To the Members of PRECISION CAMSHAFTS LIMITED
Report on the Audit of the Standalone Indian Accounting Standards (Ind AS) FinancialStatements
We have audited the Standalone Ind AS Financial Statements of PrecisionCamshafts Limited ("the Company") which comprise the Balance Sheet as at March31 2019 the Statement of Profit and Loss (including other comprehensive income) theStatement of Changes in Equity and the Statement of Cash Flows for the year then endedand notes to the Standalone Ind AS Financial Statements including a summary ofsignificant accounting policies and other explanatory information hereinafter referred toas "the Standalone Ind AS Financial Statements".
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid Standalone Ind AS Financial Statements give theinformation required by the Companies Act 2013 as amended ("the Act") in themanner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2019 its profit its changes in equity and its cash flows for the year ended on thatdate.
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 thoseStandards are further described in the Auditor's Responsibilities for the Audit ofthe Standalone Ind AS 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 together with the ethical requirements that are relevant to our auditof the Standalone Ind AS Financial Statements under the provisions of the Act and theRules thereunder and we have fulfilled our other ethical responsibilities in accordancewith these 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.
Key Audit Matters
Key Audit matters are those matters that in our professionaljudgement were of most significance in our audit of the Standalone Ind AS FinancialStatements of the current period. These matters were addressed in the context of our auditof the Standalone Ind AS Financial Statements as a whole and in forming our opinionthereon and we do not provide a separate opinion on these matters. We have determined thematters described below to be key audit matters to be communicated in our report.
a. Valuation of inventory
Inventories have been considered key audit matter due to the variety ofmodels of the product manufactured and sold part manual process of inventory valuationfollowed by the management and management judgements involved. Refer note 2.2 (j) to theStandalone Ind AS Financial Statements for accounting policy for valuation of inventories.
Principle Audit Procedures
i. We have evaluated the design of internal controls relating to the process ofinventory recording and valuation.
ii. We have conducted physical verification of inventory on a sample basis at theyear-end in order to test the assertion of existence
iii. We have conducted analysis of net realisable value (NRV) and cost of inventory ona sample basis in order to ascertain that inventory is carried at lower of NRV and Cost.
iv. We have evaluated on a test check basis the process followed by the management toidentify non-moving slow moving obsolete inventory and we have evaluated on a test checkbasis the appropriateness of the estimates for impairment (if any) accounted for on suchinventory.
v. We have conducted cut off procedures on a test check basis to ensure completeness ofinventory recorded in the books of account.
vi. We have tested on a sample basis compliance of the cost formulae as specified inthe accounting policy adopted by the company.
b. Valuation of investments
At the balance sheet date the value of current and non-currentinvestments amounted to Rs. 17225.39 lakhs representing 28.62% of total equity and 23.29% of total assets. Investments have been considered key audit matter due to the size ofthe balance different recognition and subsequent measurement principles. Refer note 2.2(o) & (p) to the Standalone Ind AS Financial Statements for its accounting policy.
Principle Audit Procedures
i. We have obtained independent external confirmations of all material currentinvestments in order to test the assertion of existence accuracy valuation andcompleteness.
ii. We have evaluated the process of the management to identify impairment (if any) forthe investments measured at amortised cost.
iii. We have assessed the compliance of the recognition and subsequent measurementprinciples as specified in the accounting policy adopted by the company.
The Company's Board of Directors are responsible for the otherinformation. The other information comprises Management Discussion and Analysis; Board ofDirectors' Report along with its Annexures and Corporate Governance Report (togetherreferred to as "the other information") included in the Annual Report but doesnot include the Standalone Ind AS Financial Statements and our Auditors' Reportthereon. The Other Information is expected to be made available to us after the date ofthis auditor's report. Our opinion on the Standalone Ind AS Financial Statements doesnot cover the other information and we will not express any form of assurance conclusionthereon. In connection with our audit of the Standalone Ind AS Financial Statements ourresponsibility is to read the other information identified above when it becomes availableand in doing so consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained in the audit or otherwise appears tobe materially misstated. When we read the other information if we conclude that there isa material misstatement therein we are required to communicate the matter to thosecharged with governance.
