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Auditor Report of Vardhman Special Steels Ltd.

Mar 31, 2023

INDEPENDENT AUDITOR''S REPORT

To the Members of Vardhman Special Steels Limited
Report on the Audit of the Financial Statements
Opinion

We have audited the financial statements of Vardhman
Special Steels Limited ("the Company") which comprise
the balance sheet as at 31 March 2023, and the statement
of profit and loss (including other comprehensive
income), statement of changes in equity and statement
of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant
accounting policies and other explanatory information.

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 Companies Act, 2013 ("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 31
March 2023, and its profit and other comprehensive
loss, changes in equity and its cash flows for the year
ended on that date.

Basis for Opinion

We conducted our audit in accordance with the
Standards on Auditing (SAs) specified under Section
143(10) of the Act. Our responsibilities under those SAs

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 together
with the ethical requirements that are relevant to our
audit of the financial statements under the provisions of
the Act 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 financial statements.

Key Audit Matters

Key audit matters are those matters that, in our
professional judgment, were of most significance in
our audit of the 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.

Other Information

The Company''s Management and Board of Directors are responsible for the other information. The other information
comprises the information included in the Company''s Management Discussion and Analysis, Board''s Report
including Annexures to Board''s Report, Business Responsibility and Sustainability Report, Corporate Governance

and Shareholder''s Information, but does not include the
financial statements and auditor''s report thereon.

Our opinion on the financial statements does not cover
the other information and we do not express any form
of assurance conclusion thereon.

In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information
is materially inconsistent with the financial statements
or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the
work we have performed, 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.

Management''s and Board of Directors Responsibilities
for the Financial Statements

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
financial statements that give a true and fair view of the
state of affairs, profit and other comprehensive income,
changes in equity and cash flows of the Company in
accordance with the accounting principles generally
accepted in India, including the Indian Accounting
Standards (Ind AS) specified under Section 133 of the
Act. 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 financial statements that give a true
and fair view and are free from material misstatement,
whether due to fraud or error.

In preparing the financial statements, the 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
Financial Statements

Our objectives are to obtain reasonable assurance
about whether the 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 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 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 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 the
Management and Board of Directors.

• Conclude on the appropriateness of the
Management and Board of Directors use of the
going concern basis of accounting in preparation
of financial statements 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 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 financial statements, including the
disclosures, and whether the financial statements
represent the underlying transactions and events in
a manner that achieves fair presentation.

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 financial
statements of the current period and are therefore
the key audit matters. We describe these matters in
our auditor''s 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

1. As required by the Companies (Auditor''s Report)
Order, 2020 ("the Order") issued by the Central
Government of India in terms of Section 143(11)
of the Act, we give in the "Annexure A" a statement
on the matters specified in paragraphs 3 and 4 of
the Order, to the extent applicable.

2 A. 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.

c. The balance sheet, the statement of profit and
loss (including other comprehensive income),
the statement of changes in equity and the
statement of cash flows dealt with by this
Report are in agreement with the books of
account.

d. In our opinion, the aforesaid financial
statements comply with the Ind AS specified
under Section 133 of the Act.

e. On the basis of the written representations
received from the directors of the Company
as on 31 March 2023 taken on record by the
Board of Directors of the Company , none of
the directors of the Company is disqualified as
on 31 March 2023 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 with reference to financial
statements of the Company and the operating
effectiveness of such controls, refer to our
separate Report in "Annexure B".

B. 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:

a. The Company has disclosed the impact of
pending litigations as at 31 March 2023 on its
financial position in its financial statements -
Refer Note 40 to the financial statements.

b. The Company did not have any long-term
contracts including derivative contracts for
which there were any material foreseeable
losses.

c. There were no amounts which were required
to be transferred to the Investor Education and
Protection Fund by the Company.

d (i) The management has represented that,
to the best of its knowledge and belief, as
disclosed in the Note 50 (v) & 50 (vi) to
the financial statements, 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(s) or entity(ies), including
foreign entities ("Intermediaries"), with
the understanding, whether recorded in
writing or otherwise, that the Intermediary
shall directly or indirectly lend or invest in
other persons or entities identified in any
manner whatsoever by or on behalf of
the Company ("Ultimate Beneficiaries") or
provide any guarantee, security or the like
on behalf of the Ultimate Beneficiaries.

(ii) The management has represented that,
to the best of its knowledge and belief, as
disclosed in the Note 50 (v) & 50 (vi) to
the financial statements, no funds have
been received by the Company from
any person(s) or entity(ies), including
foreign entities ("Funding Parties"), with
the understanding, whether recorded in
writing or otherwise, that the Company
shall directly or indirectly, lend or invest in
other persons or entities identified in any
manner whatsoever by or on behalf of the
Funding Parties ("Ultimate Beneficiaries") or
provide any guarantee, security or the like
on behalf of the Ultimate Beneficiaries.

(iii) Based on the audit procedures performed
that have been 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 (i) and (ii) of Rule 11(e),
as provided under (i) and (ii) above, contain
any material misstatement.

e. The final dividend paid by the Company during
the year, in respect of the same declared
for the previous year, is in accordance with
Section 123 of the Act to the extent it applies
to payment of dividend.

As stated in Note 48.2 to the financial statements,
the Board of Directors of the Company have
proposed final dividend for the year which is
subject to the approval of the members at the
ensuing Annual General Meeting. The dividend
declared is in accordance with Section 123 of
the Act to the extent it applies to declaration of
dividend.

f. As proviso to rule 3(1) of the Companies
(Accounts) Rules, 2014 is applicable for the
Company only with effect from 1 April 2023,
reporting under Rule 11(g) of the Companies
(Audit and Auditors) Rules, 2014 is not
applicable.

