dredging corpn Auditors report

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

Qualified

Opinion

We have audited the accompanying standalone Ind AS financial statements of Dredging Corporation of India Limited, Visakhapatnam ("the Company") which comprise the Balance Sheet as at March 31,2023, the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and Statement of Cash Flows for the year then ended and notes to the financial statements including a summary of significant accounting policies and other explanatory information. (Hereinafter referred to as "the financial statements").

In our opinion and to the best of our information and according to the explanations given to us, except for the effect of the matter described in the Basis for Qualified Opinion section of our report, the aforesaid financial statements give the information required by the Companies Act, 2013 ("the Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023 and its profit, changes in equity and its cash flows for the year ended on that date.

Basis for Qualified Opinion

1. As described in Note No 30.11 to the accompanying financial statements, Company has not determined the retrospective impact of the change in Accounting Policies on the Opening balance of Other Equity and the Current and Previous reporting periods thereby not complying with the measurement and disclosure requirements under Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors. In the absence of sufficient and appropriate audit evidence, we are unable to comment on the impact thereof on the amounts reported in the Financial Statements.

2. As described in Note No 30.21 to the accompanying financial statements which states that Outstanding balances under Trade Payables, Other Payables, Trade Receivables, TDS receivable, GST & GST ITC and Advance to Suppliers are subject to reconciliation and confirmations thereby not complying with the measurement and disclosure requirements under Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets and Ind AS 109, Financial Instruments. In absence of sufficient and appropriate audit evidence, we are unable to comment on the impact thereof on the amounts reported in the Financial Statements.

3. As stated in Note 30.20 to the accompanying financial statements an Arbitral Award for disputed payables, was passed in favour of M/s Mercator Limited (Formerly Mercator Lines Limited) (MLL). As the companys challenge of Award was dismissed in multiple legal forums, MLL had filed an Execution petition before the High Court of Delhi seeking enforcement of Arbitral Award in the year 2019. The management of the company had approached the High Court seeking time for settlement of decretal dues with Mercator Limited (Represented by the Resolution Professional) which did not fructify.

The learned High Court had directed the company to deposit an amount of an amount of ? 5.00 crores before January 31, 2023 and a further amount of ? 8.00 crores by May 10, 2023 in view of the Companys repeated violations of the directions to place a proposal for deposit of the amount awarded into court. The amount disputed is to the tune of an amount of ? 45.70 Crores totalling to an amount of approximately ? 68.71 Crores including interest and other related costs. The management of the company has concluded that no provision against the same, was required at this stage and treated the same as contingent liability. This has resulted in overstatement of profits by ? 68.71 Crores, and understatement of trade payables by the same extent.

4. As stated in Note no. 30.10 to the accompanying financial statements the trade receivables include a sum of ? 65.84 Crores due from M/s. Sethusamudram Corporation Ltd. (SCL), towards works executed during financial years 2005-06 to 2008-09 as has been recommended by a committee chaired by Additional Secretary and Financial Advisor (AS&FA committee) Government of India. The committee stated that a note seeking approval of the cabinet needs to be moved by SCL for seeking government budgetary resources for SCL to make payment of balance outstanding dues to the company. There is a significant delay in realization of the said amount and the document evidencing the relevant budget allocation by the Government of India is also not available yet. In view of the same the realisability of the said amount is remote. The management has concluded that no provision against the same, was required at this stage as the same is treated as receivable considered good though unsecured. This has resulted in overstatement of profit and receivables to the same extent.

5. As per the information submitted to the Board of Directors in its meeting dated 08th August 2022, there are indications of impairment in the case of DCI Dredge XVIII. As per Para 9 of Indian Accounting Standard (Ind AS) 36 on Impairment of Assets, the Company needs to assess at the end of each reporting period whether there is any indication that an asset may be impaired, and if any such indications exist, company shall estimate the recoverable amount of the asset. However, Company has not estimated the recoverable amount for DCI Dredge XVIII. In the absence of adequate information, we are unable to comment on the impact thereof on the amounts reported in the financial statements.

