Consolidated Construction Consortium Ltd Directors Report.
To The Members of Consolidated Construction Consortium Ltd.
Report on the Audit of the Standalone Financial Statements
Qualified Opinion
We have audited the accompanying standalone financial statements of Consolidated Construction Consortium Limited("the Company"), which comprise the Balance Sheet as at March 31, 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 on that date, and a summary of significant accounting policies and other explanatory information (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 possible effects of the matter described in the Basis for Qualified Opinion section of our report, 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 other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, the loss and total comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
Trade receivables include a sum of र 48,333.56 lakhs which are under arbitration, which according to the Management will be awarded fully in Companys favor on the basis of the contractual tenability, progress of arbitration and legal advice and hence no provision for impairment loss has been considered necessary by the management as disclosed in Note 8(b) to the standalone financial statements. However, considering the significant time involved in the arbitration process and delays in the realization of amounts in the recent years for the claims awarded in favor of the Company we are unable to comment on the carrying value of the above referred claims and the shortfall, if any, on the amount that would be ultimately realized by the Company.
We conducted our auditof the standalone financial statements in accordance with the Standards on Auditing 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 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 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 qualified opinion on the standalone financial statements.
Material Uncertainty Related to Going Concern
We draw your attention to Note 46 to the standalone financial statements, which indicate that the company has negative net worth as at March 31, 2019. Further, it has incurred net cash losses for the year then ended and in the immediately preceding financial year and the net working capital of the Company continues to be negative. Further, the Company has continuously defaulted in repayment of borrowings including interest from Banks and financial institutions. The Company has obligations pertaining to operations including unpaid creditors and statutory dues, these matters require the Company to generate additional cash flows to fund the operations as well as other statutory obligations. These indicate the existence of a material uncertainty that may cast significant doubt on the Companys ability to continue as a going concern. However, the Company is looking out for potential investors to raise cash by selling the non-core assets held by its subsidiaries or by issuing debt instruments and has proposed debt settlement plan with the bankers and further the Company expects improvement in the overall level of Operations. In view thereof and expecting favorable market conditions in future, the Audited Standalone Financial Statements have been prepared on a "going concern basis".
Our Report is not modified in respect of this matter.
Emphasis of Matters
a. Note 18.4 of the standalone financial statements regarding approval of restructuring package under "Scheme for Sustainable Structuring of Stressed Assets" (S4A) by the secured lenders. The Company has not been able to generate sufficient cash flows to service the loan repayments/interest payments which resulted into Companys borrowings from Secured lenders becoming "Non-Performing Assets" (NPAs). Such defaults entitle the lenders to revoke the S4A package. Upon exit, lenders are entitled to exercise rights and remedies available under the original loan agreements. In the absence of any communication from these lenders and on the basis of an ongoing discussion with lenders, the Company has not provided for additional interest from S4A cutoff date till 31March, 2019 which arises on account of differences between interest rate as approved under S4A package and interest rate approved as per the original sanction letter and penal interest on overdue amount of interest and instalment. The additional interest and penal interest if any could not be quantified as on date.
b. Note 18.5of the standalone financial statements regarding default committed by the Company in respect of repayment of Optionally Convertible Debentures and restructured term loans and working capital loans including interest as per the terms of approved S4A scheme.
c. Note 47of the standalone financial statements regarding outstanding balances of Trade Receivables including retention, Trade Payables, Other Deposits, Advances and Other Current Assets/Liabilities which are subject to external confirmation and reconciliation, if any. However, in the opinion of the management, adjustment, if any, will not be material. In the opinion of the Board, the value on realisation of Trade Receivables, Loans and Advances, and Other Current Assets, in the ordinary course of the business would not be less than the amount at which they are stated in the Balance Sheet and the provision for all known and determined liabilities is adequate and not in excess of the amount reasonably required.
Our Report is not modified in respect of the above 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 forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the ‘Basis for Qualified Opinion paragraph and‘Material Uncertainty Related to Going Concern paragraph, we have determined the matter described below to be the key audit matters to be communicated in our report.
