Simplex Infrastructures Limited
Report on the Audit of Standalone Financial StatementsOpinion
We have audited the accompanying Standalone Financial Statements of Simplex Infrastructures Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2023, the Statement of Profit and Loss (including Statement of Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and notes to the Standalone Financial Statements including a summary of the significant accounting policies and other explanatory information which includes 16 (sixteen) joint operations (hereinafter referred to as "Standalone Financial Statements").
In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of reports of other auditors on separate financial statements and on the other financial information of the joint operations, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013, as amended ('the Act') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, and its loss (including Other Comprehensive Income), changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. 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 Act and the Rules made there under, 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 which we have obtained is sufficient and appropriate to provide a basis for our Audit Opinion on the Standalone Financial Statements.
Emphasis of Matter
a) We draw attention to the following matters:
1. The accompanying Standalone Financial Statements Note 41(a) regarding uncertainties relating to recoverability of unbilled revenue pending for certification amounting Rs.41,584 lacs, Note 38 regarding trade receivables and retention monies amounting Rs.13,935 lacs and Rs.3,271 lacs, respectively, as at March 31, 2023, which represent receivables in respect of completed/ substantially completed/ suspended/ terminated projects. As explained to us the Company is at various stages of negotiation/ discussion with the clients in respect of the aforementioned receivables. Considering the contractual tenability, progress of negotiations/ discussions the management is confident of recovery of these receivables.
2. Note 38 to the accompanying Standalone Financial Statements regarding inventories aggregating Rs.887 lacs pertaining to certain completed projects in the view of management are good and readily useable. In the absence of any sufficient appropriate convincing audit evidence to support the significant judgments and estimates relating to support the management's view on usability of such items, we are unable to comment whether the aforesaid inventories are usable.
3. Note 39 to the accompanying Standalone Financial Statements regarding loans and advances pertaining to earlier years amounting to Rs.35,063 lacs, as informed to us the company is in active pursuit and confident of recovery of these advances. In the
absence of confirmation or any sufficient appropriate convincing audit evidence to support the significant judgments and estimates relating to management's view on the recoverability of such amount, we are unable to comment whether the aforesaid balances are recoverable at this stage.
4. Note 36 to the accompanying Standalone Financial Statement, regarding default in payment of revolving facility like Cash Credit, WCDL availed from various Banks total amount outstanding to Rs.3,85,175 lacs and also default in repayment of principal and interest aggregating to Rs.97,846 lacs due in case of Term Loan and payment to Debenture holders on the non-convertible debentures. Certain closing balances have not been confirmed by the respective banks amounting to Rs.2,52,945 lacs, the management has recognized interest liabilities on bank balances on provisional basis as per last sanction letters.
5. The Company has recognized net deferred tax assets amounting to Rs.92,085 lacs as at March 31, 2023, which includes deferred tax assets on carried forward unused tax losses, unused tax credit and other taxable temporary differences on the basis of expected availability of future taxable profit for utilization of such deferred tax assets. The management is confident that the deferred tax assets will be set off against the future foreseeable profit by the Company.
Our opinion is not modified in respect of these matters.
b) The accompanying Standalone Financial Statements
the Company has incurred net loss of Rs.50,624 lacs
(PY Rs. 52,631 lacs) during the year ended March 31,2023, as also there is default in payment of financial debts, to its bankers and others amounting to Rs.4,83,021 lacs (PY Rs.3,58,131 lacs). As stated in Note 36 to the accompanying statement, thse financial statements are prepared by the management on going concern basis for the reasons stated therein.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements for the financial year ended March 31, 2023. 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 communicated in our report. For each matter below, our description of how our audit addresses the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the Standalone Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedure designed to response to our assessment of the risks of material misstatement of the Standalone Financial Statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying Standalone Financial Statements.
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Sr. No.
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Key Audit Matter
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Auditor's Response
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Assessment of going concern basis of accounting (as described in Note 36 of the Standalone Financial Statements)
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1
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The company has incurred net loss of Rs.50,624 lacs during the year ended 31st March, 2023 and as of that date has accumulated losses aggregating Rs.1,08,980 lacs resulting in substantial erosion of its net worth.
During the year, the Company continued to default on payment to its lenders has overdue payments to operational creditors out of which certain operational creditors have also applied before the National Company Law Tribunal (NCLT) for debt resolution under the Insolvency and Bankruptcy Code, 2016, none of which has been admitted so far.
