ABAN OFFSHORE LIMITED
Report on the Ind AS Standalone Financial Statements Qualified Opinion
We have audited the accompanying standalone financial statements of M/s Aban Offshore Limited (“the Company”), which comprise the Balance Sheet as at 31st March 2023, 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 a summary of 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, except for the possible effects of the matters described in the Basis for Qualified Opinion section of our report, 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 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, its loss including total comprehensive income showing a net negative balance, changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
Non-receipt of confirmation of bank account balances including loan accounts as stated below:
Bank Balances including Deposits INR 16.28 million
Term Loans including Non-Convertible Redeemable Preference Shares INR 6,737.19 million
In view of the non-confirmation of bank and loan balances, we are not in a position to ascertain and comment on the correctness of the above mentioned outstanding balances and the resultant impact of the same on the standalone financial statements of the Company.
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (“SA”s) 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 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 on the standalone financial statements.
Material Uncertainty Related to Going Concern
We draw attention to Note - 33 to the accompanying standalone financial statements - the Company has incurred a net loss of INR 1,149.92 million for the year ended 31 March 2023 and, as of that date Company’s accumulated loss amounts to INR 31,030.92 million on account of which the net worth is eroded and also, current liabilities exceeded current assets by INR 11,497.47 million as at 31 March 2023. The company has defaulted in repayment of loan installments, payment of interest on term loans, and redemption of non-convertible redeemable preference shares. These conditions indicate that material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. However, the management believes that the use of the going concern assumption on the preparation of the standalone financial statements of the Company is still appropriate in view of its continuing discussions with its lenders to obtain approval for and implementation of an appropriate debt resolution plan and will continue to be in operation in the foreseeable future.
Our opinion is not modified in respect of this matter.
Emphasis of Matters
We draw attention to Note 26 - ‘Contingent Liabilities’ of the standalone financial statements which, disclose the amounts not paid under disputes with various Government Authorities amounting to INR 16858.18 million and are awaiting adjudication as at 31.03.2023 as mentioned in detail under point no VII (b) in ’Annexure A’ of our report.
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 the most significant 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. In addition to the matters described in the ‘Material Uncertainty in relation to the Going Concern’ 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 Matter
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How our audit addressed the key audit matter
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Contingent Liabilities relating to statutory dues
There are material tax/duty claims against the company which are under various stages of disputes, involving significant judgment to determine the possible outcome of these disputes.
Refer Note 26 of the standalone financial statements
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We have obtained details of key claims against the company, completed tax assessments, demands, and tax/ duty positions. We reviewed the status of disputes, read and analyzed selected key correspondences including appeal papers and assessment orders and representation taken from the management, discussed with appropriate senior management officials, and evaluated the management’s underlying key assumptions.
We reviewed management’s estimate of the possible outcome of the disputed cases in evaluating management’s position on these uncertain claims and tax positions and reviewed the appropriate disclosures in the financials.
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Deferred Tax Assets
The Company has carried deferred tax assets recognised in earlier years which are based on the likelihood of future taxable income available for set off. The recognition of deferred tax assets involves judgment regarding the likelihood of realization of these assets, in particular whether there will be sufficient taxable profits in future periods that support the recognition of these assets. Given the degree of judgment involved in considering these deferred tax assets as recoverable or otherwise, we consider this to be a key audit matter.
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Our procedures include obtaining an understanding of the process and the controls over the preparation of forecasts by the Management with respect to the recoverability of deferred taxes on unabsorbed depreciation and carried forward losses. We reviewed the inputs and assumptions used in the forecast. Evaluated disclosures for deferred tax asset balance including those related to significant accounting estimates and judgments in the standalone financial statements.
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Disposal of Non-Current Asset held for Sale
During the year the Company disposed off non-current assets held for sale (2 jack up rigs and a drill ship) and utilized the sale proceeds to pay the dues to the bankers.
Given the size and importance of the disposal of assets held for sale, we consider this to be a key audit matter. Refer Note 3(b) of the standalone financial statements.