| S No Key Audit Matter | How our audit addressed the key audit matter |
| 1 Revenue recognition using the percentage-of-completionmethod and Appropriateness of disclosures of revenue and other related balances in view of the Adoption of Ind AS 115 During the year, the Company recognized revenue from its construction contracts ("construction projects") based on the percentage-of-completion("POC") method amounting to र 45,604.66 lakhs. | Our procedures included: |
| • Testing of the design and implementation of controls involved for the determination of the estimates used as well as their operating effectiveness | |
| • Verification of Companys year-end internal construction progress reports to validate the percentage of construction work completed and compared with the latest certificates issued by the Project owners/project management consultants, as the case may be. | |
| The POC on construction projects was measured by reference to the surveys of work performed (output method) | |
| We focused on this area because of the significant management judgment required in: | • Testing a sample of contracts for appropriate identification of performance obligations |
| • the estimation of the physical proportion of the contract work completed for the contracts; and | • For the sample selected, reviewing for change orders and the management assessment on the estimation of the revenue arising from the variations to the original contract. |
| • the estimation of revenue for the work done on the contracts with customers that could arise from variations to original contract terms, and claims. Variable consideration is recognized when the recovery of such consideration is highly probable. | • Evaluated the design of internal controls relating to collation of data required for making disclosures as per Ind AS 115 |
| Further, Ind AS 115 mandates robust disclosures to be made in the financial statements which involves collation of information in respect of disaggregation of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. | • Evaluated the appropriateness of the disclosures provided under the new revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures. |
| 2 Recoverability assessment of trade receivables and contract assets | Our procedures included: |
| The Company has net trade receivables of र 10,667.18 lakhs (excluding receivables under arbitration, after providing for expected credit loss of र11,189.51)overdue for more than one year and contract assets in the nature of claims made to clients amounting to र 4,276.41 lakhs,(afterproviding for expected credit loss of र 21.49 lakhs) as at March 31, 2019, as disclosed in Note 8(a) and 8(c) to the standalone financial statements. | • Evaluating the ageing report and breakdown of trade receivables and contract assets, reviewing their history of repayment and the managements assessment on the financial capability of the debtors; |
| Trade receivables of the Company comprise mainly receivables in relation to the construction contracts executed by the company. | • Assessed the recoverability of the unsettled receivables on a sample basis through our evaluation of managements assessment with reference to the historical payment pattern of customers, publicly available information and latest correspondence with customers and to consider if any additional provision should be made; |
| The claims were based on the terms and conditions implicit in the construction contracts in respect of closed/suspended/under construction projects. These claims are mainly in respect of cost over run arising due to suspension of work, client caused delays, changes in the scope of work, deviation in design and other factors for which company is at various stages of negotiation/discussion with the clients. | • Evaluating the management assessment on the measurement of ECL(default rate) based on the historical provision rates which are then adjusted to reflect the relevant information about the current conditions and forecasts of future economic conditions. |
| The increasing challenges in the economy and operating environment in the real estate industry during the year have increased the risks of default on receivables from the Companys customers and hence the Company is exposed to potential risk of financial loss when the customers fail to meet their contractual obligations in accordance with the requirements of the agreements. | |
| The company recognizes impairment loss on trade receivables using expected credit loss (ECL) model, which involves use of a provision matrix constructed on the basis of historical credit loss experience as permitted under Ind AS 109. For the purpose of impairment assessment, significant judgments are made and estimates are used by the management to identify the rates to be adopted for each category of overdue amounts. | |
| 3 Evaluation of uncertain tax positions | Our procedures include: |
| The Company has material uncertain tax positions including matters under dispute (refer Note 44.5 (d) to the Standalone Financial Statements) which involves significant judgment to determine the possible outcome of these disputes. | • Obtained understanding of key uncertain tax positions; and |
| • Reviewed the external legal opinions for key uncertain tax positions; | |
| • Discussed with appropriate senior management and evaluated managements underlying key assumptions in estimating the tax provisions; and | |
| • Assessed managements estimate of the possible outcome of the disputed cases. |
Information Other than the Standalone Financial Statements and Auditors Report Thereon
The Companys management and Board of Directors are responsible for the other information. The other information comprises the information included in the Companys annual report, but does not include the standalone financial statements and our auditors report thereon.
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 and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
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 and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with Ind AS 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 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 statement 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 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 standalone financial reporting process.
Auditors Responsibilities 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 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 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 misstatement 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 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 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 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 disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
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 standalone 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, 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 Paragraph 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 Other Comprehensive Income, the Statement of Change in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the relevant books of account;
(d) in our opinion, the aforesaid Ind AS financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act;
(e) on the basis of the written representations received from the directors as on 31 March 2019 taken on record by the Board of Directors and taking into account the opinion given by the legal advisors after considering the on-going discussions with the lenders for a compromise settlement, are of the opinion that there has been no default committed in spirit (in respect of redemption of debentures) by the Company and further no order has been received by the Company under Section 71(10) of the Companies Act, 2013, we report that none of the directors aredisqualified as on 31 March 2019 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 the other matters to be included in the Auditors Report in accordance with the requirements of section 197(16) of the Act, as amended:
According to the information and explanations given to us and based on the examination of the records of the Company, no managerial remuneration is paid / provided by the Company.