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Our audit procedures included but were not limited to, the following in relation to assessment of appropriateness of going concern basis of accounting:
• Obtained an understanding of the process followed by management for identifying events or conditions that could impact the Company's ability to continue as a going concern and process followed to assess the corresponding mitigating factors existing against such events or conditions. Also, obtained an understanding around the methodology adopted by the Company to assess their future business performance of a cash flow forecast for the business;
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Sr. No.
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Key Audit Matter
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Auditor's Response
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While the above factors indicate doubt on the Company's ability to continue as a going concern, the company has taken into consideration the following mitigating factors in its assessment for going concern basis of accounting in preparation of the accompanying Standalone Financial Statements:
• Expected successful implementation of the resolution plan with the lenders.
• Time bound monetization of certain non-core assets; and
We have considered the assessment of management's evaluation of going concern basis of accounting as a key audit matter due to the pervasive impact thereof on the Standalone Financial Statements and the significant judgements and assumptions that are inherently subjective and dependent on future events, involved in preparation of cash flow projections and determination of the overall conclusion by the management.
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• Evaluated the design and tested the operating effectiveness of key controls relating to management's assessment of going concern as above;
Evaluated the management's assessment of the successful implementation of the resolution plan, current status of requisite approvals from lenders, reading of the minutes of the meetings held and understanding obtained from the management; and
Assessed the appropriateness and adequacy of the disclosures made by the management in respect of going concern in accordance with the applicable accounting standards.
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Correctness of Project Revenue recognition - Construction Contracts (as described in Note 1.14(i) and 32(i) of the Standalone Financial Statements)
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2
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Revenue from construction contracts is recognised over a period of time in accordance with the requirements of Ind AS 115, Revenue from Contracts with Customers. Revenue recognition involves usage of percentage of completion method which is determined based on proportion of contract costs incurred to date compared to estimated total contract costs, which involves significant judgments, reliable estimation of total project cost, identification of contractual obligations in respect of Company's rights to receive payments for performance completed till date, estimation of period of recovery of receivables, changes in scope and consequential revised contract price and recognition of the liability for loss making contracts/ onerous obligations.
Project revenue recognition is significant to the financial statements based on the quantitative materiality and the degree of management judgment required to apply the percentage of completion method. Management has also considered this area to be a key accounting estimate as disclosed in the 'critical estimates and judgements' Note 1A to the Standalone Financial Statements. We therefore determined this to be a key audit matter.
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Our procedures included:
• Testing of the design and implementation of controls involved for the determination of the estimates used as well as their operating effectiveness;
Testing the relevant information technology system's access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard;
• Testing a sample of contracts for appropriate identification of performance obligations;
• For the sample selected, reviewing for amendments of orders and the impact on the estimated costs to complete;
• Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings.
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Sr. No.
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Key Audit Matter
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Auditor's Response
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Unbilled Revenue balance, Trade Receivables and Retention Money relating to construction contracts of the Company (as
described in Note 7(b) and Note 9 of the Standalone Financial Statements)
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3
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Unbilled Revenue balance, Trade Receivables and Retention Money of the Company aggregates Rs. 6,04,662 lacs (PY Rs. 5,97,806 lacs) as at March 31, 2023.
The collectability of above balances is a key element of the Company's working capital management. In assessing the recoverability of the aforesaid balances, management's judgment involves consideration of status of the project, the likelihood of collection based on the terms of the contract and evaluation of litigations, if any.
We considered this as key audit matter due to the materiality of the amounts and significant estimates and judgments as stated above.
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As part of our audit procedures:
• Testing of the design and implementation of controls involving management's assessment of recoverability of Unbilled Revenue balance, Trade Receivables and Retention Money relating to construction contracts.
• We performed test of details and tested relevant contracts and documents on the basis of materiality for Unbilled Revenue, Trade Receivables and Retention Money balances.
• We also carried out additional test procedures, in respect of long outstanding balances, i.e. tested subsequent documents with customers with respect to recoverability of the same.
• We tested contracts to determine the provisioning requirement for loss making contracts/onerous obligations, if any.
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Pending litigations (as described in Note 34 of the Standalone Financial Statements)
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4
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The Company is subject to number of claims and litigations including arbitrations, mainly with customers and tax authorities. The assessment of the likely outcome of these matters can be judgmental due to the uncertainty inherent in their nature.
This area is significant to our audit, since the accounting and disclosure of claims and litigations are complex and judgmental, and the amounts involved are, or may be, material to the Standalone Financial Statements.
