Facor Steels Ltd Auditor Reports

To

The Members of Facor Steels Limited

Report on the Financial Statements

We have audited the accompanying financial statements of Facor Steels Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2016 the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors are responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. 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.

Auditor’s Responsibility

Our responsibility is to express an opinion on these 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 thereunder.

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 financial statements are free from material misstatement.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2016 and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

Without qualifying our opinion, we draw our attention to Note 1 (b) of the financial statement. The company’s operating results have been materially affected due to various factors and as on 31st March, 2016 the company’s accumulated losses have fully eroded the net worth of the company. The appropriateness of the going concern assumption is dependent on the company’s ability to establish consistent profitable operations as well as raising adequate finance to meet it short term and long term obligations. Based on the mitigation factors discussed in the said note, management believes going concern assumption is appropriate and no adjustment have been made in the financial statement for the year ended 31st March, 2016.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of Section 143 (11) of the Act, we give in the Annexure, a statement on the matters specified in the paragraph 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 and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

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

(e) On the basis of the written representations received from the directors as on 31st March, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2016 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 report in "Annexure A"; and

(g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to be 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 financial statements – refer note 44 (b) to the financial statements;

ii) the Company did not have any long term contracts including the derivative contracts for which there were any material foreseeable losses;

iii) there was no amount required to be transferred to the Investor Education and Protection Fund by the Company.

Annexure to the Independent Auditor’s Report

The Annexure referred to in our report to the members of Facor Steels Limited (‘the Company’), for the year ended 31st March, 2016.

We report that:

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

b) The company’s plant operations have been suspended with effect from 30/05/2014. The company is operating with very few skeleton staff and hence has not carried the physical verification of the fixed assets in the current year.

c) The company does not own any immovable property in its name.

ii) The company’s plant operations have been suspended with effect from 30/05/2014. The company is operating with a very few skeleton staff and hence not carried the physical verification of inventories in the current year. The company has maintained proper records of inventory.

iii) The company has not granted any loans secured or unsecured to companies, firms, Limited Liability, Partnerships or other parties covered in the register maintained under Section 189 of the Companies Act, 2013.

iv) Company has not granted any loans, investments, guarantees or securities.

v) The Company has not accepted any deposits from the public.

vi) The Companies Act has prescribed cost records for this industry under Section 148 of the Companies Act. Company has maintained the records and the same have been audited by the Cost Auditor for the financial year ended 31^st March 2015.

However, in the current financial year 2015-16, no manufacturing activity has been carried out by the company and there was no requirement for maintaining records and as such no audit has been carried out.

vii) (a) According to the information and explanation give to us, the company is depositing the undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities with some delay not exceeding six months.

(b) On the basis of our examination of the documents and records, there are no dues of Sales Tax, Income Tax, Wealth Tax, Service Tax, Excise Duty, Value Added Tax, Customs Duty and Cess which have not been deposited on account of any dispute except the following:

Name of the Statute	Nature of dues	Rs./Lacs	Forum where the dispute is pending	Period to which the amount related (various Years covering the period)
Central Excise Act, 1944	Excise Duty	30.67	Hon’ble High court Mumbai.	Jan’ 1996 to Feb’ 2000
Central Excise Act, 1944	Excise Duty	185.41	Hon’ble High court Mumbai.	Sep’ 2001 to Nov’2003
Central Excise Act, 1944	Service Tax	50.83	CESTAT, Mumbai	Mar’ 2007 to Mar’2012
Central Excise Act, 1944	Excise Duty	18.45	Commissioner (Appeals), Nagpur	Dec’2012

viii) According to the information and explanation given to us, in our opinion, company has delayed the repayment of its dues to Banks as per details given below:

Name of Banks	Term Loan (Rs. Lacs)	Working Capital Term Loan (Rs. Lacs)	Funded Interest Term Loan (Rs. Lacs)	Remark
Bank of India, Visakhapatnam	13.31	258.76	224.90	Installments due from June 2015 to March 2016 remains unpaid
Indian Overseas Bank, Visakhapatnam	7.42	76.24	69.03	Installments due from June 2015 to March 2016 remains unpaid
	20.73	335.00	293.93

ix) Company has not raised any funds by way of public offer (including debt instruments) and term loans.

x) According to the information and explanation given to us, no material fraud by the company or any material fraud on the company by its officers or employees has been noticed or reported during the year.

xi) No managerial remuneration has been paid or provided.

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 explanation given to us, the transactions with the related parties are in compliance with Section 177 and 188 of the Companies Act, 2013 and the details have been disclosed in the financial statements as required by the applicable accounting standards.

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

xv) Company has not entered into any non-cash transactions with directors or persons connected with him

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

Annexure – A to the Auditor’s Report

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 Facor Steels Ltd. ("the Company") as of 31^st March 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s 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 company’s 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 Company’s 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, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, 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 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 auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s 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 company’s 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 expenditure of the company are being made only in accordance with authorizations 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 company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31^st March, 2016, 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 SALVE & Co.
	Chartered Accountants
	(Firm’s Registration No.109003W)
	C.A. K.P. SAHASRABUDHE
Place : Nagpur	Partner
Date : 6th May, 2016	(Membership No. 07021)