To the Members of MSTC Limited
Report on the Audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying standalone Financial Statements of MSTC Limited ("the Company"), which comprise the Balance Sheet as at 31st March 2021, and the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity, 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 standalone 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 state of affairs of the Company as at 31st March, 2021, Profit and 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 Companies Act, 2013. Our responsibilities under those Standards are further described in the 'Auditor's Responsibilities for the Audit of the Standalone 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 (ICAI) together with the ethical requirements that are relevant to our audit of the standalone Financial Statements under the provisions of the Companies Act, 2013 and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
2. Without qualifying our opinion, we draw attention to the following:
(a) With reference to Note 8.4 for Trade Receivables-Credit Impaired representing pledged stocks held by the Company in the premises of the Customers on behalf of them under "Cash & Carry" model of business, now discontinued, the Company does not have appropriate internal control system in place for inventory due to which substantial amounts have had to be provided for /written off in the past as well as during the year.
Further, with reference to the said Note, last Volumetric Analysis was done during the year with quantity and Market Value of stocks in respect of few Customers while in rest of the cases, such
exercise was not undertaken for either the Stocks held are reported to be "Nil" or access was denied by the concerned Customer.
(b) With reference to Note No. 36 of the standalone Financial Statements there is a non-Provision of Deferred Tax Asset of ' 1,188.96 millions on Provision for Doubtful Debts of ' 3,402.48 millions since 1st April, 2018.
(c) The Title Deed of a freehold flat in Mumbai having Gross Block of ' 0.74 million as at 31st March, 2021 was not available for verification.
Key Audit Matters
3. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the standalone Financial Statements of the current period. These matters were addressed in the context of our audit of the standalone Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be
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Sl. Key Audit Matters
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Auditor's Response
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i. Recoverability of Trade
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Receivables:
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As at 31st March 2021,
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While examining details of
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Trade Receivables-Gross is
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R e c e i v a b l e s a n d
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' 15,502.93 millions (Net
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transactions during the
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' 7,237.64 millions), with
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year ended 31st March
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' 8,265.29 millions being
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2021 , if any, we have
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considered as Credit
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observed the nature of the
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Impaired for which a
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Trade Receivables, the
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provision for bad and
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sustainability and the
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doubtful debts for similar
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likelihood of recoverability
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amount is held in the Books.
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of Receivables. In terms of an Accounting Policy all such debts as considered doubtful of recovery have been provided for in the Books as at 31st March, 2021.
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In the event of reference of each case of debt with impaired credit to NCLT and/or other forums for adjudication, the Company is exposed to potential risk of financial loss when the reco veri es b ecom e subjected to long processes of litigations and eventually doubtful.
The recoverable amounts a r e e s t i m a t e d b y management based on their specific recoverability
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Since Company's obtaining of balance confirmations from Parties is an ongoing process (as referred to in Note 42), substantive audit procedures have been followed to ensure accuracy of balances. We h a ve a ss e ss e d th e recoverability of the unsettled receivables on a sample basis through our e v a l u a t i o n o f
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management's assessment with reference to the credit profile of the customers
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assessment on individual d e b t o r a s we l l a s co n s i d e ra ti o n a n d a p p l i c a t i o n o f a provisioning policy.
The disclosures related to Trade Receivables of the Company are provided in Note 8.1 to the accompanying standalone
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and their historical payment pattern, wherever applicable, along with the latest correspondences with the customers, as available read with the Company's existing Risk Management Policy.
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ii. IT Systems & Control:
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Preparation
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and
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We have planned, designed
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presentation of Financial
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and carried out the desired
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Statements are dependent
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audit procedures and
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on Company's supporting
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sample checks, which in our
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software and hardware
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opinion are adequate to
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controls involving risk
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provid e reasonable
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management exercise for
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assurance on the adequacy
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maximum elimination of
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of IT controls in place.
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erroneous data.
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Thus,
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quality of audit outcome
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and its authenticity are
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dependent on the extent of
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IT controls and systems.
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iii. Assessment of allowance
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for Bad and Doubtful Advances and Contingent Liabilities:
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Assessment of allowance
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We have carried out the
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for Bad and Doubtful
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v a l i d a t i o n o f t h e
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Advances made during the
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information provided by
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year and Contingent
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the management by
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l i a b i l i ti e s re q u i re assessment of probable
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performing the following procedures:- Evaluating reasonable-
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outcomes and cash flows.
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ness of the underlying
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The identification and
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assumptions.
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quantification require
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- Understanding the
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estimation and judgment
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current status of the
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by the management. The
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litigations.
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disclosure related to
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- Examining the relevant
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allowance for Bad and
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documents on available
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Doubtful Advances during
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records.
