Steel Authority of India Ltd Directors Report.

on Standalone Financial Statements

Comments Managements Replies
Report on the Audit of Standalone Indian Accounting Standards (Ind AS) Financial Statements
Qualified Opinion
We have audited the accompanying Standalone Ind AS Financial Statements of STEEL AUTHORITY OF INDIA
LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2019, the Statement of Profit and Loss, (including Other Comprehensive Income), the Cash Flow Statement, the Statement of Changes in Equity for the year then ended, and notes to the Standalone Ind AS Financial Statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as "Standalone Ind AS Financial Statements"), in which are included the Returns of 8 branches for the year ended on that date audited by the branch auditors of the Companys branches .
In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of reports of the branch auditors on separate Ind AS Financial Statements of the branches referred to in the Other Matters section below, except for the effect of the matters described in the Basis for Qualified Opinion section of our report, the aforesaid Standalone Ind AS Financial Statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 (as amended), of the state of affairs of the Company as at 31st March, 2019 and its profit (including total comprehensive income), its cash flows and the changes in equity for the year ended on that date.
Basis for Qualified Opinion
The Company has not provided for :
(i) Demand for Entry tax in various states amounting to ?1,637.35 crore as on 31st March, 2019 [Refer Note No. 47.2(a)] and In respect of item stated at (i), the Companys view is that the Nine Judges Bench of Honble Supreme Court, vide its judgment dated 11th November, 2016, upheld the constitutional validity of levy of Entry Tax by the States and has laid down principles/ tests on levy of Entry Tax Acts in various States. The respective regular benches of the Apex Court would hear the matters as per laid down principles. Pending decision by the regular benches of the Apex Court on levy of entry tax in the States of Chhattisgarh, Odisha, Jharkhand and in respect of the case pertaining to West Bengal Taxation Tribunal, the Entry Tax demands under dispute have been treated as contingent liabilities.
(ii) Amount paid to Damodar Valley Corporation (DVC) in earlier years against bills raised for supply of power and retained as advance to DVC by Bokaro Steel Plant amounting to ?587.72 crore as on 31st March, 2019 [Refer Note No.47.2(b)];
Had the impact of all the above qualifications been considered, Total Comprehensive Income (net of tax) for the year ended 31st March, 2019 would have been ?990.36 crore against reported Total Comprehensive
Income (net of tax) of ?2,437.90 crore, overstatement of other equity as on 31st March 2019 by ?1,447.54 crore, understatement of current liability by ?2,225.07 crore and understatement of asset by ?777.53 crore.
In respect of item stated at (ii), the Companys view is that the cases are sub-judice and pending for adjudication before the various judicial authorities for a long time. Further, the civil appeal filed by DVC pertaining to tariff of 2004-09 against the Order of the Appellate Tribunal for Electricity (APTEL), have been dismissed by the Honble Supreme Court of India vide its Order dated 3rd December, 2018. Accordingly, State Electricity Regulatory Commission (SERC) will finalise the retail tariff as directed by APTEL, the financial implication of which can only be ascertained after the Tariff fixation by SERC.
The above stated disputed demands, stated at (i) and (ii) above, contested on valid and bonafide grounds, have been treated as contingent liabilities as it is not probable that present obligations exist as on 31st March, 2019. Therefore, there is no adverse impact on Profit for the year.
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143 (10) of the Act. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the Standalone Ind AS Financial Statements under the provisions of the Companies Act, 2013 and the Rules issued there under and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Emphasis of Matter
We draw attention to the following
I Pending negotiations with National Joint Committee for the Steel Industry (NJCS) for wage revision and in terms of DPE office memorandums, in view of negative figures of average profit before tax of previous three years and also based on the opinion of Expert Advisory Committee of ICAI, Company has not made any provision towards wages revision (pending since 01.01.2017) for non-executive employees (Refer to Note No.47.13);
II Gross sales include sales to Government agencies for ?5,012.76 crore for the year ended 31st March 2019 (cumulative upto 31st March, 2019 ?17,252.66 crore) which is recognized on provisional contract prices (Refer Note No. 49.2).
Our opinion is not qualified in respect of these matters.

