INDEPENDENT AUDITOR'S REPORT
REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS
Qualified Opinion
We have audited the accompanying standalone Ind AS financial statements of Dredging Corporation of India Limited,
Visakhapatnam ("the Company") which comprise the Balance Sheet as at March 31,2023, the Statement of Profit and Loss
(including Other Comprehensive Income), Statement of Changes in Equity and 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. (Hereinafter referred to as "the financial statements").
In our opinion and to the best of our information and according to the explanations given to us, except for the effect of the
matter described in the Basis for Qualified Opinion section of our report, the aforesaid financial statements 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,
2023 and its profit, changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
1. As described in Note No 30.11 to the accompanying financial statements, Company has not determined the retrospective
impact of the change in Accounting Policies on the Opening balance of Other Equity and the Current and Previous reporting
periods thereby not complying with the measurement and disclosure requirements under Ind AS 8, Accounting Policies,
Changes in Accounting Estimates and Errors. In the absence of sufficient and appropriate audit evidence, we are unable to
comment on the impact thereof on the amounts reported in the Financial Statements.
2. As described in Note No 30.21 to the accompanying financial statements which states that Outstanding balances under
Trade Payables, Other Payables, Trade Receivables, TDS receivable, GST & GST ITC and Advance to Suppliers are
subject to reconciliation and confirmations thereby not complying with the measurement and disclosure requirements under
Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets and Ind AS 109, Financial Instruments. In absence of
sufficient and appropriate audit evidence, we are unable to comment on the impact thereof on the amounts reported in the
Financial Statements.
3. As stated in Note 30.20 to the accompanying financial statements an Arbitral Award for disputed payables, was passed in
favour of M/s Mercator Limited (Formerly Mercator Lines Limited) (MLL). As the company's challenge of Award was
dismissed in multiple legal forums, MLL had filed an Execution petition before the High Court of Delhi seeking enforcement
of Arbitral Award in the year 2019. The management of the company had approached the High Court seeking time for
settlement of decretal dues with Mercator Limited (Represented by the Resolution Professional) which did not fructify.
The learned High Court had directed the company to deposit an amount of an amount of ? 5.00 crores before January 31,
2023 and a further amount of ? 8.00 crores by May 10, 2023 in view of the Company's repeated violations of the directions
to place a proposal for deposit of the amount awarded into court. The amount disputed is to the tune of an amount of ?
45.70 Crores totalling to an amount of approximately ? 68.71 Crores including interest and other related costs. The
management of the company has concluded that no provision against the same, was required at this stage and treated the
same as contingent liability. This has resulted in overstatement of profits by ? 68.71 Crores, and understatement of trade
payables by the same extent.
4. As stated in Note no. 30.10 to the accompanying financial statements the trade receivables include a sum of ? 65.84
Crores due from M/s. Sethusamudram Corporation Ltd. (SCL), towards works executed during financial years 2005-06 to
2008-09 as has been recommended by a committee chaired by Additional Secretary and Financial Advisor (AS&FA
committee) Government of India. The committee stated that a note seeking approval of the cabinet needs to be moved by
SCL for seeking government budgetary resources for SCL to make payment of balance outstanding dues to the company.
There is a significant delay in realization of the said amount and the document evidencing the relevant budget allocation by
the Government of India is also not available yet. In view of the same the realisability of the said amount is remote. The
management has concluded that no provision against the same, was required at this stage as the same is treated as
receivable considered good though unsecured. This has resulted in overstatement of profit and receivables to the same
extent.
5. As per the information submitted to the Board of Directors in its meeting dated 08th August 2022, there are indications of
impairment in the case of DCI Dredge XVIII. As per Para 9 of Indian Accounting Standard (Ind AS) 36 on Impairment of
Assets, the Company needs to assess at the end of each reporting period whether there is any indication that an asset may
be impaired, and if any such indications exist, company shall estimate the recoverable amount of the asset. However,
Company has not estimated the recoverable amount for DCI Dredge XVIII. In the absence of adequate information, we are
unable to comment on the impact thereof on the amounts reported in the financial statements.
6. As stated in Note no. 30.18 to the accompanying financial statements, an Arbitral award issued by the Joint Arbitrator of
PMA against the company in favour of M/s Mazagon Dock Limited (MDL) on 12-06-2018 for an amount of t 15 Crores. The
company has challenged the said award before AMRDC and the matter is still pending. During the financial year 2019-20
MDL approached NCLT with a claim of ? 25.50 Crores and invoked CIRP against the Company. NCL T admitted the case
on October 24, 2019, and the CIRP proceedings are pending before NCLT. The management of the company has
concluded that no provision against the same was required at this stage and treated the same as contingent liability. This
resulted in understatement of trade payables by ? 25.50 crores, understatement of PPE by ? 13.30 Crores (approx.),
overstatement of Retained Earnings by ? 12.20 Crores (approx.) and profit by ? 0.99 Crores (approx.).
