Valecha Engineering Ltd Auditors Report.

To The Members of Valecha Engineering Limited

Opinion

Report on the Audit of Standalone Financial Statements

We have audited the accompanying standalone financial statements of Valecha Engineering Limited ("the Company"), which comprises of Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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 Indian Accounting Standards prescribed under section 133 of the Act read with Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2019, its profits (including other comprehensive income), changes in equity and its cash flows for the year ended on that date.

Basis for Qualified Opinion

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 financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.

Basis for Qualified Opinion:

a) The Company has not evaluated impairment provisions for expected credit losses (ECL) as required under Ind AS 109 "Financial Instruments" towards:

- Loans & advances aggregating to Rs. 258.07 crores given to its four subsidiaries and one step-down subsidiaries;

- Investments aggregating to Rs. 41.97 crores in its four subsidiaries and Rs. 0.02 crores in one associate;

- Corporate Guarantee aggregating to Rs.936.96 crores to Banks on behalf of the two subsidiaries and two step-down subsidiaries. The Company has also not done any fair valuation of such Corporate guarantees as per the requirements of Ind AS 113 but has only recognized the guarantee fees/commission for the respective periods upto March 31, 2018 of Rs. 28.01 Crores. The Company has not recognized any Guarantee Fees / Commissions during the Current Year in view of the already weak financial position of such subsidiaries and step down subsidiaries. No reversals/impairment have been done for the guarantee fees / commission recognized upto March 31, 2018.

The net-worth of the above referred subsidiaries, the step down subsidiaries and one associate is completely eroded on account of continuing losses incurred in the past. In the absence of any further detailed information, we are unable to comment upon the resultant impact which may arise owing to fair valuation adjustment of referred Corporate guarantees the impairment provision for expected credit losses on the above referred Loans & advances, Investments, if any, and its resultant impact on the profit of the year.

Attention is invited to Note No. 51 to the Financial Statements regarding the fact of the Initiation of NCLT proceedings against one of the step down subsidiary of the Company as detailed in the note thereon and its corresponding and consequential impact on the profit, assets and liabilities of the Company.

Further, the Company has also invested Rs. 0.05 crores in one of its Associate Company, financial statements of which are not made available by the Management, in the absence of detailed information and financial statements, we are unable to comment upon the need for impairment provisions, which may be required and the resultant impact on the profit for the year, if any.

b) We draw attention to Note No. 41 to the Financial Statements, where the Company has not provided for any regular interest for the current year as it expects certain relief in view of the proposed settlement proposals being pursued by the Management.

The Company has also not provided any penal interest, if any, which may arise for defaults in repayments of various borrowings for similar reasons.

The Company has also not provided for interest amounting to Rs. 3.57 crores on late payment of Tax deducted at Source.

In absence of detailed computation of penal interest, we are unable to comment on its resultant impact on the profit for the year.

c) We draw attention to Note No. 42 to the Financial Statements where the Company has assigned its loan amounting to Rs. 23.29 crores to its various creditors. Accordingly, the Company has offset the amounts payable to such creditors with its Loan receivable. However, we have not been provided with confirmations / appropriate documentation to verify such assignment of loan / offsetting and accordingly are unable to comment upon the resultant impact, if any on the assets and liabilities as at March 31, 2019.

d) We draw attention to Note No. 43 to the Financial Statements where the Company has during the year transferred its title in Investment in Equity Shares of Bhubaneshwar Express Ways Private Limited ("BEWPL") to KSS Petron Private Limited (earlier known as "Kazstroy Services Infrastructure (India) Private Limited") ("KSSPPL") in accordance with the terms of Option Agreement entered into between the Company and KSSPPL and has accordingly offset the Loan account of KSSPPL with the Cost of Investments in BEWPL. We have only been provided with the email correspondence between the Company and KSSPPL whereby KSSPPL has exercised its call notice, however we have not been provided with the Options Agreement to verify whether the Company had the right under the above arrangement to transfer such Investments at its Cost to the Company and offset such Investment balances with the Loan payable outstanding of KSSPPL. Accordingly, we are unable to comment upon the resultant impact, if any on the assets and liabilities as at March 31, 2019.

