Steelco Gujarat Ltd Auditors Report.

To

The Members of

Steelco Gujarat Limited

Report on the Audit of the Financial Statements

Disclaimer of Opinion

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

2. We do not express an opinion on the accompanying financial statements of the entity. 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 financial statements.

Basis for Disclaimer of Opinion

3. As stated in Note 44 to the financial statements, which indicates that the Company has incurred a net loss of 9,741.34 Lakhs during the year ended 31st March, 2019, and the accumulated losses aggregating 33,390.70 Lakhs have resulted in erosion of its net worth in entirety. Further, as of 31st March, 2019, the Companys current liabilities exceed its current assets by 30,404.90 Lakhs.

4. (i) As stated in Note 45(a) to the financial statements, which indicates that the aggregate amount outstanding to all consortium member banks as per the books of accounts of the company (including accrued interest) is 14762.93 Lakhs. The Company has defaulted in repayment of dues including interest to all of its consortium member banks, who have issued notices under section 13(2) of the Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (SARFAESIA). These bankers have classified the accounts as NPAs and recalled entire facilities granted to the company including interest/ penal interest, etc. Virtually the entire properties / assets of the companies and the promoters holding are charged / pledged to the bankers for the due repayment of the bankers dues. Non-compliance of the notice may entitle bankers to take possession of the secured assets, etc. The Company has responded to the notices under SARFAESIA and has submitted OTS proposal of the entire outstanding liabilities of all the banks and has requested them to keep such notice in abeyance and not to take any further action in the matter. SBI, the lead bank, on 31st December 2018 has issued a letter to the company to deposit 5% Initial deposit of OTS offer in No Lien Account of SBI SAM Branch Ahmedabad, so that all lenders bank can send their proposal to competent authority for the consideration of OTS proposal. Subsequent to the balance sheet date, the initial deposit has been deposited with SBI by Spica Business Corp, Panama (the ultimate holding company).

(ii) As stated in Note 45(b) to the financial statements, which indicates that the CDR package dated 27th June, 2012 stipulates that the lenders have right to reverse waivers amounting to 1,273 Lakhs in the event of non-compliance of the terms of CDR package. SBI, one of the lenders, has demanded (vide SARFAESIA notice) repayment of CDR sacrifice of 630 Lakhs (included in 1,273 Lakhs) and additional interest thereon of 548 Lakhs. As the company is negotiating the OTS proposal, the Company has not provided for these liabilities in the books of account but disclosed the same as contingent liabilities.

(iii) As stated in Note 45(c) to the financial statements, which indicates that the Company has appointed a financial advisor for devising a suitable debt resolution plan for the Company, which will enable the Company to come out of the present stressed liquidity situation. (iv) As stated in Note 45(d) to the financial statements, which indicates that due to defaults in repayment of dues to the bankers, restrictions are placed on the operations in current accounts such that specific approval of State Bank of India (Consortium leader) is required for each individual payment to be made from the current accounts.

(v) As stated in Note 45(e) to the financial statements, which indicates that except in case of Canara Bank, the company has not provided for the penal interest on outstanding due of the bankers, the amount of which is not ascertained.

The above conditions described in paragraph 3 and 4 above, create multiple material uncertainties that lead to a significant doubt on the Companys ability to continue as a going concern. In the absence of necessary and adequate evidence with respect to Companys assessment of going concern, we are unable to comment on the ability of the Company to continue as a going concern.

5. As stated in Note 46 to the financial statements, which indicates that the trade receivables of 6,720.96 lakhs include trade receivables of

6,372.39 lakhs, which have significant increase in credit risk, in respect of which the Company has not made any assessment for expected credit loss, in accordance with the requirements of ‘Ind AS 109: Financial instruments, as the management considers such balances as good and recoverable in future. In the absence of such assessment for expected credit loss by the Management and any other evidence to corroborate the Managements assessment, we are unable to comment on the recoverability of these balances and the consequent impact, if any, on the provision thereon and the loss reported in the financial statements.

6. As stated in Note 47 to the financial statements, which indicates that the Company has not ascertained and capitalized the borrowing costs in accordance with the requirements of ‘Ind AS 23: Borrowing Costs with respect to ERP (Oracle) System shown under capital work in progress. Since the amount required to be capitalized is not ascertained by the Management, we are unable to comment on the consequent impact, if any, on the financial statements.

