Zenith Steel Pipes & Industries Limited
(Formerly known as Zenith Birla (India) Limited)
Report on the Audit of the Standalone Financial Statements Qualified Opinion
1) We have audited the accompanying standalone financial statements of Zenith Steel Pipes & Industries Limited (formerly known as Zenith Birla (India) Limited) (“the Company”), which comprise the Balance Sheet as at 31st March 2024, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and notes to the standalone financial statements, including a summary of the material accounting policies and other explanatory information (herein after referred to as “the standalone financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, subject to the effect of the matters described in the Basis for Qualified opinion paragraph below the aforesaid standalone financial statements give the information required by the Companies Act,2013 (“the Act”) in the manner so required and give true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2024, the loss and the total comprehensive loss, changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
1. The Company has not complied with the provision of section 74 or any other relevant provision of the Act, and the Companies (Acceptance of Deposits) Rules, 2014 with regard to non-repayment of deposits and interest, on due date, maintenance of liquid assets to the extent required as well as not fully complying with the orders passed by the Company Law Board.
2. With reference to Note No 43 regarding the balance of Trade Payables, Trade Receivables, Loans, Advances, Deposits, intergroup, current liabilities, borrowing from others etc. being not confirmed by the parties due to pending reconciliation the management has not sent direct confirmations to parties and hence our inability to state whether these balances are recoverable /payable to the extent stated.
3. The Company has made a provision of Rs. 41.07 lakhs in respect of certain current bank accounts maintained with various banks, which have been frozen by regulatory authorities. In the absence of bank statements and year-end balance confirmations, we are unable to comment on its impact, if any, on the books of account. (Refer note 50).
4. The Company has accumulated losses exceeding the share capital and reserves and its net worth has been fully eroded. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the company's ability to continue as a going concern. However, the standalone financial statements have been prepared on a going concern basis considering management's assessment of the current situation and future prospects. (Refer note 47)
5. The Company has considered inventory value of Rs. 1,986.47 Lakhs as on 31st March, 2024 in the standalone financial statements by adopting weighted average cost method as informed to us. Since adequate information and necessary supporting evidences for the valuation were not made
available to us, as a result the impact of shortage/ excess of inventory, if any, could not be ascertained and adjusted in the books. (Refer Note no 49)
We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing (SA's) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the 'Auditor's Responsibilities for the Audit of the Financial Statements' section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the Standalone Financial Statements.
Emphasis of Matter
2) We draw attention to the following matters forming part of the notes to the standalone financial statements:
1. Note no. 45 regarding MOU entered into by the Company with T ribus Real Estate Pvt. Ltd (TREPL) for taking over the Company's secured bank loan, which is pending completion.
2. Note no. 48 regarding to the order issued by SEBI for violations of provisions of SEBI Act 1992 and SEBI regulations regarding issue of GDR.
3. Note no. 46 regarding Securitization & Reconstruction of Financial Assets initiated by Consortium Banks for repayment of dues Rs. 19,319.00 Lakhs as on 31st January, 2014 and have taken symbolic possession of immovable assets and filed case for physical possession. The case is pending in DRT Pune.
4. Note no. 53 regarding the show cause notice u/s 148A(b) of Income Tax Act, 1961 received by Company on 01st March, 2024 for AY 2020-21.
5. Note no. 54 regarding reversal of provisions for expenses and disclosed in the Financial Statements.
Our opinion is not modified in respect of these matters.
Key Audit Matters
3) Key Audit Matters (“KAM”) are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for Qualified Opinion Section, we have determined the matters described below to be the Key Audit Matters (“KAM”) to be communicated in our report.
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Key Audit Matter
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Auditors' Response
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Evaluation of income tax provision The Company is required to estimate its income tax liabilities in accordance with the tax laws applicable in India. Further, there are matters of interpretation in
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In view of significance of matter, we applied the following audit procedures in this area, among others to obtain sufficient appropriate audit evidence:
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terms of application of tax laws and related rules to determine current tax provision and deferred taxed.
The Company has material tax positions and litigations on a range of tax matters. This requires management to make significant judgements to determine the possible outcome of uncertain tax provisions and litigations and their consequent impact on related accounting and disclosures in the standalone financial statements.
Refer Note 34 to the Standalone Financial Statements.
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• testing the design and operating effectiveness of the company's key controls over identifying uncertain tax position and matters involving litigations/disputes.
• obtaining details of tax positions and tax litigations for the year and as at 31st March 2024 and holding discussions with designated management personnel.
• assessing and analyzing select key correspondences with tax authorities and inspecting external legal opinions obtained by management for key uncertain tax positions and tax litigations.
• evaluating underlying evidence and documentation to determine whether the information provides a basis for amounts reserved / not reserved in the books of account.
• Involving our tax specialists and evaluating managements underlying key assumptions in estimating the tax provisions and estimate the possible outcome of tax litigations; and in respect of tax positions and litigation, assessing the computation of provisions and consequent impact on related accounting and disclosures in the standalone financial statements.
We verified that the income tax provisions recognized till date in the books of account and assessed that the related disclosures are given in the financial statements.