6. As stated in Note no. 30.18 to the accompanying financial statements, an Arbitral award issued by the Joint Arbitrator of PMA against the company in favour of M/s Mazagon Dock Limited (MDL) on 12-06-2018 for an amount of t 15 Crores. The company has challenged the said award before AMRDC and the matter is still pending. During the financial year 2019-20 MDL approached NCLT with a claim of ? 25.50 Crores and invoked CIRP against the Company. NCL T admitted the case on October 24, 2019, and the CIRP proceedings are pending before NCLT. The management of the company has concluded that no provision against the same was required at this stage and treated the same as contingent liability. This resulted in understatement of trade payables by ? 25.50 crores, understatement of PPE by ? 13.30 Crores (approx.), overstatement of Retained Earnings by ? 12.20 Crores (approx.) and profit by ? 0.99 Crores (approx.).

7. As stated in Note no.30.14 to the accompanying financial statements, owing to a dispute Cochin Port Trust had forfeited the security deposit made by the company to the tune- of ? 5.59 Crores in the financial year 2020-21. The company had accepted the conciliators recommendations and issued an undertaking for full and final settlement. The company, however, continues to account for the said amount as receivable from Cochin Port Trust. As on the date of this report, company had not recovered the said security deposit nor did it receive any positive confirmation of its release from Cochin Port Trust. The management has concluded that no provision against the same, was required at this stage and the same is treated as receivable considered good. This resulted in overstatement of profit and understatement of other provisions by ? 5.59 Crores.

8. As stated in Note No. 30.13 during the year, under various dredging works carried out by the company, customers have either recovered Liquidated damages on several accounts or withheld amounts towards LD or are entitled to do the same, as per the terms of agreement that company had entered into with respective customers totalling to the tune of ? 15.34 Crores. As on the date of this report, neither the said amounts were released nor a positive confirmation from its customers is received regarding waiver of LD. The management has concluded that no provision against the same, was required at this stage and the same is treated as receivable considered good. This resulted in overstatement of profit and receivables to the same extent.

9. Company had availed ITC of GST on vendor bills/invoices- in respect of which payment is pending for more than 180 days. As per the provisions of GST, the same is to be reversed and interest is to be paid in respect of invoices pending payment beyond 180 days. In several cases ITC had not been reversed. Further, in cases where ITC has been reversed, interest which is payable under GST law has not been paid. In the absence of sufficient and appropriate audit evidence, we are unable to comment on the impact thereof on the amounts reported in the Financial Statements.

10. Out of Inventory of 135.62 Crores vide Note no. 5 to the Balance Sheet, physical verification for items valuing ? 10.28 Crores at 11 locations, had not been conducted by the Company during the year. The impact of the same on amounts stated in Financial Statements is not determinable. Further, shortages identified and reported in the physical verification to the tune of ? 3.55 Crores had not been adjusted in the books of account. As a result, profit and inventory is overstated by ? 3.55 Crores. Even in respect of reported shortages, reconciliation for entries of regular consumptions vis-a-vis physical verification shortages is pending, in as much we are unable to conclude that the shortages have been adequately adjusted in the books of account and unable to comment on the impact of the same on the amounts reported in the Financial Statements.

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143 (10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the 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 financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the 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

We draw attention to;

a. Note No 30.17 to the financial statements regarding amounts receivable from M/s Jawaharlal Nehru Port Trust on account of a disputed recovery made by them.

b. Note No 30.12 to the financial statements regarding the accounting treatment of Prior Period Items and the disclosure thereof in the Current and Previous reporting periods.

Our Opinion is not modified in respect of above matters.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of most significant in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that there are no key audit matters to communicate in our report.

Information Other than the Financial Statements and Auditors Report Thereon

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in management report and chairmans statement but does not include the financial statements and our auditors report thereon.

