21:09 Dec 21, 2014  

Suzlon Energy Ltd

HSL Code: SUZLTD   |   BSE Code: 532667  |   NSE Symbol: SUZLON  |   ISIN: INE040H01021
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19 Dec 2014 | 16:00
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Independent Auditor`s Report




To the Members of Suzlon Energy Limited

Report on the Financial Statements

1. We, SNK & Co. and S. R. BATLIBOI & Co. LLP, have audited the accompanying financial statements of Suzlon Energy Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2014, 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

2. 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 accounting principles generally accepted in India, including the Accounting Standards notified under the Companies Act, 1956 (the "Act"), read with General Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs. This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

3. 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 entity’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

4. 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, 2014;

(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.

Emphasis of Matter

5. We draw attention to Note 5 of the accompanying financial statements in respect of material uncertainty about the Company`s ability to continue as a going concern which is in part dependent on the successful outcome of the discussions with the FCCB holders and Company’s ability to generate sufficient funds to support its operations. Our opinion is not qualified in respect of this matter.

6. We draw attention to Note 4 of the accompanying financial statements in respect of contingency related to `compensation payable in lieu of bank sacrifice`, the outcome of which is materially uncertain and cannot be determined currently. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

7. As required by the Companies (Auditor’s Report) Order, 2003 (the "Order") issued by the Central Government of India in terms of subsection (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.

8. 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) In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956, read with General Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate Affairs;

(e) On the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

For SNK & Co. For S. R. Batliboi & Co.LLP
Chartered Accountants Chartered Accountants
ICAI Firm registration number: 109176W ICAI Firm registration number: 301003E
per Sanjay Kapadia per Paul Alvares
Partner Partner
Membership No.: 38292 Membership No.: 105754
Place: Pune Place: Pune
Date: May 30, 2014 Date: May 30, 2014

Annexure referred to in paragraph 8 of our report of even date under heading "Report on Other Legal and Regulatory Requirements"

Re: Suzlon Energy Limited

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

b. All fixed assets have not been physically verified by management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were noticed on such verification.

c. During the year, the Company has sold its operation and maintenance division, including its fixed assets, which constitute a substantial part of the fixed assets of the Company, to one of its subsidiaries. Based on the information and explanations given by management and on the basis of audit procedures performed by us, read with paragraph 5 of the Audit Report of even date, we are of the opinion that the sale of these fixed assets has not adversely affected the going concern status of the Company.

ii. a. The inventory has been physically verified by management during the year. In our opinion, the frequency of verification is reasonable. Inventories lying with outside parties have been confirmed by them as at year end.

b. The procedures of physical verification of inventory followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. The Company is maintaining proper records of inventory. Discrepancies noted on physical verification of inventories were not material and have been properly dealt with in the books of account.

iii. a. According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4 (iii) (a) to (d) of the Order are not applicable to the Company and hence not commented upon.

b. The Company has taken loans from two companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs 456.83 Crore and the year-end balance of the loan taken from such parties was Rs 87.65 Crore.

c. In our opinion and according to the information and explanations given to us, the rate of interest, and other terms and conditions for such loan are prima facie not prejudicial to the interest of the Company.

d. In respect of loans taken, repayment of the principal amount is as stipulated. Payment of interest has not been regular, but the delay has been waived.

iv. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness or continuing failure to correct any major weakness in the internal control system of the company in respect of these areas.

v. a. According to the information and explanations provided by management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 that need to be entered into the register maintained under section 301 have been so entered.

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi. The Company has not accepted any deposits from the public. Accordingly, the provisions of clause 4(vi) of the Order are not applicable to the Company and hence not commented upon.

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

viii. 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 are of the opinion that prima facie, the prescribed accounts and records have been made and maintained, wherever required. We have not, however, made a detailed examination of the same.

ix. a. Undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues have not been regularly deposited with the appropriate authorities and there have been serious delays in large number of cases.

b. According to the information and explanations given to us, except interest on service tax aggregating Rs 1.78 cr which was outstanding for a period exceeding six months as at March 31, 2014, from the date they were payable, 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, customs duty, excise duty, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

c. According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

Name of the statute Nature of dues Amount (Rs Crore) Accounting year to which the amount relates Forum where dispute is pending
Income Tax Act, 1961 Income tax 0.63* 2009-2010 Commissioner of Income Tax (Appeals)
Maharashtra Value Added Tax Act, 2002 Value added tax 0.50 2005-2006 Joint Commissioner of Sales Tax (Appeals), Mumbai
Finance Act, 1994 Service Tax on Consulting Engineer along with penalty and interest 3.54 1999-2000 to 2000-2003 CESTAT
Finance Act, 1994 Service Tax on Import of designs and drawings along with penalty and interest 59.42 2007-2008 to 2011-2012 CESTAT

* The amount has been paid by the Company during the year under protest.

x. The Company’s accumulated losses at the end of the financial year are more than fifty percent of its net worth. The Company has incurred cash losses during the current and immediately preceding financial year.

xi. Based on our audit procedures and as per the information and explanations given by the management, the Company has defaulted on redemption of foreign currency convertible bonds aggregating Rs 1,250 Crore (US$ 209 million) (including redemption premium). The bonds were due for redemption on October 11, 2012 and have not been redeemed till the date of this report. During the year, the Company has also defaulted in repayment of dues to financial institutions and banks in respect of Letters of Credit/Buyers’ Credit/Bills Discounting and Interest Liabilities. Following are the details of these defaults:

(Amount in Rs. Crore)

Particulars

Delay up to 30 days

Delay 31-90 days

Delay 91 to 180 days

Total Amount

Letters of Credit/ Buyers’ Credit/Bill Discounting

80.98

233.33

39.28

353.59

Interest Liabilities

78.94

18.76

97.70

The Company did not have any dues payable to debenture holders during the year.

xii. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, the provisions of clause 4(xii) of the Order are not applicable and hence not reported upon.

xiii. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company and hence not reported upon.

xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company and hence not reported upon.

xv. According to the information and explanations given to us, the Company has given guarantee for loans taken by others (subsidiaries) from banks or financial institutions, the terms and conditions whereof in our opinion are prima-facie not prejudicial to the interests of the Company.

xvi. Based on the information and explanations given to us by management, term loans were applied for the purpose for which the loans were obtained.

xvii. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that the Company has used funds aggregating to Rs 1,696.82 Crore raised on short-term basis in the form of working capital and working capital loans for long-term purposes to fund losses incurred during the year.

xviii. The Company has made preferential allotment of compulsorily convertible debentures which have been converted into equity shares, to a company covered in the register maintained under section 301 of the Companies Act, 1956. Since the allotment of the shares has been made at a price determined in accordance with Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulation, 2009, in our opinion, the price at which shares have been issued is not prejudicial to the interest of the Company.

xix. The Company had issued compulsorily convertible debentures during the year, on which no security or charge was required to be created.

xx. The Company has not raised any money by way of a public issue during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable to the Company and hence not reported upon.

xxi. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by management, we report that no material fraud on or by the Company has been noticed or reported during the year.

For SNK & Co. For S. R. Batliboi & Co. LLP
Chartered Accountants Chartered Accountants
ICAI Firm registration number: 109176W ICAI Firm registration number: 301003E
per Sanjay Kapadia per Paul Alvares
Partner Partner
Membership No.: 38292 Membership No.: 105754
Place: Pune Place: Pune
Date: May 30, 2014 Date: May 30, 2014
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