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Allowance for credit losses
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Our audit procedures related to the allowance
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The Company determines the
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for credit losses for trade receivables included
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allowance for credit losses based on
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the following, among others:
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historical loss experience adjusted to
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reflect current and estimated future
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We tested the effectiveness of controls over
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economic conditions. The Company
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the
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considered current and anticipated
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• development of the methodology for
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future economic conditions relating to
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the allowance for credit losses,
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industries the Company deals with and
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including consideration of the current
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the geographical location where it
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and estimated future economic
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operates.
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conditions
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• completeness and accuracy of
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In calculating expected credit loss, the
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information used in the estimation of
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Company has also considered credit
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probability of default and
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reports and other related credit
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• Computation of the allowance for
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information for its customers to
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credit losses.
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estimate the probability of default in
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future.
We identified allowance for credit losses as a key audit matter because the Company exercises significant judgment in calculating the expected credit losses.
Refer Note 57 to the Standalone financial statements.
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For a sample of customers:
We tested the input data such as credit reports and other credit related information used in estimating the probability of default by comparing them to external and internal sources of information.
We tested the mathematical accuracy and computation of the allowances by using the same input data used by the Company.
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Investment impairment assessment
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Evaluation of impairment risk and assessing whether triggers exist for any investment
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The Company has investments in
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based on consideration of external and
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subsidiaries. These investments are
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internal factors affecting the value and
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accounted for at cost less impairment. If an impairment exists, the recoverable
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performance of the investment.
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amounts of the above investment are
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Our audit procedures included:
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estimated in order to determine the
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• Obtained management assessment of
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extent of the impairment loss, if any.
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recoverable amount for investments where impairment risk is identified.
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Determination of triggers for
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• Evaluated the mathematical accuracy of the
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impairment in value of these
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cash flow projection and assessed the
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investments and recoverable amount
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underlying key assumptions in
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involves significant estimates and
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management's valuation models used to
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judgements.
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determine recoverable amount considering external data, including assumptions of projected EBITDA, revenue growth rate, terminal growth rates, discount rates, and assessed the sensitivity of the assumptions on the impairment assessment and assessed the forecasts against the historical performance.
We assessed the appropriateness of the related disclosures in the standalone financial statements.
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Information Other than the Standalone Financial Statements and Auditor's Report Thereon
4) The Company's management and Board of Directors are responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Director's Report including annexures to Director's Report, Corporate Governance Report and Shareholder's Information, but does not include the Standalone Financial Statements and our Auditors' Report thereon. The above-referred information is expected to be made available to us after the date of this Auditor's report.
Our opinion on the Standalone Financial Statements does not cover the other information and we do not express any form of assurance, conclusion thereon.
5) In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to date of this audit report, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.
When we read the other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take appropriate actions, if required.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements.
6) The Company's management and Board of Directors are responsible for the matters stated in Section 134 (5) of 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 (including other comprehensive income), changes in equity and cash flows of the Company in accordance with, the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act and the accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
7) In preparing the standalone financial statements, management and Board of Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone financial statements
8) Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section 143 (3) (i) of the Act, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls with reference to Standalone financial statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
9) As required by the Companies (Auditor's Report) Order, 2020 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act and on the basis of the examination of the books and records of the Company as we considered appropriate and according to the information and explanation given to us, we give in the “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
10) As required by Section 143(3) of the Act we report that:
a. 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. 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 except for the matters stated in paragraph 10(h) (vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended);
c. The Standalone Balance Sheet, the Standalone Statement of Profit and Loss (including other comprehensive income), the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows dealt with by this Report are in agreement with the books of account;
d. In our opinion and to the best of our information and explanation given to us, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as amended;
e. On the basis of the written representations received from the directors as on 31st March 2024 taken on record by the Board of Directors, none of the directors are disqualified as on 31st March 2024 from being appointed as a director in terms of Section 164(2) of the Act.
f. 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”. Our report expresses a Qualified Opinion on the internal financial controls over financial statements of the Company for the year.
g. In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the company to its directors during the year is in accordance with the provisions of section 197 of the Act.
h. With respect to the other matters to be included in the Auditors' Report in accordance with Rule11 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 as at 31st March 2024 on its financial position in its standalone financial statements. Refer Note 34 to the standalone 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 amount required to be transferred as on 31st March 2024, to the Investor Education and Protection Fund by the Company;
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a. The Management has represented that, to the best of its knowledge and belief, no
funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company.
b. The Management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any person or entity, including foreign entity (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
c. Based on such audit procedures that were considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.
v. The company has not declared or paid any Dividend during the year.
vi. Based on our examination, which included test checks, the Company has used accounting software's for maintaining its books of account for the financial year ended 31st March, 2024 which does not have a feature of recording audit trail (edit log) facility for all relevant transactions recorded in the software. Further, in absence of audit trail feature in the system we are unable to comment on whether the audit trail feature is being tampered with.
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from 1st April, 2023, reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the financial year ended 31st March, 2024.
For C K S P AND CO LLP
Chartered Accountants
FRN - 131228W / W100044
Dhananajay Jaiswal
Partner
M. No. 187686
UDIN: 24187686BKBXMW2292
Place: Mumbai
Dated: 28th May, 2024
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