Dharan Infra-EPC Limited (Earlier known as KBC Global Limited)
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the standalone financial statements of Dharan Infra-EPC Limited (“the Company”), which comprise the standalone balance sheet as at 31 March 2025, and the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone 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.
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 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 31 March 2025, and its profit (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 in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those SAs 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 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 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 obtained by us is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.
Basis for Qualified Opinion
(a) During the year ended March 31, 2023, the Company issued 950 Foreign Currency Convertible Bonds (FCCBs) of USD 100,000 each at a face value aggregating USD 95 million at a 1.5% coupon rate and a discount of 15%, raising USD 80.62 million. These FCCBs were listed on the AFRINEX Exchange, Mauritius. These FCCBs have a 37 months maturity and are convertible into listed Equity Shares at the option of the holder. In the current reporting period from April 01, 2024 to December 31, 2024, 420 FCCBs have been converted into equity, in addition to 151 FCCBs converted by March 31, 2024.
(b) Pursuant to Loan Registration Number ("LRN") 202206106 dated June 3, 2022, the Company issued and allotted 950 FCCBs to Global Focus Fund Ltd., an Alternative Investment Fund (AIF) based out of Mauritius on November 21, 2022. This LRN was obtained pursuant to submission of Offering Memorandum (OM) on April 27, 2022 and other requisite documents to AD Bank. This LRN was obtained for the end use of Overseas Business Expansion - Infrastructure Sector for Low-Cost Housing Development Project in ECOWAS & COMESA region of Africa Continent through its 100% subsidiary based in the United Arab Emirates.
(c) The funds were intended for overseas business expansion in the infrastructure sector for low-cost housing development projects, as indicated in the Loan Registration Number (LRN) obtained. However, the audit observed deviations in the deployment of these funds from the intended purpose. Specifically, the funds were transferred to its subsidiaries in Ghana, Liberia, and Kenya, contrary to the conditions set under the Foreign Exchange Management Act (FEMA) regulations and the LRN approval.
Further, the Company has been non-compliant with Foreign Exchange Management Act (“FEMA”), 1999, Foreign Exchange Management (Borrowing and Lending) Regulation, 2018, Foreign Exchange Management (Transfer or issue of security by a person resident Outside India) Regulations, 2017, and associated regulations, including:
• Improper end-use of funds raised.
• Delays and errors in filing required forms and compliances with the Reserve Bank of India (RBI).
• The Company has attempted to remedy the deviations and filed a Compounding Application on May 8, 2023 to the Reserve Bank of India ("RBI") which was further resubmitted on July 6, 2023, however the same was returned by RBI. The management of the company will file FCGPR directly with RBI and shall re-file the compounding application if there will be any observations by RBI. Financial implications cannot be quantified till the Compounding process is completed, potentially leading to additional liability.
Qualified Opinion
Based on our review conducted as stated above, except the matter described in the Basis for Qualified Opinion Paragraph above, nothing has come to our attention that causes us to believe that the accompanying Statement, prepared in accordance with the recognition and measurement principles laid down in the aforesaid Indian Accounting Standards (“lnd AS”) specified under Section 133 of the Companies Act, 2013 as amended, read with relevant rules issued thereunder and other accounting principles generally accepted in India, has not disclosed the information required to be disclosed in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 including the manner in which it is to be disclosed, or that it contains any material misstatement.
In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, 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, 2025, and its statement of profit/loss for the period ended on that date.
Material Uncertainty Relating to Going Concern
The company is incurring continuous huge losses and most of the company’s construction sites are not operational which raises concern about the company’s ability to generate sufficient cashflows to meet the ongoing obligations. Also, the Company have made various violations as per Foreign Exchange Management Act (“FEMA”), 1999 and the company has attempted to remedy these violations by submitting the compounding application. As informed by the management the said application has been rejected by the RBI and the company is currently in the process of resubmitting the compounding application to the RBI as of the date of this report. These events or conditions, along with other matters indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. However, management asserts that these losses can be recovered and the aforementioned violations will be compounded in due course of time.
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 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.
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The Key Audit Matter
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How the matter was addressed in our audit
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1. Accuracy of revenue recognition, measurement, presentation and disclosures as per Ind AS 115 “Revenue from Contracts with Customers”.
