National Steel & Agro Industries Ltd Directors Report.

TO,

THE MEMBERS OF,

NATIONAL STEEL AND AGRO INDUSTRIES LIMITED

REPORT ON THE AUDIT OF THE STANDALONE IND AS FINANCIAL STATEMENTS

OPINION

We have audited the standalone financial statements of National Steel and Agro Industries Limited, ("the company"), which comprise the balance sheet as at 31st March 2021, the statement of profit and loss, including statement of 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.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 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, 2021, its loss, changes in equity and in cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs), as 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 Standalone Ind AS 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 audit opinion on the Standalone Ind AS financial statements.

Emphasis Of Matter

1. We draw attention to Note 29 to the Ind AS financial statements. The Company has accumulated secured debts (inclusive of interest & net of payment) amounting to 1,456.43 crores which was classified as Non-Performing Assets (NPA) by the banks.

2. One of the lenders has declared Company and its Directors as Willful Defaulter. Two lender banks have issued notices to the Company and its Directors with intent to classify them as "Willful Defaulter". The Company and its Directors have respectively replied to the said notices.

3. One of the financial creditors had filed petition before National Company Law Board (NCLT) under Insolvency and Bankruptcy Code (IBC), for which Company has adopted legal recourse. Some of the Operational Creditors has filed petition before National Company Law Board (NCLT)/Supreme Court under Insolvency and Bankruptcy Code (IBC), for which Company has adopted legal recourse.

4. IDBI Bank Limited, State Bank of India, Union Bank of India (Earlier Andhra Bank), Central Bank of India and Bank of Maharashtra (collectively hereinafter referred as "Banks") through joint assignment agreement, assigned its debts extended to the Company to JM Financial Asset Reconstruction Company Limited ("JMFARC") along with all underlying securities, rights, title and interest thereof on 31st March, 2021.

Our opinion is not qualified on these matters.

Material Uncertainty Related to Going Concern

We draw attention to Note 30 of the financial statement, regarding preparation of financial statements on going concern basis, which states that the Company has incurred losses during the year, its liabilities exceeded total assets and its net worth has been fully eroded as on 31st March 2021. As stated, these events and conditions, along with other matters, indicate that a material uncertainty exists that may cast significant doubt on the Companys ability to continue as a going concern.

Our opinion is not modified in this regard.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Ind AS financial statements for the financial year ended March 31, 2021. These matters were addressed in the context of our audit of the Standalone Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditors responsibilities for the audit of the Standalone Ind AS financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the Standalone Ind AS financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying Standalone Ind AS financial statements.

Key Audit Matters How our audit addressed the Key Audit Matters
Expected Credit Loss (As described in Point No. VI e of note 1 of the standalone Ind AS financial statements)
The Company determines expected credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. Our audit procedures related to verification of expected credit losses for trade receivables included the following, among others:
The Company considered current and anticipated future economic conditions and effect from the pandemic relating to COVID-19. We identified expected credit losses as a key audit matter because the Company exercises significant judgment in calculating the same. We tested the effectiveness of controls over the (1) development of the methodology for the allowance for credit losses, including consideration of the current and estimated future economic conditions
(2) completeness and accuracy of information used in the estimation of probability of default and
(3) Computation of the allowance for credit losses based on the age wise details of trade receivables provided to us.
(4) We tested the mathematical accuracy and computation of the allowances by using the same input data used by the Company.
Provisions and contingent liabilities relating to taxation, litigations and claims
Our audit procedures included:
The provisions and contingent liabilities relate to ongoing litigations and claims with various authorities and third parties. These relate to direct tax, indirect tax, claims, general legal proceedings, and other eventualities arising in the regular course of business. (1) Understanding the process followed by the Company for assessment and determination of the amount of provisions and contingent liabilities relating to taxation, litigations and claims.
As at the year ended 31 March 2021, the amounts involved are significant. The computation of a provision or contingent liability requires significant judgment by the Company becau se of the inherent complexity in estimating future costs. The amount recognised as a provision is the best estimate of the expenditure. (2) Eva luating the desi gn a nd implementation and testing operating effectiveness of key internal controls around the recognition and measurement of provisions a nd reassessm ent of contingent liabilities.
The provisions and contingent liabilities are subject to changes in the outcomes of litigations and claims and the positions taken by the Company. It involves significant judgment and estimation to determine the likelihood and timing of the cash outflows and interpretations of the legal aspects, tax legislations and judgments previously made by authorities. (3) Involving our tax professionals with specialised skills and knowledge to assist in the assessment of the value of significant provisions and contingent liabilities relating to taxation matter, on sample basis, in light of the nature of the exposures, applicable regulations and related correspon dence wi th the authorities.
(4) Inquiring the status in respect of significant provisions and contingent liabilities with the Companys internal tax and legal team, including challenging the assumptions and critical judgments made by the Company which impacted the com pu ta ti on of th e provi si on s an d inspecting the computation.
(5) Assessing the assumptions used and estimates of outcome and financial effect, including considering judgment of the Company, supplemented by experience of similar decisions previously made by the authorities and, in some cases, relevant opinions given by the Companys advisors.
(6) Testing data used to develop the estimate for completeness and accuracy.
(7) Evaluating judgments made by the Company by comparing the estimates of prior year to the actual outcome.
Assessing the Companys disclosures in the standalone financial statements in respect of provisions and contingent liabilities.

