Swan Defence and Heavy Industries Limited
CIN No. L35110GJ1997PLC033193
Report on the Audit of the ‘Standalone Financial Statements’
Opinion
We have audited the accompanying standalone financial statements of Swan Defence and Heavy Industries Limited (“the Company”), which comprises the Balance sheet as at March 31, 2026, 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 standalone financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as “the SFS”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid SFS 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, 2026, its loss including other comprehensive income(loss), 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 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 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 Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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. We have determined the matters described below to be the key audit matters to be communicated in our report.
|
Key audit matter
|
How our audit addressed the key audit matter
|
|
1. Carrying value of Property, Plant and Equipment
|
• Tested, on a sample basis, the costs capitalised
|
|
and Capital Work in Progress (Notes 2(B) and
|
to Capital Work in Progress with reference to
|
|
2.2 to 2.4)
|
underlying supporting records;
|
|
Property, Plant and Equipment of INR 1,13,750.69
|
• Reviewed the ageing of Capital Work in Progress
|
|
lakhs and Capital Work in Progress of INR 16,593.17
|
and management’s plans for completion of the
|
|
lakhs together constitute a significant portion of
|
pending projects; and
|
|
total assets. The Company has initiated a major refurbishment/restoration drive and costs incurred on assets where refurbishment is incomplete are carried as Capital Work in Progress. The assessment of costs eligible for capitalisation and of indicators of impairment involves management judgement, and accordingly we determined this to be a key audit matter.
|
• Evaluated management’s assessment of indicators of impairment and assessed the adequacy of the related disclosures.
|
|
Key audit matter
|
How our audit addressed the key audit matter
|
|
2.
|
Recoverability of the security deposit given to E-Complex Private Limited (Note 6)
The Company has given a refundable security deposit of INR 7,370 lakhs to E-Complex Private Limited (“ECPL”) against SEZ land taken on lease, carried at a present value of INR 6,060.13 lakhs under Ind AS 116. Litigation arising from the CIRP of ECPL is pending before the Hon’ble Supreme Court of India. Management has assessed that, so long as the Company remains in possession of the leased land, no diminution in the value of the deposit is expected. Considering the amount involved and the judgement in assessing recoverability, we determined this to be a key audit matter.
|
• Read the lease agreements for the SEZ land and reviewed the status of the litigation from the orders and records made available to us;
• Evaluated management’s assessment of continued possession of the land and of the recoverability of the deposit, including its measurement at present value under Ind AS 116; and
• Assessed the adequacy of the disclosures made in Note 6.
|
|
3.
|
Going concern basis of accounting (Note 32)
The Company incurred a net loss of INR 22,750.97 lakhs during the year and has significant accumulated losses. Management has prepared the financial statements on a going concern basis having regard to the continuing financial support from the promoter group, the available liquidity and the recommencement of operations during the year. Considering the judgement involved in this assessment, we determined this to be a key audit matter.
|
• Obtained and evaluated management’s assessment of the going concern assumption, including the expected cash flows and the sources of funding;
• Verified the funding received during the year, including the interest-free unsecured loans from the promoter group company, and the completion of payments to the financial creditors under the approved resolution plan; and
• Assessed the adequacy of the disclosures made in Note 32.
|
Emphasis of Matter Paragraph
i. We draw your attention to Note 2 (B) of accompanying SFS which states that the Company has initiated major drive for refurbishment/ restoration of some of its existing fixed assets. This will enhance balance useful life of those assets. Accordingly, assets for which refurbishment is not completed as on March 31, 2026, the cost incurred is shown as Capital Work in Progress.
ii. We draw attention to Note 2.2, 2.3 and 2.4 of accompanying SFS which states that the Capital Work in Progress (net of impairment) includes assets under construction and installation amounting to INR 16,593.17 lakhs. Of these, projects amounting to INR 1,070.05 lakhs are in progress for a period of less than one year, projects amounting to INR 11,854.12 lakhs are in progress for a period of one to two years, and projects amounting to INR 3,669.00 lakhs are in progress for more than three years.
iii. We draw attention to Note 5.2 of accompanying SFS which states that the Company has not recognised net deferred tax assets as Company is not certain that sufficient future taxable income will be available against which deferred tax assets can be realised considering its present order book and anticipated orders and opportunities in the defence sector as evidences.
iv. We draw attention to Note 6.1 of accompanying SFS which states that as on March 31, 2026, an amount of INR 7,370.00 Lakhs has been given as a refundable deposit to E Complex Private Limited (“ECPL”), an erstwhile wholly-owned subsidiary of the Company, as per the lease agreements executed with ECPL . This deposit is represented in financial as on March 31, 2026 at present value of INR 6,060.13 Lakhs (Previous Year INR 5,458.58 Lakhs) as per IND AS 116,. which is presented as “ Security Deposits with Others “. Please refer Note- 35 on Related Party Transactions for more detail.
v. We draw attention to Note 14.2 of accompanying SFS which states that the Company has availed a Rupee Term Loan facility of INR 1,02,017.27 Lakhs (Previous Year: INR. Nil) from NaBFID, secured by a first pari-passu charge on immovable and movable fixed assets, intangible assets. The loan is also secured by second pari passu charge on trade receivables, inventories, book debts and other current assets of the Company, both present and future, subject to the rights of working capital lenders in accordance with the financing documents. The loan carries an interest rate linked to the 1-year NaBFID Lending Rate plus a spread of 1.25%, with a door-to door tenor of 10.75 years and structured quarterly repayments with moratorium of nine months. The facility is further secured by corporate guarantees and is subject to various financial and nonfinancial covenants.
vi. We draw your attention to Note 14.3 of accompanying SFS which states that during the period the company has taken interest free unsecured loan from Hazel Infra Limited of INR 61096.20 lakhs.