Our opinion on the 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and those charged with Governance for the Standalone 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 financial statements that give a true and fair view of the financial position, financial performance, changes in equity and cash flows of the company in accordance with the accounting principles generally accepted in India, including the Accounting Standards (Ind AS) specified under Section 133 of the Act. 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors 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 the Board of Directors 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 Responsibilities for the Audit of the Financial Statements

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

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

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

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

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

(1) As required by the Companies (Auditors Report) Order, 2020 ("the Order") issued by the Central Government of India in terms of sub-section ( 11) of section 143 of the Act, we give in the "Annexure A" a statement on the matters specified in paragraphs 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 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, 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 prescribed under Section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014.

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

(f) With respect to the adequacy of the internal financial controls over financial reporting of the company 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 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 disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note No 30.01 (A) to the standalone financial statements.

(ii) The company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

(iii) There has been 31 days delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.

(iv) As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable to the Company with effect from April 1, 2023, reporting on Audit Trail in pursuance of Rule 11 (g) of the Companies (Audit and Auditors) Rule, 2014 is considered inapplicable for the current year.

(v) (i) The Management has represented that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(ii) The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(iii) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11 (e), as provided under (i) and (ii) above, contain any material misstatement.

(h) 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, in our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

(i) As required under the directions and sub-directions issued by the Comptroller and Auditor General of India in terms of sub section 5 of Section 143 of the Companies Act, 2013 we herewith enclose our report in Annexure - C".

For Rao & Kumar

Chartered Accountants

FRN 03089S

-sd-
CA Guru Prasad K C S
Partner
M.No. 215652	Place: Visakhapatnam
UDIN No: 23215652BGRPDU1292	Date: 25/05/2023

"Annexure A" to the Independent Auditors Report

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

(i)

(a) (A) The Company has maintained its fixed asset register in an editable Excel Format and has not complied with the necessary recording of full particulars, including quantitative details and situation of Property, Plant and Equipment;

(B) The Company does not have any Intangible assets, clauses (B) of paragraph 3 (i) of the order is considered inapplicable to the company;

(b) The management has carried out a physical verification of all major assets (Dredgers) on a yearly basis. In our opinion the periodicity of the physical verification is reasonable. No material discrepancies were noticed on such verification.

(c) According to the information and explanations furnished to us and on the basis of our examination of the records of the company and read together with Note No. 30.26 (a) to the Financial Statements, the details of title deeds of immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) are held in the name of the company.

(d) The Company had not revalued any of its Property, Plant and Equipment (including right of use of assets) or intangible assets.

(e) To the best of our knowledge and information, no proceedings have been initiated or are pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder.

(ii)

(a) The Inventories on the Dredgers and at branches have been physically verified by the management during the year. The coverage and procedure of verification by the management requires improvement. Attention is invited to para 10 under the caption "Basis of Qualified Opinion" in our audit report. The discrepancies noticed upon verification, between physical stocks and book records were more than 10% in the aggregate of each class of inventory and are pending reconciliation and proper adjustment in the books of account.

(b) The company was sanctioned working capital limits in excess of ? 5 Crores in aggregate by the Banks / Financial Institutions on the basis of security of current assets. The quarterly returns or statements filed by the company with such banks / Financial Institutions are not in agreement with books of account of the company to the extent as reported below read with Note No. 30.26 (k), to the Financial Statements.

? in Crores

Particulars	Quarter ended 30th June 2022	Quarter ended 30th September 2022	Quarter ended 31st December 2022	Quarter ended 31st March 2023
Trade receivables balance as per books	314.06	297.63	243.91	435.93
Trade receivables balance as per the Quarterly Statement	313.68	298.21	335.19	425.39
Difference	0.38	-0.58	-91.28	10.54

(iii) Since the company had not made any investments/granted any loans and advances in the nature of loans, clauses (a) to (f) of paragraph 3 (iii) of the order are considered inapplicable to the company.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Section 185 and 186 of the Act, with respect to the loans, investments, guarantees and security.

(v) The company has not accepted any deposits or amounts which are deemed to be deposits to which provisions of Sections 73 to 76 and other relevant provisions of the Act and rules made thereunder are applicable.

(vi) According to the information and explanations given to us the Central Government has not prescribed maintenance of cost records under section 148(1) of the Companies Act, 2013 in respect of the Companys nature of business.

