To the Members of KPIT Technologies Limited (Erstwhile KPIT EngineeringLimited)
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of KPITTechnologies Limited (Erstwhile KPIT Engineering Limited) ("the Company") whichcomprise the standalone balance sheet as at 31 March 2019 and the standalone statement ofprofit and loss (including other comprehensive income) standalone statement of changes inequity and standalone statement of cash fl ows for the year then ended and notes to thestandalone financial statements including a summary of the significant accountingpolicies and other explanatory information. In our opinion and to the best of ourinformation and according to the explanations given to us the aforesaid standalonefinancial statements give the information required by the Companies Act 2013("Act") in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India (including accounting for thecomposite scheme of arrangement in accordance with the National Company Law Tribunal orderas referred to in Note 41(1) to the standalone financial statements) of the state ofaffeairs of the Company as at 31 March 2019 and profit and other comprehensive incomechanges in equity and its cash fl ows 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 arefurther described in the Auditor's Responsibilities for the Audit of theStandalone Financial Statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India together with the ethical requirements that are relevant to our auditof the standalone financial statements under the provisions of the Act and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of matter
We draw attention to Note 38 (2) of the standalone financial statementswhich describes the uncertainty related to the outcome of the lawsuit undertaken by theCompany pursuant to the aforesaid composite scheme of arrangement. Our opinion is notmodified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.
Description of Key Audit Matter
Accuracy of recognition measurement and presentation includingdisclosures of Revenues for Fixed price contracts with customers See note 21 and 39 to thestandalone financial statements
|The key audit matter ||How the matter was addressed in our audit |
|The Company has recognized revenue from fixed price contracts with customers of INR 989.96 million ||In view of the significance of the matter we applied the following audit procedures in this area for the Company among others to obtain sufficient appropriate audit evidence: |
|The revenue from fixed price contracts where revenue is recognized using the percentage of completion computed as per the input method based on management's estimate of contract costs (Refer Note || |
| || Evaluated the Design and implementation of internal controls over estimates for recording of revenue from fixed price contracts including unearned revenue and contract assets. |
|1.2 to the standalone financial statements) is a key audit matter considering: || |
|1. There is an inherent risk around the accuracy of revenues given the customized and complex nature of these contracts. || Tested the system application controls over Information Produced by the Entity for planned costs and actual cost reports. |
|2. Application of the revenue recognition accounting standard is complex and involves a number of key judgments and estimates including estimating the future cost-to-completion of these contracts which is used to determine the percentage of completion of the relevant performance obligation. || Performed testing of operating effectiveness of controls implemented by the Management over recognition measurement and presentation/ disclosure of Revenue from fixed price contracts. |
|3. These contracts may involve onerous obligations on the Company that require critical estimates to be made by management ||On selected samples of contracts we tested that the revenue recognized is in accordance with the accounting standard by |
| || Inspection of terms of contract evaluated the revenue recognition is as per the recognition principles in IND AS 115. |
| || Performed a retrospective review of costs incurred to date with estimated costs and contribution till date with recognized till date with the planned contribution |
| || Assessed the appropriateness of work in progress (contract assets) on balance sheet by evaluating the underlying documentation to identify possible delays in achieving milestones which may require change in estimated costs to complete the remaining performance obligations |
| || Performed analytical procedures for reasonableness of incurred and estimated costs. |
| || Performed test of details to agree the revenue recognized to underlying documents such Purchase order statement of work milestone billing and revenue calculations. |
| || Agreed the amounts in disclosures to underlying reports such as sales register and fixed price contract report. |
The Company's Management and Board of Directors are responsiblefor the other information. The other information comprises the information included in theCompany's annual report but does not include the financial statements and ourauditors' report thereon.
Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.
Management's Responsibility for the Standalone FinancialStatements
The Company's Management and Board of Directors are responsiblefor the matters stated in section 134(5) of the Act with respect to the preparation ofthese standalone financial statements that give a true and fair view of the state ofaffeairs profit and other comprehensive income changes in equity and cash fl ows of theCompany in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) specified under section 133 of the Act.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the standalone financial statements Management and Boardof Directors are responsible for assessing the Company's ability to continue as agoing concern disclosing as applicable matters related to going concern and using thegoing concern basis of accounting unless management either intends to liquidate theCompany or to cease operations or has no realistic alternative but to do so.