(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 Note44.3 to the standalone financial statements;
ii. The Company did not have any material foreseeable losses on any long-term contracts including derivative contracts; and
iii. There was no delay in transferring the amounts that were due to be transferred, to the Investor Education and Protection Fund by the Company during the year ended March 31, 2019.
For Sundar Srini & Sridhar
Chartered Accountants
Firm Registration Number : 004201S
S Sridhar
Partner
Membership Number : 025504
Place : Chennai
Date: May 29, 2019
Annexure - A to the Independent Auditors Report
The Annexure referred to in Independent Auditors Report to the members of the Company on the Ind AS financial statements for the year ended 31 March 2019, we report that:
(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.
(b) The fixed assets of the Company have been physically verified by the management at periodic intervals, which in our opinion is reasonable. According to the information and explanations given to us, no material discrepancies have been noticed on such verification.
(c) According to the information and explanations given to us, the records examined by us and based on the examination of the conveyance deeds provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings which are freehold, are held in the name of the Company as at the balance sheet date.
(ii) The inventory has been physically verified by the management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable. As per the information and explanations given to us, no material discrepancies were noticed on physical verification of inventory.
(iii) According to the information and explanations give to us and on the basis of our examination of records, the Company has granted unsecured interest free loans, to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. In our opinion, the terms and conditions under which the loans were granted to wholly owned subsidiary and fellow subsidiary were not prejudicial to the interest of the Company. In the absence of specific schedule for repayment, we could not comment on the regularity of repayment of loan.
(iv) The Company has not granted any loans or provided any guarantees or security to the parties covered under section 185 of the Act. The Company, being engaged in the business of providing infrastructural facilities, Section 186 of the Act is not applicable in respect of investments made, loans given / guarantees provided to other body corporate to by virtue of exemption provided under sub-section (11) of the said section of the Act.
(v) According to the information and explanation given to us, the Company has not accepted any deposit during the year and there are no unclaimed deposits as at March 31, 2019 to which the provisions of sections 73 to 76 of the Act or any other relevant provisions of the Companies Act 2013 are applicable. Hence paragraph 3(v) of the order is not applicable to the Company.
(vi) The maintenance of cost records has been specified by the Central Government under Section 148(1) of the Companies Act, 2013 for the product produced by the Company. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended and prescribed by the Central Government under Subsection (1) of Section 148 of the Companies Act, 2013, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company,in our opinion, the Company is not regular in depositing the undisputed statutory dues in respect of Provident funds, Income Tax, goods and service tax, cess and other material statutory dues, as applicable with the appropriate authorities. There have been significant delays in a large number of cases in depositing these dues with the appropriate authorities. Further, there were no undisputed amounts payable in respect of the statutory dues outstanding as on March 31, 2019 for a period of more than six months from the date they became payable except for the following:
| Name of the Statute | Nature of the due | Period to which relates to | र in Lakhs |
| The Jammu and Kashmir Value Added Tax, 2005 | Tax on Sales u/s 13 | Jun-17 | 22.17 |
| Income Tax Act, 1961 | Tax Deducted at Source | Apr-18 to Sep-18 | 255.62 |
| Employees Provident Funds & Miscellaneous Provisions Act, 1952 | Provident Fund Contribution payable | Apr-18 to Sep-18 | 79.62 |
(b) According to the information and explanations given to us, there are no dues of sales tax (erstwhile), service tax (erstwhile), duty of customs (erstwhile), duty of excise (erstwhile), value added tax (erstwhile) which have not been deposited with the appropriate authorities on account of any dispute except for the dues attached in Appendix 1 to this report.
(viii) According to the information and explanations given to us, the company has defaulted in repayment of loans taken from banks and financial institutions as at the year-end, as per details attached in Appendix 2 to this report
(ix) The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable.
(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) According to the information and explanations given to us and based on the examination of the records of the Company, no managerial remuneration is paid / provided by the Company.Accordingly, paragraph 3 (xi) of the Order is not applicable to the Company.
(xii) In our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company. Thus, paragraph 3(xii) of the Order is not applicable.
(xiii) In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Companies Act, 2013 where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the Ind AS standalone financial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and based on our examination of the records, the Company has not made preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and thus paragraph 3(xiv) of the Order is not applicable.
(xv) In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its Directors or persons connected to its directors and hence provisions of section 192 of the Companies Act, 2013 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 Paragraph 3(xvi) of the Order is not applicable.
For Sundar Srini & Sridhar
Chartered Accountants
Firm Registration Number : 004201S
S Sridhar
Partner
Membership Number : 025504
Place : Chennai
Date: May 29, 2019