Responsibility of Management for Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these StandaloneInd AS Financial Statements that give a true and fair view of the financial positionfinancial performance (including other comprehensive income) changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the accounting Standards specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgements and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS FinancialStatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the Standalone Ind AS Financial Statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind ASFinancial Statements
Our objectives are to obtain reasonable assurance about whether theStandalone Ind AS Financial Statements as a whole are free from material misstatementwhether due to fraud or error and to issue an auditor's report that includes ouropinion. Reasonable assurance is a high level of assurance but is not a guarantee that anaudit conducted 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 influence theeconomic decisions of users taken on the basis of these Standalone Ind AS FinancialStatements.
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 Ind AS Financial Statements whether due to fraud or error design and performaudit procedures responsive to those risks and obtain audit evidence that is sufficientand appropriate 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 the audit in order todesign 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 hasadequate internal financial controls system in place and the operating effectiveness ofsuch 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 concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the Standalone Ind AS Financial Statements or if such disclosuresare inadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditionsmay cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the Standalone IndAS Financial Statements including the disclosures and whether the Standalone Ind ASFinancial Statements represent the underlying transactions and events in a manner thatachieves fair presentation.
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 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 Standalone IndAS Financial Statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's 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
As required by the Companies (Auditor's Report) Order 2016("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 A a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
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 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) 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 Ind AS Financial Statements comply withthe Accounting Standards specified under Section 133 of the Act read with the Companies(Accounts) Rules 2014 (as amended).
(e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct.
(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.
(g) As required by section 197 (16) of the Act; in our opinion and according toinformation and explanation provided to us the remuneration paid by the company to itsdirectors is in accordance with the provisions of section 197 of the Act and remunerationpaid to directors is not in excess of the limit laid down under this section.
(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 Ind AS Financial Statements Refer Note 33 (b) to theStandalone Ind AS Financial Statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For M/s P.G.Bhagwat
Firm's Registration Number: 101118W
Membership Number: 136835
27th May 2019
Annexure A to the Independent Auditors' Report
Referred to in paragraph 1 under the heading "Report on Other legal andRegulatory Requirements" of our report on even date:
(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets are being physically verified by the management at regularintervals based on the programme of verification which in our opinion is reasonable. Partof the major fixed assets has been verified by the management in the current year.Discrepancies noticed on such physical verification were not material and the same havebeen properly dealt with in the books of account.
(c) According to the information and explanation provided to us title deeds ofimmovable properties are held in the name of the company.
(ii) Physical verification of inventory has been conducted by the management during thecurrent year. In our opinion the interval of such verification is reasonable.Discrepancies noticed on physical verification were not material and the same have beenproperly dealt with in the books of account.
(iii) The company has not granted any loans secured or unsecured tocompanies firms Limited Liability Partnerships or other parties covered in the registermaintained under section 189 of the Act in the current year except an unsecured loan toits wholly owned subsidiary company situated outside India.
|Sr No. Name ||Opening Balance र ||Opening Balance र ||Maximum Balance र |
|1 PCL International Holding BV ||Nil ||3092.33 lakhs ||3092.33 lakhs |
(a) According to the information and explanations provided to us by themanagement the interest rate charged is as per international transfer pricing guidelinesand interest is repayable annually from December 31 2019. Though there is no year wiseprinciple repayment stipulated; the entire loan amount is to be repaid before December 312026. This wholly owned company was formed in 2017-18 for making acquisitions of companiessituated outside India. This loan has been advanced in 2018-19 for the wholly ownedcompany to achieve its objectives. Based on such information we may conclude that theamounts advanced and the interest rate being charged for the current year is notprejudicial to the interest of the Company.
(b) According to the information and explanations provided to us noschedule of repayment of principal is stipulated though the entire loan amount is requiredto repaid before December 31 2026. Interest has been stipulated to be repaid annuallyfrom December 31 2019. There are no repayments made in the current year.
(c) According to the information provided to us by management andexplanations provided in point (b) above no amounts are overdue.
(iv) According to the information and explanation provided to us thereare no loans guarantees and security given by the Company to Directors covered underthe provisions of section 185 of the Act. According to the information and explanationsprovided to us provisions of section 186 of the Act have been complied with respect toloans guarantees investment and security.
(v) The Company has not accepted deposits in the current year butaccording to information and explanation provided to us it has unpaid matured deposits ofprior years for which the directives issued by the Reserve Bank of India and theprovisions of sections 73 to 76 or any other relevant provisions of the Act and the rulesframed there under to the extent applicable have been complied with. We have beeninformed by the management that no order has been passed by Company Law Board or NationalCompany Law Tribunal or Reserve Bank of India or any court or any other tribunal.