C. With respect to the matter to be included in the
Auditor''s Report under Section 197(16) of the
Act:

In our opinion and according to the information
and explanations given to us, the remuneration
paid by the Company to its directors during the
current year is in accordance with the provisions
of Section 197 of the Act. The remuneration paid
to any director is not in excess of the limit laid
down under Section 197 of the Act. The Ministry
of Corporate Affairs has not prescribed other details
under Section 197(16) of the Act which are required
to be commented upon by us.

For B S R & Co. LLP

Chartered Accountants
Firm''s Registration No.:101248W/W-100022

Gaurav Mahajan

Partner

Place: Chandigarh Membership No.: 507857

Date: 27 April 2023 ICAI UDIN:23507857BGYNVT8815


Mar 31, 2018

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of Vardhman Special Steels Limited (‘the Company’) which comprise the Balance Sheet as at March 31, 2018, the statement of profit and loss (including other comprehensive income), the Statement of Cash Flow and the Statement of Changes in Equity 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 matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation and presentation of these financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income and cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind-AS) specified under Section 133 of the Act, read with relevant rules issued thereunder.

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.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these 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 thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under sub-section 10 of section 143 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 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 internal financial control 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. 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 audit opinion on the financial statements

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, of the financial position of the Company as at 31 March, 2018, and its financial performance including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government of India 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. 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 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 and loss including Other Comprehensive Income, the statement of cash flow and statement of changes in equity dealt with by this report are in agreement with the books of account;

(d) in our opinion, the aforesaid financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act read with relevant rule issued thereunder;

(e) on the basis of written representations received from the directors as on March 31, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018 from being appointed as a director in terms of sub-section 2 of section 164 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”; and

(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:

(h) the Company has disclosed the impact of pending litigations on its financial position in its financial statements - refer note 32 to the financial statements.

(i) the Company has made provision, as required under the applicable law or Accounting Standards, for material foreseeable losses, if any, on longterm contracts including derivative contracts.

(j) there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

ANNEXURE A” TO THE INDEPENDENT AUDITOR’S REPORT

The Annexure as referred in paragraph (1) ‘Report on Other Legal and Regulatory Requirements of our Independent Auditors’ Report to the members of Vardhman Special Steels Limited on the financial statements for the year ended March 31, 2018, we report that:

i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of property, plant & equipment (fixed assets).

(b) The fixed assets have been physically verified by the management according to the programme of periodical verification in 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 fixed assets. Pursuant to the program, certain fixed assets were physically verified by the management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and on the basis of our examination of records of the Company, the title deeds of immovable properties are held in the name of the Company.

ii) We have been explained by the management that the inventory has been physically verified at reasonable intervals during the year. As far as we can ascertain and according to information and explanations given to us, the discrepancies, whenever material noticed on such physical verification of inventory as compared to book records were properly dealt within the books of accounts.

iii) The Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the Register maintained under section 189 of the Act. Accordingly, the provisions of clause 3 (iii) (a) to (c) of the Order are not applicable to the Company.

iv) According to the information and explanations given to us, the Company has not given any loans, investments, guarantees, and security under the provisions of Section 185 & 186 of the Companies Act, 2013. Accordingly, the provisions of clause 3(iv) of the Order is not applicable to the company and hence not commented upon.

v) The Company has not accepted deposits during the year and does not have any unclaimed deposits as at March 31, 2018 and therefore, the provisions of the clause 3(v) of the order are not applicable to the Company.

vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by Central Government for the maintenance of cost records under section 148(1) of the Act in respect to the Company’s products to which said rules are made applicable and are of the opinion that prima facie, the prescribed records have been made and maintained. We have however not made a detailed examination of the said records with a view to determine whether they are accurate or complete.

vii) (a) According to the information and explanations given to us and on the basis of examination of the records of the Company, the Company has generally been regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, sales-tax, income tax, service tax, goods and service tax, custom duty, excise duty, value added tax, cess and any other material statutory dues with the appropriate authorities.

There were no undisputed amounts payable in respect of provident fund, employees’ state insurance, sales-tax, income tax, service tax, goods and service tax, custom duty, excise duty, value added tax, cess and any other material statutory dues in arrears as at March 31, 2018 for a period of more than six months from the date they become payable.

(b) According to the records and information and explanations given to us, there are no dues in respect of income tax, sales tax, service tax, goods and service tax, duty of excise, duty of custom, or value added tax which have not been deposited on account of any dispute except as given below:

Name of the statute

Nature of dues

Period to which amount relates

Amount involved (D In Lakhs) *

Forum where dispute is pending

Sales Tax Act

VAT & CST Entry Tax CST VAT

2014-15

2013-14

2013-14

2013-14

2.37

6.59

3.35

3.10

Additional Commissioner of Sale Tax ( Appeals), Ghaziabad-UP Additional Commissioner of Sale Tax ( appeals), Ghaziabad-UP Additional Commissioner of Sale Tax ( appeals), Ghaziabad-UP Additional Commissioner of Sale Tax ( appeals), Ghaziabad-UP

Central Excise Act 1944

Excise Duty

1994-95

2000-01

2000-01

2005-06

2013-14

2012-13

2013-14

2014-15

2015-16

4.16

0.45

27.78

1.33

1.46

0.85

0.25

0.71

1.93

Chief Commissioner Excise, Chandigarh CESTAT, Ludhiana

Commissioner Appeals, Chandigarh

Remanded back to Commissioner Appeals by CESTAT in

August, 2010

CESTAT Ludhiana

CESTAT Ludhiana

CESTAT Ludhiana

Commissioner Of Central Excise Appeal, Ludhiana Commissioner Of Central Excise Appeal, Ludhiana

Sales Tax

Punjab VAT & CST

2011-12, 2012-13 & 2013-14

1900.00

High Court Punjab & Haryana-Chandigarh

*Net of Payment

viii) In our opinion, on the basis of audit procedures and according to the information and explanations given to us, the Company has not defaulted in repayment of loan or borrowing to any banks and financial institutions as at Balance Sheet date.