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the year and Contingent
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- Reviewing legal opinion/
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liabilities are provided in
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industry practices
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Note No 30 & 35 (a) to the
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wherever necessary.
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accompanying Standalone
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- Verification of various
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Financial Statements.
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disclosures made by the management.
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- Obtaining Management's
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Representation as per guidelines of the ICAI.
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- Company's Accounting
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Policy.
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iv. Impact of continuing
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As a result of continuing
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COVID-2019 pandemic :
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COVID-19 pandemic situation prevailing in the country, we had to encounter difficulties / delay in the process of collection of data and analysing the same in respect of Branches which could not be physically visited. Accordingly, the audit of the Branches was carried out based on remote access of the data in respect of the Branches as p r o v i d e d b y t h e management of the Company, to enable us to come to an audit conclusion without compromising the maintenance of quality of audit as desired by the regulatory authorities.
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Information Other than the Standalone Financial
Statements and Auditor's Report Thereon
4. The Company's Board of Directors is responsible for the
preparation of other information. The other information comprises the information included in the Management Discussions and Analysis, Board's Report including Annexure to Board's Report, Corporate Governance and Shareholder's Information, but does not include the standalone Financial Statements and our auditor's report thereon.
Our opinion on the standalone Financial Statements does not cover the other information and we do not express any form of assurance and conclusion thereon.
In connection with our audit of the standalone Financial Statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the standalone 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 and Those Charged with Governance for Standalone Financial Statements
5. The Company's Board of Directors are 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, total 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's 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 judgements 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.
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.
The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone
Financial Statements
6. Our objectives are to obtain reasonable assurance about whether the standalone 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 standalone Financial Statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit.
We also:
• Identify and assess the risks of material misstatement of the standalone 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 Companies Act, 2013, we are also responsible for expressing our opinion on whether the Company has adequate internal financial control systems 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 standalone 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 standalone Financial Statements, including the disclosures, and whether the standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatement in the standalone Financial Statement that, individually or in aggregate, makes it probable that the economic decision of a reasonably knowledgeable user of the Financial Statement 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 work; and (ii) to evaluate the effect of any identified misstatements in the standalone 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 standalone 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.
Other Matter
7. The following other matters are mentioned.
(a) With reference to Note 42, confirmation of balances were not available in many cases of Trade and other Receivables, Trade and other Payables, Loans and Advances, Deposits made and received and the impact of consequent adjustments required, if any, is not ascertained.
(b) The continued spreading of COVID -19 across India has resulted in restriction on physical visit to the Branches and the need for carrying out alternative audit procedures as per the Standards on Auditing prescribed by the Institute of Chartered Accountants of India (ICAI). As a result of the above, the audit was carried out based on remote access of the data in respect of the Branches as provided by the management of the Company. This has been carried out based on the advisory on "Specific Considerations while conducting Distance Audit/ Remote Audit/ Online Audit under current Covid-19 situation" issued by the Auditing and Assurance Standards Board of ICAI. We have been represented by the management of the Company that the data provided for our audit purposes is correct, complete, reliable and are generated by the accounting system of the Company.
Our audit opinion is not modified in respect of the above.
Report on Other Legal and Regulatory Requirements
8. As required by the Companies (Auditor's Report) Order, 2016 ("the Order"), issued by Government of India in terms of Sub-section (11) of Section 143 of the Companies Act, 2013, we give in the" Annexure A", a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
9. 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 Accounts 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 Cash Flow Statement dealt with by this Report are in agreement with the Books of Accounts.
(d) In our opinion, the aforesaid standalone Financial Statements comply with the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act, read with relevant Rules thereto.
(e) Notification no. G.S.R 463(E) dated 5th June, 2015 issued by Ministry of Corporate Affairs, Section 164(2) of the Companies Act, 2013 regarding disqualification of the Director is not applicable to the Company, since it is a Government Company.
(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) The Company being a Government Company, provisions of Section 197 (16) of the Companies Act, 2013 regarding managerial remuneration is not applicable to the Company as per notification no. G.S.R. 463(E) dated 5 th June, 2015 issued by Ministry of Corporate Affairs.
(h) With respect to the other matters to be included in the Auditor's Report in accordance with Rule11 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 standalone Financial Statements -Refer Note35(a) to the standalone Financial Statements.
(ii) The Company did not have any long-term contracts including derivative contracts for which there were any foreseeable material losses.
10. As required by Section 143(5) of the Act the directions and sub-directions issued by the Comptroller & Auditor General of India, we give our comments on the standalone Financial Statements in "Annexure-C" annexed herewith.
For S. Ghose & Co LLP Chartered Accountants FRN- 302184E/E300007
CA Pradip Kumar MitraPlace: Kolkata Partner
Date: June 25, 2021 M.No.052183
UDIN : 21052183AAAAAC2933
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