7. As stated in Note 48 to the financial statements, which indicates that in accordance with ‘Ind AS 8: Accounting Policies, Changes In Accounting Estimates And Errors, prior period errors / omissions aggregating 1,330.33 lakhs (net) are corrected retrospectively by restating the comparative amounts for prior periods presented in which the error occurred or if the error occurred before the earliest period presented, by restating the opening statement of financial position. Further, in view of the material weaknesses identified in the internal financial controls over financial reporting (with reference to financial statements) as at 31st March, 2019, we are unable to comment on the possibility of material misstatement, due to errors and omissions, remaining undetected and its possible impact, if any, on the financial statements.

Emphasis of Matters

8. We draw attention to note 49 and note 50 to the financial statements, regarding the delays in receipt of foreign currency receivables aggregating

8,326.67 Lakhs and payment of foreign currency payables aggregating 14,695.93 Lakhs, against the export sales and import of goods and services respectively that are outstanding for a period beyond the timelines stipulated vide FED Master Direction under the Foreign Exchange Management Act, 1999. Management of the Company has represented that the Company is in process of regularizing these defaults and has filed necessary applications with the appropriate authority for condonation of delays in the receipt and payment of foreign currency receivables and payables. The Management is of the view that the possible penalties, etc., which may be levied for this contravention are likely to be condoned by the regulatory authorities.

9. We draw attention to note 51 to the financial statements, regarding recognition of probable estimated liability (net of input tax credit receivable) of 967.41 lakhs towards import duty on materials imported under advance license benefit scheme against which export obligation have not been fulfilled before the period stipulated under the license, which is shown as exceptional items.

Our report is not modified in respect of the above matters.

Other Information

10. The Companys Board of Directors is responsible for the other information. The other information comprises Boards Report, Report on Corporate governance and Management Discussion and Analysis Report but does not include the financial statements and our auditors report thereon.

11. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. 12. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Managements Responsibility for the Financial Statements

13. 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 including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Ind AS 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

14. In preparing the 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.

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

Auditors Responsibility for the Audit of the Financial Statements

16. Our responsibility is to conduct an audit of the financial statements in accordance with Standards on Auditing 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 financial statements.

17. We are independent of the Company in accordance with the Institute of Chartered Accountants of Indias ("ICAIs") Code of Ethics and provisions of the Act that are relevant to our audit of the financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with the ICAIs Code of Ethics and the requirements under the Act in accordance with these requirements and the ICAIs Code of Ethics.

Other Matter

18. The comparative financial information for the year ended 31st March, 2018 included in these financial statements, are based on the previously issued statutory financial statements for the year ended 31st March, 2018 which were audited by the predecessor statutory auditor, whose report dated 5th July, 2018 expressed modified opinion on those financial statements. Our report is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

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

20. Further to our comments in "Annexure A", as required by Section 143(3) of the Act, based on our audit, we report that: a) As described in the Basis for Disclaimer of Opinion section of our report, 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 purpose of our audit; b) Due to the possible effects of the matters described in the Basis for Disclaimer of Opinion section of our report, we are unable to state whether proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books; c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and the Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account; d) Due to the possible effects of the matters described in the Basis for Disclaimer of Opinion section of our report, we are unable to state whether the aforesaid financial statements comply with Ind AS specified under Section 133 of the Act;

e) The matters described in the Basis for Disclaimer of Opinion section of our report may have an adverse effect on the functioning of the Company; f) On the basis of the written representations received from the directors as on 31st March, 2019 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2019 from being appointed as a director in terms of Section 164 (2) of the Act; g) The reservations relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Disclaimer of Opinion section of our report;

h) We have also audited the internal financial controls over financial reporting (with reference to financial statements) of the Company as on 31st March, 2019, in conjunction with our audit of the financial statements of the Company for the year ended on that date and our report dated 19th July, 2019, as per "Annexure B", expressed adverse opinion;

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 financial statements as detailed in Note 41 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.

21. With respect to the other matters to be included in the Auditors Report in accordance with the requirements of section 197(16) of the Act, as amended, we draw attention to note 52 to the financial statements, regarding excess managerial remuneration paid / provided to the managing director, amounting to 43.16 Lakhs, 91.59 Lakhs and 42.86 Lakhs which were / are recognized as an expense in the financial years 2016-17, 2017-18 and 2018-19 respectively, without obtaining the approvals in accordance with Section 197 of the Act. The excess managerial remuneration has been reversed and is shown as recoverable from the managing director.