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Measurement of revenue recorded over time which is dependent on the estimates of the costs to complete
Revenue recognition involves significant estimates related to measurement of costs to complete for the projects. Revenue from projects is recorded based on the Company’s assessment of the work completed, costs incurred and accrued and the estimate of the balance costs to complete.
Considering the significant estimate involved in measurement of revenue, we have considered measurement of revenue as a key audit matter.
Due to the inherent nature of the projects and significant judgment involved in the estimate of costs to complete, there is risk of overstatement or understatement of revenue.
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Principle Audit Procedures
• Evaluating that the Company’s revenue recognition accounting policies are in line with the applicable accounting standards;
• Obtaining and understanding revenue recognition process including identification of performance obligations and determination of transfer of control of the asset underlying the performance obligation to the customer;
• Identifying and testing operating effectiveness of key controls around approvals of contracts, milestone billing, intimation of possession letters / intimation of receipt of occupation certificate and controls over collection from customers;
• Identifying and testing operating effectiveness of key controls over recording of project costs;
• Comparing the costs to complete workings with the budgeted costs and inquiring for variance;
• Comparison of the estimated costs with the costing details as mentioned for registration of the projects with the Maha RERA website.
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2. Valuation of Inventories - Assessing the net realisable value
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Inventory represents the capitalized project costs to date less amounts expensed on sales by reference to the aforementioned projections. It is held at the lower of cost and net realisable value (NRV), the latter also being based on the forecast for the project. As such inappropriate assumptions in these forecasts can impact the assessment of the carrying value of inventories.
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Principle Audit Procedures
• Discussion with the management to understand the basis of calculation and justification for the estimated recoverable amounts of the unsold units (“the NRV assessment”);
• Evaluating the design and implementation of the Company’s internal controls over the NRV assessment. Our evaluation included assessing whether the NRV assessment was prepared and updated by appropriate personnel of the Company and whether the key estimates, including estimated future selling prices and costs of completion for all property development projects, used in the NRV assessment, were discussed
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and challenged by management as appropriate;
• Evaluating the management’s valuation methodology and assessing the key estimates, data inputs and assumptions adopted in the valuations, which included comparing expected future average selling prices with available market data such as recently transacted prices for similar properties located in the nearby vicinity of each property development project and the sales budget plans maintained by the Company;
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3. Tax Assessments
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Review, effect and presentation completed tax assessments
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of
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Principle Audit Procedures
• Verification of details of completed tax assessments and demands as at 31 March 2025, followed by verification of tax refunds on completed tax assessments and treatment of the same in books of account and financial statements.
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Other Information
The Company’s Management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company’s annual report, 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 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 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.
Management’s Responsibility for the Standalone Financial Statements
The Company’s Management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs, profit/loss and 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 (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 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 and Board of Directors are 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 is also responsible for overseeing the Company’s financial reporting process.
Auditors’ 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 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 Act, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls with reference to standalone 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 the Management and Board of Directors.
• 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 auditors' 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.
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) There was considerable delay in repayment of the borrowings from the financial institutions and banks. During the review period, the company has not repaid the principal component of such borrowings.
(b) The company has been irregular in the payment of statutory dues to government authorities. Notably, outstanding dues for Income Tax, GST, and TDS have remained unpaid for a period exceeding one year. The Company has opted for Direct Tax Vivad Se Vishwas (DTVSV) Scheme, 2024 for settlement of outstanding dues for AY 2020-21, 2019-20 and 2017-18. The company has filed Form 1 under the scheme as on 31/01/2025, which is pending for approval from CIT and Form 2 is also pending from CIT, and upon its issuance , the company shall proceed with the payment of determined tax amount under the scheme. Further, the company has not filed income tax returns for last two years. The company has reinstated the GST no. adopting the legal course and in the process of regularizing the same. This non-compliance raises additional concerns about the company's financial health and its ability to manage statutory obligations.
(c) The Company has not filed GST returns from December 2023 till the current reporting period i.e, as on 31/03/2025.
(d) The Company has made a provision for gratuity without obtaining an actuarial valuation report as required under Ind AS 19 - Employee Benefits. As per paragraphs 57 to 60 of Ind AS 19, the determination of the present value of defined benefit obligations and the related current service cost should be carried out by qualified actuary hence, the company has made the provision for gratuity on their own estimated basis.
