thiru arooran sugars ltd Auditors report


To

The Members of

Thiru Arooran Sugars Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of M/s Thiru Arooran Sugars Limited, ("the company"), which comprise the Balance Sheet as at 31st March 2018, and the Statement of Profit and Loss, the statement of changes in Equity, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information (hereinafter referred to as "the standalone Ind AS financial statements").

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 and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) referred to in Section 133 of the Act.

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.

Auditors Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

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

We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the standalone Ind AS financial statements. 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. In making those risk assessments, the auditor considers internal control relevant to the Companys preparation and fair presentation of the standalone Ind AS 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 accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the standalone Ind AS 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 Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the standalone Ind AS 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:

(1) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2018;

(2) In the case of the Statement of Profit and Loss, of the loss for the year ended on that date;

(3) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Material Uncertainty Related to Going Concern:

The Company is facing liquidity issues resulting in instances of default in servicing loan to Banks and others and in discharge of undisputed statutory and other liabilities including payment of salaries to employees leading to adverse working capital position; the Companys main business is facing headwinds in the form of lower sales realizations coupled with higher minimum price payable to sugarcane farmers.

The Company has guaranteed the Term Loans, Working Capital facilities and Trade Advances granted to the Associate Company, M/s. Shree Ambika Sugars Limited and its Subsidiary Company, M/s. Terra Energy Limited and these Companies are also facing some of the issues as stated in the aforesaid para. Subsequently, in July, 2018, the lender has invoked the Bank Guarantee with respect to Trade Advances availed by M/s. Shree Ambika Sugars Limited amounting to $ 537 crores and the Banks in turn have served notice on that Company.

The Management of the Company has prepared the annual standalone financial results on a going concern basis. However, the aforesaid events and conditions indicate that a material uncertainty exists that may cast significant doubt on the Companys ability to continue as a going concern. The appropriateness of assumption of going concern is dependent upon the materialization of various initiatives being undertaken by the Company including raising substantial long term funds to make the business economically viable. Our opinion is not modified in respect of this matter.

Other Matters:

The Company has not reversed Input Tax Credit with respect to non-payment of value of supplies along with tax payable thereon to the suppliers beyond a period of 180 days from the date of issue of invoice as stipulated in Section 16 of the Central Goods and Service Act, 2017 and Tamil Nadu Goods and Services Act, 2017. The input credit can be claimed once the payment is made to the creditors. Our opinion is not modified with respect to this matter.

The Company, being a first time adopter of Ind AS, has carried its investments in the Subsidiary Company, M/s. Terra Energy Limited and its Associate Company, M/s. Shree Ambika Sugars Limited at cost as on the transition date i.e., 01.04.2016 and continued to show investments at cost as on 31.03.2017. However, as on 31.03.2018, the Company has restated the aforesaid investments based on the Net Asset Value and the resulting loss amounting to $ 5.42 crores has been recognized in Other Comprehensive Income for the year ended 31.03.2018.

The aforesaid treatment of investments in Associate Company and Subsidiary Company is not in accordance with Ind AS 101. Ind AS 101 stipulates that the accounting policies used in its opening Ind AS Balance Sheet shall be applied throughout all periods presented in its first Ind AS financial statements. Had the Company restated the aforesaid investment to Net Asset value in its Opening Balance Sheet as on 01.04.2016 and Balance sheet as on 31.03.2017, the resulting loss for the year ended 31.03.2018 that has to be recognized in Other comprehensive income is $ 32.15 crores. Our opinion is not modified with respect to 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 of India in terms of sub-section (11) of section 143 of the Act, we give in the "Annexure A", a statement on the matters specified in the paragraph 3 and 4 of the order.

(2) As required by Section 143(3) of the Companies Act, 2013, we report that :

(a) 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 proper books of account as required by law have been kept by the Company so far as appears from our examination of those books

(c) The Balance Sheet, the Statement of Profit and Loss, the Statement of changes in equity and the Statement of cash flows dealt with by this Report are in agreement with the books of accounts

(d) In our opinion, the aforesaid standalone Ind AS financial statements, comply with the Accounting Standards referred to in Section 133 of the Companies Act, 2013.

(e) On the basis of written representations received from the directors, as on 31st March 2018, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2018 from being appointed as a director in terms of subsection (2) of section 164 of the Companies Act, 2013.

(f) with respect to the adequacy of internal financial controls over financial reporting of the Company & operating effectiveness of such controls, refer to our separate report in Annexure B

(g) 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, to the best of our information & 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 28 and 31.

ii. The Company does not have any long term contracts including derivative contracts for which they were any material foreseeable losses.

iii. There is no amount required to be transferred to the Investor Education and Protection Fund by the Company.

