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MRF Ltd.

BSE: 500290 Sector: Auto
NSE: MRF ISIN Code: INE883A01011
BSE 00:00 | 24 Apr 2020 MRF Ltd
NSE 05:30 | 01 Jan 1970 MRF Ltd

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OPEN 58374.20
PREVIOUS CLOSE 58692.50
VOLUME 139
52-Week high 73500.00
52-Week low 50000.00
P/E 24.45
Mkt Cap.(Rs cr) 24,925
Buy Price 58784.30
Buy Qty 2.00
Sell Price 59099.00
Sell Qty 1.00
OPEN 58374.20
CLOSE 58692.50
VOLUME 139
52-Week high 73500.00
52-Week low 50000.00
P/E 24.45
Mkt Cap.(Rs cr) 24,925
Buy Price 58784.30
Buy Qty 2.00
Sell Price 59099.00
Sell Qty 1.00

MRF Ltd. (MRF) - Auditors Report


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Company auditors report

MRF LIMITED

1. Opinion

We have audited the Separate financial statements (also known as Standalone FinancialStatements) of MRF Limited ("the Company") which comprise the Balance Sheet asat 31st March 2019 the Statement of Profit and Loss (including other ComprehensiveIncome) Statement of Changes in Equity and Statement of Cash Flows for the year thenended 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 explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards (Ind AS) prescribed underSection 133 of the Act read with Companies (Indian Accounting Standards) Rules 2015 andamended and other accounting principles generally accepted in India of the state ofaffairs (financial position) of the Company as at 31st March 2019 and itsprofit(financial performance including other comprehensive income) the changes in equityand its cash flows for the year ended on that date.

2. Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under Section 143(10) of the Act. Our responsibilitiesunder those Standards are further described in the Auditor's Responsibilities for theAudit of the Standalone Financial Statements section of our report. We are independent ofthe Company in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the independence requirements that are relevantto our audit of the Standalone financial statements under the provisions of the Act andthe Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the ICAI's Code of Ethics. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion on the Standalone financial statements.

3. Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.

Nro Key Audit Matter Our Response
1 Accuracy of recognition measurement presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 "Revenue from Contracts with Customers" (new revenue accounting standard)

The application of the new revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations determination of transaction price of the identified performance obligations effect of variable considerations and the appropriateness of the basis used to recognise revenue at a point in time or over a period of time.

Principal Audit Procedures

We assessed the Company's process to identify the impact of adoption of the new revenue accounting standard.

Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:

Evaluated the design of internal controls relating to implementation of the new revenue accounting standard.

Selected a sample of continuing and new contracts and tested the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation re-performance and inspection of evidence in respect of operation of these controls.

Tested the relevant information technology systems' access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard.

Our procedures did not identify any material exceptions.

2. Defined benefit obligation

The valuation of the retirement benefit schemes in the Company is determined with reference to various actuarial assumptions including discount rate future salary increases rate of inflation mortality rates and attrition rates. Due to the size of these schemes small changes in these assumptions can have a material impact on the estimated defined benefit obligation

We have examined the key controls over the process involving member data formulation of assumptions and the financial reporting process in arriving at the provision for retirement benefits. We tested the controls for determining the actuarial assumptions and the approval of those assumptions by senior management. We found these key controls were designed implemented and operated effectively and therefore determined that we could place reliance on these key controls for the purposes of our audit.

We tested the employee data used in calculating the obligation and where material we also considered the treatment of curtailments settlements past service costs remeasurements benefits paid and any other amendments made to obligations during the year. From the evidence obtained we found the data and assumptions used by management in the actuarial valuations for retirement benefit obligations to be appropriate.

3. Warranty Provision

The Company makes an estimated provision for assurance type warranties at the point of sale. This estimate is based on historical claims data.

We understood and tested the controls over the assumptions applied in arriving at the warranty provision particularly vouching of relevant data elements with provision calculations; validation of 'ormula used in the warranty spread sheet; management review control of the relevant internal and external factors impacting the provision.

4. Information Other than the Standalone financial statements and Auditor's Reportthereon

The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Board'sReport including Annexures to Board's Report Management Discussion and Analysis Reporton Corporate Governance Business Responsibility Report but does not include theStandalone financial statements and our auditor's report thereon.

