We have audited the accompanying standalone financial statements of Reliance Naval and Engineering Limited (“the Company”), which comprise the Balance sheet as at March 31, 2024, the Statement of Profit and Loss (including other comprehensive income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as “the SFS”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid SFS give the information required by the Companies Act, 2013 (‘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 state of affairs of the Company as at March 31, 2024, its profit including other comprehensive income, 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 SFS’ 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 SFS 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 qualified opinion on the SFS.
Emphasis of Matter Paragraph
i. We draw your attention to Note 10.1 (a) & (b) of accompanying SFS which states that the Number of equity shares in the company stands reduced based on the approved resolution plan by the Hon’ble National Company Law Tribunal in the ratio of 1 share each for 275 shares held in the company, resulting in the reduction of equity capital by ' 73,490.91 lakhs. As per the approved resolution plan, Hazel Infra Limited was to invest ' 5,000 lakhs by way of 5 crores equity shares of ' 10 each in the company. The infusion of the amount happened on October 27, 2023.
ii. We draw your attention to Note 12.2 of accompanying SFS which states that during the period the company has taken interest free unsecured loan from Hazel Infra Limited of ' 28,374 lakhs, which is repayable on demand.
iii. We draw your attention to Note 23.1 of accompanying SFS which states that as per NCLT order dated August 01, 2023, interest at the rate of SBI MCLR plus 200 basis points is payable with effect from June 23, 2023 till the making up full upfront payment of ' 200 Crores to unrelated financial creditors. Hence as per the order, the company has charged interest of ' 40.27 lakhs at the rate of 10.50% p.a. from June 23, 2023 to June 30, 2023. In the Meeting of the Joint Lenders of the company, held on September 12, 2023, the unrelated financial creditors have agreed to give an extension of time for making the balance upfront payment subject to payment of interest for the delay, at SBI MCLR of 1 year (8.5% p.a.) plus 250 basis points from September 15, 2023 till the date of payment on reducing balance basis. Therefore, the company has charged interest of ' 517.68 lakhs and ' 127.47 lakhs in the second quarter and third quarter respectively.
iv. We draw your attention to Note 23.2 of accompanying SFS which states that as per NCLT order dated November 21, 2023, 1st tranche amounted ' 312 crores is deferred, and interest is payable to unrelated financial creditors. Hence, as per the order, the company has charged interest at the rate of 10.50% p.a. on ' 200 Crores and at the rate of 8.55% p.a. on ' 112 crores from December 23, 2023, till the date of payment which is August 7, 2024. Therefore, the company has charged interest of ' 75.19 lakhs and ' 760.22 lakhs in the third quarter and fourth quarter respectively.
v. We draw your attention to Note 40 of accompanying SFS which inter-alia states that, as per regulatory compliance, the company is
required to conduct an internal audit for FY 2023-24. The internal auditor is not appointed for the period ending March 31, 2024.
Our opinion on the accompanying SFS is not modified in respect of the above-mentioned matters.
Information Other than the Financial Statements and Auditor’s Report Thereon
i. The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the Consolidated Financial Statements, Standalone Financial Statements and our auditors’ report thereon. The Director’s report is expected to be made available to us after the date of this auditors report.
ii. Our opinion on the SFS does not cover the other information and we do not express any form of assurance conclusion thereon.
iii. In connection with our audit of SFS, our responsibility is to read the other information and, in doing so, consider, whether the other information is materially inconsistent with the SFS, or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
iv. If, based on the work we have performed, we conclude that there is any material inconsistency, we are required to report that fact. We have nothing to report in this regard.
Management’s Responsibilities for the CFS
i. The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these SFS 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 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 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 the 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 SFS that give a true and fair view and are free from material misstatement, whether due to fraud or error.
ii. In preparing the SFS, 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.
iii. The Company’s Board of Directors are also responsible for overseeing the company’s financial reporting process.
iv. The new management has been granted full control of affairs of the Company with effect from January 04, 2024, only.
Auditor’s Responsibilities for the Audit of the SFS
Our objectives are to obtain reasonable assurance about whether the SFS 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 SFS.
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 SFS, 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 system 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.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the SFS 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 SFS, including the disclosures, and whether the SFS represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the SFS that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the SFS may be influenced. We consider quantitative materiality and qualitative factors (i) in planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the SFS.
We communicate with those charged with governance (‘TCWG’) 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 TCWG 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 TCWG, we determine those matters that were of most significance in the audit of the SFS 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.
Other Matters
i. The comparative Ind AS financial statement for the year ended March 31, 2023 are included in these SFS on which we have issued a modified opinion dated November 11, 2024.
Our opinion on the accompanying SFS is not modified in respect of the above mentioned matter. i. Report on Other Legal and Regulatory Requirements
(A) As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure A”, a statement on the matters specified in paragraphs 3 and 4 of the Order.
(B) 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 standalone financial statements (SFS) 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 the date of signing of these SFS (as restated) which has been taken on record by the Board of Directors of the company, none of the directors of the company incorporated in India is disqualified as on the date of signing of these SFS 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 standalone financial statement.
ii. Bases on the representations by the company, we have noted that Company does not have any long-term contracts, including derivative contracts, for which there were any material foreseeable losses.
iii. Based on the latest available secretarial audit report and representations from the company, we noted that company is not required to transfer amounts to the Investor Education and Protection Fund by the Company.
iv. (a) The Management has represented that, to the best of its knowledge and belief, no funds have been advanced
or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(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 (“Ultimate Beneficiaries”) by or on behalf of the Company 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 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 (“Ultimate Beneficiaries”) by or on behalf of the Funding Party or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(c) 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 (a) and (b) above, contain any material misstatement.
v. The company have not declared or paid any dividend during the year and have not proposed final dividend for the year.
vi. Based on our examination, which included test checks, in terms of Rule 3 (1) of the Companies (Accounts) Rules, 2014, applicable on or after April 1, 2023, the Company has used accounting software for maintaining its books of account for the financial year ended March 31, 2024, which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit, we did not come across any instance of the audit trail feature being tampered with. Accordingly, reporting under Rule 11 (g) of the Companies (Audit and Auditors) Rules, 2014 about preservation of audit trail for record retention is not applicable for the financial year ended March 31, 2024.
(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 N.N. Jambusaria & Co
Chartered Accountants Firm Reg No.104030W
Nimesh Jambusaria
Partner M. No: 038979 UDIN: 24038979BKBNXR6383
Place: Mumbai
Date: November 11, 2024
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