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Shriram EPC Ltd.

BSE: 532945 Sector: Engineering
NSE: SHRIRAMEPC ISIN Code: INE964H01014
BSE LIVE 15:40 | 20 Nov 20.00 0.30
(1.52%)
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20.15

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20.15

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19.50

NSE 15:29 | 20 Nov 20.00 0.15
(0.76%)
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19.95

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20.20

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OPEN 20.15
PREVIOUS CLOSE 19.70
VOLUME 56412
52-Week high 35.95
52-Week low 17.20
P/E
Mkt Cap.(Rs cr) 1,943
Buy Price 20.00
Buy Qty 699.00
Sell Price 0.00
Sell Qty 0.00
OPEN 20.15
CLOSE 19.70
VOLUME 56412
52-Week high 35.95
52-Week low 17.20
P/E
Mkt Cap.(Rs cr) 1,943
Buy Price 20.00
Buy Qty 699.00
Sell Price 0.00
Sell Qty 0.00

Shriram EPC Ltd. (SHRIRAMEPC) - Auditors Report

Company auditors report

to the Members of

Shriram EPC Limited

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of SHRIRAM EPC LIMITED("the Company") which comprise the Balance Sheet as at 31st March 2017 theStatement of Profit and Loss and the Cash Flow Statement for the year then ended and asummary of policies and other explanatory thesignificant information.

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 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 flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsprescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing 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 ofthe accounting records relevant to the preparation and presentation of the standalonefinancialstatements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

Auditor’s Responsibility

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

In conducting our audit we have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under Section 143(10) of the Act. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the standalone financial statements are free frommaterial 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 is sufficientand appropriate toprovide a basis for our qualified audit opinion on the standalone financial statements.

Basis for Qualified Opinion

1. We draw attention to the Note No. 47 of the financial statements regarding the duesaggregating to Rs.12141.62 Lakhs in respect of an overseas project. As mentioned in theNote the construction activities have ceased and the case filed by the Company againstthe customer for recovery of the dues is pending before Iraqi Court. The Company has alsofiled appropriate claims with Export Credit and Guarantee Corporation (ECGC). However inthe absence of any positive development till date in these matters there is uncertaintyon the amount that would be ultimately realizable by the Company. In view of theuncertainty involved we are unable to comment on the carrying value of the saidreceivable.

This matter was also qualified in our report on the standalone financial statements forthe year ended 31stMarch 2016.

2. We draw attention to Note No. 49(a)of the financial statements regarding advances ofRs. 12309.72 Lakhs and Trade Receivables of Rs. 1023.58 Lakhs due from a related party.These advances and Trade Receivables are considered good and recoverable by the managementfor the reasons stated in the said note. In the absence of audit evidence to corroboratemanagement’s assessment of recoverability of these advances and having regard to ageof these balances we are unable to comment on the extent to which these balances arerecoverable.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to usexcept for the possible effects of the matters described in the Basis forQualified Opinion paragraph above the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at 31st March 2017 and its loss and its cash flows for theyear ended on that date.

Emphasis of Matters

We draw attention to the following matters in the Notes to the standalone financialstatements:

1. Note No. 48 to the financial statements regarding the dues of Rs. 8300.19 Lakhs inrespect of a project which is not progressing due to statutory delays faced by thecustomer. The dues are considered fully realisable by the management at this stage in viewof the steps taken by the Company for their realization.

2. Note no. 49(b) to the financial statements regarding dues of Rs.78011.70 Lakhs duefrom an associate and a subsidiary of the associate which has been outstanding for aconsiderable period of time.. The dues are considered fully realisable by the managementin view of the steps taken by the management to realise the dues as given in the saidnote.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143 (3) of the Act based on our auditwe reportto theextent applicable that:

a) We have sought and except for the matters described in the Basis for QualifiedOpinion paragraph above obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.

b) Except for the possible effects of the matters described in the Basis for QualifiedOpinion paragraph above in our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet the Statement of Profit Loss and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account.

d) Except for the possible effects of the matters described in the Basis for QualifiedOpinion paragraph above in our opinion the aforesaid standalone financial statementscomply with the Accounting Standards prescribed under section 133 of the Act.

e) The matters described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company.

f) On the basis of the written representations received from the directors as on31stMarch 2017 taken on record by the Board of Directors none of the directors isdisqualified as on 31 stMarch 2017 from being appointed as a director in terms of Section164 (2) of the Act.

g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above.

h) 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 A". Our report expresses a qualifiedopinion on theoperating effectiveness of the Company’s internal financial controls over financialreporting. i) With respect to the other matters to be included in the Auditor’sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended 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 its financialposition in its standalone financial statements;

ii. Except for the possible effect of the matters described in the Basis of QualifiedOpinion above the Company has made provision as required under the applicable law oraccounting standards for material foreseeable losses on long-term contracts includingderivative contracts;

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

iv. The Company has provided requisite disclosures in the financial statements asregards its holding and dealings in Specified Bank Notes asdefinedintheNotification S.O.3407(E) dated the 8th November 2016 of the Ministry of Finance during the period andfrom 8th November 2016 to 30th December 2016; and such disclosures are in accordance withthe books of accounts maintained by the Company.

