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Bharat Electronics Ltd.

BSE: 500049 Sector: Engineering
NSE: BEL ISIN Code: INE263A01016
BSE LIVE 15:57 | 09 Dec 1514.45 30.95
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NSE LIVE 15:59 | 09 Dec 1508.55 28.30
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OPEN 1507.00
PREVIOUS CLOSE 1483.50
VOLUME 54138
52-Week high 1540.00
52-Week low 1009.00
P/E 22.86
Mkt Cap.(Rs cr) 33826.76
Buy Price 0.00
Buy Qty 0.00
Sell Price 1514.45
Sell Qty 338.00
OPEN 1507.00
CLOSE 1483.50
VOLUME 54138
52-Week high 1540.00
52-Week low 1009.00
P/E 22.86
Mkt Cap.(Rs cr) 33826.76
Buy Price 0.00
Buy Qty 0.00
Sell Price 1514.45
Sell Qty 338.00

Bharat Electronics Ltd. (BEL) - Auditors Report

Company auditors report

TO THE MEMBERS OF BHARAT ELECTRONICS LIMITED

Report on the Standalone financial statements

We have audited the accompanying standalone financial statements of BHArAteLeCtronICs LIMIted ("the Company") which comprise the Balance Sheet as at31 March 2016 the Statement of Profit and Loss and theCash Flow Statement for the yearthen ended and a summary of the significant accounting policies and other explanatoryinformation in which are incorporated the Returns for the year ended on that date auditedby the branch auditors of the Company’s branches at Ghaziabad Panchkula KotdwaraPune Navi Mumbai and Machilipatnam.

In the light of observations arising in our Auditor’s Report from the audit ofComptroller & Audit General of India our Independent Auditor’s Report dated 27May 2016 has been revised to incorporate Annexure III the directions of Comptroller &Audit General of India and our findings thereon.

This report supersedes our Independent Auditor’s Report dated 27 May 2016.

Management’s Responsibility for the Standalone financial statements

The Company’s Board of Directors are responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flowsof the Company in accordance with theaccounting principles generally accepted in India including the

Accounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014. 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.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. ThoseStandards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the standalone financial statements. The procedures selected depend onthe auditor’s judgment including the assessment of the risks of materialmisstatement of the standalone financial statements whether due to fraud or error. Inmaking those risk assessments the auditor considers internal financial control relevantto the Company’s preparation of the standalone financial statements that give a trueand fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by theCompany’s Directors as well as evaluating the overall presentation of the standalonefinancial statements.

We believe that the audit evidence obtained by us and the audit evidence obtained bythe other auditors in terms of their reports referred to in sub-paragraph (a) of the OtherMatters paragraph below is sufficient and appropriate to provide a basis for our auditopinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone required by the Act financial in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India : a) in the case of the balance sheet of the state of affairsof the Company as at 31 March 2016. b) in the case of the statement of profit and loss ofthe profit for the year ended on that date; and c) in the case of the cash flow statementof the cash flows for the year ended on that date.

Other Matters a) We did not audit the financial statements of six branches includedin the standalone financial statements of the Company whose financial statementsreflecttotal assets Offices and other offices not visited by us of Rs. 381908.39 lakhsas at 31 March 2016 and total revenues of Rs. 181023.18 lakhs for the year ended on thatdate as considered in the standalone financial statements. The financial statements ofthese branches have been audited by the branch auditors appointed by Comptroller &Audit General of India whose reports have been furnished to us and our opinion in so faras it relates to the amounts and disclosures included in respect of these Units is basedsolely on the report of such branch auditors. b) We draw attention to Note No. 31(6)regarding disclosures required under Para 5 of Part II to Schedule III of the CompaniesAct 2013 (under General Instructions for preparation of Statement of Profit and Loss)[erstwhile

Para 5 of Part II to Schedule VI of the Companies Act 1956 (under General Instructionsfor preparation of

Statement of Profit and Loss)]. c) We draw attention to Note No. 31(12) regardingdisclosure of segment information as required under AS-17.

Our opinion is not modified in respect of these matters.

report on other Legal and Regulatory Requirements

1. As required by Companies (Auditor’s Report) Order 2016 issued by the CentralGovernment in terms of sub-section 11 of section 143 of the Companies Act 2013 and basedon the comments in the auditors’ report of the respective branches we give in theannexure a statement on the matters specified in paragraph 3 and 4 of the Order to theextent applicable. (Annexure 1).

