We have audited the standalone financial statements of Electrosteel
Castings Limited ("the Company”), which comprise the balance sheet
as at March 31, 2025, and 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
financial statements, including a summary of material accounting policies
and other notes for the year ended on that date (hereinafter referred to as
"financial statements”).
In our opinion and to the best of our information and according to the
explanations given to us, except for the possible effects of the matter
described in the Basis for Qualified Opinion Paragraph, 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 Indian Accounting Standards (Ind AS) prescribed
under section 133 of the Act and other accounting principles generally
accepted in India, of the state of affairs of the Company as at March 31,
2025, and it's profit including other comprehensive income, changes in
equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
Attention is invited to the following notes of the accompanying financial
statements:
a) Note no. 49 regarding cancellation of coal block allotted to the
company in earlier year and adjustments to be given effect to in
respect of the claims made by the company, amount awarded so
far in this respect and required disclosures/ adjustments in terms of
Ind AS with respect to the carrying amounts of the property, plant
and equipment, capital work in progress, inventory and balances
lying under other heads of account and carried forward pending
determination of the amount of claim in this respect as stated in
the said note; and
b) Note No. 9.1(a) in respect of company's investment in the equity
shares of ESL Steel Limited (ESL), the pledge of which was invoked
by the lenders of ESL and the same was set aside by Hon'ble
Calcutta High court and the matter is currently pending before
the said court. Further, as stated in Note no. 9.1(b) dealing with
mortgage of Land at Elavur plant in favour of one of the lenders of
ESL who had assigned their rights to another party and symbolic
possession of the said land was taken by the said party. The matter
has been disputed by the company and as stated in the said note is
currently pending before DRAT and Hon'ble Madras High Court.
c) Pending finalization of the matters dealt with in (a) and (b) above,
required disclosures, adjustments and impacts thereof are presently
not ascertainable and as such cannot be commented upon by us.
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
Auditors' 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
('ICAI') together with the ethical requirements that are relevant to our
audit of the 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 ICAI's Code of Ethics.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our qualified opinion.
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 year. 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. In addition to
the matters described in the basis for qualified opinion section, we have
determined the matters described below to be the Key Audit Matters to
be communicated in our report:
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Key Audit Matters
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Addressing the key audit matters
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Claims by or against the company, litigations and disclosure of contingent
liabilities and assets (as described in note 28.1, 49 and 52 of the financial
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statements)
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There are substantial amount of
claims made by the company
including claims against Wagon
Investment Scheme, Railway
Siding, Parbatpur Coal Mines etc.
which are pending as on this date
as disclosed in Note no. 49 and
52(ii).
The company is also exposed
to number of significant claims
and litigations involving taxation
and other laws and regulations
and related interpretations. This
includes various matters related
to Direct and Indirect taxes,
compensation etc. as dealt with
in note no. 6.1, 24.1, 28 and 52(i)
pending before various judicial
authorities as on this date. The
assessment of the likelihood and
quantum of any liability with
respect to these matters are
matter of judgmental due to the
uncertainty involved therein.
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Our Audit procedures based on which
we arrived at the conclusion regarding
reasonableness of accounting for claims
made by or against the company and
disclosure there against includes the
following:
• Understood, assessed and tested the
design and operating effectiveness of
key controls surrounding assessment
of litigations under the relevant laws
and regulations and the internal
control environment relating to
the identification, recognition and
measurement of amount of claims
made by or against the company
and disclosure for the provisions,
litigations, contingent liabilities and
contingent assets in the financial
statements;
• Analysed significant changes/ updates
from previous periods and obtained a
detailed understanding of the nature,
status and possible implication of
the underlying litigations. Assessed
recent judgements passed by the
judicial authorities on the relevant
matter;
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Key Audit Matters
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Addressing the key audit matters
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We considered these to be a key
audit matter, since the accounting
and disclosure of claims and
litigations are complex, technical
in nature and judgmental and the
impact thereof considering the
amount involved are or can be
material to the understanding of
the financial statements.
