1. We were engaged to audit the accompanying standalone financial statements of A2Z Infra Engineering Limited ('the Company'), which comprise the Balance Sheet as at 31 March 2024, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information, in which are included the returns for the year ended on that date audited by the branch auditors of the Company's branches located at Tanzania, Nepal, and Uganda.
2. We do not express an opinion on the accompanying standalone financial statements of the Company. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements.
Basis for Disclaimer of Opinion
3. a. As stated in Note 31 to the accompanying standalone
financial statements, the Company has incurred a net loss after tax of Rs. 871.27 lakhs during the year ended 31st March 2024, and as of that date, the Company's accumulated losses amount to Rs. 1,07,546.89 lakhs, which have resulted in substantial erosion of its net worth, and the current liabilities exceed current assets by Rs. 15,546.05 lakhs. Also, certain lenders have filed applications with the National Company Law Tribunal (NCLT), Debt Recovery Tribunal (DRT) and other courts for recovery of their dues as detailed in 31. The Company has also delayed in repayment of borrowings as further detailed in Note 22.1. As confirmed by the management, the Company has been in discussions with the lenders regarding settlement of these borrowings/dues, the resolution for which is yet to be finalised. Further, the expected realisation of the amounts outstanding from certain customers, within the next 12 months, with whom the Company is in discussions is uncertain in the absence of any confirmations from such customers. Such events and conditions and its possible impact of the associated uncertainties on management's assumptions, and other matters as set forth in the note 31, cast significant doubt on the Company's ability to continue as a going concern. In the absence of sufficient appropriate audit evidence to support the management's assessment with respect to restructuring of borrowings/dues and availability of funds, we are unable to comment on the ability of the Company to continue as a going concern. Further, as detailed in Note 12, Management indicates that a material uncertainty exists that may cast significant
doubt on the Tanzania branch's ability to continue as going concern. Our Audit report on the standalone financial statements for the year ended 31 March 2023 also included a disclaimer of opinion in respect of this matter.
b. As stated in Note 22.1 to the accompanying standalone financial statement, the Company has borrowings from banks which have been classified as non-performing assets ('NPA borrowings') (referred to as 'the Lenders'). In respect of the aforementioned NPA borrowings, the Company has not recognised interest for the year ended 31 March 2024 aggregating to Rs. 2,983.20 lakhs (accumulated interest as at 31st March 2024 being Rs. 5,279.89 lakhs) payable under the terms of the said agreements, as estimated by the management on the basis of expected re-negotiation with the Lenders.
Pending confirmations/ reconciliations from the Lenders and in the absence of sufficient appropriate evidence to substantiate management's assessment, we are unable to comment on the adjustments, if any, that may be required to the carrying values of the aforesaid borrowings and dues (including interest) payable to the Lenders in accordance with the terms of loan agreements and Settlement Agreement, and the consequential impact of such adjustments on the accompanying standalone financials statement. Our Audit report on the standalone financial statements for the year ended 31 March 2023 also included a disclaimer of opinion in respect of this matter.
c. As stated in Note 5.2 to the accompanying standalone financial statement, the Company's non-current investment Rs. 7,992.84 Lakhs (net of impairment) in its associate Company namely Greeneffect Waste Management Limited (“GWML”) and its current financial assets-loan Rs. 84.67 lakhs which include amounts dues from such associate company as on 31 March 2024. The consolidated net worth of the aforesaid associate company as on that date has been fully eroded on account of losses incurred. Further, the associate company is facing liquidity constraints. Based upon the valuation report of an independent valuer, arbitration awarded in favor of GWML and other factors described in the aforementioned note, management has considered such balances as fully recoverable. However, in the absence of sufficient and appropriate audit evidence to support the management's assessment as above, we are unable to comment upon adjustments, if any, that may be required to the carrying value of these balances, and the consequential impact on the accompanying standalone financial statement. Our Audit report on the standalone financial statements for the year ended 31 March 2023 also included a disclaimer of opinion in respect of this matter.
Emphasis of Matter
4. We draw attention to:
a. Note 3.1 to the accompanying standalone financial statement, which describes the uncertainties relating to the outcome of the pending various litigations in respect of the three cogeneration power plants of the Company, for which the Company has filled petitions and appeals at various forums. The final outcome of these matters is presently unascertainable. Further, the said note also describes that these three cogeneration power plants fully impaired in its books of accounts during the year ended 31 March 2023. Hence, the management has recorded an impairment INR 35,665.04 lakhs in the present value of the power plant as at March 31, 2024.
b. Note 40(a) to the accompanying standalone financial statement, which describes the uncertainty relating to the outcome of litigation pertaining to income-tax matters pursuant to orders received by the Company against which management and the assessing authorities have filed appeals with relevant Income-tax Authorities. The final outcome of these matters is presently unascertainable.
Responsibilities of Management and Those Charged with
Governance for the Standalone Financial Statements
5. The accompanying standalone financial statements have been approved by the Company's Board of Directors. The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ('the Act') with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
6. In preparing the standalone financial statements, management is 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 management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
7. Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial
Statements
8. Our responsibility is to conduct an audit of the accompanying standalone financial statements in accordance with Standards on Auditing specified under section 143(10) of the Act, and to issue an auditor's report. However, because of the matters described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ('ICAI') together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics.