For Kedia & Kedia Associates
Chartered Accountants
Firm Registration No. 104954W
Pramod Kedia
Partner
Place of Signature: Mumbai M. No. 042309
Date: 19th July, 2019 UDIN : 19042309AAAAAH7675

"ANNEXURE A" TO INDEPENDENT AUDITORS REPORT OF EVEN DATE TO THE MEMBERS OF STEELCO GUJARAT LIMITED, ON THE

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH, 2019

(Referred to in paragraph 19 under ‘Report on Other Legal and Regulatory Requirements section of our report of even date)

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, and to the best of our knowledge and belief, we report that: 01. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has a program of verification to cover all the items of fixed assets in a phased manner over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the program, certain fixed assets were physically verified by the management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) As per the information and explanations provided to us, title deeds of immovable properties (other than self constructed) are in the name of the Company.

02. In our opinion, the management has conducted a physical verification of inventory at reasonable intervals, except for stores and spares (including packing material), which have not been verified during the year. No material discrepancies between physical inventory and book records were noticed on physical verification of inventory. However, in respect of inventories which were not physically verified, we are unable to comment on the discrepancies which could have arisen between physical inventory and book records.

03. The Company has not granted any loan, secured or unsecured to companies, firms, Limited Liability Partnerships (LLPs) or other parties covered in the register maintained under Section 189 of the Act. Accordingly, the provisions of clauses 3(iii)(a), 3(iii)(b) and 3(iii)(c) of the Order are not applicable. However the excess managerial remuneration recoverable from Managing Director is 177.61 Lakhs, which is also reported at paragraph 11 below.

04. In our opinion, the Company has not entered into any transaction covered under Sections 185 and 186 of the Act. Accordingly, the provisions of clause 3(iv) of the Order are not applicable.

05. In respect of customer advance balances for 630.52 lakhs ( 13.81 lakhs from any other company, 587.67 lakhs from foreign corporate bodies and 29.04 lakhs retained against C form, other target performance, etc.) as at 31st March 2019, the Company has been advised that the same does not fall under the definition of deposit within the meaning of section 73 to 76 of the Act and the rules framed thereunder, hence the Company is not required to make compliance with respect thereto. Save and except this, in our opinion the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended).

According to the information and explanations 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.

06. According to the information and explanations given to us, maintenance of cost records has been prescribed by the Central Government under sub-section (1) of section 148 of the Act in respect of the companys product / services. A certificate of the independent cost and management accountants is produced before us stating that the company has made and maintained the cost records for the accounting year 2018-19 and the company is in the process of compiling the same to meet the specific requirements of the Companies Cost Accounting Records Rules, 2014. 07. According to the records of the Company and the information and explanations given to us, in respect of statutory dues: (a) Undisputed statutory dues, including provident fund, employees state insurance, income-tax, sales-tax, service tax, goods and service tax, duty of customs, duty of excise, value added tax, cess, and other material statutory dues, as applicable, have generally been regularly deposited to the appropriate authorities, though there has been a slight delay in few cases.

(b) Undisputed amounts payable which were outstanding at the year-end for a period of more than six months from the date they became payable are as follows: Statement of arrears of statutory dues outstanding for more than six months

Name of the Statute Nature of dues Period to which the amount relates Amount (Rs in Lakhs) Due Date Date of Payment
Gujarat Stamp Act, 1958 Stamp duty (including interest) 2008-12 71.17 Various Unpaid

(c) The dues outstanding in respect of income-tax, sales-tax, service-tax, duty of customs, duty of excise and value added tax on account of any dispute, are as follows: Statement of Disputed Dues