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Principal Audit Procedures:
Our audit approach was a combination of test of internal controls and substantive procedures including:
• Assessing the appropriateness of the design and implementation of the Company's controls over the assessment of litigations and completeness of disclosures. Supporting documentations are tested to assess the status of Arbitration/legal proceedings with reference to related counselors' views for likely outcome of these matters.
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Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of other information. The other information comprises the information included in the Report of the Board of Directors, Management Discussion and Analysis Report, Report on CSR activities, Business Responsibility Report, Corporate Governance Report and other annexure to Directors Report including Shareholder's Information, but does not include the Standalone Financial Statements and our auditor's report.
Our opinion on the Standalone 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 Standalone Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements during the course of our audit or our knowledge obtained in the audit or otherwise appears to be materially misstated.
When we will read the other information on availability of the same to us and if there is anything to report in this regard as
required under SA 720"The Auditor's Responsibilities Relating to Other Information'; we will communicate accordingly.
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 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 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and 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, 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 Standalone Financial Statements
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 skepticism 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 financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by 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 misstatements in the Standalone Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone 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 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 Matters
a) We have been appointed as joint auditors of the Company along with M/s Chaturvedi & Co., Chartered Accountants (the other 'Joint Auditor'). We are issuing a separate audit report in accordance with the requirements of SA 299 "Responsibility of Joint Auditors" in view of the difference of opinion with the other joint auditor regarding the matters reported under "Emphasis of Matter" paragraph.
b) We did not audit the financial statements and other financial information, in respect of 13 (thirteen) joint operations whose annual financial statements and other
financial information reflect total assets of Rs.8,251 lacs as at March 31, 2023 and total revenues of Rs. 3,720 lacs, total net profit/(loss) after tax of Rs.77 lacs and total comprehensive income of Rs.77 lacs for the year ended on that date and net cash outflows of Rs. 50 lacs for the year ended March 31,2023, as considered in the financial Statement which have been audited by the other auditors.
The financial information of this joint operation have been audited by the other auditor whose report have been furnished to us by the Company's management and our conclusion in so far as it relates to the amounts and disclosures included in respect of this joint operation, is based solely on the report of such other auditor.
c) We have audited the financial statements and other financial information, in respect of 3 (three) joint operations whose annual financial statements and other financial information reflect total assets of Rs.6,478 lacs as at March 31, 2023 and total revenues of Rs.1,833 lacs, total net profit/(loss) after tax of (Rs.24 lacs) and total comprehensive income/(loss) of (Rs. 24 lacs) for the year ended on that date and net cash outflows of Rs.19 lacs for the year ended March 31, 2023, as considered in the financial Statement.
Our opinion on the Statement is not modified in respect of above matter with respect to our reliance on the work done by the other auditor and report thereon.
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 Section 143(11) of the Act based on our audit and on the consideration of report of the other auditor on separate financial statement and the other financial information of joint operations, as noted in the "Other Matters" paragraph, we give in "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, except for the
matter(s) described in the "Emphasis of Matters" paragraph 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, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books of account.
d) Except for the matter(s) described in the Emphasis of Matters paragraph. In our opinion, the aforesaid Standalone Financial Statements comply with the Ind AS specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015 as amended.
e) In view of the matter(s) described in the Emphasis of Matter paragraph above, we are unable to comment whether these may have an adverse effect on the functioning of the company.
The Company has defaulted in redemption of debentures on the due date or payment of interest due thereon and such failure to pay or redeem had continued for more than one year. Consequently, reappointment of a director of the Company is not in accordance with the provision of Section 164(2)(b) of the Act.
f) With respect to the adequacy of the Internal Financial Controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".
g) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act, as amended:
The remuneration provided by the company to its whole-time director & chief financial officer amounting to Rs. 37 lacs during the year is not in accordance with the provisions of Section 197 of the Act, as prior approval from the lenders/financial institutions/non-convertible debenture holders or any other secured creditors has not yet received.
h) 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 knowledge & belief 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 Note No. 34 to the accompanying Standalone Financial Statements].
ii. The Company has made provision as required under applicable law or accounting standards for material foreseeable losses. The Company did not have any long-term derivative contracts.
iii. There has been no delay in transferring amounts which were required to be transferred to the Investors Education and Protection Fund by the Company.
iv. a. The management has represented that,
to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("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 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:
• 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 from or on behalf of the Ultimate Beneficiaries; and
c. 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 subclause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. The Company has not declared any dividend during the year.
For BINAYAK DEY & CO.
Chartered Accountants Firm Registration No: 328896E
Binayak Dey
(Proprietor) Membership No: 062177 UDIN: 23062177BGWCAB2388
Place: Kolkata Date: 30th May, 2023
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