PRAKASH INDUSTRIES Auditors Report

1. Report on the Ind AS Financial Statements


We have audited the accompanying Ind AS financial statements of Prakash Industries Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2017, the Statement of Profit and Loss (including other comprehensive income), the Statement of Cash Flows and the Statement of Changes in Equity for the year ended on that date, and a summary of significant accounting policies and other explanatory information.


2. Management’s Responsibility for the Ind AS Financial Statements


The Company’s 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 and presentation of these Ind AS financial statements that give a true and fair view of the financial position, financial performance (including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (“Ind AS”) specified under Section 133 of the Act, read with relevant rules issued there under. 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.


3. Auditor’s Responsibility


Our responsibility is to express an opinion on these 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 specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Ind AS financial statements are free from material misstatement.


An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the Ind AS financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial controls relevant to the Company’s preparation of the 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 the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the Ind AS financial statements.


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


4. Basis for Qualified Opinion


We refer to:


a. Note 40 to the Ind AS financial statements, wherein in terms of a court order, the deferred tax liability of Rs. 236 lakhs for the year ended on March 31, 2017 has been adjusted against Securities Premium reserve. Had the deferred tax liability been accounted for pursuant to Ind AS-12 ''''Income Taxes’, total comprehensive income after tax for the year ended on March 31, 2017 would have been higher by Rs. 236 lakhs.


b. Note 41 to the Ind AS financial statements, wherein no provision for interest aggregating to Rs.1,126 lakhs for the year and Rs.2,178 lakhs as at March 31, 2017 has been made in respect of restructured Foreign Currency Bonds/Convertible Bonds. Also, no provision of interest (amount not ascertained) has been made in respect of other matured Foreign Currency Convertible Bonds as at March 31, 2017. Had such provision for interest been made, Capital work in progress and Other Current financial liabilities would have been higher to that extent. Further, the Company has classified matured Foreign Currency Convertible Bonds of Rs.15,756 lakhs as borrowings under the head “Non-Current Financial liabilities” instead of “Current Financial liabilities”.


c. Note 42 to the Ind AS financial statements, wherein MAT credit entitlement expired during the year amounting to Rs.1709 lakhs has been adjusted against the retained earnings. Had this been adjusted in the Statement of Profit & Loss, profit for the year would have been lower by such amount.


5. Qualified Opinion


In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described under paragraph 4 ‘Basis for Qualified Opinion’, the aforesaid 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, of the financial position of the Company as at March 31, 2017, and its profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.


6. Emphasis of matters


We draw attention to the following matters referred to in:


a. Note 42 to the Ind AS financial statements, wherein the provision for tax expenses made by the Company is subject to assessment by the tax authorities and set off of MAT credit entitlement is subject to availability of taxable income in future periods within the prescribed time limit as per the relevant provisions of the Income Tax Act, 1961.


b. Note 44 to the Ind AS financial statements, wherein the Coal mine blocks allocated to two Joint Venture Companies have been cancelled pursuant to an order of Hon’ble Supreme court. No provision has been made for any diminution in the value of investments of Rs.218 lakhs made by the Company in these companies and the advance of Rs.189 lakhs given by the Company.


c. Note 45 to the Ind AS financial statements, wherein the Company has not received the full and final compensation for the assets of Chotia coal mine transferred in terms of a government order. The necessary adjustment for the gain/loss on transfer of these assets will be made after receipt of full and final amount of compensation.


d. Note 60 to the Ind AS financial statements, wherein managerial remuneration amounting to Rs.523 lakhs paid/provided for the financial year ended March 31, 2016 is subject to awaited approval of the Central Government.


Our opinion is not qualified in respect of these matters.


