Simplex Projects Ltd Auditors Report.

To

The Members of

Simplex Projects Limited

Report on the Standalone Financial Statements:

1. We have audited the accompanying standalone financial statements of Simplex Projects Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2017, the Statement of Profit and Loss and 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:

2. 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 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 Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act; safeguarding the assets of the Company; 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.

Auditors Responsibilities:

3. Our responsibility is to express an opinion on these standalone 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 thereunder.

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 standalone 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 standalone financial statements.

Basis of Qualified Opinion

4. a) Attention is invited to Note no. 33 regarding companys branch at Libya which has stopped functioning due to political unrest prevailing there.

The total expenses incurred at the branch during the year amounts to Rs.2720.78 Lakhs including depreciation which have been transferred to work in progress and the total assets of the branch as on the balance sheet date amounts to Rs.94,502.35 Lakhs. The management has certified the financial accounts, assets and liabilities of the branch as on 31.03.2017 and is confident of realising the above amounts and hence no adjustments have been considered necessary in the accounts by them. The company has signed a supplementary agreement with the government for realization of dues & resumption of contract. However, in view of prolonged uncertainty of resumption the company has moved an application with the Honble High court at Delhi for proceeding with Arbitration and has been granted an interim stay for further extension/invocation of Bank guarantees for the project. Accordingly no provision for charges has been made after extension.

b) In view of the lack of adequate information we are unable to comment on the extent of the eventual recoverability of the amounts due and the assets at Libya. The impact of this matter on the financial statement, profits for the period, assets and liabilities and EPS of the Company is not ascertainable presently at this stage and hence we are unable to able to express our opinion on the impact of the same on the financial statements of the Company for the year.

c) Investment of Rs 542.94 lakhs in the partnership firm Simplex Projects (Netherlands) Co-operative U.A. is doubtful of recovery since project has not started and no provision for the same has been made by the company due to this loss of the company is understated by Rs 542.94 lakhs and Reserves of the Company overstated by same amount.

d) We did not audit the financial statements of two branches at Libya and Kuwait included in the standalone financial statements of the Company whose financial statements reflect total assets of Rs 1,06,976 as at 31st March, 2017 and total revenues of Rs 19,243.93 lacs for the year ended on that date, as considered in the standalone financial statements. The financial statements of these branches are unaudited and have been furnished to us by the management and are certified by the management and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of management.

e) Attention is invited to Note no. 30 (a) relating to non provision of interest on Eight numbers of cash credit accounts and one term Loan accounts with Bank as these accounts have become NPA. Such interest pertaining to cash credit facilities amounts to Rs 4,627.54 lakhs for year ended March 31, 2017 as per Calculation of the management without considering any late or penal interest. Also no further provision of interest has been made on to one another term loan account which is not quantified. Due to this profit are overstated.

f) Attention is invited to Note no. 30(b) regarding Interest amounting Rs 21.34 crores (as certified by the management) which has been reversed by the management and reallocated towards its Libyan branch and consequently is part of its WIP due to which profit has been overstated.

g) Attention is invited to Note no 31 where no provision for diminution in the value or impairment has been made for CWIP of Rs 18.94 crores which is lying for a long time which includes material in transit amounting to Rs 465.29 lacs pertaining to material imported and lying at port since long.

h) The company has not made any provision against Trade Receivables of more than three years amounting to Rs 142.96 crores (including trade receivable under arbitration amounting to Rs 5.80 crores) and Advances paid to suppliers of material, Subcontractors & staff advances amounting to Rs 47.84 crores since long, and advance against projects Rs 5.48 crores which according to management are recoverable / adjustable and no provision is required for the same.

i) Site work in progress (included under inventory) amounting to Rs 51.60 crores (including Rs 15.28 crores due to dispute with customers) and uncertified sales amounting to Rs 15.85 crores (included under revenue) have been lying as such since long against which no provisions have been made

Qualified Opinion:

5. 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 the 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 31st March, 2017 and its profit and its Cash Flow for the year ended on the date.

Emphasis of Matter:

6. We draw attention to the following matters in the notes to the following statement.

a) note no. 29 regarding closing balance confirmations of Debtors, Creditors, Earnest Money, loans and advances being unconfirmed in respect of which we are unable to express our opinion.

b) note no. 34 regarding foreign exchange fluctuation on account of overseas borrowing which has been amortized by treating the same as long term from the initial time of borrowing. Due to this profit has increased by Rs.683.73 Lakhs for the year as the same is amortized.

Our opinion is not modified in respect of these matters except as otherwise stated.

