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INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF SHRIRAM EPC LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of SHRIRAM EPC LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2014, the Statement of Profit and Loss for the Nine months ended 31st March, 2014 and the Cash Flow Statement for the period then ended and a summary of the significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Management is responsible for the preparation of these 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 Standards referred to in Section 211(3C) of the Companies Act, 1956 ("the Act") (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs) and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal controls 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.
Our responsibility is to express an opinion on these financial statements based on our audit. 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 the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.
The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal controls 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 our 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 a true and fair view in conformity with the accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2014;
(b) in the case of the Statement of Profit and Loss, of the Loss of the Company for the Nine months ended 31st March, 2014 and
(c) in the case of the Cash Flow Statement, of the cash flows of the Company for the period ended on that date.
Emphasis of Matter
An audit involves performing procedures to obtain audit 1. Attention is invited to Note 50 and Note 51 to the evidence about the amounts and the disclosures in the financial statements regarding the dues in respect of projects undertaken for two customers. As explained in the said notes, these projects are stalled and Company has not been able to make further progress. However, In the circumstance and for the reasons explained in these notes, the said dues are considered fully realisable by the Management.
2. Attention is drawn to Note No. 52 of the Financial Statements regarding Investments and Loans made to certain companies the aggregate of which as on 31st March 2014 exceed the limits approved by the Shareh0lders for each of such entities though the aggregate outstanding as on that date is within overall limit approved by the Shareholders. Our opinion is not qualified in respect of above matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.
2. As required by Section 227(3) 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 purposes 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 and Loss, and the 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 and Loss and the Cash Flow Statement comply with the Accounting Standards notified under the Act which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs.
(e) On the basis of the written representations received from the directors as on 31st March, 2014 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2014 from being appointed as a director in terms of Section 274(1)(g) of the Act.
ANNEXURE TO THE INDEPENDENT AUDITORS' REPORT
1. Having regard to the nature of the Company's business/activities/result, clauses (vi), (xii), (xiii), (xiv), (xix) and (xx) of paragraph 4 of the order are not applicable.
2. In respect of fixed assets:
(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 period by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.
(c) The fixed assets disposed off during the period, in our opinion, do not constitute a substantial part of the fixed assets of the company and such disposals has, in our opinion not affected the going concern status of the Company.
3. In respect of its inventories:
(a) As explained to us, the inventories (other than contract work in progress) were physically verified by the Management at the period end.
(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business.
(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.
4. In respect of loans, secured or unsecured, granted by the Company to companies, firms or other parties covered in the Register under section 301 of the Companies Act, 1956, according to the information and explanations given to us:
(a) The Company has granted unsecured loans aggregating to Rs.47,446.71 Lakhs to a party covered in the register maintained under Section 301 of the Companies Act, 1956 during the period. At the period–end, the outstanding balance of such loan was Rs.36,338.16 Lakhs from the party and the maximum amount involved during the period was Rs.36,916.95 Lakhs from the party.
(b) The rate of interest and other terms and conditions of such loans are, in our opinion, prima facie not prejudicial to the interests of the Company.
(c) The receipts of principal amounts and interest have been regular/as per stipulations.
(d) There are no overdue amounts as at the Balance Sheet date.
The Company has not taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956.
5. In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to the purchases of inventory, fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weaknesses in such internal control system.
6. To the best of our knowledge and belief and according to the information and explanations given to us, there are no contracts or arrangements that needed to be entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956.
7. In our opinion, the Company has an adequate internal audit system commensurate with the size and the nature of its business.
8. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
9. According to the information and explanations given to us in respect of statutory dues:
(a) The Company has generally been regular in depositing undisputed statutory dues including Provident Fund, Employee State Insurance, Income Tax, Customs Duty, Value added tax, Works Contract Tax, Sales Tax, Wealth tax, Service Tax, Cess and other statutory dues applicable to it with the appropriate authorities during the period. Further statutory dues in respect of Excise Duty are not applicable to the Company.
(b) There were no undisputed amounts payable in respect of Provident Fund, Employee State Insurance, Income Tax, Customs Duty, Value added tax, Works Contract Tax, Sales Tax, Wealth tax, Service Tax, Cess were in arrears, as at 31st March, 2014 for a period of more than six months from the date they became payable.
10. The accumulated losses of the Company at the end of the financial period are not less than fifty percent of its net worth and the Company has incurred cash losses during the financial period covered by our audit and in the immediately preceding financial period.
11. In our opinion and according to the information and explanations given to us, the Company has not been regular in repayment of dues to banks and there have been defaults in repayment of principal and interest amounting to Rs.17,600.46 Lakhs during the period and defaults in repayment of principal and interest amounting to Rs.13,166.91 Lakhs outstanding as at 31st March, 2014. (Refer Note No. 5.3 and Note No. 8.3 of financial statements). The company has not borrowed from financial institutions and has not issued any debentures during the period.
12. In our opinion and according to the information and explanations given to us, the Company has given a guarantee, for loans taken by one party, from a bank during the period, the terms of which are prima facie not prejudicial to the interest of the company.
13. In our opinion and according to the information and explanations given to us, the term loans have been applied by the company during the period for the purposes for which they were obtained.
14. In our opinion and according to the information and explanations given to us, and on an overall examination of the Balance Sheet of the Company, we report that funds raised on short–term basis have, prima facie, not been used during the period for long–term investment.
15. During the period, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.
16. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the period.
FOR DELOITTE HASKINS & SELLS
Registration No: 008072S
M. K. Ananthanarayanan
Place : Chennai
Date : 27th May, 2014