 

Comments Managements Replies
Information Other than the Financial Statements and Auditors Report Thereon
The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexure to Boards Report, Business Responsibility Report and Corporate Governance Report, 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 the Standalone Ind AS Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the 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 concluded that such material misstatement of the other information exists in respect of matters described in the Basis for Qualified Opinion section above.
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 of the current period. 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. In addition to the matters described in the Basis for Qualified Opinion and Emphasis of Matter sections, we have determined the matters described below to be the key audit matters to be communicated in our report:

 

S.No. Key Audit Matter Auditors Response to Key Audit Matters
1. Provisions and Contingent Liabilities
The Company is subject to a number of legal, regulatory and tax cases for which final outcome cannot be easily predicted and which could potentially result in significant liabilities. In order to get a sufficient understanding of litigations and contingent liabilities, we have discussed the process of identification implemented by the Management for such provisions through various discussions with Companys legal and finance departments.
Managements disclosures with regards to contingent liabilities are presented in Note Nos. 47 and 48.5 read with Note No. 3.17 to the Standalone Ind AS Financial Statements. We read the summary of litigation matters provided by the Companys/ Units Legal and Finance Team.
The assessment of the risks associated with the litigations is based on complex assumptions.
This requires use of judgment to establish the level of provisioning, increases the risk that provisions and contingent liabilities may not be appropriately provided against or adequately disclosed. Accordingly, this matter is considered to be a key audit matter. We read, where applicable, external legal or regulatory advice sought by the Company.
We discussed with the Companys/ Units Legal and Finance Team certain material cases noted in the report to determine the Companys assessment of the likelihood, magnitude and accounting of any liability that may arise.
In light of the above, we reviewed the amount of provisions recorded and exercised our professional judgment to assess the adequacy of disclosures in the Standalone Ind AS financial statements.
2. Tax Expenses
Provision for current tax (including Minimum Alternate Tax on Book Profits) is dependent upon availability of brought forward losses, depreciation as per income tax/ books of accounts, statement of profit and loss, balance sheet, etc. Considered the taxable profits of the Company and taxes paid, obtained details of carry forward losses and details of estimate of taxable incomes for future periods.
Deferred Tax Assets on unabsorbed depreciation and carry forward losses are to be recognized to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. Tested period over which deferred tax assets on such unabsorbed losses would be recovered against future taxable income including Managements underlying assumptions.
Refer Note No. 12 and 48.6 to the standalone Ind AS Financial Statements. Reviewed on overall basis, internally as well as the opinions given by legal/ tax experts on various issues along with various judicial/ jurisdictional pronouncements available on certain issues.
3. Property, Plant & Equipment and Intangible
Assets
There are areas where Management judgements impact the carrying value of property, plant and equipment, intangible assets and their respective depreciation and amortization amounts. These include the decision to capitalize or expense costs; the annual asset life review; the timeliness of the capitalization of assets and the use of Management assumptions and estimates for the determination or the measurement and recognition criteria for assets retired from active use. Due to the materiality in the context of the balance sheet of the Company and the level of judgements and estimates required, we consider this to be a key audit matter. We assessed the controls in place, evaluated the appropriateness of capitalization process, performed tests of details on costs capitalized, the timeliness of the capitalization of assets and the de- recognition criteria for assets retired from active use.

 

S.No. Key Audit Matter Auditors Response to Key Audit Matters
In performing these procedures, we reviewed the judgments made by management including the nature of underlying costs capitalized; determination of realizable value of the assets retired from active use; the appropriateness of asset live applied in the calculation of depreciation; useful lives of assets as per the technical assessment of the management and external technical experts. We have observed that there are no material changes.
4. Capital Work-in- Progress We per formed an understanding and evaluation of system of internal control over the capital work-in-progress, with reference to identification and testing of key controls.
The Company is in the process of executing various projects like installation and expansion of mills, facilities, etc. These projects take a substantial period of time to get ready for intended use. Due to the materiality in the context of the balance sheet of the Company and the level of judgements and estimates required, we consider this to be a key audit matter. We assessed the progress of the projects and the intention of the management to carry forward and bring the asset to its state of intended use.

