Ortel Communications Ltd Directors Report.

To the Members of Ortel Communications Limited Report on the Standalone Financial Statements Disclaimer of Opinion

We were engaged to audit the accompanying standalone financial statements of Ortel Communications Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended and a summary of significant accounting policies and other explanatory information.

We do not express an opinion on the accompanying standalone financial statements of the Company. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements.

Basis for Disclaimer of Opinion

a) As informed to us by the management, the Company has issued Credit Notes amounting to Rs 6844.75 lakhs during the year ended 31st March, 2019 towards disruption of services/ deficient provision of services during the period 1st October, 2016 to 31st December, 2018. Accordingly, the Company has debited Provision for doubtful receivables with Rs. 6844. 75 lakhs and the related Service Tax/Goods and Services Tax (GST)/ Entertainment tax liability with Rs. 1205.76 lakhs and credited Trade Receivables with Rs. 80S0.S1 lakhs. However, the Company has not provided to us sufficient appropriate audit evidence regarding the appropriateness of issuance of such credit notes viz. the month wise /area wise /analog or digital wise breakup of Rs. 6844.7S lakhs, the internal auditors/any other external experts vetting regarding the due processes and checks and balances having been followed etc. Hence, we are unable to comment on the issuance of such credit notes by the Company and it is not practicable to quantify the financial effects of the same, if any, on the standalone financial statements.

b) The Company has not provided to us for our verification GST Returns relating to the year ended 31st March, 2019 and reconciliation of such Returns with the books of accounts, along with other related documents, if any. Hence, it is not practicable to quantify the financial effects of the same, if any, on the standalone financial statements.

c) As per the relevant GST Act/Rules, where the recipient of goods/services fails to pay to the suppliers of goods or services or both (other than the supplies on which tax is payable on reverse charge basis) the amount towards the value of supply along with the tax payable thereon, within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon.

As at 31st March, 2019, the Company has material amount of outstanding payables in respect of supplies of goods and services, which, as informed to us by the management, includes dues for a period of more than 180 days from the date of issue of invoices by the relevant suppliers. However, the Company has not added to its GST output tax liability any amount towards the input tax credit availed by it in respect of such invoices raised by the relevant suppliers, together with the applicable interest. Since the Company has not provided to us the relevant details of supplies in respect of which the amount payable by the Company is due for a period of more than 180 days, it is not practicable to quantify the financial effects of the same on the standalone financial statements.

d) The Company was having an outstanding loan of Rs. 9630.54 lakhs from a Non-Banking Financial Company (NBFC) as at 30th June, 2018. Subsequently, during July, 2018, the Company has accounted for a new loan of Rs. 9630.54 lakhs from the same NBFC against which the actual funds received by the Company from the NBFC was Rs. 1700 lakhs (used to pay off a part of the old loan) and the balance of old loan amounting to Rs. 7930.54 lakhs (i.e. Rs. 9630.54 lakhs - Rs. 1700 lakhs) was adjusted by the Company against the new loan by way of a book entry. No confirmation or any other relevant document in this regard from the NBFC, evidencing the aforesaid adjustment of old loan against the new loan, has been provided to us by the Company. In absence of such a confirmation/relevant document, we are not in a position to comment on the aforesaid unilateral adjustment of loan accounted for by the Company in its books of accounts and it is not practicable to quantify the financial effects of the same, if any, on the standalone financial statements.

e) We observed from the Companys bank statement that during the year ended 31st March, 2019, the Company received Rs. 4000 lakhs from the NBFC referred to in (d) above in one instance and the amount went back to the NBFC on the same date. No accounting entry was passed in the Companys books of accounts in this respect. However, neither the transaction has been explained to us nor any relevant documents/details in this regard have been provided by the Company. Hence, we are unable to comment on the said transaction and it is not practicable to quantify the financial effects of the same, if any, on the standalone financial statements.