2. As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government in terms of Section 143(11) of the Act wegive in "Annexure B" a statement on the matters specified in paragraphs 3 and 4of the Order.

For Deloitte Haskins & Sells
Chartered Accountants
(Firm’s Registration No. 008072S)
M.K. Ananthanarayanan
Partner
Chennai 30th May 2017 (Membership No. 19521)

Annexure "A" to the Independent Auditor’s Report

(Referred to in paragraph 1(h) under ‘Report on Other Legal and RegulatoryRequirements’ of our report of even date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of Shriram EPCLimited ("the Company") as of 31st March 2017in 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 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. These responsibilities include the design implementationand maintenance of adequate internal financial that were operating effectively forensuring the orderly and efficientconduct of its business including adherence tocompany’s policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company’s internal financialcontrols over financial on our audit. We conducted our audit in accordance with theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India andthe Standards on Auditing prescribed under Section 143(10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively 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 qualified audit opinion on the Company’s internal financialcontrols system 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 statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting established includes those policies and procedures that (1) pertain tothe maintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation controls offinancial statements in accordance with generally accepted accounting principles and thatreceipts 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 thefinancial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial reporting based 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.

Basis for Qualified opinion

According to the information and explanations given to us and based on our auditmaterial weaknesses have been identified in the operating effectiveness of theCompany’s internal financial controls over financial reporting as at 31st March 2017in respect of provisioning for overdue receivables in respect of a project andprovisioning for advances which have been outstanding for a considerable period of timewhich could potentially result in the Company not recognizing a provision for the saidreceivables and advances.

A ‘material weakness’ is deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company’s annual or interim financialstatements will not be prevented or detected on a timely basis.

Qualified Opinion

In our opinion to the best of our information and according to the explanations givento usexcept for the possible effects of the material weaknesses described in Basis forQualified Opinion paragraph above on the achievement of the objectives of the controlcriteriathe Company has in all material respects maintained adequate internal financialcontrols over financial reporting and such internal financial controls over financialreporting were operating effectively as of 31st March 2017 based on the internal controlsover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls over Financial Reporting issued by the Institute of Chartered Accountants ofIndia".

We have considered these material weaknesses identified and reported above indetermining the nature timing and extent of audit tests applied in our audit of theStandalone financial statements of the Company for the year ended 31st March 2017 andthese material weaknesses affects our opinion on the said standalone financial statementsof the Company.

For Deloitte Haskins & Sells
Chartered Accountants
(Firm’s Registration No. 008072S)
M.K. Ananthanarayanan
Partner
Chennai 30th May 2017 (Membership No. 19521)

Annexure "B" to the Independent Auditor’s Report

(Referred to in paragraph 2 under ‘Report on Other Legal and RegulatoryRequirements’ section of our report of even date)

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The fixed assets were physically verified during the year by the Management inaccordance with a regular programme of verification which in our opinion provides forphysical verification of all the fixed assets at reasonable intervals. According to theinformation and explanation given to us no material discrepancies were noticed on suchverification.

(c) In respect of immovable properties of land that have been taken on lease anddisclosed as Fixed Assets in the financial statements the lease agreements are in thename of the Company where the Company is the lessee in the agreement.

(d) Immovable properties of land and buildings whose title deeds have been pledged witha bank as security for term loans are held in the name of the Company based on theMortgage deed executed between the bank and the Company for which confirmation has beenobtained from the bank.

(ii) The Company does not have any inventory and hence reporting under clause (ii) ofthe CARO 2016 is not applicable.

(iii) According to the information and explanations given to us the Company hasgranted loans secured or unsecured to companies firms Limited Liability Partnershipsor other parties covered in the register maintained under section 189 of the CompaniesAct 2013 in respect of which :

(a) The terms and conditions of the grant of such loans are in our opinion primafacie not prejudicial to the Company’s interest.