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 of 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 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, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 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 system 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.

Other Matters

We did not audit the financial statements of 8 branches included in the Standalone Ind AS Financial Statements of the Company whose financial statements reflect total assets of ?46,594.92 crore as at 31st March, 2019 and total revenue from operations of ?24,376.35 crore for the year ended on that date. The financial statements of these branches have been audited by the branch auditors whose reports have been furnished to us, 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 such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of sub section 11 of Section 143 of the Act, we give in the 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, based on our audit and on the consideration of the reports of the branch auditors on the separate financial statement of the branches, referred to in other matters above, we report, to the extent applicable, 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 section above, in our opinion proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books.

(c) The reports on the accounts of the branch offices of the Company audited under Section 143(8) of the Act by the branch auditors have been sent to us and have been properly dealt with by us in preparing this report.

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

(e) Except for the effects of the matters described in the Basis for Qualified Opinion section above, in our opinion, the aforesaid Standalone Ind AS Financial Statements comply with the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act, read with relevant rules issued there under.

(f) The matters described in the Basis for Qualified Opinion section above, in our opinion, may not have an adverse effect on the functioning of the Company.

(g) As per notification No. GSR 463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 164(2) of the Companies Act, 2013 is not applicable to the Company.

(h) 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 - 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 (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

Standalone Ind AS Financial Statements (Refer Note No. 47 and 48.5);

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

Comments Managements Replies
iii. The Company has not transferred to the Investor Education and Protection Fund, an amount of ?120,75,460/-being Unclaimed Matured Deposits which the Company was required to transfer to the said Fund since the financial year 2017-18. The Matured Deposits have already been claimed by the successors/ relatives of the individuals but are pending for submission of document of proof of legal heir by the claimants. Appropriate procedure is being followed for refunding the Matured Deposits to the legal heirs.
3. As required by section 143(5) of the Act, we give in Annexure - 3, a statement on the matters specified in the Directions issued by the Comptroller and Auditor General of India in respect of the Company.
4. As per notification no. GSR 463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 of the Act is not applicable to the Government Companies.

 

For Singhi & Co. For Chatterjee & Co. For and on behalf of Board of Directors
Chartered Accountants Chartered Accountants
Firm Registration No. 302049E Firm Registration No. 302114E
Sd/- Sd/- Sd/-
(Shrenik Mehta) (Bedanta Bhattacharya) (Anil Kumar Chaudhary)
Partner Partner Chairman
M.No. 063769 M.No. 060855
For A.K.Sabat & Co. For V.K. Dhingra & Co.
Chartered Accountants Chartered Accountants
Firm Registration No. 321012E Firm Registration No. 000250N
Sd/- Sd/-
(A.K. Sabat) (Vipul Girotra)
Partner Partner
M.No.030310 M.No. 084312
Place : New Delhi Place : New Delhi
Dated : 30th May, 2019 Date : 28th June, 2019