7. As stated in Note no.30.14 to the accompanying financial statements, owing to a dispute Cochin Port Trust had forfeited
the security deposit made by the company to the tune- of ? 5.59 Crores in the financial year 2020-21. The company had
accepted the conciliator's recommendations and issued an undertaking for full and final settlement. The company, however,
continues to account for the said amount as receivable from Cochin Port Trust. As on the date of this report, company had
not recovered the said security deposit nor did it receive any positive confirmation of its release from Cochin Port Trust. The
management has concluded that no provision against the same, was required at this stage and the same is treated as
receivable considered good. This resulted in overstatement of profit and understatement of other provisions by ? 5.59
Crores.
8. As stated in Note No. 30.13 during the year, under various dredging works carried out by the company, customers have
either recovered Liquidated damages on several accounts or withheld amounts towards LD or are entitled to do the same,
as per the terms of agreement that company had entered into with respective customers totalling to the tune of ? 15.34
Crores. As on the date of this report, neither the said amounts were released nor a positive confirmation from its customers
is received regarding waiver of LD. The management has concluded that no provision against the same, was required at
this stage and the same is treated as receivable considered good. This resulted in overstatement of profit and receivables to
the same extent.
9. Company had availed ITC of GST on vendor bills/invoices- in respect of which payment is pending for more than 180
days. As per the provisions of GST, the same is to be reversed and interest is to be paid in respect of invoices pending
payment beyond 180 days. In several cases ITC had not been reversed. Further, in cases where ITC has been reversed,
interest which is payable under GST law has not been paid. In the absence of sufficient and appropriate audit evidence, we
are unable to comment on the impact thereof on the amounts reported in the Financial Statements.
10. Out of Inventory of 135.62 Crores vide Note no. 5 to the Balance Sheet, physical verification for items valuing ? 10.28
Crores at 11 locations, had not been conducted by the Company during the year. The impact of the same on amounts
stated in Financial Statements is not determinable. Further, shortages identified and reported in the physical verification to
the tune of ? 3.55 Crores had not been adjusted in the books of account. As a result, profit and inventory is overstated by ?
3.55 Crores. Even in respect of reported shortages, reconciliation for entries of regular consumptions vis-a-vis physical
verification shortages is pending, in as much we are unable to conclude that the shortages have been adequately adjusted
in the books of account and unable to comment on the impact of the same on the amounts reported in the Financial
Statements.
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 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 together with the ethical requirements that are
relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 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 opinion on the
standalone financial statements.
Emphasis of Matter
We draw attention to;
a. Note No 30.17 to the financial statements regarding amounts receivable from M/s Jawaharlal Nehru Port Trust on
account of a disputed recovery made by them.
b. Note No 30.12 to the financial statements regarding the accounting treatment of Prior Period Items and the disclosure
thereof in the Current and Previous reporting periods.
Our Opinion is not modified in respect of above matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of most significant 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. We have determined
that there are no 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 is responsible for the other information. The other information comprises the information
included in management report and chairman's statement 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 in
the 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.
Responsibilities of Management and those charged with Governance for the Standalone Financial Statements
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, changes in equity and cash flows of the company in accordance with the accounting
principles generally accepted in India, including the 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 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 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, the Board of Directors 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 the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the 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 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 financial statements.
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 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 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.
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
terms of sub-section ( 11) of section 143 of the Act, we give in the "Annexure A" a statement on the matters specified in
paragraphs 3 and 4 of the Order, to the extent applicable.
(2) 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, Statement of Changes in Equity and the Cash Flow Statement
dealt with by this Report are in agreement with the books of account.
(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards prescribed
under Section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014.
(e) On the basis of the written representations received from the Directors as on March 31,2023, taken on record by the
Board of Directors, none of the Directors is disqualified as on March 31,2023 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", and
(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 financial statements -
Refer Note No 30.01 (A) to the standalone financial statements.
(ii) The company did not have any long-term contracts including derivative contracts for which there were any
material foreseeable losses.
(iii) There has been 31 days delay in transferring amounts, required to be transferred, to the Investor Education
and Protection Fund by the company.
(iv) As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable to the Company with effect
from April 1, 2023, reporting on Audit Trail in pursuance of Rule 11 (g) of the Companies (Audit and Auditors) Rule, 2014 is
considered inapplicable for the current year.
(v) (i) 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;
(ii) 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;
(iii) 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 (i) and (ii) above, contain any material misstatement.
(h) 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, in our opinion and to the best of our information and according to the explanations
given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of
section 197 of the Act.
(i) As required under the directions and sub-directions issued by the Comptroller and Auditor General of India in terms of
sub section 5 of Section 143 of the Companies Act, 2013 we herewith enclose our report in Annexure - C".
For Rao & Kumar
Chartered Accountants
FRN 03089S
-sd-
CA Guru Prasad K C S
Partner
M.No. 215652 Place: Visakhapatnam
UDIN No: 23215652BGRPDU1292 Date: 25/05/2023
|