(e) The Company is facing significant losses, with most construction sites non-operational, raising concerns about its ability to generate sufficient cash flow to meet obligations. Additionally, it has deviated FEMA regulations and submitted a long-pending compounding application to the RBI. These factors create material uncertainty about the Company’s ability to continue as a going concern. However, management believes the losses can be recovered, and the violations will be resolved in due course.
(f) As per information received from the management, the company has provided the Corporate Guarantee in respect of the loans taken by Shree Sainath Land & Development (India) Private Limited from LIC Housing Finance Limited. However, the said loan has become NPA now and the borrower has received demand notice u/s 13(2) of the Sarfaesi Act, 2002. Also, the said company has been going under the Corporate Insolvency Resolution Process (CIRP) after the admission of application by honorable court on 20th October 2023. Accordingly, corporate guarantee given by the company for such loan can be invoked which may lead to additional liability on the company. The company holds only 15% stake in Shree Sainath Land & Development (India) Private Limited. The Court Order has been obtained for a negotiated settlement amongst LIC and the said company to avoid liquidation since the property value is much higher than the guarantee issued by the company.
(g) The above audited standalone financial results which are published in accordance with Regulation 33 and 52of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, as amended have been reviewed by the Audit Committee and approved by the Board of Directors at their meeting held on March 27, 2025. The audited standalone financial results are prepared in accordance with the Indian Accounting Standards (Ind AS) as prescribed under section 133 of the Companies Act, 2013.
(h) The Company’s business activity falls within a three-business segment viz. ‘Development of Real Estate Property’, ‘Civil Contracting Business’ and ‘Investment segment’, the financial statements are reflective of the information required by Ind AS 108 “Operating Segments”. The financial details of both the segments for the quarter ended on March 31, 2025 are given with these financial results.
(i) The interest on the various loan accounts has been recorded on a provisional basis due to their classification as Non-Performing Assets (NPA), and as a result of this NPA classification, the statements for these accounts were not accessible.
(j) Since the nature of activities being carried out by the Company is such that profits / losses from certain transactions do not necessarily accrue evenly over the year, results of a quarter may not be representative of the profit / losses for the year.
(k) Previous period figures have been regrouped, re-arranged and re-classified wherever necessary to conform to current period’s classification.
(l) The statutory auditors of Dharan Infra-EPC Limited have expressed a modified opinion on the audited standalone financial results for the quarter ended March 31, 2025.
(m) The Company has not maintained adequate records or data to enable classification of its trade receivables into Micro, Small and Medium Enterprises (MSME) and non-MSME as required , in the absence of such classification, we have, for the purpose of reporting under the Companies Act, 2013 considered all trade payables/receivables under the MSME category by way of abundant caution.
(n) The Company has not provided the repayment schedule/details of its borrowings during the audit period. In the absence of such information, we were unable to accurately determine the current maturities of long-term borrowings. The actual classification may differ upon receipt of the detailed repayment schedule from the Company.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors’ Report) Order, 2020 (“the Ordef’), issued by the Central Government of India in terms of sub-section 11 of section 143 of the Act, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, 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, based on our audit 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 purpose 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 standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows 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 Ind AS specified under Section 133 of the Act.
e) On the basis of the written representations received from the directors as on 31 March 2025 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2025 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 with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure B” to this report.
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 Auditor’s) 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 as at 31 March 2025 on its financial position in its standalone financial statements - Refer Note 51 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 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 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 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 on behalf of the Ultimate Beneficiaries; and
(c) Based on such audit procedures as 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) of the Companies (Audit and Auditor’s) Rules, 2014 contain any material misstatement.
v. The Company has neither declared nor paid any dividend during the year.
vi. Proviso to Rule 3(1) of the Companies (Accounts) Rues, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from 1st April 2023 and accordingly, reporting under Rule 11(g) of The Companies (Audit and Auditors) Rules, 2014 is applicable for the financial year ended 31st March 2024. The accounting software used by the company has no feature of audit trail.
h) With respect to the matter to be included in the Auditor’s Report under Section 197(16) of the Act:
In our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which are required to be commented upon by us.
For Sharp Aarth & Co LLP
Chartered Accountants
Firm Registration No - 132748W / W-100823CA Praveen Purohit
Partner
Membership No.429231
UDIN: 25429231BMHSZL9254
Place: Nashik
Date: 30/05/2025
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