S.A.L Steel Ltd Auditors Report.

To the Members of S.A.L. STEEL LIMITED AHMEDABAD

Report on the Financial Statements

We have audited the accompanying financial statements of S.A.L STEEL Limited (the Company), which comprise the Balance sheet as at March 31, 2017, the Statement of Profit and loss , the Cash Flow Statement for the year then ended, 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 the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with relevant rules issued there under.

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 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 provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the 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 financial control relevant to the Companys preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the 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

1. Management is of the view that they do not anticipate execution of its ongoing capital projects. However, the Company has not made adequate provision towards recovery of capital advances for the said project for the amount of Rs. 912.32 Lacs which are currently shown under Long term loans and advances. The consequential impact of adjustment, if any, on the actual realization of said advances on the financial statements is currently not ascertainable. Therefore, we are unable to comment on its consequential financial impact, if any, on the financial statements.

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 the matter described in the Basis for Qualified Opinion paragraph 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 , of the state of affairs of the Company as at March 31, 2017 , and its profits for the year ended March 31, 2017 and its cash flows for the year ended on that date.

Emphasis of Matters

We draw attention to the following matters in the Notes to the Financial Statements:

1. Note 26 to the financial statements which describes that the Non disclosure of Reportable Segments as required under Accounting Standard - 17 Segment Reporting, there is no impact on the Statement of Profit and Loss due to non disclosure.

2. During the year, the Company has accumulated losses and its net worth has been fully eroded. The Financial Statements indicates that the Company has incurred a net loss during the previous year(s) and, the Companys current liabilities exceeded its current assets as at the current and previous year balance sheet date. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Companys ability to continue as a going concern. However, the financial statements of the Company have been prepared on a going concern basis for the reasons stated in the said Note 28 to the financial statements.

3. Assignment of dues for various facilities provided to the company by banks to Invent Assets Securitization and Reconstruction Private Limited as per Note 29 to the financial statements.

4. Note 27 to the Financials regarding the companys reference being filed under section 15(1) of SICA (Special Provision) Act, 1985. The Honorable BIFR vide its letter reference no 3(S-10)/BC/2015 dated 24th August 2015 has registered the reference filed by the company vide case no 109/2015.

Our opinion is not modified in respect of these matters.

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 subsection (11) of section 143 of the Act, we give in the Annexure A, a statement on the matters specified in the paragraph 3 and 4 of the Order, to the extent applicable.

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

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above , in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

c) The Balance sheet, the Statement of Profit and loss and the Cash flow statement dealt with by this Report are in agreement with the books of account;

d) Except for the effects of the matter described in the Basis for 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 relevant rules issued there under;

e) The going concern matter as described in sub-paragraph (2) under the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

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 B"; and

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

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:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 18 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 were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

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 8 November, 2016 to 30 December, 2016 . Based on audit procedures and relying on Management representation, we report that the disclosures are in accordance with the books of accounts maintained by the Company and as produced to us by the Management . Refer to Note 45 to the Financial statements.

For Talati & Talati
Chartered Accountants
(Firm Reg. No: 110758W)
Umesh Talati
Place: Ahmedabad Partner
Date: May 27, 2017 Mem No. : 034834

ANNEXURE A TO INDEPENDENT AUDITORS REPORT

The Annexure referred to in Independents Auditors Report to the members of the Company on the Standalone financial statement 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 the fixed assets on the basis of available information.

b) As explained to us, a major portion of the fixed assets has been physically verified by the management during the year in accordance with a phased program of verification adopted by the Company. In our opinion, the frequency of verification is reasonable having regard to the size of the company and nature of its assets. As informed to us, no material discrepancies were noticed on such physical verification.

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

ii) In respect of its inventories:

As explained to us, inventories (excluding Goods in Transit and Goods lying at Port) were physically verified by the management at reasonable intervals during the year. In our opinion, the frequency of the verification is reasonable. The discrepancies noticed on verification between the physical stocks and the book records were not material.

iii) In respect of Loans, Secured or Unsecured granted by the company to companies, firms, Limited liability partnership or other parties covered in the register maintained under section 189 of the Companies Act, 2013:

According to the information and explanations given to us and on the basis of the records produced before us, the company has not granted any Loan, Secured or Unsecured to the companies, Limited liability partnership or firms or other parties covered in the register maintained under section 189 of the Companies Act 2013 and hence sub-clause (a) & (b) & (c) of paragraph 3 of the Companies Auditors Report Order 2016 are not applicable to the Company.

iv) The Company has complied with the provision of Section 185 & 186 of Companies Act, 2013 with respect of loans, investments and guaranty made.

v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit and hence the provisions of Section 73 to 76 or any other relevant provisions of the Companies Act and the Companies (Acceptance of Deposits) Rules, 2014 with regard to the deposits accepted are not applicable to the Company. Therefore, the provisions of Clause (v) of paragraph 3 of the Companies Auditors Report Order 2016 are not applicable to the Company. According to the information and explanations given to us, no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