(vii)

(a) Subject to paras 2 & 9 under the caption "Basis of Qualified Opinion" in our audit report, according to the information and explanations given to us and on the basis of our examination of the records of the company, the company is regular in depositing the undisputed statutory dues including Goods and Services Tax, Provident Fund, Employees State Insurance, Income-Tax, Sales-Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess, and other statutory dues with the appropriate authorities.

(b) According to the information and explanations given to us, the following demands have not been deposited on account of disputes.

Sl.No	Name of the Statute	Nature of Dues	Forum where Dispute is pending	Period to which amount relates	Rs.(in Lakhs)
1	Income Tax Act, 1961	Income Tax	High Court	2008-09 to 2011-12	2,828.00
2	Income Tax Act, 1961	Income Tax	CIT (A)	2011-12 to 2017-18	5,262.00
3	Income Tax Act, 1961	Income Tax	ITAT	2015-16	84.00
4	Income Tax Act, 1961	Income Tax	CPC	2020-21	596.00
5	Finance Act, 1994	CVD	CESTAT	2004-05 to 2017-18	13,292.00
6	Finance Act, 1994	Service Tax	CESTAT	2016-17 to 2017-18	551.00
7	Finance Act, 1994	GST	Yet to be filed	2017-18	918.00

(viii) There were no transactions that were not recorded in the books of account that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 ( 43 of 1961).

(ix)

(a) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of loans or other borrowings or in the payment of interest to any lender;

(b) From the information furnished to us, the company is not declared willful defaulter by any bank or financial institution or other lender;

(c) Based on review of the records of the term loan drawn and utilization thereof on an overall basis, the term loans have been applied for the purposes for which the loans were raised;

(d) According to the information and explanations given to us, and the procedures performed by us, and on an overall examination of the financial statements of the company, we report that no funds raised on short-term basis have been used for long-term purposes by the company;

(e) The company had not taken any fund from any entity or person on account of or to meet the obligations of its subsidiaries. Associates or joint ventures.

(f) During the year the company had not raised any loans on the pledge of securities held in its subsidiaries, joint ventures or Associate Companies.

(x)

(a) The Company had not raised any money by way of Initial Public Offer or further Public Offer (including Debt Instruments).

(b) According to the information and explanations given to us and based on our examination of the records of the Company, during the year the Company has not made any preferential allotment or private placement of shares or convertible debentures (fully, partially or optionally convertible debentures during the year.

(xi)

(a) Based upon the audit procedures performed for the purpose of reporting true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud by the Company or any fraud on the Company has been noticed or reported during the year.

(b) The Auditors have not filed any report with the Central Government under sub-section (12) of section 143 of the Companies Act, in form ADT - 4, as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014.

(c) From a review of the Secretarial Records, we observe that the company had not received any whistle-blower complaints during the year.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, Paragraph 3 (xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, the transactions with related parties are in compliance with Section 177 and 188 of the Act, where applicable and details of such transactions have been disclosed in the Financial Statements as required by the applicable Accounting Standards.

(xiv)

(a) The company has appointed an external agency to carry out internal audit and their reports were made available to us. In as much, in our opinion, the company has an internal audit system commensurate with the size and nature of its business.

(b) We have considered the reports of the Internal Auditors for the period under audit.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into Non-Cash transactions with Directors or persons connected with them.

(xvi)

(a) According to the information and explanations given to us, the company is not required to be registered under section 45-IA.

(b) Upon a review of the records of the company, we are of the opinion that the company had not conducted any NonBanking Financial or Housing Finance activity.

(c) The company is not a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India.

(d) The Company is not part of any group (as per provisions of the Core investment Companies (Reserve bank ) Directions, 2016 as amended).

(xvii) The Company has neither incurred any cash loss in the current financial year nor in the immediately preceding financial year.

(xviii) During the year there is no resignation of statutory auditors.

(xix) According to the information and explanations given to us and on the basis of the financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the standalone financial statements, our knowledge of the Board of Directors and management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report that the Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts upto the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one year from the balance sheet date, will get discharged by the Company as and when they fall due.