For Guru & Ram LLP

Chartered Accountants

Firm Registration No.:009723S/S200039

A. Rajasekaran

Partner

Membership No. 025549

Chennai : August 14, 2018

Annexure-A to the Auditors Report

(Referred to in paragraph 1 of our report of even date)

(1) On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

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

(b) The company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

(c) According to the information and explanations given to us, the title deeds of immovable properties are held in the name of the Company.

(2) The Management has conducted physical verification of inventories at reasonable intervals and on the basis of information and explanation provided to us and the records produced to us, no material discrepancies were noticed on such verification

(3) According to the information and explanation given to us, the Company has not granted any loan secured or unsecured to Companies, Firms, or other parties covered in the register maintained under section 189 of the Companies Act 2013 and clause (iii)(a),(iii)(b) and (iii)(c) are not applicable.

(4) In our opinion and according to the information and explanation given to us, in respect of investments made by the Company and the guarantee given by the Company for the loans taken by the Holding Company, the company has complied with the provisions of Section 185 and 186 of the Companies Act 2013, as applicable.

(5) The Company has not accepted deposits from the public.

(6) The Central Government has prescribed the maintenance of cost records under sub section (1) of Section 148 of the Companies Act, 2013, and such records and accounts have been maintained.

However we are not required to and have not carried out any detailed examination of such accounts and records.

(7) (a) The Company is not regular in depositing undisputed statutory dues including Provident fund, Income-tax, Sales tax, Service tax, Goods and Services tax, Value added tax, and Cess with the appropriate authorities during the year and the arrears of outstanding statutory dues as on the last day of the financial year concerned for a period of more than six months from the date they become payable are as under :

Nature of Dues Amount in $
1 Excise Duty 1,11,76,779
2 Value Added Tax & Central Sales Tax 88,26,150
3 Cane cess 1,05,02,234

(b) There are no dues of Income Tax, Sales Tax, Value added tax, duty of customs, excise, service tax, cess or other statutory dues that have not been deposited on account of any dispute except the following :

Name of the Statute Central Excise Act, 1944 Nature of the dues Cenvat on materials and penalty Amount Forum where dispute is pending Central Excise and Service Tax Appellate Tribunal, Chennai
$
17,86,537
Finance Act, 1994 Service tax on Goods transport 3,63,998 Supreme Court
Tamil Nadu General Sales Tax Act, 1959 Waiver of purchase tax on cane 10,25,97,189 High Court of Madras
Tamil Nadu General Sales Tax Act, 1959 Purchase tax on cane 8,43,950 Deputy Commissioner (CT), (Appeals)
Income Tax Act, 1961 Income tax 33,291 Commissioner of Income tax (Appeals)
Finance Act, 1994 Service tax on Cane harvesting charges 10,47,14,986 Central Excise and Service Tax Appellate Tribunal, Chennai
Income Tax Act, 1961 Tax and interest for Assessment Year 2013-14 2,50,15,710 Commissioner of Income Tax (Appeals)
Finance Act, 1994 Service tax on cane transport 15,19,555 Central Excise and Service Tax Appellate Tribunal, Chennai.

(8) The Company has defaulted in the repayment of dues to the banks and financial institutions.

(9) The Company has not raised any money by way of initial public offer or further public offer (including debt instruments). As per the records of the Company, the term loans availed during the year were applied for the purpose for which those are raised.

(10) To the extent of our knowledge and as per the explanations given to us no material fraud on or by the Company has been noticed or reported during the course of our audit.

(11) As explained to us, the Company has paid/ provided remuneration to its managerial personnel in accordance with the requisite approval mandated by the provisions of Section 197 read with Schedule V of the Companies Act, 2013.

(12) 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.

(13) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with related parties are in compliance with Section 177 and 188 of the Act and details of such transactions have been disclosed in the standalone Ind AS financial statements as required by the applicable accounting standards.

(14) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.

(15) The Company has not entered into any non-cash transaction either with the directors or any persons connected with them.

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

For Guru & Ram LLP

Chartered Accountants

Firm Registration No.:009723S/S200039

A. Rajasekaran

Partner

Membership No. 025549

Chennai : August 14, 2018

Annexure - B to the Auditors Report

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 Thiru Arooran Sugars Limited ("the Company"), as of 31 March 2018 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 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. 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. 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 financial statements for external purposes 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 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 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, to the best of our information and according to the explanations given to us, 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 March 31, 2018, 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 Guru & Ram LLP Chartered Accountants

Firm Registration No.:009723S/S200039

A. Rajasekaran

Partner

Membership No. 025549

Chennai : August 14, 2018