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• Discussed the status of the material
litigations and potential implication
of the matters as reported and placed
before the Board of Directors;
• Evaluating management's assessment
by understanding precedents set
in similar cases and analysed the
reliability of management's past
estimates/judgements.
• Reviewed the opinions and views
of the external legal experts and in¬
house legal team and other evidences
to corroborate management's assess¬
ment of the risk profile in respect of
claim pending ascertainment as on
this date. These being technical in
nature reliance has been placed on
the legal interpretations and opinions
provided on the matter; and
• Assessment of the adequacy of
management's assumptions and
estimates related to the claims
both by or against the company,
underlying dispute and disclosures
made in the financial statement. Also,
the references have been made in the
Auditors' Report wherever relevant
and appropriate.
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Verification of Inventory and Valuation thereof (as described in note 13
and 3.8 of the financial statements)
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The Inventory of the Company
as on March 31, 2025 amounts to
Rs. 18,83,87.01 lakhs which forms
around 20.57% of the total assets
of the Company.
This includes bulk materials such
as coal, coke, iron ore etc., which
are susceptible to handling loss,
moisture loss/gain, spillage etc.
and determination of the same
requires estimation based on
experience and technical expertise.
We determined this to be a matter
of significance to our audit due
to the quantum of amount and
estimations involved.
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Our Audit procedures based on which
we arrived at the conclusion regarding
reasonableness of determination of year-
end inventory and valuation thereof
includes the following:
• Evaluating the accounting policy
followed for valuation of inventory
and appropriateness thereof with
respect to relevant Indian Accounting
Standards in this respect;
• The process followed for physical
verification have been reviewed.
This includes deployment of an
Independent Agency for verification
of Bulk Materials during which we
were present to oversee the process
of the verification;
• We reviewed the report submitted
by external agency and obtained
reasons/explanation for variations
observed by them with respect
to book stock, considering the
materiality for variations taking into
account the reasonable allowance for
volumetric measurement;
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Key Audit Matters
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Addressing the key audit matters
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• Understanding and testing the
design and operating effectiveness
of controls as established by the
management in determination of cost
of production and net realizable value
of inventory and consistency with
respect to the policy followed in this
respect; and
• We evaluated the policy for valuation,
processes/ methodologies involved
and disclosures made in the financial
statements in this respect and checks
being performed at multiple levels
and verified the valuation arrived
for the different items and class of
Inventory to ensure that the valuation
is consistent as per the policy followed
and disclosed in this respect.
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Recoverability of Government Grant (as described in note 18.4 and
52(ii)(a) of the financial statements)
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The Company has been entitled for
various sales tax incentives under
industrial promotion scheme
issued by the State Government.
The company had complied with
the condition of the Scheme and
incentives were accounted for in
the books in earlier years. A sum of
Rs. 58,83.07 lakhs are outstanding
as on March 31, 2025.
Further such incentive for the
period from July 01, 2017 to
March 31, 2019 for reasons stated
in Note no. 52(ii)(a) has not been
recognised.
We determined these to be a
matter of significance due to
compliances involved in terms
of the scheme and in certain
cases legislative changes being
contemplated and matter being
pending for decision before
judicial forum and authorities and
also the period for which these are
outstanding for recovery.
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Our Audit procedures based on which
we arrived at the conclusion regarding
reasonableness of accounting and
disclosure include the following:
• Evaluating eligibility requirement of
the schemes and compliances by the
company;
• Understanding and testing the
design and operating effectiveness
of controls as established by the
management in recognition and
assessment of the recoverability of
the grant;
• Considering the relevant notifi¬
cation to ascertain the basis for
determination, completion of
performance obligation and
assessing the appropriateness of
the government grant and timing of
recognition and past receipts of the
grants;
• Analysed significant changes/
updates from previous periods and
proposed legislative changes and
applicability thereof along with
possible implications and obtained
detailed understanding of such items.
Assessed recent judgements passed
by the court authorities affecting such
changes.
• This being a technical matter,
reliance has been placed on legal
advices received and management's
assessment for recoverability.
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Information Other than the Financial Statements and Auditors'
Report Thereon
The Company's Board of Directors is responsible for the other information.