(xx)

(a) The company does not have any unspent amount in respect of other than ongoing projects as required under subsection (5) of section 135 of the said Act

(b) The company does not have any unspent amount in respect of ongoing projects that require to be transferred to a special account in compliance with the provision of sub-section (6) of section 135.

(xxi) There are no reportable entities under these clauses, hence paragraph 3 (xx) of the order is considered inapplicable to the company.

For Rao & Kumar

Chartered Accountants

FRN 03089S

-sd-
CA GURU PRASAD
Partner	Place: Visakhapatnam
MN No.215652	Date: 25/05/2023

Annexure-B

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

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act").

We have audited the internal financial controls over financial reporting of Dredging Corporation of India Limited ("the Company") as of March 31,2023 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 issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, to the extent applicable to an audit of internal financial controls, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls 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 qualified 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.

Qualified Opinion

According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified in the Control environment, Entitys risk assessment process, Control activities, Information system and communication, Monitoring of controls and the operating effectiveness of the Companys internal financial controls with reference to financial statements as at March 31,2023.

a) Internal control system for identification and valuation of non-moving and obsolete stock.

b) Delays and omission in passing consumption entries and subsequent rectifications thereof for Inventory lying onboard the Dredgers.

c) System allows posting of consumption entries against inventory items which have inadequate/nil balances resulting in negative inventory closing balances.

d) Internal control system for customer acceptance, credit evaluation and establishing credit limits for sales, which could potentially result in the Company recognizing revenue without establishing reasonable certainty of ultimate collection.

e) Internal control over customer confirmations and follow-up for recovery of dues is inadequate.

f) The Fixed Asset Register is being maintained in editable Excel format outside the ERP system.

g) The ERP system is not periodically tested although during the year systems audit was carried out and reports were submitted.

h) Periodical Reconciliation of Trade Payable and Receivable Accounts with proper monitoring and clearing of pending items.

A material weakness is a deficiency, or a combination of deficiencies, in internal financial controls with reference to financial statements such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis.

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 material weakness described in Basis for Qualified Opinion paragraph above on the achievement of the objectives of the control criteria, the Companys internal financial controls with reference to financial statements were operating effectively as of March 31, 2023 based on the internal controls with reference to the financial statements 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.

We have considered the material weakness identified and reported above in determining the nature, timing and extent of audit tests applied in our audit of the financial statements of the company for the year ended March 31, 2023 and these material weaknesses do not affect our opinion on the financial statements of the company.

For Rao & Kumar

Chartered Accountants

FRN 03089S

-sd-
CA Guru Prasad K C S
Partner	Place: Visakhapatnam
M.No.215652	Date: 25-05-2023

Annexure-C

(Referred to in Paragraph 2 of Report on Other Legal and Regulatory Requirements in our report of even date)

(Report on Directions issued by the Comptroller and Auditor General of India under section 143(5) of the Companies Act, 2013.

S. No	Areas Examined	Observations/Findings
1	Whether the company has system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated.	The Company has system in place to process all the accounting transactions through IT System. i.e., Microsoft Dynamics. During the year Systems Audit was carried out, and findings in the Audit Report are yet to be complied with. It is suggested that the Company shall make a policy for getting Systems Audit done periodically.
2	Whether there is any restructuring of an existing loan or cases of waiver / write off of debts / loans / interest etc. made by a lender to the company due to the companys inability to repay the loan? If yes, the financial impact may be stated. Whether such cases are properly accounted for? (In case, lender is a Government Company, then this direction is also applicable for statutory auditor of lender company).	According to the information and explanations given to us and based on our examination of the records of the Company, there has been no restructuring / waiver / write off of any existing loan taken by the Company.
3	Whether funds (grants / subsidy etc.) received / receivable for specific schemes from central / state Government or its agencies were properly accounted for / utilized as per its term and conditions? List the cases of deviation.	No such Funds have been received/ receivable for specific schemes from central/ state agencies.

 

	For Rao & Kumar Chartered Accountants
	FRN 03089S
	-sd-
	CA Guru Prasad K C S
Place: Visakhapatnam	Partner
Date: 25-05-2023	M.No.215652