.Y.2016-17. The SEBI has suspended trading of Companys securities w.e.f 11.05.2018.

h) Further, we draw attention on Note No. 51, where in the management mentioned that one of the major manufacturing unit of the company has not been in its operations from October, 2017.

Our opinion is not qualified in respect of the above matters

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 in terms of sub-section (11) of section 143 of the Act, we give in the 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 further 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 appears from our examination of those books;

c) the Balance Sheet, Statement of Profitand Loss including Other Comprehensive Income, the Statement of Cash Flows and the statement of changes in equity dealt with by this Report are in agreement with the books of account;

d) in our opinion, the aforesaid Standalone Ind AS Financial Statements comply with the applicable Accounting Standards specified under Section 133 of the Act, read with relevant rule issued there under.

e) On the basis of written representations received from the directors as on March 31, 2018, and 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 B; and

g) With respect to 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 explanations given to us:

i. The Company has pending litigations which would impact its financial position disclosed in notes to financial statements.

ii. The Company does not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There are no amounts which were required to be transferred to the Investor Education and Protection Fund by the company.

	For P. Murali & Co.,
	Chartered Accountants
	Firm Registration No: 007257S
	A Krishna Rao
Place: Hyderabad	Partner
Date : 30/05/2018	M.No. 020085

ANNEXURE A TO THE INDEPENDENT AUDITORS REPORT

Annexure referred to in Independent Auditors Report to the Members of M/s BS LIMITED on the Standalone Ind AS Financial Statements for the year ended 31st March 2018, we report that:

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

(b) As explained to us, fixed assets have been physically verified by the management at regular intervals; as informed to us no material discrepancies were noticed on such verification. In our opinion, the frequency verification is reasonable.

(c) According to the information and explanations given to us and on the basis of our examination of records of the Company, the title deeds of immovable properties are held in the name of the Company.

ii. (a) The Inventory has been physically verified during the year by the Management and in our opinion, the frequency of verification is not reasonable.

(b) In our opinion, the procedures of the physical verification of inventory followed by the Management are not adequate in relation to the size of the Company and the nature of its business.

iii. The Company has not granted any loans, secured or unsecured, to companies, firms, and Limited Liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Therefore, the provisions of Clause 3(iii), (iii)(a), (iii) (b) and (iii)(c) of the said order are not applicable to the company.

iv. The Company has not granted any loans or made any Investments, or provided any guarantee or security to the parties, covered under section 185 and 186 of the Act. Therefore, the provisions of clause 3(iv) of the said order are not applicable to the company.

v. The Company has not accepted any deposits from the public covered under Section 73 to 76 of the Companies Act, 2013 and rules framed there under to the extent notified.

vi. We have broadly verified the books of accounts and records maintained by the company in respect of products where, pursuant to the rules made by the central government of India, the maintenance of cost records has been specified under the sub-section (1) of section 148 of the Companies Act 2013, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made detailed examinations of the records with a view to determine whether they are accurate or complete.

vii. (a) According to the information and explanations given to us and based on the records of the company examined by us, the company is not regular in depositing the undisputed statutory dues except in few cases, including Provident Fund, Employees State Insurance, Income Tax, Custom Duty, Excise Duty and other material statutory dues, as applicable, with the appropriate authorities in India ;

(b) There were undisputed amounts payable amounting Rs. 9,92,61,855 in respect of Provident Fund, Service Tax, TDS, Dividend Distribution Tax and Professional Tax, in arrears as at 31st March 2018 for a period of more than 6 months from the date they became payable.

(c) According to the information and explanations given to us and based on the records of the company examined by us, there are no dues of Income Tax, Wealth Tax, Sales Tax, Customs Duty and Excise Duty which have not been deposited on account of any disputes. But there is a disputed liability of Service Tax. The details are as follows:

Particulars	Amount Rs.	Forum Where it is pending
Service Tax	156,283,794	CBEC Commissoinarate II, Hyderabad
Income Tax	850,622,530	Income Tax Appellate Tribunal, Hyderabad.

viii. The company has defaulted in the repayment of loans taken from banks and financial institutions during the current financial year and no interest provision was made by the company on working capital loan amounting to Rs. 169.67 Crores and term loan amounting to Rs.28.60 Crores. These Loans have become NPA during the preceding financial year.

ix. The Company has not raised any moneys by way of initial public officer, further public offer (including debt instruments) and term loans during the year. Accordingly, the provisions of this clause are not applicable to the Company.

x. According to the information and explanations given to us, no material fraud by the company or on the company by its officers or employees has been noticed or reported during the course of our Audit.

xi. The Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandate by the provisions of section 197 read with schedule V to the Companies Act 2013.

xii. As the Company is not a Nidhi Company and the Nidhi Rules, 2014 are not applicable to it; the Provisions of clause 3(xii) of the order are not applicable to the company.

xiii. The Company has entered into transactions with related parties in compliance with the provisions of section 188 of the Act. The details of such related party transactions have been disclosed in the Ind AS Financial Statements as required under Indian Accounting standard (Ind AS) 24, related party disclosures specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014.

xiv. The Company has not made any preferential allotment of private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, the provisions of clause 3(xiv) of the Order are not applicable to the Company.

xv. The Company has not entered into non-cash transactions with its directors or persons connected with him. Accordingly, the provisions of clause 3(xv) of the Order are not applicable to the Company.

xvi. The Company is not required to be registered under section 45-IA of The Reserve Bank of India Act 1934. Accordingly, the provisions of clause 3(xvi) of the order are not applicable to the Company.

	For P. Murali & Co.,
	Chartered Accountants
	Firm Registration No: 007257S
	A Krishna Rao
Place: Hyderabad	Partner
Date : 30/05/2018	M.No. 020085

Report on the Internal Financial Controls over Financial Reporting under clause (i) of the Sub-section 3 of the Section 143 of the Companies Act, 2013 (‘The Act)

We have audited the internal financial controls over financial reporting of M/s BS LIMITED (‘the company) as of 31st march 2018 in conjunction with our audit of IND AS Financial Statements of the company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Companys management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

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 deemed to be prescribed under section 143(10) of the Act 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 ICAI. These standards and guidance note require that we comply with ethical requirements and plan and performed 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 risk of material misstatement of the IND AS 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 and the companys internal financial control system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Companys internal financialcontrol 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 these policies and procedures that (1) pertain to the maintenance of records that, in reasonable detailed, 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 principles, and that receipts and expenditures are being made only in accordance with authorization 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 Limitation of Internal Financial Controls over Financial Reporting

Because of the inherent limitation 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 does not have adequate internal financial controls system with respect to inventory over financial reporting and such internal financial controls over financial reporting were not operating effectively as at March 31st, 2018, 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 P. Murali & Co.,
	Chartered Accountants
	Firm Registration No: 007257S
	A Krishna Rao
Place: Hyderabad	Partner
Date : 30/05/2018	M.No. 020085