f) The Company took a loan of Rs. 1060 lakhs from its wholly-owned subsidiary, Ortel Broadband Limited (OBL) in July, 2018 and subsequently transferred the aforesaid loan to the credit of the NBFC referred to in (d) above by way of an accounting entry in its books of accounts. As informed to us by the management, based on an understanding between the Company, OBL and the NBFC, the aforesaid loan amount along with outstanding interest needs to be repaid by the Company to the NBFC and not to OBL. No confirmation or any other relevant documents from OBL or the NBFC has been provided to us for our verification, based on which the loan amount along with outstanding interest stands transferred as aforesaid. In absence of such a confirmation/relevant documents, we are not in a position to comment on the aforesaid accounting entry made by the Company in its books of accounts and it is not practicable to quantify the financial effects of the same, if any, on the standalone financial statements.

g) As mentioned in Note no. 57 to the standalone financial statements, no impairment assessment of Property, Plant and Equipment, Capital Work-in-Progress, Goodwill and Stores & Spares in carrying values as at 31st March 2019 has been made by the Company. Therefore, we are unable to comment on the consequential impairment, if any, that is required to be made in the carrying value of Property, Plant and Equipment, Capital Work in-Progress, Goodwill and Stores a Spares.

h) In respect of Companys borrowings from banks and financial institutions aggregating to Rs. 17524.90 lakhs and bank balances (current account and term deposits) aggregating Rs S9.41 lakhs, independent balance confirmations as at 31st March 2019 have not been received.

i) As a part of Corporate Insolvency Resolution Process (CIRP), creditors were called upon to submit their claims. The process of submitting claims is still going on and it is also under reconciliations with amounts as appearing in the books of accounts. Pending reconciliations and final outcome of the CIRP, no accounting impact in the books of accounts has been made in respect of excess, short, or non-receipts of claims for operational and financial creditors. Hence, it is not practicable to quantify the financial effects of the same, if any, on the standalone financial statements, (refer Note No. S6 to the standalone financial statements.)

j) Attention is drawn to Note No. S2 to the standalone financial statements, regarding nonrecognition of interest amounting to Rs. 1067.14 lakhs, subsequent to Insolvency Commencement Date i.e. 27th November, 2018, on borrowing from banks and financial institutions and on non-convertible, redeemable cumulative preference shares, which is not in compliance with the requirements of Ind AS - 23 on "Borrowing Costs" read with Ind AS -109 on "Financial Instruments". Had the aforesaid interest expense been recognised, finance costs, total expenses and loss for the year would have been higher by the said amount having consequential impact on other current financial liabilities and other equity.

k) We have been informed by the Resolution Professional that certain information including the minutes of meetings of the Committee of Creditors are confidential in nature and cannot be shared with anyone other than the Committee of Creditors and NCLT. Accordingly, it is not practicable to comment on the possible financial effects on the standalone financial statements, including on presentation and disclosures, if any, that may have arisen if we had been provided access to those information.

l) The Company has given advances for supplies/services and the amount outstanding there against as at 31st March, 2019 was Rs. 1927.51 lakhs. However, we have been unable to obtain sufficient appropriate audit evidence regarding certain aspects of the aforesaid advances viz. ageing analysis and the basis on which the same will be adjusted etc. Hence, we are unable to comment on the aforesaid advances and it is not practicable to quantify the financial effects of the same, if any, on the standalone financial statements.

m) As at 31st March, 2019, the Company is having liabilities against Creditors for Capital Goods and Liability for Operating Expenses amounting to Rs. 6933.23 lakhs and Rs. 3450.64 lakhs respectively. However, we have been unable to obtain sufficient appropriate audit evidence regarding certain aspects of the aforesaid liabilities viz. ageing analysis, and the basis on which the aforesaid liabilities will be settled etc. Hence, we are unable to comment on the balances appearing under the aforesaid liabilities and it is not practicable to quantify the financial effects of the same, if any, on the standalone financial statements.

n) The Company is having a non-current investment of Rs 211.28 lakhs in equity shares of Odisha Television Limited as at 31st March, 2019. In the absence of the fair valuation of the said investments as at 31st March, 2019, we are unable to comment on the remeasurement gain/ loss, if any, on the said investment.

