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Updated:13 Dec, 2019, 16:01 PM IST



The Members of PSL Limited Report on the Financial Statements

We have audited the accompanying financial statements of PSL Limited which comprise the Balance Sheet as at 31st March 2015, the Statement of Profit and Loss Account and the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matter stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation & presentation of these standalone 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 Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. 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 control, 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 misstatements, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these standalone 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 provision of the Act and Rules made thereunder.

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 the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amount and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

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


In our opinion and to the best of the information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give true and fair view in conformity with the accounting principles generally accepted in India.

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2015.

(ii) in the case of the Statement of Profit and Loss, of the loss of the Company for the year ended on that date and

(iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Emphasis of Matter

We draw attention to:

1. Long Term Borrowings: Note No. 4 of Balance Sheet and Schedules.

Default In Payment to Banks

Based on our audit procedure and as per the information and explanation given to us, the company has defaulted in repayment of loan and interest to the banks and financial institutions as on 31st March 2015. The Company has sought a restructuring program from the bankers under the guidelines issued by the Reserve Bank of India. The Company had filed an application before the CDR Cell on March 06, 2013 (Cut Off Date : 01.01.2013) along with the Flash Report. After considering the proposal, the final restructuring package was approved by CDR Empowered Group on 23rd August, 2013 which was duly communicated to the Company by the CDR Cell vide its Letter of Approval dated 23rd September, 2013.

In terms of the aforesaid Letter of Approval, for the CDR package:

a) The promoters of the Company are required to make a total contribution of Rs.146.81 Crore by way of subscribing to the equity capital of the Company/ unsecured loan so that the said contribution constitutes 25% of the total sacrifice computed for the aforesaid restructuring.

b) A portion of outstanding debt of lenders of the Company is required to be converted into Equity Shares. Yes Bank, being one of the lenders of the Company, has assigned its debt to Edelweiss Asset Reconstruction Company Ltd. through execution of Deed of Accession to Master Restructuring Agreement. The outstanding portion of debt 2. amounting to Rs. 5 Crore (Rupees Five Crore only) of Edelweiss Asset Reconstruction Company Ltd. was required to be converted into Equity Shares. However the debt amounting to Rs.2.72 (Rupees Two Crore Seventy Two Lacs only) out of aforesaid total debt amount has already been converted into Equity 3. Shares in accordance with the members' approval dated 4th July, 2014 obtained through Postal Ballot dated 20th May, 2014. Now the remaining debt of Rs.2.28 Crore (Rupees Two Core Twenty Eight Lacs only) if required to be converted into Equity Shares of the Company.

c) The Board of the Directors has, in accordance with the SEBI (ICDR) Regulations by passing a resolution on 5th February, 2015 also duly ratified on 10th

February, 2015 considered and approved, subject to the approval of the members of the company, the proposal of issuance of a total of 50619232 Equity Shares of face value of Rs.10/– (Total Ten only) each at a total price of Rs.26/– (Rupees Twenty Six only) 5. per equity share (including premium of Rs.16/– to the Promoter/Promoter Group/Promoter's Group Entities and a CDR Lender namely Edelweiss Asset Reconstruction Company Ltd. hereinafter collectively referred to "Proposed Allottees" of the Company as mentioned at Point a) and b) above calculated in accordance with the Regulation 76 of Chapter VII of the SEBI (ICDR) Regulations for an aggregate value upto approx. Rs.1,31,61,00,120/–(Rupees One Hundred Thirty One Crores Sixty One 7. Lacs and One Hundred Twenty only).

d) Other terms applicable to the proposed issue are as follows:

i) The equity shares shall be subject to lock–in for a period in accordance with the provisions of

the SEBI (ICDR) Regulations.

ii) The equity shares now to be issued shall rank passu with the existing equity shares of the Company in all respects.

e) Further it was mentioned that the Promoters of the Company were required to bring total contribution of Rs.146.9 Crores being 25% of lenders sacrifice. It was stated that the Promoters have infused Rs.38.60 Crores by way of cash, Rs.31.6 Crores by way of subscription of equity, in lieu of sale of land belonging to promoter owned company, Broken Hills International Pvt Ltd located in Tamil Nadu and Rs.57 Crores by mortgaging promoter owned land at Kalkaji, Delhi. The CDR EG opined that CDR package is not being implemented as per CDR guidelines as promoter's contribution is not infused in time but as lenders want to continue under the aegis of CDR, the company can continue under CDR though the package has not been implemented within the timelines.