2. As required by Section 143 (3) of the Act we report that : (a) We have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit. (b) In our opinion proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books. The audit of the accounts of Bangalore Hyderabad and Chennaibranches and Corporate Office has carried out by us. In the case of New York and Singaporeand in respect of which the accounts are maintained at Corporate Office the returns /records received from the said offices have been verified and found to be adequate for thepurpose of our audit.

(c) The reports on the accounts of the Unit’s offices of the Company audited underSection 143 (8) of the Act by Branch auditors ( in respect of Ghaziabad PanchkulaKotdwara Pune Navi Mumbai and Machilipatnam Units) have been sent to us and have beenproperly dealt with by us in preparing this report. d) The Balance Sheet the Statementof Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreementwith the books of account of the Company. e) In our opinion the aforesaid standalonefinancial statements comply with the Accounting Standards specified under Section 133 ofthe Act read withRule 7 of the Companies (Accounts) Rules 2014. f) On the basis of thewritten representations received from the Directors as at 31 March 2016 taken on record bythe Board of Directors none of the

Directors is disqualified as on 31 March 2016 from being appointed as a Director interms of Section 164 (2) of the Act. g) With respect to the adequacy of the internalfinancial controls over financial reporting of the Company’s financial statements andthe operating effectiveness of such controls a separate report is annexed (Annexure II).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 in our opinionand to the best of our information and according to the explanations given to us :

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements as at 31 March 2016 – Refer Note 31(8) to the financial atements.

ii. The Company did not have any long-term contracts including derivatives contractsfor which there were any material foreseeable losses. iii. There has been no delay intransferring amounts required to be transferred to the Investor Education and ProtectionFund by the Company.

3. As required under Section 143 (5) of the Act which is applicable to the Companyfindings on the directions issued by Comptroller and Auditor General of India is annexed(Annexure III).

For Badari Madhusudhan & Srinivasan
Chartered Accountants
Firm Registration Number : 005389S
(S.RAJENDIRAN)
Bengaluru Partner
15 July 2016 Membership No. 021883

AnneXure I to tHe Independent AudItor’s report

The Annexure referred to in paragraph 1 in Report on Other Legal and RegulatoryRequirements of the Independent Auditor’s Report of even date to the members of thecompany on the Standalone financial statements for the year endedMarch 31 2016 We reportthat :

(i) (a) The Company has generally maintained proper records showing full particularsincluding quantitative details and situation of its fixed assets (b) As explained to usand based on our examination of records the Management has generally carried out thephysical verification

Assets in accordance with their phased programme of physical verification which isconsidered reasonable having regard to the size of the Company and nature of its fixedassets. In accordance with the programme certain fixed assets were verified during theyear and discrepancies if any were properly dealt with on such verification year. Asinformed to us no material discrepancies have been noticed on such verification year.

(c) As explained to us and based on our examination of records the title deeds ofimmovable properties are held in the name of the company. We draw your attention to NoteNo. 9 to the financial statements.

(ii) The raw materials stores and spare parts tools work-in-progress semi-finishedgoods and finished inventory (excluding stock with third parties and material in transit)have been physically verified by the management during the year. In our opinion thefrequency of verification relation to the size of the Company and the nature of itsbusiness.

As informed to us no material discrepancies have been noticed on such verification.The discrepancies noticed on verification book records have been properly dealt in thebooks of account.

In respect of materials with sub-contractors confirmations have been receivedgenerally and reconciled with the book records. However in case of such items for whichno confirmations have been received which are not significant the company has dealt withthe same by making adequate provision in the books of account

(iii) According to the information and explanations given to us the Company hasgranted unsecured loan to one subsidiary company covered in the register maintained undersection 189 of the Companies Act 2013 ("Act").

The Company has not granted loans to firms parties covered in the register maintainedunder Section of a portion of the Fixed189 of the Act.

(a) According to the information and explanations given to us and based on the auditprocedures conducted by us we are of the opinion that the terms and conditions of loansgranted by the company to it’s subsidiary covered in the register maintained undersection 189 of the Companies Actduring the 2013 are not prejudicial to the company’sinterest. (b) In case of the loans granted to the Company listedduringthe in the registermaintained under section 189 of the Act the borrower has been regular in the payment ofinterest and repayment of principal as stipulated. (c) There is no amount overdue for morethan 90 days.