As per information and explanation given to us the Company had not taken any loan or borrowings from the government. Further, the Company had not issued any debenture.

ix) According to the information and explanations given to us, the Company has not raised money by way of initial public offer or further public offer (including debt instruments) during the year. The term loans availed by the company were prima facie applied for the purposes for which they were raised.

x) To the best of our knowledge and according to the information and explanations given to us, no instance of fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.

xi) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

xii) The Company is not a Nidhi Company and hence reporting under clause 3(xii) of the Order is not applicable to the Company.

xiii) In our opinion and according to the information and explanations given to us, the Company is in compliance with section 177 and 188 of the Act where applicable, for all transactions with the related parties and the details of related parties transactions have been disclosed in the financial statements as required by the applicable Accounting standards.

xiv) During the year, the Company has not made any preferential allotment or private placement of shares and hence reporting under clause 3(xiv) of the order is not applicable to the Company.

xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

“ANNEXURE B” TO THE INDEPENDENT AUDITOR’S REPORT

REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER CLAUSE (I) OF SUB-SECTION 3 OF SECTION 143 OF THE COMPANIES ACT, 2013 (“THE ACT”) AS REFERRED TO IN PARAGRAPH 2(F) OF ‘REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS’ SECTION

We have audited the internal financial controls over financial reporting of Vardhman Special Steels Limited (“the Company”) as of March 31, 2018 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

MANAGEMENT’S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit.

We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A Company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorisations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

OPINION

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For S. S. Kothari Mehta & Company

Chartered Accountants

Firm’s Registration Number: 022150N

Harish Gupta

Place: Gurugram Partner

Date: April 27 ,2018 Membership Number: 098336


Mar 31, 2016

INDEPENDENT AUDITORS'' REPORT

To the members of Vardhman Special Steels Limited Ludhiana

Report on the Financial Statements

We have audited the accompanying financial statements of VARDHMAN SPECIAL STEELS LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2016, 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.

Management''s Responsibility for the 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 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 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these 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 ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the 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 internal financial control 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. 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 audit opinion on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the 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, 2016;

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.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. 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;

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 aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e) On the basis of the written representations received from the Directors as on 31st March, 2016 taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March, 2016 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".

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. 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 has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts -Refer Note 43 to the financial statements;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

ANNEXURE A TO THE INDEPENDENT AUDITOR''S REPORT TO THE MEMBERS OF VARDHMAN SPECIAL STEELS LIMITED DATED 29th APRIL, 2016

Report on the matters specified in paragraph 3 of the Companies (Auditor''s Report) Order, 2016 ("the Order'') issued by the Central Government of India in terms of section 143(11) of the Companies Act, 2013 ("the Act") as referred to in paragraph 1 of ''Report on Other Legal and Regulatory Requirements'' section -

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

(b) As explained to us, Fixed Assets are verified by rotation every year. Discrepancies observed during physical verification of fixed assets during the financial year were adequately dealt with in books of accounts;

(c) The title deeds of immovable properties are held in the name of the Company.

(ii) (a) As explained to us, inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(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 are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records have been adequately dealt with in books of accounts.

(iii) The Company has not granted loans, secured or unsecured to Companies, Firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013.

(iv) The Company has complied with the provisions of section 185 and 186 of the Companies Act, 2013 in respect of loans, investments, guarantees, and security.

(v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits within the meaning of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and rules framed there under. We have been explained that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal against the Company during the year.

(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 Section 148 (1) of the Companies Act, 2013 and we 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 said records with a view to determine whether they are accurate or complete.

(vii) (a) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, the Company is generally regular, except delay in few cases, in depositing undisputed statutory dues including provident fund, employees'' state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no undisputed amounts payable in respect of provident fund, Employees'' State Insurance, Income-Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other statutory dues were outstanding as at 31st March, 2016 for a period of more than six months from the date they became payable.

(b) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, there are no dues of Income Tax / Sales Tax / Wealth Tax / Service Tax / Customs Duty / Excise Duty / Value Added Tax / Cess which have not been deposited on account of any dispute, except the following:

S.No.

Nature of dues

Amount due (Rs.)

Forum where pending

1.

Punjab VAT Act, 2005

Penalty Rs. 595,963

AETC MOBILE WING, PATIALA

2.

CENVAT - DENIAL OF CENVAT

Basic & Penalty Rs. 415,723 Interest Rs. 405,723

CHIEF COMMISSIONER EXCISE,CHANDIGARH

S.No.

Nature of dues

Amount due (Rs.)

Forum where pending

3.

CENVAT - DENIAL OF CENVAT

Basic Rs. 45,450 Interest Rs. 45,450

CESTAT

4.

CENVAT - DENIAL OF CENVAT

Basic & Penalty Rs. 25,394 Interest Rs. 5,713

CESTAT

5.

CENVAT - DENIAL OF CENVAT

Basic Rs. 84,910 Interest Rs. 22,924

CESTAT

6.

RULE 6 B OF VALUATION RULES-CENTRAL EXCISE

Basic & Penalty Rs. 2,778,084 Interest Rs. 1,739,042

COMMISSIONER APPEALS CHANDIGARH

7.

DENIAL OF CENVAT

Basic Rs. 133,333 Interest Rs. 133,333

REMANDED BACK TO COMMISSIONER APPEALS BY CESTAT

8.

DENIAL OF CENVAT

Basic & Penalty Rs. 26,938 Interest Rs. 9,091

CESTAT

9.

DENIAL OF CENVAT

Basic & Penalty Rs. 145,529 Interest Rs. 26,196

CESTAT

10.

DENIAL OF CENVAT

Basic & Penalty Rs. 26,756 Interest Rs.11,438

CESTAT

11.

DENIAL OF CENVAT

Basic & Penalty Rs. 7,284

Interest Rs. 2,295

CESTAT

12.