2 Due to this there is a Cash and Capital crunch and the Company is under stress due to reduction in turn over, slow down in economic environment, increase in the cost of production as well as due to idle labour, lack of sufficient orders and reduced net realization in comparison to the increase cost of sales. There is shortage of working capital.

3 The Company has not provided for the interest amounting to Rs.627.21 Crores for the period from 1st January 2013 to 31st December 2014 which was to be built up as funded interest term loan (FITL) on the Working Capital Term Loan and Cash Credit. The Company has also not provided regular interest for the period of three months i.e. from 1.1.2015 to 31.03.2015 amounting to Rs. 88.58 Crores. The loss of the Company in this financial year is understated to an extent of Rs. 88.58 Crores.

4 The Company has not carried out detailed assessment of the useful life and hence not adjusted depreciation charge accordingly as per the notification to Schedule II of the Companies Act 2013.

5 The Kandla Port Authorities cancelled Lease of certain leasehold lands at Kandla. They have demanded damages and arrears. The ultimate expected liability is not fully provided.

6 The Company has accumulated losses exceeding the entire "Net Worth' and has incurred cash loss. More than 51% of the paid up capital is held partly by one or more public financial institutions which includes share of promoters pledged with the banks and institutions.

7 The Company's financial statements have been prepared under the assumption considering the management assessment and plan to get requisite funding from various other sources as contemplated.

8 Leasing of the Land/Plant & Machinery of Manufacturing Unit – (Varsana, Vizag, Vaiyavoor & Jaipur)

Operations Maintenance and Management

Agreement with Jindal Tubular (India) Limited:

a) The company has negotiated with Jindal Tubular (I) Ltd., through the Manager (Special Purpose Vehicle owned and controlled by Jindal Saw Limited) with necessary assistance from ICICI Bank for handing over the operations of manufacturing units of the company located at Varsana, Vizag, Vaiyavoor and Jaipur on some broad terms and conditions as are finalized between two companies consequent upon personal discussions between the senior officials of the two companies and ICICI Bank.

b) The duration of the proposed transaction will be for a period of one year from the date mentioned in the Definitive Agreements and shall be renewable for an additional period of one year as may be mutually agreed between the parties.

c) Subject to deduction of all costs and expenses incurred by the Manager towards satisfaction of legacy dues, employee and utility dues/other liability of PSL Limited, the Manager will pay to the company 70% of the net revenue for identified facilities at Vaiyavoor, Jaipur and Vizag and for facilities located at Varsana the Manager will pay 50% of net revenue.

d) Upon satisfactory completion of legal and taxation due diligence / identified facilities by the Manager the party shall decide the start up date. (Since decided 15th April, 2015).

e) After completion of the proposed transaction period the parties may agree for any sale of the identified facility, the Company and the ICICI Bank shall provide the Manager a right of first refusal.

f) As per the OMMA the Company shall , as the case may be, comply in full with the condition precedent by April 15, 2015 or within such extended time line as mutually agreed between the parties.

g) An agreement dated March 4, 2015 giving such option to sale the specific units by the Company to JTL has also been extended.

9. Lender Banks' Balance Confirmation as on 31st March 2015:

We are informed that the company has applied for their confirmation of Bank certificate / Bank Guarantees / Letter of Credits / Corporate Guarantees given on behalf of subsidiary companies and interest certificates as on 31st March 2015 which are yet to be obtained and supplied to us.

The loan figures were arrived in the ledger as per the MRA for both categories (signed and not signed). We are informed that the figures in the MRA a document has to be taken as confirmation of balance for the loan account.

10. Investments in Subsidiaries: Note No.11  Non Current Investments.

A) Foreign Subsidiaries:

i) PSL FZE (Sharjah) (Step down Subsidiary) Pipeline Systems Ltd. Mauritius

The Company had invested Rs. 141.63 Crores in a wholly owned subsidiary namely Pipeline Systems Mauritius . Due to cumulative losses in the subsidiary the value of investment is eroded. The Company has not provided for the same.