7. Other Matter


The comparative financial information of the Company for the year ended March 31, 2016 and the transition date opening balance sheet as at April 1, 2015 included in the Ind AS financial statements, are based on the previously issued audited financial statements for the years ended March 31, 2016 and March 31, 2015 prepared in accordance with the Companies (Accounting Standards) Rules, 2006 which were audited by the predecessor auditor whose report for the years ended March 31, 2016 and March 31, 2015 dated May 24, 2016 and May 25, 2015 respectively expressed modified/ unmodified opinion on those financial statements. The adjustments to financial statements for the differences in the accounting principles adopted by the Company on transition to the Ind AS, have been audited by us.


8. Report on Other Legal and Regulatory Requirements


1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”), issued by the Central Government of India in terms of section 143 (11) of the Act, we give in the “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order.


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


a. We have sought and except for the matters described under ''''Basis for Qualified Opinion’ paragraph, 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. Except for the effects of matters described in the ''''Basis for Qualified Opinion’ paragraph, in our opinion 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 books of account.


d. In our opinion, except for the effects of matters described in the ''''Basis for Qualified Opinion’ paragraph, the aforesaid Ind AS financial statements comply with the Indian Accounting Standards specified under section 133 of the Act, read with relevant rules issued there under.


e. On the basis of the written representations received from the directors as on March 31, 2017 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2017 from being appointed as a director in terms of Section 164 (2) of the Act.


f. The qualification relating to the maintenance of accounts and other matters connected there with are as stated in the ''''Basis for Qualiued Opinion’ paragraph;


g. 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”.


h. With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the information and explanations given to us:


i. The Company has disclosed the impact of pending litigations on its financial position in its Ind AS financial statements (refer note 36 & 38);


ii. Except for the effects of matters described under ''''Basis of Qualified Opinion’ paragraph, the Company has made provisions, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts except in matters described in the ''''Basis for Qualified Opinion’ paragraph. The Company did not have any derivative contracts;


iii. There were no amounts which were required to be transferred, to the Investor Education and Protection Fund by the Company during the year;


iv. The company has provided requisite disclosures in the Ind AS financial statements as to holdings as well as dealings in Specified Bank Notes during the period from November 8, 2016 to December 30, 2016. Based on audit procedures and relying on management’s representation, we report that disclosures are in accordance with the books of account maintained by the Company and as produced to us by the management (Refer note 58).


ANNEXURE A REFERRED TO IN INDEPENDENT AUDITOR’S REPORT OF EVEN DATE TO THE MEMBERS OF PRAKASH INDUSTRIES LIMITED (“THE COMPANY”) ON THE IND AS FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2017


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


(b) The fixed assets were physically verified during the year by the management in accordance with a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. According to the information and explanations given to us, discrepancies noticed on such verification were not material and have been properly dealt with in the books of account.


(c) The title deeds of immovable properties are held in the name of the company except for one case of freehold land having gross/net block value of Rs. 20 lakhs;


(ii) According to the information and explanations given to us, the management has conducted physical verification of inventory at reasonable intervals during the year except materials in transit as at the year end. The discrepancies noticed on verification between physical inventory and book records were not material and have been properly dealt with in the books of account.


(iii) The Company has granted an interest free unsecured loan of Rs. 189 lakhs to a Joint venture company covered under register maintained under section 189 of the Act. In our opinion, the terms and conditions of the loan granted by the Company, having regard to the nature and purpose of the transaction and relying on management’s representation that the Company is obliged to provide finances to the joint venture company, are not prejudicial to the interest of the Company. The schedule of the repayment of the amount is not stipulated, hence we are not able to comment whether the repayments are regular or the outstanding is overdue (Refer note 43).


(iv) According to information and explanations given to us, the company has complied with the provisions of section 185 and 186 of the Act, in respect of loans, investments, guarantees and security as applicable.


(v) According to the information and explanations given to us, the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the rules framed there under.


(vi) We have broadly reviewed the cost records maintained by the Company pursuant to the rules made by the Central Government 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 made and maintained. We have, however, not made a detailed examination of these records with a view to determine whether they are accurate or complete.


