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INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF STEEL AUTHORITY OF INDIA LIMITED
REPORT ON THE STANDALONE FINANCIAL STATEMENTS
We have audited the accompanying Standalone financial statements of Steel Authority of India Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2015, the Statement of Profit and Loss, the Cash Flow Statement and a summary of significant accounting policies and other explanatory information for the year then ended.
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. 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.
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 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 the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Standalone financial statements are free from material misstatement. 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 the internal financial control relevant to the Company preparation of the Standalone 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 control 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 Standalone financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Financial Statements.
Basis for Qualified Opinion
1. The Company has not provided for;
a) entry tax amounting to Rs.94.89 crore (current year Rs.3.34 crore) in the state of Uttar Pradesh, Rs.1084.32 crore (current year Rs.13.04 crore) in the state of Chhatisgarh and Rs.333.95 crore (current year Rs.119.14 crore) in the state of Odisha (refer note no.29.2(a));
b) amount paid to DVC against bills raised for supply of power and retained as advance by Bokaro Steel Plant amounting to Rs.393.59 crore ( current year Rs.101.83 crore) (refer note no.
2. At Salem Steel Plant, inventory includes estimated quantity of9089 MT of skull extractable from slag valued at Rs.51.80 Crore. Valuation of skull was not justified since there is no separate distinguishable physical existence of 9089 MT of skull and therefore cannot be considered as inventory as on 31–03–2015. Further, this constitutes a departure from Para 9
The mentioned cases are sub–judice and pending before the Hon'ble Supreme Court and other various courts. The disputed demands, contested on valid and bonafide grounds, have been disclosed as contingent liabilities as it is not probable that present obligations exist on the Balance Sheet date. Therefore, there is no adverse impact on profit. These cases were sub–judice as on 31st March, 2012 also and there is no change in the status of these cases during the Financial Years 2012–13, 2013–14 & 2014–15.
During the Year 2014–15, Salem Steel Plant has extracted 1124 MTs of Skull from Slag, out of which 615 MT has been consumed as melting scrap during 2014–15. Thus existence of skull in Slag has been established. The award of contract for extraction of skull fromof the Guidance note on Audit of inventories, which states that all recorded inventories should exist at year end, as there is no identifiable skull as such and hence should not have been considered as inventory to that extent.
The total impact of above para (1) to (2) has resulted in, overstatement of Profit before Tax for the year by Rs.289.15 crore, overstatement of Reserves & Surplus by Rs.1958.55 crore (Previous Year Rs.1669.40 crore), understatement of Current Liabilities by Rs.1906.75 crore (Previous Year Rs.1669.40 crore) and overstatement of Current Assets by Rs.51.80 crore (Previous Year XNil).
In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion 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:
(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2015;
(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.
Emphasis of Matter
We draw attention to;
i. net sales include sales to Government agencies which are recognised on provisional contract prices (refer note no.32.1);
ii. based on technical opinion, the Co. has adopted effective useful life of Plant & Machinery used in the manufacture of steel as a continuous process plant working on three shift basis, which is different from useful life as prescribed in Schedule II of the Companies Act, 2013 (refer note no.32.9); Our opinion is not qualified in respect of these matters.
We did not audit the financial statements of 9(Nine) Plants/Units included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of Rs.74,872.72 crore as at 31st March, 2015 and total revenues of Rs.23,883.15 crore for the year ended on that date, as considered in the standalone financial statements. The financial statements/information of these Plants/Units have been audited by the branch auditors, appointed by Comptroller & Auditor General of India, whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these Plants/Units, is based solely on the report of such Plants/Units auditors.
Our opinion is not qualified in respect of this matter.
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 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. (a) (b) As required by Section 143 (3) of the Act, we report that:
We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
b.Except for the effect of the matter described in the Basis for Qualified opinion paragraph above, in our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the Plants/ Units not visited by us.
c. The reports on the accounts of the Plants/Units of the Company audited under Section 143 (8) of the Act by Plants/Units auditors have been sent to us and have been properly dealt with by us in preparing this report.
d. The Balance Sheet and Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account.
e. Except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, 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. inventory of Slag is in process. Thus the 9089 MTs of Slag extractable from Skull is in existence and inventory of skull has been considered correctly.
f) The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may not have an adverse effect on the functioning of the Company.