(iv) According to the information and explanations given to us in respect of loansinvestments guarantees and security the provisions of section 185 and 186 of theCompanies Act 2013 are not applicable

(v) According to the information and explanations given to is reasonable and adequatein us the Company has not accepted any deposit from public in the current year as per thedirectives issued by the Reserve Bank of India and the provisions of sections 73 to 76 orany other relevant provisions of the Companies Act and the rules framed there under.between the physical stocks and the All deposits have matured and settled except for Rs.36.95 lakhs out of which Rs. 36.50 lakhs is retained as per Garnishee Order of LokayuktaBangalore and the balance of Rs. 0.45 lakhs though matured is unpaid due to legal issues.

In our opinion and according to the information and explanations given to us and basedon our examination of records the Company has complied with the provisions of Section 73and other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules2014.

(vi) The Company pursuant to sub-section (1) of section 148 of the Companies Act forthe maintenance and audit of cost records prescribed by the Central Government hasmaintained cost records. We are of the opinion that prima facie the prescribed costaccounts and cost records have been made and maintained. However we have not carried outany detailed examination of the cost records with a view to determine whether they areaccurate or complete.

(vii) (a) The Company is regular in remittance of undisputed statutory dues includingProvident Fund Employees’ State Insurance Income-tax Sales-tax Service-taxCustom Duty Excise Duty Cess and other applicable statutory dues.

According to the information and explanation given to us no undisputed statutory duesare outstanding as at 31 March 2016 for a period of more than six months from the datethey became payable.

(b) According to the information and explanations given to us there are no disputedamounts that remain unpaid as at 31 March 2016 for a period of more than six months fromthe date they became payable in respect of Provident Fund Employees’ StateInsurance Income-tax Sales-tax Service-tax Custom Duty Excise Duty Cess and otherapplicable statutory dues with the exception of the following :

Name of Statute Nature of Dues Financial year to which amount relates Amount ( Rs. in Lakhs) Forum where dispute is pending
Sales Tax Act Sales Tax dues 1995-96 to 1997-98 2005-2015 4971.49 Various levels of Appellate authority
Sales Tax Act Sales Tax dues 2000-01 361.16 Uttrakhand high court Nainital
Central Sales tax Act Central Sales Tax (CST) 1980-81 1991-92 2005-06 to 2007-08 2011-12 2194.00 Various levels of Appellate authority
Central Excise Tax Excise Duty Modvat Credit 1991-92 38.56 Commissioner (Appeals)
Customs Act Customs Duty 2012-13 103.52 CESTAT
Customs Act Customs Duty - 123.23 Assistant Commissioner of Customs
Finance Act 1994- Service Tax Service Tax 2007-08 2009-10 113.96 CESTAT
Finance Act 1994- Service Tax Revisionary Showcause Notice 2008-09 34.01 Commissioner
Vacant Land Tax Vacant Land Tax 1998-99 to2003-04 10.35 Director Directorate of Town Panchayat Chennai
Urban Land Tax Urban Land Tax 1984-85 to 2002-03 41.44 Principal Commissioner and Commissioner of Land Reforms Chennai.
ESI Act 1948 Interest and damages towards late deposits - 3.52 Punjab and Haryana High Court Chandigarh
Total disputed amount 7995.24
Total amount paid under protest pending final order 3426.90

(viii) On the basis of examination of records of the Company and information andexplanations given to us the

Company has not defaulted in repayment of dues to a bank financial institution orothers.

(ix) The requirement relating to application of moneys raised by way of initial publicoffer or further public offer (including debt instruments) and term loans for the purposesfor which they were raised are not applicable to the Company.

(x) During the course of our examination of the books of account and records of theCompany carried out in accordance with the generally accepted auditing practices in Indiaand according to the information and explanations given to us we have neither come acrossany instance of fraud by the Company or any fraud on the Company or by its officers oremployees has been noticed or reported during the year nor have we been informed of anysuch case by the Management that causes the financial statements to be materiallymisstated.

(xi) According to the information and explanations given to us and based on theexamination of records the provisions in relation to disbursement of managerialremuneration is in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Companies Act.