Board of Directors is also responsible for overseeing theCompany's financial reporting process.
Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue 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 auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to infl uence theeconomic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls with reference to financialstatements in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of Management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the standalone financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditors' report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) Order 2016("the Order") issued by the Central Government in terms of section 143 (11) ofthe Act we give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
(A) As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.
c) The standalone balance sheet the standalone statement of profit andloss (including other comprehensive income) the standalone statement of changes in equityand the standalone statement of cash fl ows dealt with by this Report are in agreementwith the books of account.
d) In our opinion the aforesaid standalone financial statements complywith the Ind AS specified under section 133 of the Act.
e) On the basis of the written representations received from thedirectors as on 31 March 2019 taken on record by the Board of Directors none of thedirectors is disqualified as on 31 March 2019 from being appointed as a director in termsof Section 164(2) of the Act.
f) With respect to the adequacy of the internal financial controls withreference to financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure B".
(B) With respect to the other matters to be included in theAuditors' 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 theexplanations given to us:
i. The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements. Refer Note 38(2) to thestandalone financial statements.
ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses
iii. There are no amounts which are required to be transferred to theInvestor Education and Protection Fund by the Company.
iv. The disclosures in the standalone financial statements regardingholdings as well as dealings in specified bank notes during the period from 8 November2016 to 30 December 2016 have not been made in these financial statements since theCompany was incorporated on 08 January 2018.
(C) With respect to the matter to be included in the Auditors'Report under section 197(16):
In our opinion and according to the information and explanations givento us the remuneration paid by the company to its directors during the current year is inaccordance with the provisions of Section 197 of the Act. The remuneration paid to anydirector is not in excess of the limit laid down under Section 197 of the Act. TheMinistry of Corporate Affeairs has not prescribed other details under Section 197(16)which are required to be commented upon by us.
| ||For B S R & Co. LLP |
| ||Chartered Accountants |
| ||Firm's Registration No. 101248W/W-100022 |
| ||Swapnil Dakshindas |
|Place: Pune ||Partner |
|Date: 15 May 2019 ||Membership No. 113896 |
Annexure A Independent Auditors' Report 31 March 2019
(Referred to in our report of even date on the financial statements)
The Annexure referred to in Independent Auditor's Report to themembers of the Company on the financial statements for the year ended 31 March 2019 wereport that:
(i) In respect of its fixed assets:
a. The Company has maintained proper records showing full particularsincluding quantitative details and situation of fixed assets.
b. The Company has a regular programme of physical verification of itsfixed assets by which all fixed assets are verified annually. In our opinion thisperiodicity of physical verification is reasonable having regard to the size of theCompany and the nature of its assets. No material discrepancies were noticed on suchverification.
c. The title deeds of the immovable properties are in the process ofbeing transferred in the name of the Company under the Scheme of arrangement. (Refer note41(1) of the standalone financial statements)
(ii) The inventory has been physically verified by the Managementduring the year. In our opinion the frequency of such verification is reasonable andthere were no material discrepancies noted during such verification.
(iii) In our opinion and according to the information and explanationsgiven to us the Company has not granted any loans secured or unsecured during the yearto companies firms Limited Liability Partnerships or other parties covered in theregister maintained under Section 189 of the Act. Accordingly paragraph 3(iii) of theOrder is not applicable to the Company.
(iv) In our opinion and according to information and explanation givento us the Company has complied with provisions of Section 186 of the Act with respect toinvestments made during the year. No loan and guarantees were given during the year otherthan those transferred to the Company under the Scheme of arrangement (Refer note 41(1) ofthe standalone financial statements). The Company has not given any loan guarantee orsecurity covered under Section 185 of the Act during the year.
(v) According to the information and explanations given to us theCompany has not accepted any deposits from the public to which the provisions of Section73 to Section 76 or any other relevant provisions of the Act and the rules framed thereunder apply. Accordingly paragraph 3(v) of the Order is not applicable.
(vi) According to the information and explanations given to us theCentral Government has not prescribed the maintenance of cost records under sub section(1) of Section 148 of the Act for any of the services rendered by the Company.Accordingly paragraph 3(vi) of the Order is not applicable.