Our opinion on the Standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the Standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required

to report that fact. We have nothing to report in this regard.

5. Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance changesin equity and cash flows of the Company in accordance with the Ind AS and other accountingprinciples generally accepted in India. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the Standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.

In preparing the Standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

The Board of Directors are responsible for overseeing the Company's financial reportingprocess.

6. Auditor's Responsibility for the audit of the Standalone financial statements

Our objectives are to obtain reasonable assurance about whether the Standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these Standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgement andmaintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under Section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial

controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe Standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained upto the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the Standalonefinancial statements including the disclosures and whether the Standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

Materiality is the magnitude of misstatements in the Standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships

and other matters that may reasonably be thought to bear on our independence and whereapplicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the Standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

7. 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 theOrder.

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 bestof 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 theCompany so far as it appears from our examination of those books.

c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Changes in Equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of account.

d) In our opinion the aforesaid standalone financial statements comply with the Ind ASprescribed under section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014.

e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in terms of Section164 (2) of the Act.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.

g) With respect to the other matters to be included in the Auditor's Report inaccordance 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 explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of Section 197 of the Act.

h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in its Standalone financial statements - Refer Note 27 (n) to the Standalonefinancial statements;

ii. The Company has long-term contracts including derivative contracts for which therewere no material foreseeable losses; and

iii. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.

For SCA AND ASSOCIATES For MAHESH VIRENDER & SRIRAM

Chartered Accountants Chartered Accountants

Firm Reg.No.101174W Firm Reg.No.001939S

Shivratan Agarwal B R Mahesh

Partner Partner

Mem.No.104180 Mem.No.18628

Place: Chennai Date : 02nd May 2019

ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT OF

EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF MRF

LIMITED

i) In respect of its Fixed Assets:

a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Fixed Assets;

b) As explained to us the Assets have been physically verified by the management inaccordance with a phased programme of verification which in our opinion is reasonableconsidering the size and the nature of its business. The frequency of verification isreasonable and no material discrepancies have been noticed on such physical verification;

c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.

ii) The inventory has been physically verified by the management during the year. Inour opinion the frequency of verification is reasonable. No material discrepancies werenoticed on such physical verification. As regards materials lying with third partiesconfirmations have been obtained;

iii) The Company has not granted any loans secured or unsecured during the year tocompanies firms limited liability partnerships or other parties covered in the registermaintained under section 189 of the Act. Accordingly the clauses 3(iii) (a) (b) and (c)of the Order are not applicable to the Company.

iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Act in respect ofgrant of loans and making investments as applicable.

v) The Company has complied with the directives issued by Reserve Bank of India and theProvisions of Section 73 to 76 of the Act and the rules framed thereunder with regard todeposits accepted from the public. We are informed by the management that no order has

been passed by the Company Law Board or National Company Law Tribunal or Reserve Bankof India or any Court or any other Tribunal on the Company.

vi) We have broadly reviewed the books of account maintained by the Company pursuant tothe rules made by the Central Government for the maintenance of cost records under section148 (1) of the Act and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained.

vii) a) The Company is regular in depositing undisputed statutory

dues including Provident Fund Employees' State Insurance Income Tax Sales-TaxService Tax Goods and Services Tax duty of customs duty of excise value added taxcess and any other statutory dues with appropriate authorities where applicable.According to the information and explanations given to us there are no undisputed amountspayable in respect of such statutory dues which have remained outstanding as at 31stMarch 2019 for a period of more than six months from the date they became payable.

b) According to the records of the Company the dues outstanding

of income-tax sales-tax service tax duty of customs duty of excise and value addedtax on account of any dispute are as follows:

Statute and nature of dues Financial year to which the matter pertains Forum where the dispute is pending Crores
CENTRAL SALES TAX ACT 1956 and VAT LAWS
Sales tax / VAT and penalty 1999-2000 2000-012002-03 200304 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 201112 2014-1 5 201 5-1 6 201 6-17 2017-18 Appellate

Commissioner

3.57
1997-98 1998-99 1999-00 200001 2001-02 2003-04 2004-05 2006-07 2007-08 2008-09 200910 2010-1 1 201 1-12 201 3-14 2014-1 5 201 6-1 7 Appellate