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 as specified under Section 148 of the Companies Act, 2013 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

vii) In respect of the Statutory dues:

a) According to the records of the company, undisputed Statutory dues including provident fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues have not been generally regularly deposited during the year with the appropriate authorities. On the basis of records produced before us for our verification and according to the information & explanation given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2017 for a period of more than six months from the date of becoming payable except dues for (1) deferred sales tax liability for Rs. 22.63 lacs which was due on May 2016 and not paid by the Company and the same is unpaid as at 31st March 2017 and (2) dues of Value added tax(VA T) during the year to the tune of Rs. 11,94,28,290/- which are outstanding for more than 180 days as at the balance sheet date..

b) On the basis of records produced before us for our verification and according to the information and explanations given to us, the details of disputed dues of Rs. 25,73,86,625/- have not been deposited as on 31st March, 2017 on account of matters pending before the appropriate authorities. The details of which are as under:

Name of the Statute Nature of the Dues Period to which the amount Relates Forum where the dispute is pending Amount under dispute not yet deposited (in Rs.)
1. Central Excise Act, 1944 Central Excise Duty 2006-07 Appellate Tribunal Ahmedabad 5,55,781
2. Central Excise Act, 1944 Central Excise Duty 2008-09 Appellate Tribunal Ahmedabad 10,41,057
2. Central Excise Act, 1944 Central Excise Duty 2008-09 Appellate Tribunal Ahmedabad 10,41,057
3. Custom Act, 1962 Custom Duty 2011-12 Appellate Tribunal Ahmedabad 2,41,79,202
4. Central Excise Act, 1944 Central Excise Duty 2012-13 Appellate Tribunal Ahmedabad 4,49,84,993
5. Gujarat Value Added Tax Act 2003 Value Added Tax 2006-07 Jt. Value Added Tax Commissioner (Appeal) 3,65,63,595
6. Central Excise Act, 1944 Central Excise Duty 2008-09 to 2010-11 Supreme Court 5,90,14,068
7. Central Service Tax Act, 1994 Service Tax Duty 2009-10 Service Tax Commissioner 25,36,074
8. Central Excise Act, 1944 Central Excise Duty 2005-06 to Sep 2014 Central Excise Commissioner 6,26,28,410
9. Central Excise Act, 1944 Central Excise Duty 2012-13 Central Excise Commissioner 80,11,535
10. Gujarat Value Added Tax Act 2003 Value Added Tax 2011-12 Jt. Value Added Tax Commissioner (Appeal) 1,78,71,910

viii) On the basis of the information and explanation given to us and on the basis of records produced before us, the company has defaulted in repayment of dues as follows:

NAME OF THE BANK

NATURE OF FACILITY

Amount (in Rs.)of Default as at 31-03-2017

Period Of Default (No. of Days)

Union Bank Of India

Term Loan

45,85,10,556

1 to 1170

Working Capital

31,93,91,914

1 to 745

Interest

30,41,67,170

1 to 745

State Bank of India

Term Loan

41,05,87,716

1 to 1170

Working Capital

37,35,80,824

1 to 944

Interest

39,41,86,852

1 to 944

State Bank of Saurashtra

Term Loan

7,67,57,187

1 to 1170

State Bank of Hyderabad

Term Loan

5,07,11,642

1 to 1170

Interest

2,38,72,699

1 to 836

*The Dues of State bank of Hyderabad, Union Bank of India, State bank of India have been assigned to Invent Assets Securitization and Reconstruction Pvt Ltd respectively w.e.f 1st July 2015, 3rd July 15 and 30th Oct 2015. However, no agreements have been executed between the company and Invent Assets Securitization and Reconstruction Pvt Ltd as on March 31, 2017. And hence, defaults have been considered towards banks as mentioned above till the date of Dues of respective banks being assigned to Invent Assets Securitization and Reconstruction Pvt Ltd.

ix) According to the records of the company, the company has neither raised any monies by way of Initial Public Offer or Further Public Offer nor has the company obtained any term loan. Hence, the comments under the clause are not called for.

x) Based on the audit procedures performed and representation obtained from management we report that, no case of material fraud by the Company or on the Company by its officers and employee has been noticed or reported for the year under audit.

xi) The Company has provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V of the Companies Act, 2013.

xii) In our opinion, and to the best of our information and according to the explanations provided by the management, we are of the opinion that the company is not a nidhi company. Hence, in our opinion, the requirements of clause (xii) of Paragraph 3 of the Order do not apply to the Company.

xiii) The Company has complied with Section 177 and 188 of Companies Act, 2013, in respect of transactions with the related parties and relevant details have been disclosed in the financial statements as required by the applicable accounting standards.

xiv) The Company has not made any preferential allotment or private placement of shares or full or convertible debentures during the year under review. Hence, the provisions of Clause (xiv) of paragraph 3 of the Order are not applicable to the Company.

xv) The Company has not entered into any non-cash transactions with directors or persons connected with him. Therefore, the provisions of Clause

(xv) of paragraph 3 of the Order are not applicable to the Company.

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

(xvi) of paragraph 3 of the Order are not applicable to the Company.

For Talati & Talati
Chartered Accountants
(Firm Reg. No: 110758W)
Umesh Talati
Place: Ahmedabad Partner
Date: May 27, 2017 Mem No. : 034834