(vii) a. According to the information and explanations given to us andon the basis of our examination of the records of the Company amounts deducted/accrued inthe books of accounts in respect of undisputed statutory dues including provident fundemployee's state insurance income tax goods and service tax and any other statutorydues have generally been deposited regularly during the year by the Company to theappropriate authorities except for certain delays in payment of Income tax (tax deductedat source) ranging from 30 to 89 days. As explained to us the Company did not have anydues on account of sales tax custom duty excise duty value added tax and cess.
According to the information and explanations given to us noundisputed statutory dues payable in respect of provident fund employees' stateinsurance income-tax goods and service tax and other material statutory dues were inarrears as at 31 March 2019 for a period of more than six months from the date they becamepayable.
b. According to the information and explanations given to us there areno dues with respect to income tax sales tax goods and service tax value added taxcustom duty excise duty which have not been deposited with the appropriate authoritieson account of any dispute.
(viii) In our opinion and according to the information and explanationsgiven to us the Company has not defaulted in repayment of dues to its banks and financialinstitution and government. The Company did not have any debentures during the year.
(ix) In our opinion and according to the information and explanationsgiven to us the term loans transferred to the Company under the Scheme of arrangement(Refer note 41(1) of the standalone financial statements) have been applied for thepurpose for which they were raised. The Company has not raised money by way of furtherpublic offer during the year.
(x) According to the information and explanations given to us and onthe basis of our examination of the records of the Company no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of the audit.
(xi) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the Company has paid /provided for managerial remuneration in accordance with the requisite approvals mandatedby the provisions of section 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi company as per the Act. Accordingly paragraph3(xii) of the Order is not applicable.
(xiii) According to the information and explanations given to us and onthe basis of our examination of the records of the Company all transactions with therelated parties are in compliance with section 177 and 188 of the Act and the details havebeen disclosed in the financial statements as required by the applicable accountingstandards.
(xiv) In our opinion and according to the information and explanationsgiven to us during the year under audit the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures. Hencethe provisions of clause 3 (xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not entered intoany non-cash transactions with directors or persons connected with him. Accordinglyparagraph 3(xv) of the Order is not applicable.
(xvi) The Company is not required to be registered under Section 45-IAof the Reserve Bank of India Act 1934.
For B S R & Co. LLP
Chartered Accountants Firm's Registration No. 101248W/W-100022
Partner Membership No. 113896
Place: Pune Date: 15 May 2019
Annexure B to the Independent Auditors' Report on the standalonefinancial statements of KPIT Technologies Limited (Erstwhile KPIT Engineering Limited) forthe period ended 31 March 2019
Report on the internal financial controls with reference to theaforesaid standalone financial statements under Clause (i) of Sub-section 3 of Section 143of the Companies Act 2013
(Referred to in paragraph 1A (f) under Report on Other Legal andRegulatory Requirements' section of our report of even date)
We have audited the internal financial controls with reference tofinancial statements of KPIT Technologies Limited (Erstwhile KPIT Engineering Limited)("the Company") as of 31 March 2019 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date.
In our opinion the Company has in all material respects adequateinternal financial controls with reference to financial statements and such internalfinancial controls were operating effectively as at 31 March 2019 based on the internalfinancial controls with reference to financial statements criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India (the "Guidance Note").
Management's Responsibility for Internal Financial Controls
The Company's management and the Board of Directors areresponsible for establishing and maintaining internal financial controls based on theinternal financial controls with reference to financial statements criteria established bythe Company considering the essential components of internal control stated in theGuidance Note. These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013(hereinafter referred to as "the Act").
Our responsibility is to express an opinion on the Company'sinternal financial controls with reference to financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note and the Standards on Auditingprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to financial statements. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols with reference to financial statements were established and maintained andwhether such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls with reference to financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of such internal financialcontrols assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment ofthe risks of material misstatement of the standalone financial statements whether due tofraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls with reference to financial statements.
Meaning of Internal Financial controls with Reference to FinancialStatements
A company's internal financial controls with reference tofinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. Acompany's internal financial controls with reference to financial statements includethose policies and procedures that (1) pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could havea material effect on the financial statements.
Inherent Limitations of Internal Financial controls with Reference toFinancial Statements
Because of the inherent limitations of internal financial controls withreference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.
For B S R & Co. LLP
Chartered Accountants Firm's Registration No. 101248W/W-100022
Partner Membership No. 113896
Date: 15 May 2019