The other information comprises the Report of the Directors and the
annexures thereto (namely Management Discussion and Analysis,
Report on performance and financial position of the subsidiaries and
joint ventures, Report on Corporate Governance, Annual Report on CSR
Activities, Business Responsibility and Sustainability Report, Conservation
of energy, technology absorption, foreign exchange earnings and outgo
and remuneration and other specified particulars of employees) but does
not include the financial statements and our auditors' 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 on the
other information that we have obtained prior to the date of this auditors'
report, 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 the Management and those charged with
governance for the 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 financial statements that give a true and fair view
of the state of affairs (financial position), Profit (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
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 statement that give a
true and fair view and are free from material misstatement, whether due
to fraud or error.
In preparing the 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.
Those Board of Directors are also responsible for overseeing the
Company's financial reporting process.
Auditors' Responsibility 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 auditors'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
with reference to financial statements 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 auditors' 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 auditors' report. However, future events or
conditions may cause the Company to cease to continue as a going
concern; and
• 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 auditors' 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 (Auditors' 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, to the
extent applicable.
2. Further to our comments in the annexure referred to in the
paragraph above, 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 Cash Flow Statement dealt with by this Report
are in agreement with the relevant books of account;
d) Except for the possible effects of the matters described in
the Basis for Qualified Opinion Paragraph, in our opinion,
the aforesaid financial statements comply with the Indian
Accounting Standards specified under Section 133 of the Act,
read with Rule 7 of the Companies (Accounts) Rules, 2014;
e) The matter described in the Basis for Qualified Opinion
Paragraph, in the event of being decided unfavorable, in our
opinion, may have an adverse effect on the functioning of
the company;
f) On the basis of the written representations received from
the directors as on March 31, 2025 taken on record by the
Board of Directors, none of the directors is disqualified as on
March 31,2025from being appointed as a director in terms of
Section 164 (2) of the Act;
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
with reference to financial statements in place and the
operating effectiveness of such controls, refer to our separate
Report in "Annexure B” Our report expresses an unmodified
opinion on the adequacy and operating effectiveness of
the Company's internal control with reference to financial
statements.
3. With respect to the other matters to be included in the Auditors'
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. Except for the matters dealt with in the Basis for Qualified
Opinion paragraph impact whereof are presently not
ascertainable, the Company has disclosed the impact of
pending litigations (other than those already recognized in
the financial statements) on its financial position as required
in terms of the Ind AS and provisions of the Companies Act,
2013 - Refer Note 52(i) to the financial statements;
ii. The Company has made provision, as required under
the applicable law or accounting standards, for material
foreseeable losses, if any, on long-term contracts including
derivative contracts - Refer Note 46(d) to the financial
statements;
iii. There has been no delay in transferring amounts, required to
be transferred 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 (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; and
(c) Based on the audit procedures and generally accepted
auditing practices followed in terms of SAs 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;
and
v. As stated in note no. 21.7 of the financial statements, the
dividend proposed by the Company during the year is in
accordance with section 123 of the Act.
vi. Based on the verification carried out by an Independent
Professional appointed for the purpose and our examination
of the data and details provided to us, which includes test
checks and samples obtained by us in this respect and being
a technical matter placing reliance on the report submitted
by the professional, we report that the Company has used
accounting software(s) for maintaining its books of account
for the financial year ended March 31, 2025, which have 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(s). Further, during the course of our
audit we did not come across any instance of the audit trail
feature being tampered with and the said audit trail has been
preserved by the Company as per the statutory requirements
for record retention.
4. With respect to the reporting under section 197(16) of the Act to
be included in the Auditors' Report, In our opinion and according
to the information and explanations given to us, the remuneration
(including sitting fees and commission) paid by the Company
to its Directors during the current year is in accordance with the
provisions of section 197 of the Act and is not in excess of the limit
laid down therein.
For Lodha & Co LLP,
Chartered Accountants
Firm's ICAI Registration No.:301051E/E300284
R. P. Singh
Partner
Place : Kolkata Membership No: 052438
Date : May 10, 2025 UDIN: 25052438BMONNL3047
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