(vi) We have broadly reviewed the books of account relating tomaterials labour and other items of cost maintained by the Company pursuant to the rulesmade by the Central Government for the maintenance of cost records under sub-section (l)of section 148 of the Act and we are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. We have not however made a detailedexamination of records with a view to determine whether they are accurate and complete.
(vii) (a) The Company is generally regular in depositing undisputedstatutory dues including provident fund employees' state insurance income-tax dutyof customs goods and service tax cess and any other statutory dues with the appropriateauthorities. According to the information and explanation provided to us no undisputedamounts payable in respect of statutory dues were in arrears as at March 31 2019 for aperiod more than six months from the date they became payable.
(b) According to the information and explanation provided to us thereare no dues of income tax sales tax service tax duty of customs duty of excise goodsand service tax value added tax or cess which have not been deposited on account of anydispute except those mentioned below:
|Name of the Statute ||Nature of Dues ||Amount (र in lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|Central Excise Act 1944 ||Excise Duty ||20.76 ||2006-07 ||Commissioner |
|Finance Act 1994 ||Service Tax on outward transport ||1.41 ||2013-14 ||CESTAT |
|Finance Act 1994 ||Service Tax on outward transport ||0.97 ||2014-15 ||Commissioner |
|Goods and Service Tax Acts ||GST ||83.95 ||2012-14 ||Directorate General Of Goods and Service Tax Intelligence |
|Income Tax Act 1961 ||Income tax on ESOP expenses and other disallowances ||1597.12* ||2013-14 ||CIT (Appeals) |
*Company has paid 200.00 lakhs under protest and has adjusted refund due of Rs. 39.60lakhs with respect to FY 2006- 2007 against the above demand.
(viii) Based on our audit procedures and according to the information and explanationprovided to us the Company has not defaulted in repayment of loans or borrowings to afinancial institution bank or government. The Company did not have debenture holders.
(ix) In our opinion and according to the information and explanations given by themanagement we report that monies raised by way of initial public offer in the nature ofequity shares were applied for the purposes for which those were raised thoughidle/surplus funds which were not required for immediate utilization have been gainfullyinvested in demand deposits with banks. The maximum amount of idle/surplus funds investedduring the year was Rs. 12491.76 lakhs out of which Rs 2325.40 lakhs was outstanding atthe end of the year. According to the information and explanation provided to us termloans availed by the Company were prima facie applied for the purpose for which the loanswere obtained.
(x) Based upon the audit procedures performed by us and according to the informationand explanations provided to us by the management no fraud by the Company or any fraud onthe Company by its officers or employees has been noticed or reported to us during theyear.
(xi) According to the information and explanation provided to us the managerialremuneration has been paid and provided in accordance with the requisite approvalsmandated by the provisions of section 197 read with Schedule V to the Act.
(xii) The Company is not a Nidhi Company and accordingly Clause (xii) of the Order isnot applicable to the Company.
(xiii) According to the information and explanation provided to us all transactionswith the related parties are in compliance with sections 177 and 188 of Act whereverapplicable and the details have been disclosed in the Standalone Ind AS FinancialStatements as required by the applicable accounting standards.
(xiv) According to the information and explanation provided to us the Company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year under review.
(xv) According to the information and explanation provided to us the Company has notentered into any non-cash transactions with directors or persons connected with him.
(xvi) According to the information and explanation provided to us the Company is notrequired to be registered under section 45-IA of the Reserve Bank of India Act 1934.
For M/s P.G.Bhagwat
Firm's Registration Number: 101118W
Membership Number: 136835
27th May 2019
Annexure B to the Independent Auditors' Report
Referred to in paragraph 2 (f) under the heading "Report on Otherlegal and Regulatory Requirements" of our report on even date:
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financialreporting of Precision Camshafts Limited ("the Company") as of March 31 2019 inconjunction with our audit of the Ind AS Financial Statements of the Company for the yearended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.
Our responsibility is to express an opinion on the Company'sinternal financial controls over financial reporting based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing to theextent applicable to an audit of internal financial controls both issued by the Instituteof Chartered Accountants of India. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting 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 Ind AS 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 system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting isa process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Ind AS Financial Statements for external purposes inaccordance with generally accepted accounting principles. A company's internalfinancial control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation ofInd AS Financial Statements in accordance with generally accepted accounting principlesand that receipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the Ind ASFinancial Statements.
Inherent Limitations of Internal Financial Controls Over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 31 2019 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.
For M/s P.G.Bhagwat
Firm's Registration Number: 101118W
Membership Number: 136835
27th May 2019