(b) The schedule of repayment of principal and payment of interest not been stipulatedand in the absence of such schedule we are unable to comment on the regularity ofrepayments or receipts of principal amounts and interest.

(c) There are no overdue amounts remaining outstanding as at the Balance Sheet dateexcept for an amount of Rs. 13333.30 Lakhs as referred to sub- paragraph 2 of Basis ofQualified Opinion paragraph above and an amount of Rs.78011.70 Lakhs as referred to insub-paragraph 2 of Emphasis of Matters paragraph above which have been outstanding for aconsiderable period of time and as explained to us the Management has taken reasonablesteps for recovery of the principal amounts and interest.

(iv) In our opinion and according to the information and explanations given to us theCompany as complied with the provisions of Sections 185 and 186 of the Companies Act 2013in respect of grant of loans making investments and providing guarantees and securitiesas applicable.

(v) According to the information and explanations given to us the Company has notaccepted any deposit during the year.

(vi) The maintenance of cost records has been specified by the Central Government undersection 148(1) of the Companies Act 2013. We have broadly reviewed the cost recordsmaintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014as amended prescribed by the Central Government under sub-section (1) of Section 148 ofthe Companies Act 2013 and are of the opinion that prima facie the prescribed costrecords have been made and maintained We have however not made a detailed examination ofthe cost records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us in respect ofstatutory dues:

(a) The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employees’ State Insurance Income-tax Sales Tax ServiceTaxCustoms Duty Excise Duty Value Added Tax cess and other material statutory duesapplicable to it to the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident FundEmployees’ State Insurance Income-tax Sales Tax Service TaxCustoms Duty ExciseDuty Value Added Tax cess and other material statutory dues in arrears as at 31st March2017 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax Service Tax and Value added Tax which have not beendeposited as on 31st March 2017on account of disputes are given below:

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to financialinstitutions banks and government. The Company has not issued any debentures.

(ix) The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause (ix) ofthe Order is not applicable. (x) To the best of our knowledge and according to theinformation and explanations given to us no fraud by the Company and no material fraud onthe Company by its officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of theOrder is not applicable.

(xiii) In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

Name of the Statute Nature of Dues Forum where Dispute is pending Period to which the amount relates (Financial Year) Amount involved (Rs. In lakhs) Amount Unpaid (Rs. In lakhs)
Income Tax Act 1961 Income Tax interest and penalty Commissioner of Income Tax (Appeals) 2005-2006 2006-2007 2007-2008 2008-2009 207.00 207.00
Income Tax Act 1961 Income Tax interest and penalty Income Tax Appellate Tribunal 2012-2013 4.56 4.56
Service Tax (Chapter V of the Finance Act 1994) Service Tax and penalty Customs Excise and Service Tax Appellate Tribunal 2006-07 to 2012-2013 694.28 694.28
Service Tax (Chapter V of the Finance Act 1994) Service Tax and penalty Commissioner of Service tax (Appeals) 2009- 2010 to 2011-2012 114.53 114.53
Andhra Pradesh Value Added Tax Act Value Added Tax Supreme Court 2008-2009 and 2009-2010 223.33 223.33
Tamil Nadu Value added Tax Act Value Added Tax High Court 2008-09 to 2014-15 1357.62 1357.62
West Bengal Value Added Tax Act Value Added Tax West Bengal Commercial Taxes Appellate & Revisional Board 2007-08 558.45 558.45
West Bengal Value Added Tax Act Value Added Tax Joint Commissioner (Appeals) 2008-09 to 2012- 2013 871.20 871.20
West Bengal Value Added Tax Act Value Added Tax Joint Commissioner (Appeals) 2012-2013 263.07 263.07
Maharashtra Value Added Tax Act Value Added Tax Deputy Commissioner (Appeals) 2010-2011 246.13 246.13
Orissa Value added Tax Value added Tax High Court 2011-12 and 2012-13 6700.75 6700.75

(xiv) According to the information and explanations given to us the Company has madepreferential allotment of equity shares during the year under review.

In respect of the above issue we further report that: a) the requirement of Section 42of the Companies Act 2013 as applicable have been complied with; and b) the amountsraised have been applied by the Company during the year for the purposes for which thefunds were raised other than temporary deployment pending application.

(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or persons connected with him and hence provisions of section 192 of theCompanies Act 2013 are not applicable.

(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.

For Deloitte Haskins & Sells
Chartered Accountants
(Firm’s Registration No. 008072S)
M.K. Ananthanarayanan
Partner
Chennai 30th May 2017 (Membership No. 19521)