METALYST FORGINGS LIMITED

Report on the Audit of the Financial statements

Qualified Opinion

We have audited the accompanying Financial Statements of METALYST FORGINGS LIMITED (‘the Company'), which comprise the Balance sheet as at 31^st March 2023, the statement of Profit and Loss including other comprehensive income, the statement of cash flows and the statement of changes in equity for the year then ended, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “Financial Statements”)

We do not express an opinion on the accompanying financial statements. 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 financial statements.

Basis for Qualified Opinion

(a) As per "IND AS 36 Impairment of Assets", the Company should assess at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset. The company should assess recoverability of following assets:

*Out of total balance of Rs 942.04 lakhs, 398.61 lakhs is overdue for more than a year. In absence of relevant ageing reports, exact overdue period cannot be calculated.

^AOut of total balance of Rs 105.13 lakhs, 49.92 lakhs are adjusted against old demands. No appeal has been made with respect to such adjustments. In absence of any appeal, company should impair such assets.

Such assets are not realised for substantial period. Due to non-availability of ageing reports for following assets, it was not possible to determine since when the said balances were due to be realised. There is an indication that such asset might be

impaired. Management has not determined fair value/ recoverable value of such assets. Accordingly, we are unable to ascertain the possible effects of the same on the statements.

(b) As per "IND AS 109 Financial Instruments” the Company should recognize a loss allowance for expected credit losses on all financial assets of the company. Since the Company is still under the CIRP process and RP and COC are in the process of finalization of successful resolution, the Company and the management has not determined value of these assets in use. Accordingly, we are unable to ascertain the possible effect of the same on the Statements.

(c) As required under “IND AS 36- Impairment of Assets”, the company has not done impairment testing on Property, plant and equipment having net block value of Rs 1,25,514.20 lakhs and Capital Work in Progress having closing value of Rs 14,060.03 Lakhs. We are informed by the management that since the company is under CIRP process, it is not possible for them to determine value in use and hence impairment testing has not been carried out. Accordingly, we are unable to ascertain the possible effects of the same on the financial statements.

(d) The company has not maintained Fixed Asset register. Accordingly, we cannot comment on accuracy of the carrying value of Property, Plant and Equipment, current & Accumulated depreciation and its possible impact on the financial statements.

(e) Refer Note No._to the financial statements where it is mentioned that there is

total VAT refund receivable of Rs 707.73 lakhs for FY 2014-15, FY 2015-16 and FY 2016-17 in the books of accounts. As per the Assessment orders received in January 2023 for these years, the refund amount is assessed at Rs 300.47 Lakhs. The company has not filed any appeal against the said orders. As represented by management the company is in the process of filing an appeal for reassessment. However, the company has not reduced the balance in books of accounts. Thus, the loss for the period is overstated to the extent of Rs 407.26 lakhs.

(f) Certain current accounts having aggregate balance of Rs. 351.23 Lakhs are not confirmed due to non-availability of confirmation as well as relevant bank statements from respective Banks. In absence of these details, we are unable to ascertain the possible impact on financial statements. (Only to be taken for amount on which banks statements is not available)

(g) Balance of Trade receivables, loans and advances and Trade payables are subject to confirmations and consequent adjustments, if required. In absence of balance confirmations, financial impact on financial results is not ascertainable. As per the Insolvency and Bankruptcy code, the RP has to receive, collate and reconcile all the claims submitted by the creditors of the company. The RP has verified and admitted the claims submitted by the creditors as per the code. Pending - finalisation of

resolution plan, the impact of such claims if any, have also not been considered in the preparation of the financial statements.

(h) We have not been provided with any inventory records containing information related to inwards, outwards, consumption and closing stock in quantity as well as valuation of cost. We have been provided with physical verification reports of M/s SR MALU & Co. wherein there are qualifications regarding provisions required in valuation of inventory. In absence of these complete data, we cannot verify accuracy of cost of inventory. Furthermore, we cannot ascertain whether the cost of inventory is stated at lower of cost or NRV and possible impact on the financial statements.

(i) As per IND AS 19, company has to take independent actuarial valuation under IND AS to calculate gratuity and leave encashment provision. Since the same is not taken by the company, total comprehensive income is overstated to an extent of 48.24 lakhs.

Emphasis of Matter

We draw attention to the following:

1. Refer note no._where it is mentioned that considering the ongoing corporate

insolvency resolution process, the certainty as to realization of unused tax losses and MAT credit cannot be ascertained at this stage. Consequently, adjustment to deferred tax (net) and available MAT credit have not been given effect to.

2. Refer note no._Considering the ongoing corporate insolvency resolution process,

interest on the financial debt from the date of commencement of CIRP i.e. from December 15, 2017 till March 31, 2023 have not been provided in the books of accounts and charged to profit and loss account.

Material Uncertainty Related to Going Concern

The company has accumulated losses of Rs. 256884.63 Lakhs and its net worth is fully eroded. It has incurred net loss during the year ended March 31, 2023, amounting to Rs. 31,341.81 Lakhs. It is unable to repay its debts and meet other financial obligations/commitments. The application of Financial Creditors under section 9 of the Insolvency and Bankruptcy Code (IBC) had been admitted by Hon'ble National Company Law Tribunal (“NCLT”), Mumbai Bench. The company has been in the CIRP process under the code since December 15, 2017, and till date no resolution has been arrived at.