Entry Tax

Rs. 85,000,000

PUNJAB & HARYANA HIGH COURT

(viii) Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that, the Company has not defaulted in repayment of dues to a Financial Institution, Bank or Government during the period. As the Company has not issued debentures, clause regarding default to debenture holders does not apply to the Company.

(ix) The moneys raised by way of debt instruments and term loans were applied for the purposes for which those are raised.

(x) During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of fraud by the Company or fraud on the Company by its officers or employees, noticed or reported during the period, nor have we been informed of such case by the management.

(xi) The managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act.

(xii) The Company is not a Nidhi Company, hence clause (xii) of the Order is not applicable to the Company;

(xiii) All transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013, as applicable and the details have been disclosed in these Financial Statements as required by the applicable accounting standards.

(xiv) The Company has not made any preferential allotment or private placement of shares or debentures during the year under review, hence clause (xiv) of the Order is not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has not entered into non-cash transactions with Directors and persons connected with them, hence clause (xv) of the Order is not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For S. S. Kothari Mehta & Co.

Chartered Accountants

(Firm''s Registration No. 022150N)

CA DINESH K. ABROL

Place: Gurgaon (Partner)

Date: 29th April, 2016 Membership No. 087899


Mar 31, 2015

We have audited the accompanying financial statements of Vardhman Special Steels Limited ("the Company"), which comprise the Balance Sheet as at March 31,2015, and the Statement of Profit and Loss and 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 matters in section 134(5) of the Companies Act, 2013 ("the Act") with respect to 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 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 the maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding of the assets of the Company and for preventing and detecting the frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of 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 misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these 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 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 ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, 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 control relevant to the Company's preparation of the financial statements that give true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by 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 audit opinion on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us,the 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 loss 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.

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 of India in terms of sub-section 11 of section 143 of the Act, we give in the Annexure a statement on the matters prescribed in paragraphs 3 and 4 of the Order.

2. 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 appears from our examination of those books

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

d) in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e) on the basis of written representations received from the directors as on March 31, 2015, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2015 from being appointed as a director in terms of Section 164(2) of the Act.

f) With respect to the other matters included in the Auditor's Report and to the best of our information and according to the explanations given to us :

I. The Company does not have any pending litigations which would materially impact its financial position;

II. The Company did not have any long-term contracts including derivatives 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.

THE ANNEXURE REFERRED TO IN PARAGRAPH 1 OF THE OUR REPORT OF EVEN DATE TO THE MEMBERS OF VARDHMAN SPECIAL STEELS LIMITED ON THE ACCOUNTS OF THE COMPANY FOR THE YEAR ENDED 31ST MARCH, 2015.

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

(b) As explained to us, Fixed Assets are verified by rotation every year. No discrepancies were observed in the Fixed Assets physically verified during the financial year.

2. (a) As explained to us, inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(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 are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been adequately dealt with in books of accounts.

3. (a) According to the information and explanations given to us and on the basis of our examination of the books of account, 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. Consequently, the provisions of clauses iii (a) and iii (b) of the order are not applicable to the Company.

4. In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the Company and the nature of its business, for the purchase of inventories & fixed assets and for sale of goods& services. Further, on the basis of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control procedures.

5. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits within the meaning of sections73 to 76 or any other relevant provisions of the Companies Act, 2013 and rules framed thereunder. We have been explained that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal against the Company during the year.

6. 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 Section 148 (1) of the Companies Act, 2013 and we 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 said records with a view to determine whether they are accurate or complete.

7. (a) According to the records of the Company examined

by us and the information and explanations given to us, in our opinion, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, Employees' State Insurance, Income-Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other statutory dues applicable to it. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no undisputed amounts payable in respect of provident fund, Employees' State Insurance, Income-Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other statutory dues were outstanding, as at 31.03.2015 for a period of more than six months from the date they became payable.

(b) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, there are no dues of income-tax / sales tax / wealth tax / service tax / customs duty / excise duty / Value Added Tax / cess which have not been deposited on account of any dispute, except the following:

S. Nature of dues (Rs.) Amount due (Rs) Forum where pending No

1 PUNJAB SALE TAX Basic& Penalty JOINT DIRECTOR, Rs. 186500 ENFORCEMENT, PATIALA

2. PUNJAB SALE TAX Basic & Penalty JOINT DIR Rs. 180000 ENFORCEMENT PATIALA

3. Punjab VAT Act, PENALTY AETC MOBILE WING, 2005 Rs. 595963 PATIALA

4. CENVAT - DENIAL Basic & Penalty CHIEF COMMISSIONER OF CENVAT Rs. 415723 Interest EXCISE, Rs.405723 CHANDIGARH

5. CENVAT - DENIAL Basic Rs. 45450 Interest CESTAT OF CENVAT Rs.45450

6. CENVAT - DENIAL Basic & Penalty ASSISTANT OF CENVAT Rs. 25394 COMMISSIONER, Interest LUDHIANA Rs.3428

7. CENVAT - DENIAL Basic Rs. 84910 Interest ASSISTANT OF CENVAT Rs.15283 COMMISSIONER, LUDHIANA

8. RULE 6 B OF Basic & Penalty COMMISSIONER VALUATION RULES- Rs. 2778084 APPEALS, CENTRAL EXCISE Interest CHANDIGARH Rs.1739042

9. DENIAL OF CENVAT Basic REMANDED BACK TO Rs. 133333 COMMISSIONER Interest Rs.133333 APPEALS BY CESTAT

10. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 26938 Interest COMMISSIONER Rs. 6667 LUDHIANA

11. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 145529 COMMISSIONER, Interest Rs. 13098 LUDHIANA

12. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 25756 COMMISSIONER, Interest Rs. 9030 LUDHIANA

13. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 7284 Interest COMMISSIONER, Rs.1639 LUDHIANA

14. Entry Tax Rs.8,50,00,000 Punjab & Haryana High Court

(c) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no amount was required 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 thereunder.