Tribunal

17.82
Statute and nature of dues Financial year to which the matter pertains Forum where the dispute is pending Crores
1996-97 2006-07 to 2016-17 High Court 24.68
1996-97 2000-01 to 2002-03 Supreme Court 0.12
CUSTOMS ACT 1962
Customs Duty and penalty 2016-17 Appellate

Tribunal

11.23
1992-93 to 1994-95 High Court 74.89
CENTRAL EXCISE ACT 1944 and Finance Act

1994

Excise duty Service tax and penalty 2012-13 to 2016-17 Director General Goods and Service Tax 221.31
1997-98 2006-07 2011-12 201213 2013-14 2014-15 2015-16 2016-17 and 2017-18 Appellate

Commissioner

2.61
2008-09 to 2016-17 Appellate

Tribunal

22.80
2001-02 Supreme Court 0.06
INCOME TAX 1961
Income Tax 2009-10 2013-14 2015-16 Appellate

Commissioner

22.77
2010-11 2014-15 Appellate

Tribunal

20.78
2002-03 and 2004-05 High Court 4.51

viii) The Company has not defaulted in repayment of its loans or borrowings to banksand debenture holders.

ix) The Company has not raised any moneys by way of Initial public offer or furtherPublic offer (Including debt instruments) during the year. Moneys raised by way of TermLoan were applied for the purpose for which those are raised.

x) On the basis of our examination and according to the information and explanationsgiven to us no fraud by the Company or any material fraud on the Company by its officersor employees has been

noticed or reported during the year nor have we been informed of any such case by themanagement.

xi) The managerial remuneration has been paid/provided in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the Act.

xii) The Company is not a nidhi Company and accordingly provisions of clause (xii)ofPara 3 of the order are not applicable to the Company.

xiii) On the basis of our examination and according to the information and explanationsgiven to us we report that all the transaction with the related parties are in compliancewith Section 177 and 188 of the Act and the details have been disclosed in the Financialstatements Refer Note 27(e) as required by the applicable accounting standards.

xiv) The Company has not made any preferential allotment or private placement of shareor fully or partly paid convertible debentures during the year and accordingly provisionsof clause (xiv) of Para 3 of the Order are not applicable to the Company.

xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with directors or persons connected with the directors. Accordinglyprovisions of clause (xv) of Para 3 of the Order are not applicable to the Company.

xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act1934 and accordingly provisions clause (xvi) of Para 3 of the Order arenot applicable to the Company.

For SCA AND ASSOCIATES Chartered Accountants Firm Reg.No.101174W

Shivratan Agarwal Partner

Mem.No.104180 Place: Chennai Date : 02nd May 2019

For MAHESH VIRENDER & SRIRAM Chartered Accountants Firm Reg.No.001939S

B R Mahesh Partner Mem.No.18628

"ANNEXURE B" TO THE INDEPENDENT AUDITOR'S REPORT OF

EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF

MRF LIMITED.

1. REPORT ON THE INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING UNDER CLAUSE (I)OF SUB-SECTION 3 OF SECTION 143 OF THE COMPANIES ACT 2013 ("THE ACT")

We have audited the internal financial controls over financial reporting of MRF LIMITED("the Company") as of March 31 2019 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date.

2. MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to Company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Act.

3. AUDITORS' RESPONSIBILITY

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") issued by The Institute of Chartered Accountants of Indiaand the Standards on Auditing prescribed under section 143(10) of the Companies Act 2013to the extent applicable to an audit of internal financial controls. 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 over financial reporting was established and maintained and if such controlsoperated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

4. MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A Company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A Company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the Company are being made only in accordance with authorisations ofmanagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of theCompany's assets that could have a material effect on the financial statements.

5. INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

6. OPINION

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting

and such internal financial controls over financial reporting were operatingeffectively as at March 31 2019 based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note issued by the Institute of Chartered Accountants ofIndia.

For SCA AND ASSOCIATES For MAHESH VIRENDER & SRIRAM

Chartered Accountants Chartered Accountants

Firm Reg.No.101174W Firm Reg.No.001939S

Shivratan Agarwal B R Mahesh

Partner Partner

Mem.No.104180 Mem.No.18628

Place: Chennai Date : 02nd May 2019


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