We have determined that there are no other key audit matters to communicate in our report.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITORS REPORT THEREUPON

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report 2020-21, but does not include the Standalone Ind AS financial statements and our auditors report thereon.

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

MANAGEMENTS RESPONSIBILITY FOR THE STANDALONE IND AS 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 Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone Ind AS 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 RESPONSIBILITY FOR THE AUDIT OF STANDALONE IND AS FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the Standalone Ind AS 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 Standards on Auditing (SAs) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Ind AS financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the Standalone Ind AS 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 with reference to Standalone Ind AS financial statements of the Company in place and the operating effectiveness of such controls.

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

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

- Evaluate the overall presentation, structure and content of the Standalone Ind AS financial statements, including the disclosures, and whether the Standalone Ind AS 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 Standalone Ind AS financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditors Report) Order, 2016 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the "Annexure-A" a statement on the matters specified in 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 obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b. In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c. The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity 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 Indian Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended.

e. On the basis of the written representation received from the directors as on March 31, 2021 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2021 from being appointed as a director in terms of Section 164(2) of the Companies Act, 2013.

f. With respect to the adequacy of the internal financial controls with reference to Standalone Ind AS financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure-B" to this report.

g. In our opinion, no managerial remuneration for the year ended March 31, 2021 has been paid/provided by the Company to its directors. Therefore, the provisions of Section 197 read with Schedule V to the Act are not applicable.

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, as amended in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 31 to the 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 no amount that is required to be transferred to the Investor Education and Protection Fund by the Company.

For Fadnis & Gupte
Chartered Accountants
FRN-006600C
Place : Indore CA Vikram Gupte
Dated : 30th June, 2021 (Partner)
Membership No. 074814
UDIN: 21074814AAAAEG4591

ANNEXURE A TO THE AUDITORS REPORT

As referred to in our Independent Auditors Report of even date to the members of National Steel and Agro Industries Limited for the year ended March 31, 2021

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of property, plant and equipment.

(b) As informed and explained to us, the management, during the year, has physically verified the items of the property, plant and equipment of the company at reasonable interval and no significant 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) As informed and explained to us the inventory has been physically verified during the year by the management. In our opinion, the frequency of verification needs to be strengthened in view of the nature & size of the business. No material discrepancies were noticed on such physical verification.

(iii) As explained to us, 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) 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 and investments made.

(v) According to the information and explanations given to us, the company has not accepted any deposits under sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 148(1) 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 books of accounts and records examined by us as per the generally accepted auditing practices in India, in our opinion, the company has been regular in depositing undisputed statutory dues. According to the information and explanations given to us, there were no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income tax, Sales Tax, Customs Duty, Excise Duty, Service Tax, Cess and other material statutory dues which have remained outstanding as at 31st March 2021 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 the records of the Company examined by us, there are no dues of income-tax, service-tax and goods and service tax, which have not been deposited on account of any dispute except as mentioned below:-