(vii) (a) According to information and explanations given to us and the records of the Company examined by us, the Company is generally regular in depositing undisputed statutory dues in respect of provident fund, employee’s state insurance, duty of customs, cess and any other statutory dues except sales tax, income tax, service tax, duty of excise, value added tax and duty on power with the appropriate authorities. The outstanding statutory dues as on March 31, 2017 include the amount of Rs. 2411 lakhs outstanding for a period of more than six months from the date they became payable.


(b) According to the information and explanations given to us and the records of the Company examined by us, there were no outstanding dues in respect of income tax, sales tax, service tax, duty of customs, duty of excise and value added tax which have not been deposited on account of any dispute except the following:






















































Name of Statue



Nature of Dues



Amount (Rs. in Lakhs)



Period to which the amount relates



Forum where the dispute is pending



Central Excise Act, 1944



Excise


Duty



274.46



1994-95, 2005-06 to 2008-09



CESTAT, New Delhi



119.70



2012-13 & 2013-14



Appellate Authority - Addl. Commissioner



5.09



2001-02



Appellate Authority - Jt. Commissioner



17.92



1995-96 & 2010-11 to 2012-13



Appellate Authority - Dy. Commissioner



0.11



1996-97



Appellate Authority - Asstt. Commissioner



The Income Tax Act, 1961



Income


Tax



356.70



1998-99 to 2000-01 & 2006-07



Commissioner of Income Tax (Appeals)



Finance Act, 1994



Service


Tax



194.70



2012-13 to 2014-15



Appellate Authority - Commissioner



(viii) According to the information and explanations given to us, there are no loans or borrowings payable to the Government. The details of the delays by the Company in repayments of loans / borrowing to financial institutions, bank and bond holders are as under:








































Lender



Rs. in Lakhs



Period of Default (days)



Remark



Repayment of Principal



Payment of Interest



Foreign Currency Convertible Bonds (FCCB)



15,756



-



702



Refer note 47



Foreign Currency Bonds (FCB)



3,472 - 6,944



-



213 - 336



Rural Electrification Corporation Limited



6,323



6,419



Rescheduled/restructured by lenders (Refer note 19(b))



Corporation Bank



4,756



1,394



(ix) According to the information and explanations given to us, the Company has not raised any money by way of initial public offer or further public offer (including debt instruments) and term loans have been applied by the Company during the year for the purposes for which they were obtained.


(x) According to the information and explanations given to us, no fraud by the Company or on the Company by its officers or employees have been noticed or reported during the year.


(xi) According to the information and explanations given to us and based on the audit procedures conducted by us, the managerial remuneration paid/provided during the year is in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act. The Company’s applications for approvals in respect of excess managerial remuneration of '''' 523 lakhs paid/payable during the previous year, are pending with the appropriate authority. Accordingly, pending approvals, the Company has taken no further steps in this regard.


(xii) In our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company. Therefore, the provisions of Para 3 (xii) of the Order are not applicable to the Company.


(xiii) In our opinion and according to the information and explanations given to us and based on our examination of the records of the Company, all transactions with the related parties are in compliance with Sections 177 and 188 of the Act, where applicable and the details have been disclosed in the Ind AS financial statements as required by the applicable accounting standards.


(xiv) According to the information and explanations given to us, the Company has, during the year, made allotment of Equity shares to the Foreign Currency Convertible Bond (FCCB) holders on exercising the option of conversion by them as per the terms of the FCCB. The requirements of section 42 of the Companies Act, 2013 have been complied with by the Company to the extent applicable.


(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the company has not entered into any non-cash transactions with directors or persons connected with them. Accordingly, the provisions of clause 3 (xv) of the Order are not applicable to the company.


(xvi) In our opinion, the Company is not required to be registered under section 45 IA of the Reserve Bank of India Act, 1934. Accordingly, the provisions of clause 3 (xvi) of the Order are not applicable to the Company.


For Chaturvedi & Co.


Chartered Accountants


Firm Registration No. 302137E


Pankaj Chaturvedi


New Delhi Partner


May 22, 2017 Membership No. 091239

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.

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