e) We draw attention to Note No. 44 to the Financial Statements, the Company has not repaid deposits (including unpaid interest provided upto March 2017 of Rs. 2.58 crores) amounting to Rs. 30.74 crores as at March 31, 2019 as per the contractual terms and repayment schedule / order passed by the Company Law Board - New Delhi Branch heard on February 22, 2016 (Order passed under section 74(2) of the Companies Act Ref.C.P.NO.05(MB) 2016). The Company has also not provided for regular interest on such deposits for the F.Y. 2017-18 and F.Y.2018-19 as per the terms of issue and acceptance of deposits. Further, the Company has also not provided penal interest and fine as may be applicable under rule 21 of (Acceptance of Public Deposit) Rules, 2014. Non provision of such interest is not in compliance with lnd AS 23 "Borrowing Cost". In absence of detailed information and computation of such regular interest, penal interest and fine, if any, we are unable to comment upon its resultant impact on the profit of the year.

f) We draw attention to Note No. 45 to the Financial Statements, the Company has not evaluated expected credit losses for long outstanding Trade Receivables which includes Rs. 160.30 crores pertaining to additional claims raised during previous years due to price escalation and various other reasons which are under arbitration before various authorities.

The Company has not evaluated impairment provisions for expected credit losses as required under Ind AS 109 "Financial Instruments" for loans extended to various related parties (other than subsidiaries, step down subsidiaries and associates as referred in point (a) above) amounting to Rs. 3.56 crores and to others amounting to Rs. 157.32 crores as at March 31, 2019. In absence of detailed information, third party confirmation/ reconciliation, we are unable to comment upon its recoverability and corresponding impact of impairment on profit of the year.

g) We draw attention to Note No. 46 to the Financial Statements, where the Company in relation to its seventeen project sites, which have either been de-mobilized or completed or otherwise shut or non-operational, could not obtain details of transactions effecting, if any, through Bank accounts previously operated through such project sites. There have been no operations in such project sites during the year. Movement in accounts of such project sites, if any, is on account of payments / receipts being made by the Head Office division. Such Project Sites comprises total assets of Rs. 112.29 crores and total liabilities of Rs. 73.54 crores as at the year end. In view of unavailability of information, we are unable to comment upon the resultant impact, if any on profit for the year and assets & liabilities as at March 31, 2019 of the Company, had the said units been verified by us.

h) The accounts of certain Banks, Loans & Advances given, Trade Receivables, Other Current Assets, Lenders liability, Trade Payables and Other liabilities are subject to confirmations, reconciliations and adjustments, if any, having consequential impact on the net profit for the year and assets & liabilities as at year ended, the amounts whereof are presently not ascertainable.

i) There are various Legal Cases filed by / against the Company, since the cases are ongoing, we are unable to comment on any consequential impact in respect of the same on the profit for the year ended, accumulated losses, liabilities as at the year end, the amounts whereof are presently not ascertainable.

Qualified Opinion:

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the aforesaid standalone 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 Indian Accounting Standards prescribed under section 133 of the Act read with Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2019, its profits (including other comprehensive income), changes in equity and its cash flows for the year ended on that date.

Material Uncertainty Related to Going Concern:

We draw attention to Note No. 41 & Note No. 52 to the Financial Statements which indicates that the Company has accumulated losses and its net worth has been substantially eroded and there has been defaults in repayment of various borrowings and deposits. These conditions, along with other matters set forth in Note No 41 & Note No. 52, indicate the existence of a material uncertainty that may cast significant doubt about the Companys ability to continue as a going concern. However, the financial statements of the Company have been prepared on a going concern basis for the reasons stated in Note No.52 to the Financial Statements.

Emphasis of matters:

a) We draw attention to Note No. 50 to the Financial Statements, where the Company has stated that Other Current Assets as at March 31, 2019 includes Rs. 34.42 crores receivable towards various indirect taxes from Government Authorities which are pending for assessments. The Management is confident of ultimate recovery of these amounts and we have relied on the management assertions for recovery of these amounts.

b) The value of inventory is taken and valued as per the details furnished and certified by Management.

c) We draw attention to Note no. 49 to the Financial Statements where the Company has paid / provided managerial remuneration of Rs. 1.10 Crores and Rs 1.98 Crores in current year and previous year, respectively and is hopeful of getting requisite approval from the secured lenders for waiver of recovery of managerial remuneration in terms of the special resolution passed by the members in their Annual General Meeting.

Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Sr. No. Key Audit Matters Auditors response
1 Adoption of Ind AS 115 – Revenue from Construction Contracts
There are significant accounting judgment including estimation of costs to complete, determining the stage of completion and the timing of revenue recognition. Our procedures included:
Assessing the appropriateness of the Companys revenue recognition accounting policies in line with Ind AS 115 and testing thereof.
The Company recognizes revenue and profit/loss on the basis of stage of completion based on the proportion of contract costs incurred at balance sheet date, relative to the total estimated costs of the contract at completion. The recognition of revenue and profit/loss therefore rely on estimates in relation to total estimated costs of each contract. Testing of the design and implementation of controls involved for the determination of the estimates used as well as their operating effectiveness;
Testing the relevant information technology systems access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard;
Testing a sample of contracts for appropriate identification of performance obligations;
Refer to Note Number 2.7 Summary of significant accounting policies – "Revenue Recognition" of the Standalone Financial Statements For the sample selected, reviewing for change orders and the impact on the estimated costs to complete;
Discussion with the qualified & experienced project personnel regarding estimates of costs to complete for sample contracts, determination of milestones, various inherent contingencies in the contracts.
Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings.
2 Evaluation of Uncertain Indirect Tax positions
The Company has material indirect tax matters pending for assessments which involves significant judgment to determine the possible outcome of these assessments. Refer to Note Number 50 of the Standalone Financial Statements. Our procedures included the following:
• Obtained details of key uncertain indirect tax matters;
• Discussed with appropriate senior management and evaluated the Managements underlying key assumptions in estimating the tax provisions;
• Assessed managements estimate of the possible outcome of the assessment proceedings in evaluating managements position on these uncertain tax positions.

Information Other than the Standalone Financial Statements and Auditors report thereon

The Companys Board of Directors is responsible for the preparation of other information. The Other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexures to the Board report, Corporate Governance report and Shareholders information, but does not include the standalone financial statement and our auditors report thereon.

Our opinion on the standalone 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 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 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 required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and those charged with Governance for the Standalone Financial Statements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance (including other comprehensive income), changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Account) Rules, 2014.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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.

In preparing the financial statements, the 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 are also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements 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 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 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 Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial control 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 the 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 entitys 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 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 entity to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statements that individually or in aggregate makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work and (ii) to evaluate the effect of an identified misstatements in the financial statements.

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 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 Matter:

a) Opening balances have been considered based on the audited financial statements issued by the predecessor auditor whose qualified audit report dated 19th July, 2018 have been furnished to us.

b) Our report is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. Pursuant to 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 paragraphs 3 and 4 of the Order.

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

(a) We have sought and except for the possible effects of matters described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit of the aforesaid Standalone Ind As Financial Statements.

(b) Except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph, in our opinion, proper books of account as required by law relating to preparation of the aforesaid Standalone Ind As Financial Statements 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 & Loss (including other comprehensive income), Statement of Changes in Equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) Except for the possible effects of matters described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid Standalone Ind AS Financial Statements comply with the Accounting Standards specified under Section 133 of Companies Act, 2013, read with rule 7 of the Companies (Accounts) Rules, 2014.

(e) On the basis of the written representation received from the directors as on March 31, 2019 taken on record by the Board of Directors, one of the directors is disqualified as on March 31, 2019 from being appointed as a Directors in terms of Section 164(2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure "B".

