Kakatiya Cement Sugar & Industries Ltd Directors Report.

To

The Members of Kakatiya Cement Sugar and IndustriesLimited

Report on the Audit of the Financial Statements

Opinion

We have audited thefinancial statements ofKakatiya Cement Sugar and Industries Limited ("the

Company"), which comprise the Balance Sheet as at 31st March, 2020, the Statement of Profit and Loss

(including Other Comprehensive Income), the Statement of Changes in Equity and Statement of Cash

Flows for theyearthenended,and significantaccounting policies and other explanatory summaryof information.

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 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 31st March, 2020, and its Loss, total comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the financial statement 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 financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance 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 the matters described below to be the key audit matters in our audit of the Company for the year ended 31st March, 2020.

Sr. No. Key Audit Matter Auditors Response
1 Provision for Wheeling Charges Principal Audit Procedures
Adequacy of the estimated provision made for wheeling charges for the energy generated at bagasse based cogen plant to the cement plant as per the orders of the Honble Supreme Court of India. Refer Note 31(x) of the financial statements. We have performed the following audit procedures:
Given the significance of the matter, there is a risk that provision made for wheeling charges could significantly vary from what is being estimated. ? Reviewed the wheeling agreement entered by the Company with Electricity Companies.
? Reviewed the wheeling charges tariff orders of State Electricity Regulatory Commission.
? Verified the workings such as number of units generated by the bagasse based cogen,wheeling charges tariff considered etc. in the respective years.
Verified the adequate disclosures made as per Ind AS 1 and Schedule III of the Companies Act, 2013
2 Evaluation of uncertain tax positions The Company has material uncertain tax positions including matters under dispute which involves significant determine the possible outcome of these disputes. Principal Audit Procedures
Refer Notes 31 to the Financial Statements ? Obtained details of completed tax assessments and demands for the year ended 31st March, 2020 from management.
We involved our internal experts to challenge the managements underlying assumptions in estimating the tax provision and the possible outcome of the disputes.
? Our internal experts also considered legal precedence and other rulings in evaluating managements position on these uncertain tax positions. Additionally, we considered the effect of new information in respect of uncertain tax positions as at April 1, 2019 to evaluate whether any change was required to managements position on these uncertainties.
3 Net Realizable Value of Finished Goods

Principal Audit Procedures

Finished goods inventory are valued at lower of cost and net realizable value (estimated selling price less estimated cost to sell). Considering that there is always volatility in the selling price of sugar which is dependent upon various market conditions, determinationof the net realizable value involves significant management judgement and therefore has been considered as a key audit matter. ? Obtained an understanding of the determination of the net realizable values of the commodities and assessed and tested the reasonableness of the significant judgements applied by the management.
The total value of finished goods of sugaras at 31stMarch, 2020 is Rs.3104.75lakhs. ? Evaluated the design of internal controls relating to the valuation of finished goods (including commodities) and also tested the operatingeffectiveness of the aforesaid controls.
? Compared the actual realization after the year end / latest realization to assess the reasonableness of the net realisable value that was estimated and considered by the management.
? Compared the actual costs incurred to sell after the year end / based on the latest sale transaction to assess the reasonableness of the cost to sell that was estimated and considered by the management.
? Compared the cost of the finished goods with the estimated net realisable value and checked if the finished goods were recorded at net realisable value where the cost was higher than the net realisable value.
? Assessed the appropriateness of the disclosure in the financialstatements in accordance with the applicable financial reporting framework.

Information Other than the Financial Statements(Other Information)

The Companys Board of Directors are responsible for the other information. The other information comprises the information included in the Boards Report, Management Discussion & Analysis, and Report on Corporate Governance 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 will 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 identfied above when it becomes available 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.

When we read the Directors Report and Corporate Governance Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Managements Responsibility for the 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 thesefinancial statements that give a true and fair view of the financialposition, financial performance, total comprehensive and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Indian Accounting Standards specifiedunder 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 implementation and maintenance of 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, 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 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 thesefinancial 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 fectiveness of such controls.ef financial controls systemin place andthe operating

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 the Companys ability to continue as orconditionsthatmaycastsignificant 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 thefinancial 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 financialstatements, including content of the 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 year ended 31 st March, 2020 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 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 financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act read with Rule 7 of Companies (Accounts) Rules, 2014.

(e) On the basis of the written representations received from the directors as on 31st March, 2020 taken on record by the Board of Directors, none of the directors is disqualified as on 31 st March, 2020 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 A".

(g) With respect to 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.