Material Uncertainty Related to Going Concern

We draw attention to Note No. S4 to the standalone financial statements which indicates that due to the events or conditions as mentioned in the said Note, material uncertainty exists that may cast significant doubt on the Companys ability to continue as a going concern and, therefore, it may be unable to realize its assets and discharge its liabilities in the normal course of business. However, the standalone financial statements have been prepared on a going concern basis for the reasons stated in the said Note.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

The Honble National Company Law Tribunal (NCLT), New Delhi Bench, admitted a petition for initiation of CIRP u/s 9 of the Insolvency and Bankruptcy Code, 2016 ( IBC ) filed by one of the operational creditors of the Company vide order dated 27th November, 2018 and appointed an Interim Resolution Professional (IRP) to manage the affairs of the Company in accordance with the provisions of IBC. The Committee of Creditors (CoC) in its meeting held on 07th January, 2019 passed a resolution proposing to replace the IRP and appoint a Resolution Professional (RP) which was confirmed by NCLT vide its order dated 1st February, 2019. In view of pendency of the CIRP and in view of suspension of powers of the Board of Directors and as explained to us, the power of adoption of the standalone financial statements of the Company for the year ended 31st March, 2019 vests with the RP (refer Note No. 1 to the standalone financial statements).

The Companys Board of Directors/RP is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (the Act) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Indian Accounting Standards ("Ind AS") specified under section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions 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, 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 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 financial statements, the Board of Directors/RP 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/RP either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors/RP is also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Financial Statements

Our responsibility is to conduct an audit of the Companys standalone financial statements in accordance with Standards on Auditing issued by the Institute of Chartered Accountants of India ("1CAI") and to issue an auditors report. However, because of the matters described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements.

We are independent of the Company in accordance with the Code of Ethics issued by ICAI and provisions of the Act that are relevant to our audit of the standalone financial statements in India under the Act, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics issued by ICAI and the requirements under the Act.

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 "Annexure 1" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

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

a. As described in the Basis for Disclaimer of Opinion paragraph, we sought but were unable to obtain all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. Due to the possible effects of the matters described in the Basis for Disclaimer of Opinion paragraph and para (vi) of Annexure 1 to this Independent Auditors Report, we are unable to state whether proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

c. The Balance Sheet, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the books of account;

d. Due to the possible effects of the matters described in the Basis for Disclaimer of Opinion paragraph, we are unable to state whether the aforesaid standalone financial statements comply with the Indian Accounting Standards referred to in Section 133 of the Act, read with the relevant rules issued there under;

e. The matters described under the Basis for Disclaimer of Opinion paragraph and Material Uncertainty Related to going concern paragraph, as above, in our opinion, may have an adverse effect on the functioning of the Company;

f. We are unable to state whether any director is disqualified as on 31st March, 2019 from being appointed as a director, under Section 164(2) of the Act, as we have been explained that the Company has not received any written representation from any director in this respect.;

g. Any qualification, reservation or adverse remark relating to the maintenance of accounts and other matters connected therewith is as stated in the Basis for Disclaimer of Opinion paragraph above;

h. With respect to the adequacy of the internal financial controls with reference to the financial statements of the Company and the operating effectiveness of such controls, we give our separate Report in "Annexure 2".

i. With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

(i) The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note Nos. 38 and 47 to the standalone financial statements;

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

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

(3) As required by Section 197(16) of the Act, we report that 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.

For Haribhakti a Co.LLP
Chartered Accountants
ICAI Firm Registration No. 103S23W/ W100048
Anand Kumar Jhunjhunwala
Partner
Membership No.0S6613
UDIN:
Kolkata
16th August, 2019