(g) With respect to the other matters to be included in the Auditors Report in accordance with the requirements of Sec 197(16) of the Act, as amended: In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

(h) With respect to the matters to be included in the Auditors report in accordance with the rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements. [Refer Note No. 31]

ii. Except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the Company has made provision, as required under the applicable law or Ind AS, for material foreseeable losses, if any, on long term contracts.

ii. There has been delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

For Bagaria & Co. LLP
Chartered Accountants
Firm Registration No:
113447W/W-100019
Vinay Somani
Partner
Place : Mumbai Membership No: 143503
Date : July 30, 2019 UDIN : 19143503AAAAFN5914

Annexure "A" referred to in "Report on Other Legal and Regulatory Requirements" section of our report to the members of Valecha Engineering Limited of even date:

On the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of our audit, we state that:

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

b) A major portion of fixed assets have been physically verified by the management in accordance with the programme of verification, which, in our opinion, provides for physical verification of all fixed assets at reasonable interval having regard to the size of the Company and nature of its assets. According to the information and explanations given to us, the discrepancies noticed on such verification were properly dealt with in the books of account.

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

ii) According to the information and explanations given to us, the inventories have been physically verified during the year by the management at reasonable intervals and no material discrepancies were noticed on such verification.

iii) The Company has granted short-term interest-free unsecured loans to five subsidiaries (including 1 step-down subsidiaries) covered in the register maintained under Section 189 of the Act, and with respect to the same:

a. In our opinion the terms and conditions of such loans are not, prima facie, prejudicial to the Companys interest;

b. The Company has granted short term interest-free unsecured loan which are payable on demand. Hence clause iii(b) and iii(c) are not applicable to the Company.

iv) In our opinion and according to the information and explanations given to us, the Company has not entered into any transactions referred to in section 185 of the Act. The Company has complied with the provisions of 186 of the Act with respect to the loans and investments made.

v) According to the information and explanations given to us, during the year the Company has not accepted any deposit from the public. However, the Company has defaulted in repayment of Deposits accepted in previous years amounting to Rs.28.16 Crores and cumulative interest thereon of Rs.2.58 Crores. Further, the Company has not complied with repayment schedule / order passed by the Company Law Board – New Delhi Branch heard on February 22, 2016 (Order passed under section 74(2) of the Companies Act Ref.C.P.NO. 05(MB) 2016). Further, the Company has also not provided penal interest and fine as levied under rule 21 of (Acceptance of Public Deposit) Rules, 2014.

vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government of India, regarding the maintenance of cost records under sub-section (1) of Section 148 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

vii) a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of custom, duty of excise, value added tax, goods and service tax, cess and other material statutory dues applicable to it.

b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees state insurance, income-tax, service tax, sales-tax, duty of custom, duty of excise, value added tax, goods and service tax, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable , except for the following :

Name of the Statute Nature of the Dues Amount (Rs. in Crores) Period to which the amount relates Due Date
Income Tax Act, 1961 Tax Deducted at source 0.09 FY 2014-15 7th day from the end of the relevant month.
4.24 FY 2015-16 7th day from the end of the relevant month.
1.86 FY 2016-17 7th day from the end of the relevant month.
0.14 FY 2017-18 7th day from the end of the relevant month.
0.23 April 2018 to September 2019 7th day from the end of the relevant month.
Total 6.63
Provident Fund & Misc. Provident Fund Contribution 0.09 FY 2015-16 15th day from the end of the relevant month.
Provision Act 1952. 0.04 FY 2016-17 15th day from the end of the relevant month.
0.14 FY 2017-18 15th day from the end of the relevant month.
0.56 April 2018 to September 2019 15th day from the end of the relevant month.
0.82
Total
Goods and Service Act, 2017 Goods and Service Tax 0.54 FY 2017-18 20th day from the end of the relevant month.
1.03 April 2018 to September 2019 20th day from the end of the relevant month.
Total 1.57

c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, there are no dues of Income Tax, Sales Tax, Service tax, Duty of Customs, Duty of Excise and Value Add Tax which have not been deposited on account of any dispute.

viii) In our opinion and according to the information and explanations given to us, except for the loans, borrowings, and dues mentioned below, the Company has not defaulted in repayment of loans or borrowings to any financial institution or bank or Government. Further, the Company does not have any debentures issued / outstanding any time during the year.