(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, in our opinion and to the best of our information and according to the explanations given to us we further report that:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements(Refer note 31);

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

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

2. As required by the Companies (Auditors Report) Order, 2016, (‘the Order) issued by the Central Government in terms of Section 143 (11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

For Ramanatham & Rao
Chartered Accountants
(FRN: S-2934)
C. Kameshwar Rao
Partner
Membership No.024363
UDIN:20024363AAAABI7053

Place: Hyderabad Date: 24th June, 2020

Annexure "A" to the Independent Auditors Report

(Referred to in paragraph 1(f) under ‘Report on Other Legal Regulatory Requirements section of our report to the Members of the Companyon the financial statements for the year ended 31st March, 2020):

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 Kakatiya Cement Sugar and Industries Limited ("the Company") as of 31st March, 2020 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 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 CompaniesAct, 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 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 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 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 Ind AS financial statements in 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 Ind AS financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

financial reporting, including the Becauseoftheinherentlimitations of internal financial 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 financialreporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, to the best of our information and according to the explanations given to us, 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, 2020, 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 Ramanatham & Rao
Chartered Accountants
(FRN: S-2934)
C. Kameshwar Rao
Partner
Membership No.024363
UDIN:20024363AAAABI7053

Place: Hyderabad Date: 24th June, 2020

Annexure "B" to the Independent Auditors Report

With reference to Paragraph 2 under ‘Report on Other Legal Regulatory Requirements section of our report to the Members of the Company, on the financialstatements for the year ended 31 st March, 2020, we report that -

(i) (a) The Company is in the process of updating proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) As explained to us, the fixed assets have been physically verified by the management in a periodical manner, which in our opinion is reasonable, having regard to the size of the Company and the nature of its business. No material discrepancies were noticed on such physical 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) The inventories have been physically verified during the year by the management.The discrepancies noticed on verification between the physical stocks and book records were not material.

(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 Act. Accordingly, paragraph 3 (iii) (a) to (c) of the said Order is not applicable 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 loans, investments, guarantees and securities made.

(v) The company has not accepted deposits within the meaning of Sections 73 to 76 of the Act and the rules framed there under paragraph 3 (v) of the said Order is not applicable to the

Company.

(vi) We have broadly reviewed the cost records maintained by the Company as prescribed under sub-section (1) of section 148 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained.

(vii) (a) According to the information and explanations given to us and the records of the

Company examined by us, the Company is regular in depositing undisputed statutory dues including provident fund, employees state insurance, income-tax, goods and service tax and any other statutory dues as applicable with the appropriate authorities and there were no arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and records of the Company examined by us, the particulars of income tax, value added Tax, customs dutyas at 31st March, 2020 which have not been deposited on account of any dispute pending, are as under:

Name of the Statute Nature of dues Amount (Rs.in Lakhs) Period to which the amount relates Forum where dispute is pending
Income-Tax Act, 1961 Income Tax 12.42 Assessment Years 1999-2000 High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh
2000-2001
2001-2002
Income-Tax Act, 1961 Income Tax 969.26 Assessment Year 2016-2017 ITAT Hyderabad
VAT Act, 2005 Sales Tax 29.53 Financial Year 2012-13 Appellate Tribunal, Hyderabad
VAT Act, 2005 Sales Tax 27.52 Financial Year 2013-14 Appellate Tribunal, Hyderabad
VAT Act, 2005 Sales Tax 173.33 Financial Year 2014-15 Additional Joint Commissioner Hyderabad
Customs Act, 1962 Customs Duty 65.77 Financial year 2012-2013 Additional Commissioner Customs

(viii) The Company has not defaulted in repayment of loans or borrowing to a financial institution, banks, Governments and dues to debenture holders.

(ix) The Company did not raise any money by way of initial public offer or further public offer during the year. In our opinion and according to the information and explanations given to us, the term loans have been applied for the purpose for which the loans were obtained other than amounts temporarily invested pending utilization of the funds for the intended use.

(x) To the best of our knowledge and belief and according to the information and us, no fraud on or by the Company was noticed or reported during the year.

(xi) According to the information and explanations give to us of the Company, the Company has paid/provided for managerial remuneration the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

(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 records of the Company, transactions with the related parties are in compliance with section177 and 188 of the Act where applicable and details of such transactionshave been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, paragraph 3 (xiv) of the Order is not applicable.

(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 any non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3 (xv) of the Order is not applicable to the Company.

(xvi) The Company is not required to be registered under section45-IA of the Reserve Bank of India Act, 1934. Accordingly, paragraph 3 (xv) of the Order is not applicable to the Company.

For Ramanatham & Rao
Chartered Accountants
(FRN:S-2934)
C.Kameshwar Rao
Partner
Membership No.024363
UDIN:20024363AAAABI7053

Place: Hyderabad Date: 24thJune, 2020