All these indicate material uncertainty about the Company's ability to continue as a Going Concern. However, the financial statements are prepared on a going concern basis.

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.

Except for the matters described in the Basis for qualified opinion we have determined that there are no other key audit matters to communicate in our report

Information other than the financial statements and Auditor's Report thereon

The Company's Board of Directors are responsible for the other information. The other information comprises the information included in the Director's Report, including annexure thereto, Report on Corporate Governance and Management Discussion and Analysis Report, but does not include the Financial Statements and our 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 during the course of our 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.

Responsibility of Management's and Those Charged with Governance's Responsibility for the Financial Statements

The Resolution Professional of the company 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 Companies (Indian Accounting Standards) Rules, 2015.

The company has gone into Corporate Insolvency Resolution Process (“CIRP”) vide order of the National Company Law Tribunal, Mumbai Bench (“NCLT”) dated December 15, 2017, under the provision of the Insolvency & Bankruptcy Code 2016 (“Code”). Pursuant to the Order, the powers of the Board of Directors stand suspended and such powers are exercisable by Mr. Dinkar T. Venkatasubramanium, who has been appointed as Resolution Professional (“RP”) by NCLT vide order dated December 15, 2017, and was consequently confirmed as Resolution Professional (RP) by the Committee of Creditors (COC) in its meeting held on January 12, 2018. The members of the COC (vide the meeting held 18 May 2018) authorized RP to file an application to NCLT for extension of CIRP period by 90 days (i.e., from 180 days to 270 days) as per the Code.

Accordingly, Mr. Dinkar T. Venkatasubramanium took control of the management and operations of the company. As the powers of the Board of Directors had been suspended, the financial statements have not been adopted by Board of Directors however, the same have been signed by Mr. Dinkar T. Venkatasubramanium (Resolution Professional), Mr. Yogesh Kapur (Director), Mr. Arun Maiti (CFO) and Ms. Pratibha Chaudhary (CS) of Company confirming accuracy and completeness of the results. These Financial Statements have been signed by the RP.

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; 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, Resolution Professional 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.

Auditor's Responsibility for the audit of 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 Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in 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 Standards on Auditing, 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 explaining our opinion on whether the Company has an 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 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 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.

Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our audit work; and (ii) to evaluate the effect of any identified misstatements in the Financial Statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 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 exercise of powers conferred by sub section (11) of section 143 of the act, we give in “annexure A”, a statement on the matters specified in paragraph 3 & 4 of the Order, to the extent applicable.

2. As required by section 143(3) of the Act, we report that:

(a) Except for the matter described in Basis of Qualified opinion paragraphs, 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) Except for the matter described in Basis of Qualified Opinion paragraphs, 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. It was not possible to verify if daily backups were being taken in the absence of any evidence to that effect;

(c) Except for the matter described in Basis of Qualified Opinion paragraphs, the Balance sheet, the statement of Profit and Loss including other comprehensive income, the cash flow statement and the statement of changes in equity dealt with by this report are in agreement with the relevant books of account;

(d) Except for the matter described in Basis of Qualified Opinion paragraphs, the aforesaid Financial Statements comply with the Indian Accounting Standards specified under section 133 of the Act, read with the relevant rules there under;

(e) In our opinion the matters described in the Basis of Qualified Opinion paragraphs above may have adverse effect in the functioning of the Company.

(f) Since the company is under CIRP under the provisions of the Insolvency and Bankruptcy Code, the powers of board are suspended and RP is managing the operations of the company. Thus, written representations of the directors are not received and taken on record by the company and

(g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above; and

(h) With respect to the adequacy of the internal financial controls over financial reporting of the company and the operating effectiveness of such controls, refer to our separate report in “Annexure B”. Our report expresses disclaimer opinion on the adequacy and the operating effectiveness of the company's internal financial controls over financial reporting. An internal audit has also not been undertaken by company.

(i) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act, as amended, we report, that the managerial remuneration for the year ended 31st March, 2023 has not been paid to its directors.

(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:

i. The company has disclosed the impact of pending litigations on its financial position in its Financial Statements [Refer Note no. 3.26.4 of financial statements].

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

iii. The company has Rs 17.84 lakhs pending to be transferred to Investor Education and Protection Fund which is unclaimed for period 2012-13 and 2013-14.

iv. Further,

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 persons or entities, 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 to or 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 persons or entities, 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 from or on behalf of the Ultimate Beneficiaries;

c) Based on the audit procedures that have been considered reasonable and, 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 or paid any dividend during the year.

vi. 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, no remuneration is paid by the Company to directors during the current year. In absence of such remuneration paid, reporting under this clause is not applicable.

vii. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.

For Jayesh Sanghrajka & Co. LLP

Chartered Accountants

ICAI Firm Registration No. 104184W/W100075

Rishikesh Nasikkar

Designated Partner Membership No. 166493

Date: Oct 28^th 2023 Place: Mumbai

UDIN:- 23166493BGYASR7490