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We have reviewed the sale agreements and related board approvals. We have verified the sale proceeds utilization. Reviewed the disclosure of information relating to this in the standalone financial statements.
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Suits against the Company - Contingent Liabilities
The Company’s disclosures relating to a civil suit filed against the Company have been identified as a key audit matter due to the quantum and complexity of claims.
Refer Note 26 of the standalone financial statements.
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Obtained the Company’s legal cases summary and critically assessed management’s position through discussions with the legal head and Company management, on both the probability of success in significant cases and the magnitude of any potential loss.
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Bareboat Income Accounting
The accounting for bareboat contracts with customers under Ind AS 116 ‘Leases’ is dependent on the specific arrangements between the Company and its clients as agreed upon in the contracts. The guidance provided by Ind AS 116 however, is mainly from a lessee perspective and provides less guidance from a lessor perspective, which is the majority of the company’s income.
We considered this area to be a key audit matter given the magnitude of the amounts involved.
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Our procedures included obtaining an understanding of and evaluating the Company’s process and control over revenue recognition. A specific emphasis was set on verifying that revenue transactions at the end of the financial year and at the beginning of the new financial year have been recognized in the proper accounting period by comparing revenues close to the balance sheet date with the respective contractual terms.
We assessed the Company’s disclosure relating to revenue recognition and Ind AS 116.
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Information Other than the Financial Statements and Auditors’ Report Thereon
The Company’s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Directors Report and Corporate Governance Report but does not include the standalone financial statements, consolidated 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 and 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 Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these 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 Ind AS and other accounting principles generally accepted in India.
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 implementation and maintenance of 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 statement that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the standalone 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.
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 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 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 an 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.
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 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
IX. Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor’s Report) Order, 2016 (“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.
1. As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, we give in the Annexure (“Annexure A”) a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the foreign branch not visited by us.
(c) The report on the accounts of the foreign branch office of the Company, audited by a person duly qualified to act as an auditor of the accounts of the branch office in accordance with the laws of that country, as per Section 143 (8) of the Act, has been provided to us and the same has been considered in preparing this report.
(d) The Balance Sheet, the Statement of Profit and Loss including other comprehensive income, the Cash Flow Statement, and the Statement of Changes in Equity dealt with in this Report are in agreement with the books of account.
(e) In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act.
(f) On the basis of the written representations received from the directors as on 31st March 2023 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2023 from being appointed as a director in terms of Section 164 (2) of the Act.
(g) With respect to the adequacy of the internal financial controls over the financial reporting of the Company with reference to this standalone Financial Statements and the operating effectiveness of such controls, refer to our separate Report in “Annexure B” to this report. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.
(h) With respect to the other matters to be included in the Auditor’s Report in accordance with the requirements of Section 197(16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us, during the year under audit the Company has not paid any remuneration to its directors.
(i) 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, as detailed in note 26 to the standalone Financial Statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2023.
ii. The Company did not have any long-term contracts including derivatives contracts for which there were any material foreseeable losses as at 31 March 2023.
iii. There were no amounts that are required to be transferred, to the Investor Education and Protection Fund by the Company as at 31st March 2023.
iv. (a) The Management has represented that, to the best of its knowledge and belief, other than as disclosed
in the notes to the accounts, 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 Beneficiary”) 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, other than as disclosed in the notes to the accounts, 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 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 Funding Party (“Ultimate Beneficiary”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(c) Based on the audit procedures which are considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations made by the
Management under sub-clause (a) and (b) above, contain any material misstatement.
v. The Company has not declared or paid any dividend during the year ended 31 March 2023.
vi. As per the Ministry of Corporate Affairs (MCA) notification G.S.R. 235 (E) dated 31.03.2022, the opinion on the accounting software audit trail is not applicable for the year under audit.
For Ford Rhodes Parks & Co. LLP
Chartered Accountants
ICAI Registration No: 102860W / W100089
Ramaswamy Subramanian
Partner
Membership No: 016059
ICAI UDIN: 23016059BGYZHL8331
Place: Chennai Date: May 24, 2023
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