8. The Company does not have any accumulated loss and has incurred cash loss during the financial year covered by our audit, however had incurred cash loss in the immediately preceding financial year.

9. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that, the Company has not defaulted in repayment of dues to a financial institution or bank during the period. As the Company has not issued debentures, clause regarding default to debenture holders does not apply to the Company.

10. According to the information and explanations given to us, the Company has not given any guarantees for loan taken by others from a bank or financial institution.

11. According to the records of the Company examined by us and the information and explanations given to us, term loans availed by the Company during the year have been utilized for the purpose they have been received.

12. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of fraud on or by the Company, noticed or reported during the period, nor have we been informed of such case by the management.

For S. S. Kothari Mehta & Co. Chartered Accountants (Firm Regn. No. 022150N) (CA Dinesh K. Abrol) PLACE: GURGAON Partner DATE: 2nd MAY, 2015 Membership No.87899


Mar 31, 2014

We have audited the accompanying financial statements of Vardhman Special Steels Limited ("the Company"), which comprise the Balance Sheet as at 31st March 2014, and the Statement of Profit & Loss and Cash Flow Statement for the year ended on that date, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

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 sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control 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.

Auditor''s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and 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 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 accounting policies used and the reasonableness of the accounting estimates made by 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.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the 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 & Loss of the loss 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.

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 of India in terms of sub-section (4A) of section 227 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 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 appears from our examination of those books.

c) the Balance Sheet, 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, Statement of Profit & Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956.

e) On the basis of written representations received from the Directors as on 31st March, 2014 and 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 clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

f) Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

THE ANNEXURE REFERRED TO IN PARAGRAPH 1 OF THE OUR REPORT OF EVEN DATE TO THE MEMBERS OF VARDHMAN SPECIAL STEELS LIMITED ON THE ACCOUNTS OF THE COMPANY FOR THE YEAR ENDED 31st MARCH, 2014.

On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

(b) As explained to us, Fixed Assets are verified by rotation every year. No material discrepancies were observed in the Fixed Assets physically verified during the Financial Year.

(c) In our opinion and according to the information and explanations given to us, during the period, the Company has not disposed off substantial portion of fixed assets. Therefore, it has not affected the ability of Company to continue as going concern.

2. (a) As explained to us, inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(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 are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been adequately dealt with in books of accounts.

3. (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Consequently, the provisions of clauses iii (b), iii(c) and iii (d) of the order are not applicable to the Company.

(e) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has not taken loans from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Thus sub clauses (f) & (g) are not applicable to the Company.

4. In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the Company and the nature of its business, for the purchase of inventories & fixed assets and payment for expenses & for sale of goods. Further, on the basis of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control procedures.

5. Based on the audit procedures applied by us and according to the information and explanations provided by the management, there are no transactions made in pursuance of contracts or arrangements that need to be entered into the register maintained under section 301. Thus sub clause (b) is not applicable to the Company.

6. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits within the meaning of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed thereunder. We have been explained that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal against the Company during the year.

7. As per information & explanations given by the management, the Company has an internal audit system commensurate with its size and the nature of its business.

8. 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 Section 209 (1) (d) of the Companies Act, 1956 and we 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 said records with a view to determine whether they are accurate or complete.

9. (a) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to it. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no undisputed amounts payable in respect of provident fund, Investor Education and Protection Fund, Employees'' State Insurance, Income-Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Cess and other statutory dues were outstanding, as at 31.03.2014 for a period of more than six months from the date they became payable.

(b) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, there are no dues of sale tax, income-tax / sales tax / wealth tax / service tax / customs duty / excise duty / cess which have not been deposited on account of any dispute, except the following:

S. Nature of dues Amount due (Rs.) Forum where pending No. 1. PUNJAB SALE TAX Basic & Penalty JOINT DIRECTOR, Rs.1,86,500 ENFORCEMENT, PATIALA

2. PUNJAB SALE TAX Basic & Penalty JOINT DIRECTOR Rs.1,80,000 ENFORCEMENT PATIALA

3 PUNJAB VAT ACT, 2005 Penalty AETC MOBILE WING, Rs. 5,95,963 PATIALA

4. CENVAT - DENIAL OF Basic & Penalty CHIEF CENVAT Rs.4,15,723 COMMISSIONER Interest Rs. EXCISE,CHANDIGARH 4,05,723 5. CENVAT - DENIAL OF Basic Rs.45,450 CESTAT CENVAT Interest Rs.45,450

6. CENVAT - DENIAL OF Basic & Penalty ASSISTANT CENVAT Rs.25,394 COMMISSIONER, Interest Rs.1,143 LUDHIANA

7. CENVAT - DENIAL OF Basic Rs.84,910 ASSISTANT CENVAT Interest Rs.7,642 COMMISSIONER, LUDHIANA

8. RULE 6 B OF VALUATION Basic & Penalty COMMISSIONER, RULES-CENTRAL EXCISE Rs.27,78,084 APPEALS Interest CHANDIGARH Rs.17,39,042

9. DENIAL OF CENVAT Basic & Penalty CESTAT Rs. 7,51,035 Interest Rs.7,41,035

10. DENIAL OF CENVAT Basic Rs.1,33,333 REMANDED BACK Interest Rs. 1,33,333 TO COMMISSIONER APPEALS BY CESTAT IN AUG''10

11. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 26,938 COMMISSIONER Interest Rs.4,243 LUDHIANA

12. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 25,756 COMMISSIONER, Interest Rs.6,622 LUDHIANA

13. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 7,284 COMMISSIONER,

Interest Rs. 983 LUDHIANA

10. The Company does not have any accumulated losses and has incurred cash loss during the Financial Year covered by our audit but not in the immediately preceding Financial Year.

11. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that, the Company has not defaulted in repayment of dues to a financial institution or bank during the period.