Annexure-1 to the Independent Auditors Report on Standalone Financial Statements

Comments Managements Replies
We report that:
(i) In respect of its fixed assets:
(a) The Company has maintained proper records showing in most cases, full particulars including quantitative details and situation of its fixed assets. However, the location and the extent of arrear in respect of a few lands needs to be updated in the fixed assets register and have to be reconciled with the revenue records as to the extent of holding and location of land. The delay is attributable to procedural matters involved in ascertaining and reconciling with revenue records maintained by the revenue departments of state governments involved. Necessary action is being taken to update location and extent of area in respective plants in fixed assets registers. This is a continuous process.
(b) The fixed assets of the Company have been physically verified by the management at reasonable intervals in a phased manner so as to generally cover all the assets once in three years. However, it is observed certain land and buildings are under encroachments/ unauthorised occupation. As informed, no material discrepancies have been noticed on such verification. In our opinion these periodicity of physical verification is reasonable having regard to the size of the Company and nature of its assets. Necessary action is being taken to evict the occupants from land and buildings under encroachment/unauthorised occupation.
(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/lease deeds of immovable properties are held in the name of the Company except in the following cases:
Particulars Freehold Land Leasehold Land Building
Area not in name of the Company 46587.26 acres 17244.15 acres 571.24 sq mts
Gross Block thereof Rs crore 175.00 149.10 0.48
Net Block thereof Rs crore 175.00 126.89 0.31
(ii) In respect of physical verification of inventory:
a. The inventories have been physically verified by the management with reasonable frequency during the year. In certain cases, the stocks have been verified on the basis of visual survey/estimates.
b. In our opinion and according to the information and explanations given to us, discrepancies noticed on physical verification of inventories, which were not material, have been properly dealt with in the books of account.
(iii) In our opinion and according to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnership or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Hence, the clauses (iii) (a), (iii) (b) and (iii) (c) of the paragraph 3 of the order are not applicable to the Company.
(iv) In our opinion, and according to the information and explanations given to us, the Company has complied with the provisions of Section 185 and 186 of the Companies Act, 2013 in respect of the loans and investments made. The Company has not provided any guarantees and security, covered under Section 185 and 186 of the Companies Act, 2013.
(v) The Company has not accepted any deposits from public within the meaning of Sections 73 to 76 of the Companies Act 2013 and rules framed there-under during the year. Accordingly paragraph 3(v) of the order is not applicable to the Company.
(vi) Pursuant to the rules made by the central government of India, the Company is required to maintain Cost Records as specified under section u/s 148(1) of the Act in respect of its products.
We have broadly reviewed the same and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether these are accurate and complete.
(vii) According to the information and explanations given to us in respect of statutory dues:
a. The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees State Insurance, Income-tax, Goods and Service Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Taxes, Cess and other Statutory Dues with the appropriate authorities. According to the information and explanations given to us, there are no undisputed statutory dues outstanding for a period of more than six months from the date they became payable, as per books of accounts as at 31st March, 2019.
b. According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited as on 31st March, 2019 as given herein below:
Statute Nature of Dues Amount ( Rs crore) Forum where disputes are pending
Sales Tax & VAT Sales Tax and VAT Demands 10.45 Supreme Court
494.15 High Courts
597.33 Sales Tax Tribunal
186.32 Sales Tax Department
Goods and Services Tax GST demands 16.63 High Court
Entry Tax Entry Tax Demands 1257.26 Supreme Court
484.06 High Courts
758.68 Tribunal
48.22 Department
Central Excise Act, 1944 Excise Duty 295.95 Supreme Court
333.37 High Courts
4109.99 CESTAT
518.03 Department
0.32 BIFR
Service Tax Service Tax 34.32 High Courts
64.07 CESTAT
202.58 Department
Customs Duty Customs Duty 4.20 CESTAT
1.71 Department
Income Tax Act, 1961 TDS on Perks 2.32 Supreme Court
134.60 High Court
Other TDS matters 0.22 ITAT
21.93 Department
Income Tax Disputes 194.52 High Courts
552.99 ITAT
47.61 Department
TOTAL 10,371.83

(viii) The Company has not defaulted in repayment of loans or borrowings to financial institutions, banks, Government or dues to debenture holders during the year. Accordingly, paragraph 3(viii) of the Order is not applicable to the Company.

(ix) According to the information and explanations given to us, the Company has not raised any money by way of initial public offer or further public offer (including debt instrument). Term loans from banks and financial institutions have been applied for the purpose for which they were obtained.

(x) To the best of our knowledge and belief and according to the information and explanations given to us and based on the audit procedures performed, we report that no case of material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.

(xi) As per notification no. GSR 463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 of the Act is not applicable to the Government Companies. Accordingly, paragraph 3 (xi) of the Order is not applicable to the Company.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations 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 Standalone Ind AS Financial Statements as required under Ind AS 24 Related Party Disclosures specified under Section 133 of the Act read with relevant rules.

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

(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 to the Company.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, paragraph 3(xvi) of the Order is not applicable to the Company.