vii. We draw your attention to Note 35 (a) note 2 of accompanying SFS which states that ‘E Complex Private Limited (“ECPL”), an erstwhile wholly-owned subsidiary of the Company is admitted for Corporate Insolvency Resolution Process (CIRP) with NCLT Ahmedabad since December 9 2020. The CIRP process was completed as per the NCLT order dated December 4, 2023 which was set-aside, but the same is challenged and now pending for final hearing before the Supreme court of India. Company has already impaired this investment. Although the Company continues to hold 100% of the equity share capital of ECPL, the management has assessed that the Company does not have control over ECPL in accordance with Ind AS 110. Hence ECPL has not been considered a related party for the purposes of disclosures under Ind AS 24.
viii. We draw your attention to Note 38(l) of accompanying SFS which states that (l) the Board at its meeting held on November 22, 2024, has considered and approved the Scheme of Arrangement and Amalgamation between Triumph Offshore Private Limited (“the Transferor Company” or “TOPL”) and Swan Defence and Heavy Industries Limited [Formerly known as Reliance Naval and Engineering Limited] (“the Transferee Company” or “SDHI”) and their respective shareholders and creditors under Sections 230 to 232 read with Section 66 and Section 52 and other applicable provisions of the Companies Act, 2013 and Rules & Regulations made thereunder (“The Act”), which inter alia provides for the following:
1. Reduction and re-organisation of the capital of the Transferee Company.
2. Amalgamation of the Transferor Company with the Transferee Company and in consideration thereof, SDHI will issue 1325 (One Thousand Three Hundred and Twenty Five) 8% Non-Convertible Redeemable Preference Shares having face value of INR 10/- (Rupees Ten) each credited as fully paid-up to be issued to the equity shareholders of TOPL for every 1000 (One Thousand) Equity Shares of INR 10/- (Rupee Ten) each fully paid-up, held by such shareholders in TOPL.
As on 31st March, 2026, the Company had received the requisite approvals from the Stock Exchanges for proceeding with the filing of the Petition before the Hon’ble National Company Law Tribunal, Ahmedabad Bench (“NCLT”). Pursuant thereto, the Company filed the Petition with the Hon’ble NCLT on 27th March, 2026. Subsequent to the date of the financial statements, the following developments have taken place in the matter:
The Order of the Hon’ble NCLT was received on 13th April, 2026 and updated order was received on 16th April, 2026.
Pursuant to the said Order, the NCLT-convened Extraordinary General Meeting (“EGM”) of the shareholders of the Company was duly held on 25th May, 2026, and the requisite shareholders’ approval has been obtained.
Our opinion on the accompanying SFS is not modified in respect of the above-mentioned matter. Information Other than the Financial Statements and Auditor’s Report Thereon
i. The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the Consolidated Financial Statements, Standalone Financial Statements and our auditors’ report thereon. The Director’s report is expected to be made available to us after the date of this auditor’s report.
ii. Our opinion on the SFS does not cover the other information and we do not express any form of assurance conclusion thereon.
iii. In connection with our audit of SFS, our responsibility is to read the other information and, in doing so, consider, whether the other information is materially inconsistent with the SFS, or our knowledge obtained during our audit or otherwise appears to be materially misstated.
iv. If, based on the work we have performed, we conclude that there is any material inconsistency, we are required to report that fact. We have nothing to report in this regard.
Management’s Responsibilities for the Statements
i. The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these SFS 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 (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 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 the 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 SFS that give a true and fair view and are free from material misstatement, whether due to fraud or error.
ii. In preparing the SFS, 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.
iii. The Company’s Board of Directors are also responsible for overseeing the company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the SFS
Our objectives are to obtain reasonable assurance about whether the SFS 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 SFS.
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 SFS, 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 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 the 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
SFS 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 SFS, including the disclosures, and whether the SFS represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the SFS that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the SFS may be influenced. We consider quantitative materiality and qualitative factors (i) in 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 SFS.
We communicate with those charged with governance (‘TCWG’) 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 TCWG 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 TCWG, we determine those matters that were of most significance in the audit of the SFS 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
(A) As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure A”, a statement on the matters specified in paragraphs 3 and 4 of the Order.
(B) 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 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 (SFS) comply with the Ind AS specified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors of the company as on the date of signing of these SFS (as restated) which has been taken on record by the Board of Directors of the company, none of the directors of the company incorporated in India is disqualified as on the date of signing of these SFS 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”.
(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 standalone financial statement.
ii. Bases on the representations by the company, we have noted that Company does not have any long-term contracts, including derivative contracts, for which there were any material foreseeable losses.
iii. Based on the latest available secretarial audit report and representations from the company, we noted that company is not required to transfer amounts 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 person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever (“Ultimate Beneficiaries”) by or on behalf of the Company 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 person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever (“Ultimate Beneficiaries”) by or on behalf of the Funding Party or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(c) Based on the audit procedures performed 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 (a) and (b) above, contain any material misstatement.
v. The company have not declared or paid any dividend during the year and have not proposed final dividend for the year.
vi. Based on our examination, which included test checks, in terms of Rule 3 (1) of the Companies (Accounts) Rules, 2014, applicable on or after April 1, 2023, the Company has used accounting software for maintaining its books of account for the financial year ended March 31, 2026, which has 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. Further, during the course of our audit, we did not come across any instance of the audit trail feature being tampered with. Further, the audit trail, to the extent maintained in the prior year, has been preserved by the Company as per the statutory requirements for record retention.
(C) 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.
For N.N Jambusaria & Co.
Chartered Accountants Firm Reg No.104030W
Nimesh Jambusaria
Partner
Place: Mumbai Membership Number.:038979
Date: 27/05/2026 UDIN: 26038979TDOLHS9486
|