Rs. In Crores
Particulars Amount of Default Total Period of Default
Principal Interest
Term Loan
Central Bank Of India 35.98 13.04 49.02 30 to 1279 Days
Syndicate Bank 58.16 19.71 77.88 30 to1186 Days
Yes Bank 6.90 1.65 8.56 30 to 668 Days
State Bank of India 12.08 3.47 15.56 30 to 1095 Days
Working Capital Facilities
State Bank of India 195.53 44.48 240.01 30 to 1097 Days
Axis Bank Ltd 71.66 13.44 85.10 30 to 1106 Days
Canara Bank 22.39 1.93 24.32 30 to 1266 Days
Lakshmi Vilas Bank 30.30 - 30.30 30 to 456 Days
Fixed Deposits from Public 28.16 2.58 30.74 30 to 1673 Days
Machinery Loan
SREI Equipment Finance Ltd. 20.16 10.28 30.44 30 to 730 Days
Total 482.19 110.63 592.82

ix) The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) during the year. No fresh term loans were obtained during the year.

x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company by the officers or employees has been noticed or reported during the year, except for the following instance of fraud on the Company: The Company has received order from Securities and Exchange Board of India (SEBI) on January 5, 2016 under section 11, 11B and 11(4) of the SEBI Act, 1992 Regulation 11 of the SEBI (Prohibition of Fraudulent And Unfair Trade Practices Relating to Securities Market) Regulations, 2003, which has restrained the Company from raising capital from public and further prohibit from buying, selling or otherwise dealing in securities, directly or indirectly, in any manner, whatsoever, for the period of three years from the date of Order.

xi) According to the information and explanations given to us and based on the examination of the records, the Company has paid / provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act. However, since the Company has defaulted in repayment of public deposits, the Company is required to obtain approval from its secured lenders for the remuneration paid / payable to the Directors which is yet to be received.

xii) The provisions of Nidhi Company are not applicable to the Company. Therefore, Para 3 (xii) of the Order is not applicable to the Company.

xiii) According to the information and explanations given to us, the provision of Section 177 and 188 of the Act, to the extent applicable, in respect of transactions with the related parties have been complied by the Company and the details have been disclosed in the Ind AS Financial Statements as required by the applicable accounting standards in Note No. 36 to the Ind AS Financial Statements.

xiv) During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures. Therefore, Para 3 (xiv) of the Order is not applicable to the Company.

xv) According to the information and explanations given to us, during the year, the Company has not entered into any non-cash transactions with directors or persons connected with him under Section 192 of the Act.

xvi) According to the information and explanations given to us the Company is not required to be registered under Section 45 IA of the Reserve Bank of India Act, 1934.

For Bagaria& Co. LLP
Chartered Accountants
Firm Registration No:
113447W/W-100019
Vinay Somani
Partner
Place : Mumbai Membership No: 143503
Date : July 30, 2019 UDIN : 19143503AAAAFN5914

Annexure "B" referred to in "Report on Other Legal and Regulatory Requirements" section of our report to the members of Valecha Engineering Limited of even date:

Report on the Internal Financial Controls over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Act

We have audited the internal financial controls over financial reporting of Valecha Engineering Limited ("the Company") as of March 31, 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Board of Directors of the Company 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 component 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 Act.

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 deemed to be prescribed under section 143(10) of the Act 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 ICAI. 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 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 entity are being made only in accordance with authorizations of management; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entitys 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.

Qualified Opinion

According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified in the operating effectiveness of the Companys internal financial controls over financial reporting as at March 31, 2019:

a. The Company is not having a full fledge ERP system to manage different operational activities. Accordingly, many of the operations, which would have been taken care by the system, required manual intervention and to that extent there are limitations in control system and processes. The discrepancies noticed due to the above weakness, were, however, rectified by the year end with manual intervention.

b. The Company did not have an appropriate internal control system at seventeen (17) projects sites which could potentially result in the Company recognizing revenue without establishing reasonable certainty of ultimate collection and could potentially result in material misstatements in the Companys trade payables, consumption, inventory and expense account balances.

A ‘material weakness is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, 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, to the best of our information and according to the explanations given to us, except for the possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as of March 31,2019, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the said Guidance Note.

We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the standalone financial statements of the Company for the year ended March 31, 2019.

For Bagaria& Co. LLP
Chartered Accountants
Firm Registration No:
113447W/W-100019
Vinay Somani
Partner
Place : Mumbai Membership No: 143503
Date : July 30, 2019 UDIN : 19143503AAAAFN5914