For Singhi & Co. For Chatterjee & Co. For and on behalf of Board of Directors
Chartered Accountants Chartered Accountants
Firm Registration No. 302049E Firm Registration No. 302114E
Sd/- Sd/- Sd/-
(Shrenik Mehta) (Bedanta Bhattacharya) (Anil Kumar Chaudhary)
Partner Partner Chairman
M.No. 063769 M.No. 060855
For A.K.Sabat & Co. For V.K. Dhingra & Co.
Chartered Accountants Chartered Accountants
Firm Registration No. 321012E Firm Registration No. 000250N
Sd/- Sd/-
(A.K. Sabat) (Vipul Girotra)
Partner Partner
M.No.030310 M.No. 084312
Place : New Delhi
Place : New Delhi Date : 28th June, 2019
Dated : 30th May, 2019

Annexure-2 to the Independent Auditors Report on Standalone Financial Statements

Comments Managements Replies
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 the Steel Authority of India Limited ("the Company") as of 31 March, 2019 in conjunction with our audit of the Standalone Ind AS 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 reporting 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 over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial
controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls
over financial reporting included obtaining an understanding of internal financial controls over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including
the assessment of the risks of material misstatement of the Standalone Ind AS Financial Statements, whether due
to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A Companys internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Standalone Ind AS Financial Statements for external purposes in accordance with generally accepted accounting principles. A Company s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of Standalone 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 authorisations of Management and Directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the Companys assets that could have a material effect on the Standalone Ind AS Financial Statements.
Comments Managements Replies
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 not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting 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 over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March, 2019, 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 Singhi & Co. For Chatterjee & Co.
Chartered Accountants Chartered Accountants
Firm Registration No. 302049E Firm Registration No. 302114E
Sd/- Sd/-
(Shrenik Mehta) (Bedanta Bhattacharya)
Partner Partner
M.No. 063769 M.No. 060855
For A.K.Sabat & Co. For V.K. Dhingra & Co.
Chartered Accountants Chartered Accountants
Firm Registration No. 321012E Firm Registration No. 000250N
Sd/- Sd/-
(A.K. Sabat) (Vipul Girotra)
Partner Partner
M.No.030310 M.No. 084312
Place : New Delhi
Dated : 30th May, 2019

Annexure-3 to the Independent Auditors Report on Standalone Financial Statements

Comments

Managements Replies

On the directions issued by the Comptroller and Auditor General of India under sub section 5 of section 143 of the Companies Act, 2013, based on the verification of records of the Company and information and explanations given to us, we report that:
A. Directions under Section 143(5) of Companies Act, 2013
QUESTIONS AUDITORS COMMENTS
1. Whether the Company has a system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated. The company uses SAP software for processing accounting transactions in respect of four integrated steel plants and central marketing organisation. In respect of other plants/ units Company uses legacy software systems.
Based on our audit, on test basis, and based on reports received from the branches, wherever the accounting transactions are based on workings outside IT system, no instances of lack of integrity of accounts and no financial implications has been noted/ reported.
2. Whether there is any restructuring of an existing loan or cases of waiver/ write off of debts/loans/interest etc., made by a lender to the company due to the companys inability to repay the loan? if yes, the financial impact may be stated. As per information and explanations obtained there was no restructuring of an existing loan or cases of waiver/ write off of debts/loans/interest etc., made by a lender to the company due to the companys inability to repay the loan.
3. Whether funds received/ receivable for specific schemes from Central/ State agencies were properly accounted for/ utilized as per its terms and conditions? List the cases of deviation. To the best of our information, checks applied by us during the course of our audit and based on reports received from the branches/ units, we are of the opinion that funds received/ receivable for specific schemes from Central/ State agencies were properly accounted for/ utilized as per its terms and conditions.

 

For Singhi & Co. For Chatterjee & Co.
Chartered Accountants Chartered Accountants
Firm Registration No. 302049E Firm Registration No. 302114E
Sd/- Sd/-
(Shrenik Mehta) (Bedanta Bhattacharya)
Partner Partner
M.No. 063769 M.No. 060855
For A.K.Sabat & Co. For V.K. Dhingra & Co.
Chartered Accountants Chartered Accountants
Firm Registration No. 321012E Firm Registration No. 000250N
Sd/- Sd/-
(A.K. Sabat) (Vipul Girotra)
Partner Partner
M.No.030310 M.No. 084312
Place : New Delhi
Dated : 30th May, 2019