(Step down Subsidiary)

The Company had invested Rs. 130.34 Crores in a wholly owned subsidiary namely PSL USA Inc. Due to cumulative losses in the subsidiary the value of investment is eroded. The Company has not provided for the same. Also the outstanding debtors includes receivable amounting to Rs. 22.30 Crores from the subsidiary which is not provided for.

We were informed that the financial statements for the period ending on 31st March 2015 audited by other auditors of the above subsidiary companies are yet to be supplied to us. Due to this, provision for diminution / impairment in the value of its investments in the above subsidiary companies is yet to be considered.

B) Indian Subsidiaries:

PSL Infrastructure & Ports Pvt. Ltd.

• Total investment in PSL Port & Infrastructure Limited is Rs.28.21 Crores.

• The company was awarded the construction of Jetty at Kandla Port. Till date the company has incurred construction Expenses of Rs 65.39 Crores.

• Due to restrictions imposed by CDR package of PSL Ltd, the parent company, could not inject/ contribute funds for the construction of the jetty.

• The Kandla Port authorities have given notice for the cancellation of the agreement. The matter is in dispute and under Arbitration. At present, project is incomplete.

11. Loan & Advances : Note No. 12 of Balance Sheet & Schedules

i) The company has given Bank Guarantees on behalf of subsidiary companies.

ii) During the year, Bank Guarantees of Rs 171.72 Crores have been encashed relating to the subsidiaries and debited to the Profit and Loss account.

12. Inventory, Current Assets: Note No. 15 of Balance Sheet and Schedules

The closing inventory as on 31st March, 2015 is Rs. 1391.25 Crores which includes non moving stock of Rs.1101.71 Crores (includes Rs.1078.38 Crores as reported earlier). In view of company's production activities having come down and slow movement in the inventory, there is a need for systematic age wise segregation and analysis of the items comprised in the inventory to assess their usefulness/ usability in the production and servicing activities, period over which they could be used also whether the inventory items are capable of being sold/disposed off as standalone items. Pending such an exercise, we are unable to express an opinion towards non moving and obsolete inventories and the eventual realizable amount in respect of the inventories, as also the possible effect on the financial statements.

13. Debtors: Note No. 16 of Balance sheet and Schedules

i) The Company has Sundry Debtors of Rs 311.94 Crores as on March 31, 2015

The Company has not produced confirmation of balances from sundry debtors confirming the amount outstanding as on March 31, 2015. In the absence of adequate evidence and information made available to us supporting the recoverability of this amount, we are further unable to comment on the financial impact of this matter on the profit / loss for the year ended on 31st March 2015.

14. Sundry Creditors & Loans and Advances:

In the absence of pending confirmation of balances from Trade Payables, Other Loans & Advances as on 31st March, 2015, provision for any adverse variation in the balances is not quantified.

15. The management has decided not to provide for Gratuity, Leave Encashment & Superannuation for the period of 1st April, 2014 to 31st March 2015 because current provision is considered sufficient by the management for this purpose.

16. The Company has incurred losses during the extended financial year 2013 and paid excess remuneration aggregating to Rs.5.91.crores to Seven whole time directors. Since the remuneration was in excess to the limits specified in relevant Sections of the Companies Act, 1956 read with Schedule XIII of The Companies Act, 1956 the company has filed an application to Ministry of Corporate Affairs, Govt. of India to permit waiver of recovery of the aforesaid excess remuneration from each of the 7 Whole Time Directors. Subsequently Permission for six directors received by the Company , permission for one director is still pending.

17. The Estate Office Kandla Port Trust under Public Premises (Evacuation of unauthorized) passed order on 27th March, 2014 for the evacuation of the Kandla PCD–I premises because lease period was over The Estate Office has taken over the possession of the land. Since the lease amount is under dispute, the lease payments have not been made and not provided in the accounts.

18 Some of Creditors have filed winding up petition u/s 433(e) and 434 of The Companies Act, 1956. The matter is sub juidice.

19 A petition under Article 14, 21, 28 and 226 of the Constitution of India has been filed against the company. Our opinion is not qualified in respect of these matters.

