Impex Ferro Tech Ltd Auditors Report.

To

The Members of Impex Ferro Tech Limited

Report on the Financial Statements

We have audited the accompanying Financial Statements of IMPEX FERRO TECH LIMITED ("the Company"), which comprises the Balance Sheet as at 31st March, 2017, Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date, and a summary of significant accounting policies and other explanatory information.

Managements Responsibility for the Financial Statements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of 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 flow 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 accounti ng records in accordance with the provision of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementati on and maintenance of adequate internal financial control, that were operating effecti vely for ensuring that accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these Financial Statements based on our audit.

We have taken into account the provision of the Act, the accounting and auditing standards, and matters which are required to be included in the audit report under the provision of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under secti on 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 disclosures in the Financial Statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the Financial Statements, whether due to fraud or error. In making those risk assessments; the auditor considers internal control relevant to the Companys preparation and fair presentation of the Financial Statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Companys 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.

Basis for Qualified Opinion

(a) The lenders have stopped charging interest on debts, since the dues from the Company have been categorised as Non Performing Asset (NPA). The Company is in active discussion/negotiati on with its lenders to restructure its debt at a sustainable level. In view of the above, pending finalisati on of the restructuring plan, the Company has not provided accrued interest in its books during the year and reversed interest provided in earlier periods pertaining to the period the account was declared NPA by the respective lenders. The amount of interest reversed for earlier periods is 281.01 lacs. The amount of interest not provided for the year ended 31st March, 2017 is 3,227.11 lacs. Had the aforesaid interest expense been recognised, the net loss for the year ended 31st March, 2017 would have been 14,218.88 lacs instead of 10,710.76 lacs.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of our observation stated in (a) above 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,

(a) In the case of Balance Sheet of the state of affairs of the Company as at 31st March 2017; and

(b) In the case of Statement of Profit & Loss of the loss of the Company for the year ended on that date, and

(c) In the case of Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Emphasis of Matter

(a) We draw your attenti on to Note No. 37 of the Financial Statements which indicate that as at 31st March, 2017, the accumulated losses amounting to 25,197.12 lacs has eroded the entire net worth of the Company, indicating the existence of a material uncertainty about the Companys ability to continue as a going concern. The Financial Statements have been prepared on a going concern basis for the reasons stated in the said note.

(b) Pending confirmations of certain unsecured loans and advances, trade receivables, trade payables and other liabilities as referred in Note no. 32 of accompanying statements, are subject to confirmations and reconciliation.

Our report is not qualified in this matter.

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 enclose in the "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by section 143(3) of the Act, we report that:

(a) We have sought and, except for the possible effects of matter (a) described in the Basis of Qualified Opinion paragraph above, 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, except for the possible effects of matter (a) described in the Basis of Qualified Opinion paragraph above, 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, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) Except for the possible effects of matter (a) described in the Basis of Qualified Opinion paragraph above, 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) The matters described in the basis for Qualified opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;

(f) On the basis of written representations received from the directors as on 31st March, 2017, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2017, from being appointed as a director in terms of section 164 (2) of the Act.

(g) 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

(h) In our opinion and to the best of our information and according to the explanations given to us, we report as under with respect to other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014:

i) The Company has disclosed the impact of pending litigations on the financial position in the Financial Statements - Refer Note - 28 (b) to (f) to its Financial Statements;

ii) The Company did not have any long-term contracts including derivati ve contracts for which there were any material foreseeable losses.

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

iv) The Company has provided requisite disclosures in its Financial Statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016 and the same are in accordance with the books of accounts maintained by the Company.

For R. Kothari & Company
Chartered Accountants
FRN: 307069E
CA Manoj Kumar Sethia
Place: Kolkata Partner
Date: 30th May, 2017 Membership Number: 064308

The Annexure referred to in paragraph 1 under the heading Report on Other Legal & Regulatory Requirement of our report of

even date to the Financial Statements of the Company for the year ended 31st March, 2017, we report that:

i. In respect of its Fixed Assets:

(a) The Company has maintained proper records showing full particulars including quantitative details and situation of Fixed Assets.

