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Independent Auditors' Report
The Members of SPML INFRA LIMITED ,
1. Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of SPML Infra Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.
2. Management's Responsibility for the Standalone 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 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 (as amended). 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 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 standalone financial statements based on our audit.
4. 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 thereunder.
5. 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 standalone financial statements are free from material misstatement.
6. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. 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 internal financial controls relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. 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 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 standalone financial statements.
7. Basis for Qualified Opinion
As stated in Note 39 and 40 to the standalone financial statement, the company's trade receivables, fixed assets and inventories as at March 31, 2015 comprise of Rs. 4,829.10 lakhs (March 31, 2014: Rs. 1904.78 lakhs), Rs. 1,084.28 (March 31,2014: Rs. 1,608.00 lakhs) and Rs. 557.74 lakhs, respectively, related to contracts which have been foreclosed by customers in earlier year and the current year and these are presently under arbitration/litigation proceedings. During the current year, the Company has recorded income aggregating to Rs. 834.69 Lakhs in respect of one of the foreclosed contract which is under arbitration, which in our opinion is not consistent with the principles of revenue recognition. In absence of sufficient appropriate evidence, we are unable to comment upon the recoverability of the aforesaid trade receivables and the existence and carrying value of the aforesaid inventories and fixed assets and the consequential impact, if any, on the financial statements that may arise on settlement of the aforesaid matters. The Auditor's report on the financial statements for the year ended March 31,2014 was also qualified in respect of the matter described in Note 39 referred to above.
8. 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 stated in the basis for qualified opinion paragraph above, the aforesaid standalone 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 state of affairs of the Company as at March 31, 2015, and its profit and its cash flows for the year ended on that date.
9. Emphasis of Matter
We draw attention to note 42 to the standalone financial statements, which indicates the uncertainty relating to the outcome of litigations pending with courts/appellate tribunals with respect to arbitration awards amounting to Rs. 15,543.40 lakhs (including interest of Rs. 4,280.06 lakhs) pronounced in favor of the company and recognized in the books of account, however, the customers have preferred appeals on such awards. Pending the final outcome of these litigations, which is presently unascertainable, no adjustment has been recorded in the statement. Our audit report is not qualified in respect of this matter.
10. Other Matters
We did not audit the financial statements of two unincorporated integrated joint ventures, included in the standalone financial statements, whose financial statements reflect Company's share in profit of Rs. 17.53 lakhs for the year ended March 31, 2015. These financial statements have been audited by other auditors whose reports have been furnished to us, by the management, and our opinion on the standalone financial statements of the Company for the year then ended to the extent relate to the financial statements not audited by us as stated in this paragraph is based on solely on the audit reports of the other auditors. Our opinion is not modified in respect of this matter.
We did not audit the financial statements of an unincorporated integrated joint venture, included in the standalone financial statements, whose financial statements reflect Company's share in profit of Rs. 8.35 lakhs for the year ended March 31, 2015. These financial statements have been certified by the Company's management, and our opinion on the standalone financial statements of the Company for the year then ended to the extent they relate to the financial statements as stated in this paragraph is based solely on, on such management certified financial statements. Our opinion is not modified in respect of this matter.
The standalone financial statements of the company for the year ended March 31, 2014 were audited jointly by another auditor and Sunil Kumar Gupta & Co who had expressed a qualified opinion on those financial statements vide their report dated May 29, 2014. Sunil Kumar Gupta & Co., continues to be Joint auditor for the current year ended March 31, 2015.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government of India 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.
As required by section 143(3) of the Act, we report that:
a. we have sought and (except for the possible effect of the matter 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;
b. except for the possible effect of the matter 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 standalone financial statements dealt with by this report are in agreement with the books of account;
d. except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended);
e. the matter described under the Emphasis of Matter/ Basis of Qualified opinion paragraph in our opinion, may have an adverse effect on the functioning of the Company;
f. on the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as at March 31, 2015 from being appointed as a director in terms of Section 164(2) of the Act;
g. 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 explanations given to us:
i. as detailed in Note 25 to the standalone financial statements, the Company has disclosed the impact of pending litigations on its standalone financial position;
ii. Except for the possible effect of the matter described in the Basis for Qualified Opinion paragraph, the Company, as detailed in Note 34(b) to the standalone financial statements, has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long–term contracts. The Company did not have any derivative contracts for which there were any material foreseeable losses
iii. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
Annexure to the Independent Auditor's Report of even date to the members of SPML Infra Limited, on the financial statements for the year ended March 31, 2015
Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, we report that:
(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assets under which fixed assets are verified in a phased manner over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification (except to the extent stated in note 39 of the financial statements).
(ii) (a) The management has conducted a physical verification of inventory at reasonable intervals, except for as stated in note 40, which have not been verified during the year.
(b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.
(c) The Company is maintaining proper records of inventory and no material discrepancies between physical inventory and book records were noticed on physical verification.
(iii) The Company has granted unsecured loans to companies, firms or other parties covered in the register maintained under Section 189 of the Act, and with respect to the same:
(a) the terms of repayment of the principal amount and the payment of the interest have not been stipulated and hence we are unable to comment as to whether receipt of the principal amount and the interest is regular; and
(b) in the absence of stipulated terms and conditions, we are unable to comment as to whether there is any overdue amount in excess of Rs. one lakh and whether reasonable steps have been taken by the Company for recovery of the principal amount and interest.
(iv) In our opinion, 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. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub–section (1) of Section 148 of the Act in respect of Company's products and services and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
(vii) (a) Undisputed statutory dues including provident fund, employees' state insurance, income–tax, sales–tax, wealth tax, service tax, duty of custom, value added tax, cess and other material statutory dues, as applicable, have not been regularly deposited with the appropriate authorities and, there has been significant delays in large number of cases. The Company did not have any dues towards excise duty during the year. Undisputed amounts payable in respect thereof, which were outstanding at the year–end for a period of more than six months from the date they become payable are as follows:
(C) The Company has transferred the amount required to be transferred to the investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder within the specified time.
(viii) Without considering the possible effects if any, of the matter stated in, Basis for Qualified opinion paragraph of our audit report, in our opinion, the Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and the immediately preceding financial year.
(ix) During the year, the Company has delayed in repayment of principal and interest to banks and financial institutions. The delays with respect to principal and interest upto 90 days amounted to Rs. 6,276.12 lakhs and Rs. 919.62 lakhs, respectively; the delays between 91 to 180 days amounted to Rs. 317.78 lakhs and Rs. 1.76 lakhs, respectively to banks and financial institutions.
As at the year end, the Company has defaulted in repayment of loan and interest aggregating to Rs. 312.50 lakhs and Rs. 35.73 lakhs respectively to banks. As at the balance sheet date, the periods of delays in these cases were up to 90 days.
(x) In our opinion, the terms and conditions on which the Company has given guarantee for loans taken by others from banks or financial institutions are not, prima facie, prejudicial to the interest of the Company.
(xi) In our opinion, the Company has applied the term loans for the purpose for which these loans were obtained.
(xii) No fraud on or by the Company has been noticed or reported during the period covered by our audit.
For Walker Chandiok & Co LLP
per Neeraj Sharma
Membership No. 502103
For SUNIL KUMAR GUPTA & CO.
Firm Registration No : 003645N
per S.K. Gupta
Membership No. 082486
Gurgaon, May 29, 2015