20. As required by the Companies (Auditor's Report) Order 2015 issued by the Central Government Ministry of Corporate Affairs in terms of Sub–section (11) of Section 143 of the Companies Act, 2015, we enclose Annexure – A, attached to our report.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 of the Act, 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 it appears from our examination of those books.

c) The Balance Sheet, the statement of Profit & Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the Balance Sheet, the statement of Profit & Loss and the Cash Flow Statement comply with the Accounting Standards notified under the Act read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013.

e) On the basis of written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164 of the Act.


Referred to in paragraph 1 under the heading 'Report on Other Legal and Regulatory Requirements' of our Report of even date on the financial statements for the year ended on 31st March 2015 of PSL Limited

1. a) The company has maintained proper records showing full particulars including quantitative details and situation of the Fixed Assets. These fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

b) In our opinion the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets.

2. Subject to our remark in Item No. 12 in "Emphasis of Matter" the physical verification of inventory has been conducted at reasonable intervals by the management; and the procedures of physical verification of inventory followed by the management is reasonable and adequate in relation to the size of the Company and nature of its business.

The Company is maintaining proper records of inventory and any material discrepancies noticed on physical verification have been properly dealt with in the books of account.

3. The Company has not granted loans, secured/unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act.

4. There is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. There is no failure to correct major weaknesses in internal control system. However the internal controls over accounting of consumption, wastages, material reconciliation, need further strengthening.

a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under section 189 of the Companies Act, 2013 have so been entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 189 of the Companies Act, 2013 have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public within the meaning of Section 73 to 76 of the Act and the rules framed there under. Therefore, the provisions of Section 73 and 74 of the Act and any other relevant provisions of the Companies Act, 2013 and the rules framed there under with regard to deposits accepted from the public are not applicable to the Company.

7. 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. The cost audit is completed up to the year ended 31st March 2012.

The Cost Audit Report is mandatory u/s. 233B of the Companies Act 1956.

8. According to the records of the Company, the Company is not regular in depositing undisputed Statutory dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Excise, valued added tax cess and any other statutory dues with the appropriate authorities, however there is some delay in depositing Govt. dues due to financial difficulties. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Sales Tax, Customs Duty, Service Tax, Excise Duty and Cess were outstanding, at the financial reporting period ending on 31st March 2015 for a period of more than six months from the date they became payable.

As on 31st March, 2015 according to the records of the Company the following are the particulars of disputed dues on account of Excise duty, Customs, Income Tax, Service Tax, Sales Tax & DGFT and have not been deposited.

9. The Company has transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder has been transferred to such fund within time.

10. Based on our audit procedures and on the information and explanations given by the management, the Company has defaulted in repayment of dues as per CDR package amounting to Rs. 273.11 Crore towards principal and Rs. 88.58 Crores towards Interest during the year to financial institution, and banks due to financial difficulty. The Company operates in a multiple banking system availing facility for various coated pipe supply projects from respective bankers. In this circumstances amount of overdue principal and overdue interest as on a particular date and corresponding period of delay is not quantifiable.

11. In our opinion and explanation given to us the Company has given Guarantees for loan taken by its subsidiaries from banks/financial institutions, but terms and conditions of such guarantees are not prejudicial to the interest of the Company. However company has not given any guarantee during the year.

12. Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained. However there is no new loan availed by the company during the year.

13. According to the information and explanations given to us & based on the documents & records produced to us, the Company has not granted loans or advances on the basis of security by way of pledge of shares, debentures & other securities.

14. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash flow statement of the Company, the Company has not availed any new loan.

15. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

Reasons for unfavourable /Qualified answers

1. Paragraph No. 7 – Cost Audit – We were given to understand that report for the period ended September 2013, March 2013, March 2014 and March 2015 are under progress.

2. Paragraph No. 8 – Statutory dues Due to Financial crunch non availability of funds there is irregularity in depositing statutory dues. However the management is taking all the necessary steps to be in line.

3. Paragraph No. 10– – Default in repayment of bank loan

Due to Financial crunch the repayments were not made. The company is in the process of entering into a Contract (OMMA) with another company in order to revive the operation and generate revenue towards repayment of loan. In the absence of bank confirmation banks loans were taken as per books.

For Suresh C. Mathur & Co.

Chartered Accountants,

(Firm Regn. No. 000891N)

 (Suresh C. Mathur)

PARTNER M. No. 1276

Place: New Delhi

Dated: 13th May, 2015