(b) The Fixed Assets were physically verified during the year by the management in accordance with a regular programme of verificati on which, in our opinion, provides for physical verificati on of all the Fixed Assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

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

ii. As explained to us, the stocks of finished goods have been physically verified in accordance with the instruction of the management at the end of the Financial Year and for stocks of raw materials, for which there is a perpetual inventory system, a substantial portion of stocks has been verified during the year. In our opinion, the frequency of verification is reasonable. In our opinion and according to the information and explanations given to us, the discrepancies noted on verification between the physical stock and the book records were not material having regard to the size of the operations of the Company and the same have been properly dealt with in the books of accounts.

iii. According to the information and explanations given to us, the Company has not granted loans to Companies, firms or other parties covered in the Register maintained under section 189 of the Companies Act, 2013; and therefore reporting under paragraph 3(iii) of the Order is not applicable.

iv. In our opinion and according to the information and explanations given to us, the Company has not given any loan, not made any investment and have not provided any guarantee. Accordingly the paragraph 3(iv) of the Order is not applicable.

v. The Company has not accepted any deposits from the public and consequently, the directives issued by Reserve Bank of India and provisions of section 73 to section 76 or any other relevant provisions of the Act and the Companies (Acceptance of Deposit) Rules, 2015 with regard to the deposits accepted from the public are not applicable.

vi. We have broadly reviewed the books of accounts maintained by the Company in respect of manufacture of iron and Steel product and power generation unit pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Companies Act, 2013 and we are of the opinion that prima facie the records have been maintained. We have not however made a detailed examination for the records with a view to determine whether they are accurate & complete.

vii. In respect of statutory dues:

(a) According to the information & explanation given to us and on the basis of examination of the books of account, the Company has generally been irregular in depositing undisputed statutory dues, in respect of Provident Fund, Employees State Insurance, Income Tax, Tax deducted at sources, Professional Tax, Service Tax, Cess and other material statutory dues applicable to it, with the appropriate authorities. The following statutory dues remain over due for a period greater than six months as at 31 March, 2017:

SI. No. Nature of Dues (Lacs)
1 Tax Deducted Source 3.55
2 Service tax on Reverse Charge 73.97
TOTAL 77.52

(b) According to the informati on and explanati ons given to us, there are no dues of Income Tax, Sales Tax, Value added Tax, Service Tax, Customs duty, Excise duty and Cess which have not been deposited with the appropriate authorities on account of any dispute except the following :-

Name of the statute Nature of Dues Financial Year /lacs Forum where Dispute is Pending
Central Excise Act, 1994

Excise Duty

2005-06 12.36 Commissioner of Central Excise (Appeals) (III)
2007-08 15.55 CESTAT, Calcutta Bench
Total 27.91 20.92 lacs paid under protest
Central Sales Tax and Local Sales Tax Act

VAT

2005-06 304.13 WBCT, Appellate and Revisional Board
2006-07 479.91 WBCT, Appellate and Revisional Board
2008-09 748.45 WBCT, Appellate and Revisional Board
2009-10 211.18 Sr. Joint Commissioner of Commercial Taxes
Total 1,743.67 88.43 lacs paid under protest
W.B. Entry Tax Act Entry Tax 2012-13 & 2013-14 272.51 Honble High Court of Calcutta
Total 272.51
Income Tax Act, 1961 Income Tax 2011-12 1,606.46 Commissioner of Income Tax (Appeals), Kolkata
Total 1,606.46

viii. Based upon the audit procedures performed and according to the records of the Company examined by us and the information and explanation given to us, the Company has defaulted in payment of principal and interest on borrowings to banks as follows:

Amount of default of Principal portion as on the Balance (Rs. in Lacs)