Name of the statute Nature of dues Amount ( in lakhs) Amount paid under Protest (Rs in Lakhs) Period to which the amount relates Forum where dispute is pending
The Income tax Act, 1961 Income tax/ Penalty 253.84 - A.Y. 2008-09 CIT (Appeal)
The Income tax Act, 1961 Income tax/ Penalty 143.91 - A.Y. 2009-10 CIT (Appeal)
The Income tax Act, 1961 Income tax/ Penalty 240.49 - A.Y. 2013-14 CIT (Appeal)
The Income tax Act, 1961 Income tax/ Penalty 148.57 - A.Y. 2014-15 CIT (Appeal)
The Income tax Act, 1961 Income tax/ Penalty 2.53 - A.Y. 2015-16 CIT (Appeal)
The Income tax Act, 1961 Income tax/ Penalty 49.01 9.803 AY 2016-17 CIT (Appeal)
Cenvat Credit Rebate Claim 119.00 - F.Y. 1995-96 Hon. Supreme court
Rules, 1995 Adjustment
Cenvat Credit Rules, 2005 Input Credit wrongly 107.01 - F.Y.2005-06 - do -
availed
Cenvat Credit Rules, 2008 - do - 191.36 - F.Y.2008-09 Commissioner , Vadodara-II
Cenvat Credit Rules, 2009 - do - 37.31 1.40 F.Y.2009-10 Tribunal, Ahmedabad
Cenvat Credit Rules, 2009 - do - 36.97 - F.Y.2009-10 Add. Commissioner, Vadodara-II
The Income tax Act , 1961 Income tax / Penalty 253.84 - AY 2008-09 CIT (Appeal)
Cenvat Credit Rules, 2009 - do - 4.87 4.50 F.Y.2009-10 Tribunal, West Zonal Bench, Ahmadabad
Cenvat Credit Rules, 2010 - do - 4.19 - F.Y.2010-11 Tribunal, West Zonal Bench, Ahmadabad
Cenvat Credit Rules, 2010 - do - 9.74 - F.Y.2010-11 Commissioner, Vadodara-II
Cenvat Credit Rules, 2011 - do - 12.46 - F.Y.2011-12 Commissioner, Vadodara-II
Cenvat Credit Rules, 2011 - do - 3.95 - F.Y.2011-12 Tribunal, West Zonal Bench, Ahmadabad
Cenvat Credit Rules, 2011 - do - 5.78 - F.Y.2011-12 Dy. Commissioner Appeal, Bharuch
Cenvat Credit Rules, 2011 - do - 1.18 - F.Y.2011-12 Dy. Commissioner Appeal, Bharuch
Cenvat Credit Rules, 2012 - do - 9.04 - F.Y.2012-13 Dy. Commissioner Appeal, Bharuch
Cenvat Credit Rules, 2012 - do - 11.13 - F.Y.2012-13 Tribunal, West Zonal Bench, Ahmadabad
Cenvat Credit Rules, 2013 - do - 3.42 - F.Y.2013-14 Asst. Commissioner, Bharuch
Cenvat Credit Rules, 2013 - do - 6.83 - F.Y.2013-14 Dy. Commissioner Appeal, Bharuch
Cenvat Credit Rules, 2013 - do - 13.97 - F.Y.2013-14 Tribunal, West Zonal Bench, Ahmadabad
Cenvat Credit Rules, 2015 - do - 8.05 - F.Y.2015-16 Tribunal, West Zonal Bench, Ahmadabad
Cenvat Credit Rules, 2016 - do - 25.29 - F.Y.2016-17 Tribunal, West Zonal Bench, Ahmadabad
Cenvat Credit Rules, 2016 - do - 12.08 - F.Y.2016-17 Dy. Commissioner Appeal, Bharuch
Cenvat Credit Rules, 2017 - do - 6.94 - F.Y.2017-18 Tribunal, West Zonal Bench, Ahmedabad

* A.Y. – Assessment Year / F.Y. – Financial Year

08. The Company has defaulted in repayment of borrowings to the following banks during the year, which is detailed below:

Name of the bank Amount of outstanding as at 31st March, 2019 (Rs in Lakhs) Classified as NPA since Remark
State Bank of India 9868.44 June 2016 Total outstanding recalled during the year
Federal Bank 1085.83 December 2016
Canara Bank 2357.57 July 2018 -
Bank of India 1451.10 November 2018 -

The Company did not have any outstanding debentures during the year.

09. The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) and has not taken any term loans during the year. Accordingly, paragraph 3 (ix) of the order is not applicable.

10. In our opinion, no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the period covered by our audit.

11. As described in paragraph 22 under the Report on Other Legal and Regulatory Requirements section of our report of even date, the Company has provided (and)/paid managerial remuneration, which is not in accordance with the requisite approval mandated by the provisions of Section 197 of the Act, read with Schedule V to the Act. The details of the same are as follows:

Payment made to Amount Paid/provided in excess of limits prescribed Amount due for Recovery as at 31st March, 2019 Steps taken to secure the recovery of the amount Remarks (if any)
(Rs in Lakhs) (Rs in Lakhs)
1. Managing Director 42.86 42.86 None -

12. In our opinion, the Company is not a Nidhi Company. Accordingly, provisions of clause 3(xii) of the Order are not applicable.

13. In our opinion, all transactions with the related parties are in compliance with Sections 177 and 188 of Act, where applicable, and the requisite details have been disclosed in the financial statements, as required by the applicable Ind AS.

14. During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures. 15. In our opinion, the Company has not entered into any non-cash transactions with the directors or persons connected with them covered under Section 192 of the Act.

16. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

For Kedia & Kedia Associates
Chartered Accountants
Firm Registration No. 104954W
Pramod Kedia
Partner
Place of Signature: Mumbai M. No. 042309
Date: 19th July, 2019 UDIN : 19042309AAAAAH7675

"ANNEXURE B" TO INDEPENDENT AUDITORS REPORT OF EVEN DATE TO THE MEMBERS OF STEELCO GUJARAT LIMITED, ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH, 2019

(Referred to in paragraph 20(h) under ‘Report on Other Legal and Regulatory Requirements section of our report of even date)

Independent Auditors report on the Internal Financial Controls with reference to financial statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

In conjunction with our engagement to audit the financial statements of Steelco Gujarat Limited ("the Company") as at and for the year ended 31st March, 2019, we have audited the internal financial controls over financial reporting (with reference to financial statements) of the Company as at that date.

Managements Responsibility for Internal Financial Controls

The Companys Board of Directors 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 (‘the Guidance Note) issued by the Institute of Chartered Accountants of India (‘the 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 the Companys 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 Act.

Auditors Responsibility

Our responsibility is to express an opinion on the internal financial controls over financial reporting (with reference to financial statements) of the Company 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") issued by the ICAI and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an internal financial controls over financial reporting (with reference to financial statements). 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 (with reference to financial statements) 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 over financial reporting (with reference to financial statements) of the Company and their operating effectiveness. Our audit of the internal financial controls over financial reporting (with reference to financial statements) included obtaining an understanding of the internal financial controls over financial reporting (with reference to financial statements) of the Company, 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 adverse audit opinion on the internal financial controls over financial reporting (with reference to financial statements) of the Company.

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

A companys the internal financial controls over financial reporting (with reference to financial statements) is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial controls over financial reporting (with reference to financial statements) include 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 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 financial statements.

Inherent Limitations of the internal financial controls over financial reporting (with reference to financial statements)

Because of the inherent limitations of internal financial controls over financial reporting (with reference to financial statements), including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting (with reference to financial statements) to future periods are subject to the risk that internal financial controls over financial reporting (with reference to financial statements) may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Adverse opinion

In our opinion, according to the information and explanations given to us and based on audit procedures performed, the following material weaknesses have been identified the internal financial controls over financial reporting (with reference to financial statements) as at 31st March, 2019: a) The Company did not have sufficient appropriate supervisory and review controls over financial statement closure process, in accordance with the accounting principles generally accepted in India, which led to multiple modifications in the financial statements during the course of the audit and correction of prior period errors and omissions with retrospective effect in accordance with Ind AS 8. b) The Companys internal control system with respect to assessing the Companys ability to continue as a going concern, was not operating effectively, which could result in the incorrect fundamental assumption that the Company can continue as a going concern, which could potentially result in a material misstatement in the carrying value and classification of assets and liabilities and consequential impact on earnings, reserves and related disclosures in the financial statements.

c) The Companys internal control system with respect to assessment of recoverability of trade receivables and consequent provision towards expected credit loss / doubtful debts in accordance with Ind AS 109 "Financial Instruments", was not operating effectively, which could potentially result in a material misstatement in the carrying value of trade receivables and consequential impact on the earnings, reserves and related disclosures in the financial statements. d) The Companys internal control system with respect to payment of managerial remuneration in accordance with the provisions of Schedule V to the Act, was not operating effectively, thereby resulting in non-adherence with the relevant provisions of the Act and a potential material misstatement in the employee benefits expense and consequential impact on the earnings, reserves and related disclosures in the financial statements. e) The Company did not have an appropriate internal control system with respect to the assessment of settlement of advances received, remittance of payments and receipt of receivables within the time limit stipulated by FEMA, which could result in a material misstatement in the carrying value of the Companys trade receivables, trade payables, other current liabilities and the resultant impact on the earnings, reserves and related disclosures in the financial statements. f) The Company did not have effective IT general Controls (ITGC), primarily because of reliance on ‘DOS based legacy accounting/ inventory/ MIS system, which could compromise applications, database, etc which may potentially affects the reliance on management reports, interfaces and the overall data integrity.

A ‘material weakness is a deficiency, or a combination of deficiencies, in internal financial controls over financial reporting (with reference to financial statements), such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis.

In our opinion, because of the possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained adequate internal financial controls over financial reporting (with reference to financial statements) and such the internal financial controls over financial reporting (with reference to financial statements) were not operating effectively as of 31st March, 2019, based on the internal financial controls over financial reporting (with reference to financial statements) criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the ICAI.

We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our engagement to audit the financial statements of the Company as at and for the year ended 31st March, 2019, and these material weaknesses have affected our audit report on the financial statements of the Company and we have issued a disclaimer of opinion on the financial statements.

For Kedia & Kedia Associates
Chartered Accountants
Firm Registration No. 104954W
Pramod Kedia
Partner
Place of Signature: Mumbai M. No. 042309
Date: 19th July, 2019 UDIN : 19042309AAAAAH7675