12. According to the information and explanations given to us, the Company has not given any guarantees for loan taken by others from a bank or financial institution.

13. According to the records of the Company examined by us and the information and explanations given to us, term loans availed by the Company during the year have been utilized for the purpose they have been received.

14. Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31st March, 2014, we report that no funds raised on short-term basis have been used for long-term investment by the Company.

15. Based on the audit procedures performed and the information and explanations given to us by the management, we report that the Company has not made any preferential allotment of shares during the year.

16. The Company has not issued any debentures during the period covered by our audit report.

17. The Company has not raised any money by public issue during the year.

18. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of fraud on or by the Company, noticed or reported during the period, nor have we been informed of such case by the management.

19. Matters specified in clauses xii, xiii, xiv & xviii, of paragraph 4 of the CARO 2003 do not appear to be applicable for the year under report.

For S. S. Kothari Mehta & Co. Chartered Accountants (Firm Regn. No. 022150N)

(CA Dinesh K. Abrol) PLACE: GURGAON Partner DATE: 17th MAY, 2014 Membership No.87899


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Vardhman Special Steels Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year ended on that date and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

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 sub- section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control 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.

Auditor''s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and 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 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by 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 qualified audit opinion.

Basis for Qualified Opinion

The Company''s liability in respect of ECB was restated as on 30th June, 2012 for determining quarterly results. However, as at the year end, it has not been restated, which constitutes a departure from the Accounting Standards referred to in sub- section (3C) of section 211 of the Act. The Company''s records indicate that had management restated the ECB as at the end of the year, this would have resulted in gain of an amount of Rs. 2.20 crore for the financial year. Accordingly, liability in respect of ECB would have decreased by Rs. 2.20 crore and profit before tax would have been increased by Rs. 2.20 crore.

Qualified Opinion

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 paragraph, the 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, 2013;

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.

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 of India in terms of sub-section (4A) of section 227 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 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 appears from our examination of those books;

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

d) except for the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub-Section (3C) of Section 211 of the Companies Act, 1956;

e) on the basis of written representations received from the directors as on 31st March, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2013, from being appointed as a director in terms of clause (g) of sub- section (1) of section 274 of the Companies Act, 1956.

f) Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

THE ANNEXURE REFERRED TO IN PARAGRAPH 1 OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF VARDHMAN SPECIAL STEELS LIMITED ON THE ACCOUNTS OF THE COMPANY FOR THE YEAR ENDED 31ST MARCH, 2013.

On the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of our audit, we report that:

1. (a) The company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

(b) As explained to us, Fixed Assets are verified by rotation every year. No discrepancies were observed in the Fixed Assets physically verified during the financial year.

(c) In our opinion and according to the information and explanations given to us, during the year, the company has not disposed off substantial portion of fixed assets. Therefore, it has not affected the ability of Company to continue as going concern.

2. (a) As explained to us, inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(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 are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been adequately dealt with in books of accounts.

3. (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Consequently, the provisions of clauses iii (b), iii(c) and iii (d) of the order are not applicable to the Company.

(b) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has not taken loans from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Thus sub clauses (f) & (g) are not applicable to the company.

4. In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of inventories & fixed assets and payment for expenses & for sale of goods. Further, on the basis of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control procedures.

5. Based on the audit procedures applied by us and according to the information and explanations provided by the management, there are no other transactions made in pursuance of contracts or arrangements that need to be entered into the register maintained under section 301.

6. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits within the meaning of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed thereunder. We have been explained that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other tribunal against the Company during the year.

7. As per information & explanations given by the management, the Company has an internal audit system commensurate with its size and the nature of its business.

8. 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 Section 209 (1) (d) of the Companies Act, 1956 and we 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 said records with a view to determine whether they are accurate or complete.

9. (a) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income-tax, wealth tax, service tax, sales tax, custom duty, excise duty, cess and other statutory dues applicable to it. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no undisputed amounts payable in respect of provident fund, employees'' state insurance, income-tax, wealth tax, service tax, sales tax, custom duty, excise duty, cess and other statutory dues were outstanding as at 31.03.2013 for a period of more than six months from the date they became payable.

(b) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, there are no dues of income-tax / sales tax / wealth tax / service tax / customs duty / excise duty / cess which have not been deposited on account of any dispute, except the following:

S. Nature of dues Amount due (Rs.) Forum where pending No.

1. PUNJAB SALE TAX Basic & Penalty JOINT DIRECTOR, Rs. 1,86,500 ENFORCEMENT, PATIALA

2. PUNJAB SALE TAX Basic & Penalty JOINT DIRECTOR, Rs. 1,80,000 ENFORCEMENT, PATIALA

3. CENVAT - DENIAL Basic & Penalty CHIEF COMMISSIONER OF CENVAT Rs. 4,15,723 EXCISE,CHANDIGARH Interest Rs. 4,05,723

4. CENVAT - DENIAL Basic Rs. 45,450 CESTAT OF CENVAT Interest Rs. 45,450

5. RULE 6 B OF Basic & Penalty COMMISSIONER VALUATION RULES- Rs. 27,78,084 APPEALS, CENTRAL EXCISE Interest Rs. 17,39,042 CHANDIGARH

6. DENIAL OF CENVAT Basic & Penalty CESTAT Rs. 7,51,035 Interest Rs. 7,41,035

7. DENIAL OF CENVAT Basic & Penalty REMANDED BACK TO Rs. 1,33,333 COMMISSIONER Interest Rs.1,33,333 APPEALS BY CESTAT IN AUG''10

8. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 26,938 COMMISSIONER, Interest Rs. 1,820 LUDHIANA

9. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 4,87,766 COMMISSIONER, Interest Rs. 35,976 LUDHIANA

10. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 7,09,984 COMMISSIONER, Interest Rs. 1,16,545 LUDHIANA

11. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 26,756 COMMISSIONER, Interest Rs. 4,214 LUDHIANA

12 DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 8,01,248 COMMISSIONER, Interest Rs. 95,160 LUDHIANA

13. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 7,284 COMMISSIONER, Interest Rs. 327 LUDHIANA

14. DENIAL OF CENVAT Basic & Penalty ASSISTANT Rs. 9,70,642 COMMISSIONER, Interest Rs. 1,68,655 LUDHIANA

10. The Company does not have any accumulated loss and has not incurred cash loss during the financial year covered by our audit and in the immediately preceding financial year.

11. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that, the Company has not defaulted in repayment of dues to a financial institution or bank during the year.

12. According to the information and explanations given to us, the Company has not given any guarantees for loan taken by others from a bank or financial institution.

13. According to the records of the Company examined by us and the information and explanations given to us, no term loans have been taken by the Company during the year.

14. Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31st March, 2013, we report that no funds raised on short-term basis have been used for long-term investment by the Company.

15. Based on the audit procedures performed and the information and explanations given to us by the management, we report that the Company has not made any preferential allottment of shares during the year.

16. The company has not issued any debentures during the year covered by our audit report.

17. The Company has not raised any money by public issue during the year.

18. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

19. The other provisions of the Order do not appear to be applicable for the year under report.

For S. S. Kothari Mehta & Co.

Chartered Accountants

(Firm Regn. No. 022150N)

(CA Dinesh K. Abrol)

Place : LUDHIANA Partner

Date : 10th May, 2013 Membership No.087899


Mar 31, 2012

We have audited the attached Balance Sheet of Vardhman Special Steels Limited, Ludhiana as at 31st March 2012, and also the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

1. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

2. As required by the Companies (Auditor's Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the enclosed Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

3. Further to our comments in the Annexure referred to in Para 2 above, we report that:

(i) 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;

(ii) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(iii) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv) In our opinion, subject to compliance of Accounting Standard 11 regarding "The Effects of Changes in Foreign Exchange Rates applicable to footnote to Note 25 to Financial Statements," the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors, as on 31st March 2012 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us, subject to footnote to Note 25 to Financial Statements, thereby understating profits for the year to the extent of Rs. 370 Lac and resulting into overstatement of liability to that extent, the said Balance Sheet and Statement of Profit and Loss read together with significant Accounting Policies and other notes thereon, give the information required by the Companies Act, 1956, 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 2012;

(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.

ANNEXURE REFERRED TO IN PARAGRAPH 2 OF OUR REPORT OF EVEN DATE

1. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

2. Fixed Assets are verified by rotation every year. No discrepancies were observed in the Fixed assets physically verified during the financial year.

3. During the period, the Company has not disposed off substantial portion of fixed assets. Therefore, it has not affected the ability of Company to continue as a going concern.

4. The inventory of the Company has been physically verified during the period by the management. In our opinion, the frequency of verification is reasonable.

5. In our opinion and according to the informations and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

6. On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been adequately dealt with in books of accounts.

7. We have been informed that there are no loans granted in pursuance of contracts or arrangements that need to be entered into the register maintained under section 301.

8. We have been informed that there are no loans taken in pursuance of contracts or arrangements that need to be entered into the register maintained under section 301.

9. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control procedures.

10. We have been informed that there are no other transactions made in pursuance of contracts or arrangements that need to be entered into the register maintained under section 301.

11. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits within the meaning of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed thereunder. We have been explained that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other tribunal against the Company during the period.

12. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

13. 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 Section 209 (1) (d) of the Companies Act, 1956 and we 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 said records with a view to determine whether they are accurate or complete.

14. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees' state insurance, income-tax, wealth tax, service tax, sales tax, custom duty, excise duty, cess and other statutory dues applicable to it.

15. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no undisputed amounts payable in respect of provident fund, employees' state insurance, income-tax, wealth tax, service tax, sales tax, custom duty, excise duty, cess and other statutory dues were outstanding, as at 31.03.2012 for a period of more than six months from the date they became payable.

16. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, there are no dues of sale tax/ income-tax / wealth tax / service tax / customs duty / excise duty / cess which have not been deposited on account of any dispute, except the following:

S. Nature of dues Amount due (Rs.) Forum where pending No.

1. Punjab Sale Tax Basic 1,86,500 Joint Director, Enforcement, Patiala

2. Punjab Sale Tax Basic 1,80,000 Joint Director, Enforcement, Patiala

3. Excise - Denial Basic Rs. 4,15,723 Chief Commissioner of CENVAT Interest Rs.4,05,723 Excise, Chandigarh

4. Excise - Denial Basic Rs. 45,450 CESTAT of CENVAT Interest Rs.45,450

5. Excise - CREDIT Rs. 27,78,084 Commissioner Appeals, Interest Rs.17,39,042 Chandigarh

6. Excise - Denial Basic Rs.7,51,035 CESTAT of CENVAT Interest Rs.7,41,035

7. Excise - Denial Basic Rs.1,33,333 Remanded Back to of CENVAT Interest Rs.1,33,333 Commissioner Appeals By CESTAT

8. Excise - Denial Basic Rs. 5,44,993 Commissioner of CENVAT Penalty Rs.5,44,993 Appeals, Interest Rs. 2,14,742 Chandigarh

9. Excise - Denial Basic Rs. 33,69,378 Assistant of CENVAT Interest Rs.12,04,668 Commissioner, Ludhiana

10. Excise - Denial Basic Rs. 1,85,693 Assistant of CENVAT Interest Rs.1,49,848 Commissioner

11. Excise - Denial Basic Rs. 15,13,305 Assistant of CENVAT Interest Rs.1,57,467 Commissioner

12. Excise - Denial Basic Rs. 5,78,560 Assistant of CENVAT Interest Rs.49,075 Commissioner

17. The Company does not have accumulated losses as at the end of the financial period. The Company has not incurred any cash losses during the financial period covered by our audit.

18. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to any financial institution or bank during the period.

19. 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.

20. According to the records of the Company examined by us and the information and explanations given to us, term loans (ECB) taken by the Company during the period are being utilized for the purpose they have been received.

21. According to the information and explanations given to us and on the basis of an overall examination of the balance sheet of the Company, in our opinion, generally, there are no funds raised by the Company on short-term basis, which have been used for long- term investment.

22. The Company has not made any preferential allotment of shares during the period.

23. The Company has not issued any debentures during the period covered by our audit report.

24. The Company has not raised any money by way of public issue during the period covered by our audit report.

25. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of fraud on or by the Company, noticed or reported during the period, nor have we been informed of such case by the management.

26. The other provisions of the Order do not appear to be applicable for the year under report.

For S. S. Kothari Mehta & Co.

Chartered Accountants

(Firm Regn. No. 022150N)

(CA Dinesh K. Abrol)

Place : GURGAON Partner

Date : 21st APRIL, 2012 Membership No.87899


Mar 31, 2011

We have audited the attached balance sheet of Vardhman Special Steels Limited, Ludhiana as at 31st March 2011, and also the Profit and Loss Account and the Cash Flow Statement for the period ended on that date annexed thereto. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

1. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

2. As required by the Companies (Auditor's Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the enclosed Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

3. Further to our comments in the Annexure referred to in Para 2 above, we report that:

(i) 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;

(ii) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

(iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors, as on 31st March 2011 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said Balance Sheet and Profit & Loss Account read together with significant Accounting Policies and other notes thereon, give the information required by the Companies Act, 1956, 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 2011 ;

(b) in the case of the Profit and Loss Account, of the profit for the period ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the period ended on that date.

ANNEXURE REFERRED TO IN PARAGRAPH 2 OF OUR REPORT OF EVEN DATE

1. The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

2. Fixed Assets were physically verified during the period and the discrepancies observed, which were not material in nature, have been properly adjusted in the books of accounts.

3. During the period, the company has not disposed off substantial portion of fixed assets. Therefore, it has not affected the ability of Company to continue as going concern.

4. The inventory of the Company has been physically verified during the period by the management. In our opinion, the frequency of verification is reasonable.

5. In our opinion and according to the information's and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

6. On the basis of our examination of the records of inventory, we are of the opinion that the company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been adequately dealt with in books of accounts. 7. We have been informed that there are no loans granted in pursuance of contracts or arrangements that need to be entered into the register maintained under section 301.

8. We have been informed that there are no loans taken in pursuance of contracts or arrangements that need to be entered into the register maintained under section 301.

9. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control procedures.

10. We have been informed that there are no other transactions made in pursuance of contracts or arrangements that need to be entered into the register maintained under section 301.

11. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits within the meaning of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed there under. We have been explained that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other tribunal against the Company during the period.

12. In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

13. 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 Section 209 (1) (d) of the Companies Act, 1956 and we 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 said records with a view to determine whether they are accurate or complete.

14. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees' state insurance, income-tax, wealth tax, service tax, sales tax, custom duty, excise duty, cuss and other statutory dues applicable to it.

15. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no undisputed amounts payable in respect of provident fund, employees' state insurance, income-tax, wealth tax, service tax, sales tax, custom duty, excise duty, cuss and other statutory dues were outstanding, as at 31.03.2011 for a period of more than six months from the date they became payable.

16. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, there are no dues of sale tax, income-tax/sales tax/wealth tax/service tax/ customs duty/excise duty/cuss which have not been deposited on account of any dispute, except the following:

S. Nature of dues Amount due (Rs.) Forum where pending No.

1. Punjab Sales Tax Basic Rs. 1,86,500 Joint Director, Enforcement, Patiala

2. Punjab Sales Tax Basic Rs. 1,80,000 Joint Director, Enforcement, Patiala

3. Punjab Sales Tax Basic Rs. 2,00,000 joint Director, Enforcement, Patiala 4. CENVAT - Denial Basic Rs. 4,15,723 Chief Commissioner of CENVAT Excise, CHD

5. CENVAT - Denial Basic Rs. 45,450 CESTAT of CENVAT

6. CENVAT Credit Rs. 27,78,084 Commissioner Appeals, CHD

7. CENVAT - Denial Basic Rs. 9,51,035 CESTAT of CENVAT

8. CENVAT - Denial Basic Rs. 1,33,333 Remanded back to of CENVAT Commissioner Appeals by CESTAT in Aug'10

9. CENVAT - Denial Basic Rs. 5,44,993 Commissioner of CENVAT Appeals, Chandigarh

10. CENVAT - Denial Basic Rs. 33,69,378 Assistant Commissiner, of CENVAT Ludhiana

17. The company does not have accumulated losses as at the end of the financial period. The company has not incurred any cash losses during the financial period covered by our audit. This is the first financial year of the Company.

18. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that the company has not defaulted in repayment of dues to any financial institution or bank during the period.

19. According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank or financial institutions.

20. According to the records of the Company examined by us and the information and explanations given to us, no term loans have been taken by the Company during the period.

21. According to the information and explanations given to us and on the basis of an overall examination of the balance sheet of the Company, in our opinion, generally, there are no funds raised by the Company on short-term basis, which have been used for long- term investment.

22. The company has not made any preferential allotment of shares during the period.

23. The company has not issued any debentures during the period covered by our audit report.

24. The Company has not raised any money by way of public issue during the period covered by our audit report.

25. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of fraud on or by the Company, noticed or reported during the period, nor have we been informed of such case by the management.

26. The other provisions of the Order do not appear to be applicable for the period under report.

For S. S. Kothari Mehta & Co.

Chartered Accountants

(Firm Regn. No. 022150N)

Place : New Delhi (CA Dinesh K. Abrol)

Date : 271h April, 2011 Partner

Membership No.87899

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