(xii) The provisions in relation to compliance of Nidhi

Company with the Net Owned Funds to Deposits in the ratio of 1:20 to meet out theliability maintenance of ten per cent unencumbered term deposits as specified in the NidhiRules 2014 to meet out the liability is not applicable to the Company.

(xiii) On the basis of examination of records of the Company and information andexplanations given to us all transactions with the related parties are in compliance withsections 177 and 188 of Companies Act2013 and the details have been disclosed in theFinancial Statements vide Note No. 31(14) as required by the applicable accountingstandards.

(xiv) The provisions in relation to preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under pursuant to therequirement of section 42 of the Companies Act 2013 are not applicable since no suchissues have been made by the Company.

(xv) According to the information and explanations given to us and on the basis ofexamination of records the Company has not entered into any non-cash transactions withdirectors or persons connected with him and therefore the provisions of section 192 ofCompanies Act 2013 are not applicable.

(xvi) The requirement of registration under section 45-IA of the Reserve Bank of IndiaAct 1934 is not applicable to the Company.

For Badari Madhusudhan & Srinivasan
Chartered Accountants
Firm Registration Number : 005389S
(S.RAJENDIRAN)
Bengaluru Partner
15 July 2016 Membership No. 021883

AnneXure II to tHe Independent AudItor’s report oF eVen dAte report on theInternal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of theCompanies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of BharatElectronics Limited ("the Company") as of March 31 2016 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.

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 designimplementation 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 theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditor’s 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") and the Standards on Auditing issued by ICAI and deemed tobe prescribed under section 143(10) of the Companies Act 2013 to the reflect thetransactions and extent applicable to an audit of internal financial controls bothapplicable to an audit of Internal Financial Controls and both issued by the Institute ofChartered Accountants of India.

Those Standards and the Guidance Note require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls over financial reporting was established and maintained and ifsuch controls operated 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 included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor’s judgement including the assessment of the risks of materialmisstatement 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 controlssystem over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial accordance with generally accepted accounting principles.A company’s internal financial control over financial includes those policies andprocedures that : (1) pertain to the maintenance of records that in reasonabledetailaccuratelyandfairly dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the company’s assets that could have a material effect on thefinancial statements.

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 periods are subject to the risk that the internal financial control overfinancial reporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For Badari Madhusudhan & Srinivasan
Chartered Accountants
Firm Registration Number : 005389S
(S. RAJENDIRAN)
Bengaluru Partner
15 July 2016 Membership No. 021883

ANNEXURE III TO THE INDEPENDENT AUDITOR’S REPORT OF EVEN DATE

Report under Section 143(5) of the Companies Act 2013

sl. no. Directions/Sub-directions Action Taken Impact on Financial Statement
1. Whether the company has clear title/lease for freehold and leasehold respectively? If not please state the area of freehold and leasehold land for which title/lease deeds are not available? Yes the Company holds clear title/lease for freehold and leasehold lands. Nil
1) In case of Freehold land measuring 1010.26 acres (Bangalore Complex and Hyderabad Units) sale deeds are pending finalization.
2) Title deeds of land measuring 14.02 acres (Bangalore Complex Panchkula and Kotdwara Units) are under litigation.
3) In case of leasehold land for Windmill Generators at various locations for land measuring to 19.07 acres lease agreements are pending finalization.
4) Disputed Demand of Rs. 5.12 crores for additional compensation from TSIIC towards land aggregating to 22.375 acres included in Contingent Liabilities.
2. Whether there are any cases of waiver/ write off of debts/loans/interest etc. if yes the reasons therefore and the amount involved. The total write off during the year aggregating to Rs. 142.29 crores as detailed in the annexure. Annexure A
3. Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt. or other authorities? Yes proper records are maintained for the inventories lying with third parties and there is no such case of gift received from Govt. or other authorities. Nil

Annexure – A

Amount (Rs. In crores)

sl. no. Particulars Total Amount written off Write off Against Provision/Accumulated Depreciation (Rs.) Impact in P/L (Rs. )
1. Bad debts/LD/advances written off 54.62 54.38 0.25
2. Write off of Raw materials Stores & Components 5.70 5.69 *0.01
3. Fixed Assets write off 81.97 74.73 **7.24
Total Write Off 142.29 134.80 7.50

* Represents value reduction of obsolete stores and materials.

** Represents loss of Rs. 7.23 Crores caused due to floods at Chennai Unit.

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