Statement of Disputed Dues

Name of Statute Period to which Dispute Relates Amount Disputed (Rs.) Forum where the dispute is pending
Differential Excise Duty 2018-19 4,63,09,420/- Customs Excise and Service Tax Appellate Tribunal, New Delhi
Central Excise Duty 2020-21 3,02,81,875/- Principal Commissioner, Ujjain
Export Shipping Bill 2016-17 1,02,50,000/- Customs Excise and Service Tax Appellate Tribunal, Mumbai
Import Duty 2016-17 1,92,99,130/- Customs Excise and Service Tax Appellate Tribunal, Ahmedbad
SDA Refund 2013-14 6,48,119/- Customs Excise and Service Tax Appellate Tribunal, Mumbai
Import Duty 2012-13 47,48,458/- Customs Excise and Service Tax Appellate Tribunal, Mumbai
SDA Refund 2009-10 1,38,07,709/- Customs Excise and Service Tax Appellate Tribunal, Mumbai
Commercial Tax 2004-05 5,19,604/- M.P. Commercial Tax Appellate Board, Bhopal
Commercial Tax 2005-06 18,68,541/- M.P. Commercial Tax Appellate Board, Bhopal
Entry Tax 2004-05 50,47,197/- M.P. High Court Jabalpur, Indore bench
Income Tax (Ground of Appeal) 2010-11 42,32,291/- Commissioner of Income Tax Appeal, Mum bai
Income Tax (Ground of Appeal) 2011-12 1,18,30,313/- Commissioner of Income Tax Appeal, Mum bai

(viii) The Company has defaulted in repayment of loans or borrowings to banks/ financial institution as at balance sheet date as mentioned below;

Name of the Bank Amount of Default as at Balance Sheet Date (Including Interest) Period of Default
(Rs. in Crores)
Oriental Bank of Commerce 119.39 Since 25.06.2018
Bank of India 158.81 Since 02.07.2018
United Bank of India 48.82 Since 21.05.2018
Punjab National Bank 113.26 Since 13.07.2018
M/s. JM Financial AR Company Limited 1,016.14 (Refer Clause 3 of EOM)

(ix) Paragraph 3(ix) of the Order is not applicable to the Company in respect of initial public offer or further public offer.

(x) According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the year under audit.

(xi) According to the information and explanations give to us and based on our examination of the records of the Company, owing to continuous losses the Company has not paid/provided for managerial remuneration in accordance with the provisions of section 197 read with Schedule V to the Act.

(xii) In our opinion, the company is not a chit fund or a Nidhi mutual benefit fund/ society. Therefore, the provisions of clause (xii) of Para 3 of the said order are not applicable to the company.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 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) 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.

(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 him. Accordingly, paragraph 3(xv) of the Order is not applicable.

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

For Fadnis & Gupte
Chartered Accountants
FRN-006600C
Place : Indore CA Vikram Gupte
Dated : 30th June, 2021 (Partner)
Membership No. 074814
UDIN: 21074814AAAAEG4591

ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT

Referred to in paragraph 2(f) of the Independent Auditors Report of even date to the members of National Steel & Agro Industries Limited on the Standalone Financial Statements as of and for the year ended 31st March, 2021

Report on the Internal Financial Controls with reference to Standalone Financial Statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls with reference to Standalone Financial Statements of National Steel and Agro Industries Limited, ("the Company"), as of 31 March 2021 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 (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 Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls with reference to standalone financial statements 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 with reference to standalone financial statements 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 control system with reference to standalone financial statements and their operating effectiveness. Our audit of internal financial controls with reference to standalone financial statements included obtaining an understanding of internal financial controls with reference to standalone financial statements, 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 standalone 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 with reference to standalone financial statements.

Meaning of Internal Financial Controls over Financial Reporting with reference to financial statements

A companys internal financial control with reference to financial statements 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 with reference to standalone financial statements 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 the transactions are recorded as necessary to permit preparation of Ind AS financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures 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 companys assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls with reference to Standalone Financial Statements

Because of the inherent limitations of internal financial controls with reference to standalone financial statements, 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 with reference to standalone financial statements to future periods are subject to the risk that the internal financial control with reference to standalone financial statements 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 with reference to standalone financial statements and such internal financial controls with reference to standalone financial statements were operating effectively as at 31st March 2021, 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 Fadnis & Gupte
Chartered Accountants
FRN-006600C
Place : Indore CA Vikram Gupte
Dated : 30th June, 2021 (Partner)
Membership No. 074814
UDIN: 21074814AAAAEG4591