Name of Bank Funded Interest Term Loan Restructured Term Loan Working Capital Term Loan Cash Credit Period of default TOTAL
State Bank of India 109.12 47.43 353.04 -

Refer Note 5 (IV) (v) of Financial Statements

509.59
Bank of Baroda 37.76 7.56 146.24 - 191.65
Punjab National Bank 29.84 15.84 88.72 - 134.40
State Bank of Travancore 45.20 - 201.20 - 246.40
United Bank of India 44.32 - 196.80 - 241.12
Grand Total 266.24 70.92 986.00 - 1,323.16

Amount of default of Interest portion as on the Balance

Name of Bank Funded Interest Term Loan Restructured Term Loan Working Capital Term Loan Cash Credit Period of default TOTAL
State Bank of India 144.28 202.26 532.75 850.60

Refer Note 7(b) of Financial Statements

1,729.89
Bank of Baroda 32.67 34.84 237.28 251.54 556.33
Punjab National Bank 34.18 77.78 155.33 231.68 498.97
State Bank of Travancore 45.84 - 251.81 147.20 444.85
United Bank of India 74.11 - 236.43 115.44 425.98
Grand Total 331.08 314.88 1,413.60 1,596.47 3,656.03

ix. Based upon the audit procedures performed and the informati on and explanati ons given by the management, the Company has not raised monies during the year by way of initial public issue/follow-on offer including debt instruments and term loans.

x. Based upon the audit procedures performed and the information and explanations given by the management, we report that no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.

xi. Based upon the audit procedures performed and the information and explanations given by the management, we report that managerial remuneration has been paid/ provided in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V to the Companies Act, 2013.

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

xiii. Based upon the audit procedures performed and the informati on and explanati ons given by the management, all transactions with the related parties are in compliance with section 177 and 188 of Companies Act, 2013 and the details have been disclosed in the Financial Statements as required by the applicable Accounting Standards and Companies Act, 2013.

xiv. The Company has made not made any preferential allotment of shares during the year under review. Therefore, reporting under Paragraph 3 (xiv) of the Order is not applicable to the Company and hence not commented upon.

xv. Based upon the audit procedures performed and the informati on and explanati ons given by the management, the Company has not entered into any non-cash transactions with directors or persons connected with him. Accordingly, the reporting under Paragraph 3 (xv) of the Order is not applicable to the Company and hence not commented upon.

xvi. In our opinion, the Company is not required to be registered under secti on 45 IA of the Reserve Bank of India Act, 1934 and accordingly, reporting under Paragraph 3 (xvi) of the Order is not applicable to the Company and hence not commented upon.

For R. Kothari & Company
Chartered Accountants
FRN:307069E
CA Manoj Kumar Sethia
Place: Kolkata Partner
Date: 30th May, 2017 Membership Number: 064308

Annexure ‘B to the Independent Auditors Report

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

We have audited the Internal Financial Controls over Financial Reporting of M/s. IMPEX FERRO TECH LIMITED ("the Company") as of 31st March, 2017 in conjunction with our audit of the Financial Statements of the Company for the year ended on that date. Managements Responsibility for Internal Financial Controls

The Companys management is responsible for establishing and maintaining Internal Financial Controls based on the internal control over Financial Reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate Internal Financial Controls that were operating effecti vely 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, issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of Internal Financial Controls, 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 auditors judgment, including the assessment of the risks of material misstatement of the Financial Statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys Internal Financial Controls system over Financial Reporting.

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 Reporti ng and the preparati on of Financial Statements for external purposes in accordance with Generally Accepted Accounti ng Principles. A Companys internal financial control over Financial Reporti ng 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 authorization of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the 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 31st March, 2017, 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 R. Kothari & Company
Chartered Accountants
FRN:307069E
CA Manoj Kumar Sethia
Place: Kolkata Partner
Date: 30th May, 2017 Membership Number: 064308