(g) On the basis of the written representations received from the Directors as on 31 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(2) of the Companies Act, 2013.
(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 explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 29 to the financial statements;
ii. the Company did not have any long–term contracts including 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 Company.
3. As required by section 143(5) of the Act, we give in Annexure – B, a statement on the matters specified by the Comptroller and Auditor General of India for the Company.
Annexure–A to the Independent Auditors’ Report (Referred to in paragraph 1 of our Report on Other Legal and Regulatory Requirements relevant to paragraph 3 & 4 of “the Order”)
(i) In respect of its fixed assets:
(a) The Company has maintained proper records showing in most cases, full particulars including quantitative details and situation of its fixed assets.
However the location and extent of area in few of the plants in respect of land needs to be updated in the fixed assets registers and have to be reconciled with the revenue records as to the extent of holding and location of land. The delay is attributable to procedural matters involved in ascertaining and reconciling with revenue records maintained by the revenue departments of the state governments involved.
Necessary action is being taken to update the location and extent of area in respective plants in the fixed assets registers. This is acontinu ous process.
b) The fixed assets of the Company have been physically verified by the management at reasonable intervals in a phased manner so as to generally cover all the assets once in three years. However, it is observed that certain land and buildings are under encroachment/unauthorised occupation. As informed to us, no material discrepancies have been noticed on such verification
Necessary action is being taken to evict the occupants from land and buildings under encroachment/unauthorized occupation.
(ii) In respect of physical verification of Inventory:
a) The inventories have been physically verified by the management with reasonable frequency during the year. In certain cases, the stocks have been verified on the basis of visual survey/estimates.
b) In our opinion and according to the information and explanations given to us, the procedures for physical verification of inventories followed by the management are generally 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 discrepancies noticed on physical verification of inventories were not material and have been properly dealt with in the books of account.
(iii) In our opinion and according to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the Register maintained under Section 189 of the Companies Act, 2013. Therefore, clauses (iii) (a) and (iii) (b) of Paragraph 3 of the Order are not applicable to the Company.
iv) In our opinion and according to the information and explanations given to us, there are internal control systems 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, we have not observed any major weaknesses in the internal control system.
v) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Companies Acceptance of deposits) Rules, 2014.
vi) The Company has made and maintained cost records pursuant to the Companies (Cost Records and Audit) Rules, 2014 prescribed by the Central Government under Section 148(1) of the Companies Act, 2013.
vii) 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, Employees’ State Insurance, Income–tax, Sales Tax, Wealth tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Taxes, Cess and other Statutory Dues with the appropriate authorities.
According to the information and explanations given to us, there are no undisputed statutory dues outstanding for a period of more than six months from the date they became payable, as per books of accounts as at 31st March, 2015
b) According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited as on 31st March, 2015 as given herein below:
c) According to the information and explanations given to us, amounts which were to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under has been transferred to such fund.
viii) There are no accumulated losses of the company as at the end of the year. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.
ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Financial Institutions or Banks or Debenture holders.
x) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from Banks or Financial Institutions
xi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, the term loans availed by the Company were, prima facie, applied by the Company during the year for the purpose for which the loans were obtained other than temporary deployment pending application.
xii) To the best of our knowledge and belief and according to the information and explanations given to us, we report that no fraud on or by the Company has been noticed or reported during the year.
For O.P. Totla & Co.
Firm Registration No000734C
[ Rajendra P. Totla ] Partner(M. No. 400658)
For B.N. Misra & Co.
. Firm Registration No. 321095E
[ B. N. Misra ] Partner M. No. 083927)
For Sharma Goel & Co. LLP
Firm Registration No. 000643N
[ Amar Mittal ] Partner ( (M. No. 017755)
For and on behalf of the Board of Directors
(Rakesh Singh) Chairman
Place : New Delhi
Dated : 3rd July, 2015