Other Matter
9. We did not audit the financial statements of one branch included in the standalone financial statement of the Company, whose financial statements reflects total assets and net assets of Rs. 527.76 lakhs and Rs. 366.64 lakhs respectively as at 31 March 2024, and total revenues of Rs. Nil, total net loss after tax of Rs. 9.74 lakhs, and total comprehensive loss of Rs. 9.74 lakhs, and cash flows (net) of Rs. Nil for the year then ended, as considered in the standalone financial statements. These financial statements of the aforesaid branches have been audited by their respective branch auditors, whose reports have been furnished to us by the management.
Further this one branch are located outside India whose financial statements and other financial information have been prepared in accordance with accounting principles generally accepted in their respective countries and which have been audited by branch auditor under generally accepted auditing standards specified in Annexure 1, as applicable in their respective countries. The Company's management has converted the financial statements of such branches from accounting principles generally accepted in their respective countries to accounting principles generally accepted in India. We have audited these conversion adjustments made by the Company's management. This report, in so far as it relates to the balances and affairs of this branch, is based on the audit report of branch auditor, and the conversion adjustments prepared by the management of the Company and audited by us.
The standalone financial statement includes the financial statement and information of two branches, which has not been audited by branch auditors, and whose financial information reflects total revenues of Rs. 48.25 lakhs, total net loss after tax of Rs. 24.17 lakhs and total comprehensive loss of Rs. 24.17 lakhs for the year ended 31st March 2024, as considered in the standalone
financial statement. This report, in so far as it relates to the balances and affairs of this branch, is based solely on such financial statement and information, as certified and provided by the management. According to the information and explanations given to us by the management, their would not be consequential material impact on the financial statements of the Company.
Report on Other Legal and Regulatory Requirements
10. Based on our audit, and on the consideration of the reports of the branch auditors as referred to in paragraph 9 above, we report that the Company has not paid or provided for any managerial remuneration during the year. Accordingly, reporting under section 197(16) of the Act is not applicable.
11. 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.
12. Further to our comments in Annexure A, as required by section 143(3) of the Act, and on the consideration of the reports of the branch auditors as referred to in paragraph 9 above, we report, to the extent applicable, that:
a) as described in the Basis for Disclaimer of Opinion section, we sought but were unable to obtain all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;
b) due to the possible effects of the matters described in the Basis for Disclaimer of Opinion section, we are unable to state whether 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. Proper returns adequate for the purposes of our audit have been received from the branches not visited by us;
c) the reports on the accounts of the branch offices of the Company audited under section 143(8) of the Act by the branch auditors have been sent to us and have been properly dealt with by us in preparing this report;
d) the standalone financial statements dealt with by this report are in agreement with the books of account and with the returns received from the branches not visited by us;
e) due to the possible effects of the matters described in the Basis for Disclaimer of Opinion section, we are unable to state whether the aforesaid standalone financial statements comply with the Ind AS specified under section 133 of the Act;
f) the matters described in Paragraph 3 and 4 in the Basis for Disclaimer of Opinion / Emphasis of Matter section, in our opinion, may have an adverse effect on the functioning of the Company;
g) on the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on
31 March 2024 from being appointed as a director in terms of section 164(2) of the Act;
h) the reservations relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Disclaimer of Opinion section, read with paragraph 12(b) above;
i) we were also engaged to audit the internal financial controls with reference to standalone financial statements of the Company as on 31 March 2024 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated 15 May 2024 as per Annexure B expressed disclaimer of opinion; and
j) 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 (as amended), in our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of the reports of the branch auditors as referred to in paragraph 9 above,:
i. due to the possible effects of the matters
described in the Basis for Disclaimer of Opinion section, we are unable to state whether the Company has disclosed fully the impact of pending litigations on its financial position as at 31 March 2024;
ii. due to the possible effects of the matters
described in the Basis for Disclaimer of Opinion section, we are unable to state whether the Company has made adequate provision as at 31 March 2024, as required under the applicable law or Ind AS, for material foreseeable losses, if any, on long-term contracts including derivative contracts;
iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2024; and
iv. (a) The Management has represented that,
to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(b) The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(c) Based on the audit procedures 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 (a) and (b) above, contain any material misstatement.
v. The Company has not declared/paid dividend
during the year, accordingly compliance u/s 123
of the Act is not applicable to the company.
vi. The reporting under Rule 11(g) of the companies (Audit and Auditors) Rules, 2014 is applicable from 1st April, 2023. Based on our examination, which includes test checks, the company has used the accounting software for maintaining its books of account which has a feature of recording audit trail / edit log facility and the same has been operated throughout the year for all the relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered.
For MRKS & ASSOCIATES
Chartered Accountants
Firm's Registration No.: 023711N
Sd/-
Saurabh Kuchhal
Partner
Membership No.: 512362
UDIN: 24512362BKFCDQ2511
Place: Gurugram
Date: 15 May 2024
|