Report on Other Legal and Regulatory Requirements:

7. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of section 143(11) of the Act, we give in the Annexure-A a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

a) except for the indeterminate effect of matter referred to in paragraph 4(a) to (i) above, we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b) in our opinion, except for the effect of the matter described in the Basis for Qualified opinion paragraph 4(a) to (i) above, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books except in case of branches which have not have audited and for which we are unable to give our comments.

c) The reports on the accounts of the two branch offices of the Company duly certified by the management have been given to us and have been properly dealt with by us in preparing this report.

d) except for the matter referred to in paragraph 4(a) to (i) and above, 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 and with the certified accounts of the two branches given by the management.

e) in our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph 4 above the aforesaid standalone financial statement comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rule, 2014.

f) The matter described in the Basis for Qualified Opinion paragraph 4 above in our opinion may have an adverse effect on the function of the Company.

g) On the basis of written representations received from the directors as on March 31, 2017, and 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.

h) The qualification relating to the maintenance of accounts and other matters connected therewith reference is drawn to Basis of Qualified Opinion paragraph to the financial statements and the matters are as stated in the Basis of Qualified Opinion paragraph above.

i) 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

j) 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 standalone financial position, as detailed in Note 35 to the standalone financial statements;

ii) the Company has long term contracts as on 31st March, 2017. Material Foreseeable losses relating to the same has not been quantified by the Company.

iii) there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company at the end of the year.

iv) The company has provided requisite disclosures in its financial statements for dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016 and these are in accordance with the books of accounts maintained by the company. Refer Note 46 to the financial statements.

For Chaturvedi & Company
Chartered Accountants
(Firm Reg. No. 302137E)
Nilima Joshi
Place : Kolkata Partner
Date : 12th June, 2017 Membership No. 52122

ANNEXURE-A TO THE INDEPENDENT AUDITORS REPORT

ANNEXURE-A TO THE INDEPENDENT AUDITORS REPORT (REFERRED TO IN PARAGRAPH-7 UNDER ‘REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS SECTION OF OUR REPORT OF EVEN DATE)

(i) (a) The company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) Fixed assets have been physically verified by the management during the year end (except for the assets deployed at its branch in Libya and Kuwait), which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification. However, in absence of physical verification at its branch in Libya and Kuwait, we are unable to comment on the discrepancies therein, if any.

(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 the immovable properties are held in the name of the Company.

(ii) As explained to us, the inventories were physically verified during the year by the Management except for the branch at Libya at reasonable intervals and no material discrepancies were noticed on physical verification.

(iii) (a) According to the information and explanation given to us, the company has granted interest free advance in the nature of loans to two parties (one subsidiaries of the company and one Joint Venture) which are covered in the register maintained under section 189 of the Companies Act 2013.

(b) The advance in the nature of loans are given interest free.

(c) According to the information and explanation given to us no repayment schedule has been specified and loans are repayable on demand. Accordingly paragraph 3(iii)(b) of the order is not applicable to the Company in respect of repayment of principal amount.

(d) There are no overdue amounts in respect of loans granted to the bodies corporate listed in the register maintained under section 189 of the Act

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans, making investments and providing guarantees and securities, as applicable except that no interest is being charged to the associate and joint venture.

(v) In our opinion and according to the information and explanations given to us, the company has not accepted any deposits and therefore, the directives issued by the Reserve Bank of India and the provisions contained in Section 73 to 76 or any other relevant provisions of the Companies Act, 2013 and Rules framed there under are not applicable to the company. According to the information and explanation given to us no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal in respect of deposits.

(vi) We have broadly reviewed the books and accounts maintained by the company pursuant to rules made by the Central Government of India, regarding the maintenance of cost records under such clause (l) of the section 148 of the Companys Act, 2013 and are of the opinion that prima facie, the prescribed accounts and records have been maintained. We have not made a detailed examination of the records with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanation given to us and as per the records of the Company examined by us undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, duty of customs, duty of excise, VAT, Cess, TDS and other material statutory dues have been deposited with the appropriate authorities with certain delays.

Undisputed amount payable in respect of Service Tax and TDS dues outstanding at the year-end for a period of more than six months from the date it became payable, is in respect of service tax Rs. 579.88 lacs and in respect of TDS Rs. 19.88 lacs.

(b) According to the information and explanation given to us, the particulars of dues of Income Tax, Sales Tax, Service Tax, duty of customs, duty of excise, VAT which have not been deposited on account of dispute are as follows:

Nature of Dues Period to which the amount related Amount Forum where the dispute is pending
2000-01 to 2004-05 531.24 Commissioner of Service Tax, Kolkata
2005-06 to 2008-09 167.15 The Honble Customs Excise & Service Tax Appeliate Tribunal, EZB, Kolkata, Stay Granted.
2007-08 to 2009-10 3.32 Demand confirmed by Addl. com. of Service tax for which Appeal is pending before Commissioner (Appeal-I)
Service Tax 2006-07 to 2010-11 946.85 Demand confirmed by Commissioner of Service tax for which Appeal is pending before The Honble Customs Excise & Service Tax Appellate Tribunal, EZB, Kolkata. Stay Granted
2006-07 to 2007-08 26.75 Addl. Com. Of Service Tax
2010-11 to 2011-12 62.58 Commissioner of Service Tax-I Commissionerate Kolkata
Sales Tax/VAT/ 2005-06 1.79 Calcutta Hight Court
CST 2007-08 560.13 Appeal filed before Revisional Board
2008-09 1060.04 Appeal filed before Revisional Board
2009-10 203.50 Appeal filed before Revisional Board
2010-11 363.82 Appeal filed before Revisional Board
2012-13 57.71 Appeal filed before Joint commissioner commercial Taxes Kolkata (South) Circle.
Income Tax 2008-09 367.44 CIT (A) - XXX, Kolkata
2009-10 50.02
2012-13 50.16 CIT (A) - 4 Kolkata

(viii) Based on our audit procedures and according to the information and explanation given to us, the company has delayed in making repayment of dues to banks and financial Institution. The Company has also defaulted in some repayment of dues to certain Banks and some bank accounts have become NPA. The outstanding dues as on 31.03.2017 are as follows :

(Rs in Lakhs)

Sl.No. Bank Principal due Interest and other charges due Period of outstanding
A. Cash Credit Accounts
1. State Bank of Travancore - 1,171.80 Delay in payment throughout the year and Irregular From SEPT16 Onward from when it has become NPA. No interest booked in accounts after December, 2016.
2. IDBI Bank 641.84 Delay in payment throughout the year and Irregular From JULY16 Onward from where it has become NPA. No interest booked in accounts after September, 2016.
-
3. DCB Bank - 18.28 Delay in payment throughout the year.
4. Axis Bank - - Delay in payment throughout the year.
5. UCO Bank - 404.55 Delay in payment throughout the year and Irregular From DEC15
Onward from where it has become NPA. No interest booked in accounts for 2016 – 17.
6. State Bank of India - 3877.53 Delay in payment throughout the year and Irregular From JULY16
Onward from where it has become NPA. No interest booked in accounts after July, 2016.
7. Bank of Baroda - 2406.61 Delay in payment throughout the year and Irregular From Jan16
Onward from where it has become NPA. No interest booked in accounts after April, 2016.
8. Yes Bank - 329.23 Delay in payment throughout the year and Irregular From SEPT15
Onward from where it has become NPA. No interest booked in accounts after September, 2016.
9. DBS Bank - 552.37 Delay in payment throughout the year and Irregular From 2014-15
Onward from where it has become NPA. No interest booked in accounts for 2016 – 17.
10. ICICI - 705.57 Delay in payment throughout the year and Irregular From JULY16 Onward from where it has become NPA. No interest booked in accounts after July, 2016.
B. Term Loan Account :
11. ICICI 1391.23 - Irregular From JULY16 Onward from where it has become NPA.
No further provision of interest has been made thereafter
12. Kotak Mahindra Bank 350.74 - Irregular From 2014-15 Onward from where it has become NPA. No further provision of interest has been made thereafter

(ix) The Company has not raised money by way of initial public offer or further public offer (including debt instruments). The term loans have been applied for the purpose for which they were raised.

(x) To the best of our knowledge and according to the information and explanations given to us by the Management, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.

(xi) To the best of our knowledge and according to the information and explanations given to us, the Company has paid /provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

(xii) The Company is not a Nidhi Company and hence reporting under clause 3(xii) of the order is not applicable.

(xiii)In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Act, where applicable, for all transactions with related parties and the details of related party transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards.

(xiv) During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under clause 3(xiv) of the order is not applicable.

(xv) In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non cash transactions with its Directors or persons connected to its Directors and hence provisions of Section 192 of the Act are not applicable.

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

For Chaturvedi & Company
Chartered Accountants
(Firm Reg. No. 302137E)
Nilima Joshi
Place : Kolkata Partner
Date : 12th June, 2017 Membership No. 52122

ANNEXURE "B TO THE INDEPENDENT AUDITORS REPORT

ANNEXURE – B TO THE INDEPENDENT AUDITORS REPORT

(REFERRED TO IN PARAGRAPH 8(I) UNDER ‘REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS OF OUR REPORT OF EVEN DATE)

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 SIMPLEX PROJECTS LIMITED (‘the Company) as on 31st March, 2017 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 the Companys policies, the safe guarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the ‘Guidance Note) and the Standards on Auditing, issued by 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 were 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 operative 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 judgement, 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 of 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 reporting and the preparation of financial statements for external purpose 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 responsible detail, accurately and fairy reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are records as necessary to permit preparation of financial statements in accordance with authorizations of the 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 financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and nor be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future period are subject to the risk that the internal financial control over financial reporting may become inadequate because of change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March, 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For Chaturvedi & Company
Chartered Accountants
(Firm Reg. No. 302137E)
Nilima Joshi
Place : Kolkata Partner
Date : 12th June, 2017 Membership No. 52122