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Apollo Tyres Ltd.

BSE: 500877 Sector: Auto
NSE: APOLLOTYRE ISIN Code: INE438A01022
BSE 00:00 | 22 Jan 231.90 14.65
(6.74%)
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221.00

HIGH

237.40

LOW

219.20

NSE 00:00 | 22 Jan 231.90 14.60
(6.72%)
OPEN

220.00

HIGH

237.50

LOW

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OPEN 221.00
PREVIOUS CLOSE 217.25
VOLUME 3054615
52-Week high 237.40
52-Week low 73.55
P/E 34.66
Mkt Cap.(Rs cr) 14,728
Buy Price 232.00
Buy Qty 855.00
Sell Price 232.90
Sell Qty 95.00
OPEN 221.00
CLOSE 217.25
VOLUME 3054615
52-Week high 237.40
52-Week low 73.55
P/E 34.66
Mkt Cap.(Rs cr) 14,728
Buy Price 232.00
Buy Qty 855.00
Sell Price 232.90
Sell Qty 95.00

Apollo Tyres Ltd. (APOLLOTYRE) - Auditors Report

Company auditors report

To the Members of Apollo Tyres Limited

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

OPINION

1. We have audited the accompanying standalone financial statements of Apollo TyresLimited (‘the Company') which comprise the Balance Sheet as at 31 March 2020 theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofthe significant accounting policies and other explanatory information.

2. 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 (‘Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India includingIndian Accounting Standards (‘Ind AS') specified under section 133 of the Act of thestate of affairs of the Company as at 31 March 2020 and its profit (including othercomprehensive income) its cash flows and the changes in equity for the year ended on thatdate.

BASIS FOR OPINION

3. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the

Company in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (‘ICAI') together with the ethical requirements that arerelevant to our audit of the 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.

EMPHASIS OF MATTER

4. We draw attention to Note A3.27 of the standalone financial statements whichdescribes the uncertainties due to the outbreak of Covid-19 pandemic and management'sevaluation of the impact on the standalone financial statements of the Company as at thebalance sheet date. The impact of these uncertainties on the Company's operations issignificantly dependent on future developments.

Our opinion is not modified in respect of this matter.

KEY AUDIT MATTERS

5. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.

6. We have determined the matters described below to be the key audit matters to becommunicated in our report.

Key audit matter How our audit procedures addressed the key audit matter
A. Provision for sales related obligations Our audit procedures included:
As at 31 March 2020 the Company carries provisions for sales related obligations amounting to Rs 1388.91 million (Refer note C7). a) Obtained an understanding from the management with respect to process and controls followed by the Company to ensure appropriateness of recognition measurement and completeness of the sales related obligations;
Such provision is recognised based on past trends frequency expected cost of obligations management estimates regarding possible future incidences and appropriate discount rates for non-current portion of the obligations.
b) Tested the management's computation of sales related obligations by evaluating the reasonability of the key assumptions reviewing the contractual terms comparing the assumptions to historical data and analysing the expected costs of incidences;
These estimates require high degree of management judgement with respect to the underlying assumptions thus giving rise to inherent subjectivity in determining the amounts to be recorded in the financial statements.
c) Traced the inputs used in the computations to the relevant accounting records including discussions with the relevant management personnel and tested the arithmetical accuracy of the computation;
Considering the materiality of the above matter to the financial statements complexities and judgement involved and the significant auditor attention required to test such management's judgement we have identified this as a key audit matter for current year audit.
d) Compared the amounts recognized as provision in the past years with the corresponding settlements and assessed whether the aggregate provisions recognized as at the current year-end were sufficient to cover expected costs in light of known and expected incidences;
e) Performed sensitivity analysis on the management's computation by evaluating the impact of change on the obligation by changing certain key assumptions such as discount rates used; and
f) Assessed and validated the adequacy and appropriateness of the disclosures made by the management in the standalone financial statements.
B. Litigations and claims: provisions and contingent liabilities Our procedures included but were not limited to the following:
As included under Note C16 [contingent liability note] and Note C7 [Provision for contingencies note] to the standalone financial statements the Company is involved in direct and indirect tax litigations (‘litigations') amounting to Rs 3411.57 million that are pending with various tax authorities. a) Obtained an understanding from the management with respect to process and controls followed by the Company for identification and monitoring of significant developments in relation to the litigations including completeness thereof;
b) Obtained the list of litigations from the management and reviewed their assessment of the likelihood of outflow of economic resources being probable possible or remote in respect of the litigations. This involved assessing the probability of an unfavorable outcome of a given proceeding and the reliability of estimates of related amounts;
Whether a liability is recognised or disclosed as a contingent liability in the financial statements is inherently judgmental and dependent on a number of significant assumptions and assessments. These include assumptions relating to the likelihood and/or timing of the cash outflows from the business and the interpretation of local laws and pending assessments at various levels of the statute. We placed specific focus on the judgements in respect to these demands against the Company.
c) Performed substantive procedures including tracing from underlying documents / communications from the tax authorities and recomputation of the amounts involved;
d) Assessed management's conclusions through discussions held with their in house tax experts and understanding precedents in similar cases;
Determining the amount if any to be recognised or disclosed in the standalone financial statements is inherently subjective. The amounts involved are potentially significant and due to the range of possible outcomes and considerable uncertainty around the various claims the determination of the need for creating a provision in the financial statements is inherently subjective and therefore is considered to be a key audit matter in the current year
e) Obtained and evaluated the independent confirmations from the consultants representing the Company before the various authorities;
f) Engaged auditor's experts who obtained an understanding of the current status of the litigations conducted discussions with the management reviewed independent legal advice received by the Company if any and considered relevant legal provisions and available precedents to validate the conclusions made by the management; and
g) Assessed and validated the adequacy and appropriateness of the disclosures made by the management in the standalone financial statements.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON

7. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisReport on Corporate Governance and Director's Report but does not include the standalonefinancial 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 in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.

RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE STANDALONEFINANCIAL STATEMENTS

8. The accompanying standalone financial statements have been approved by the Company'sBoard of Directors. The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including the IndAS specified under section 133 of the Act. This responsibility also includes maintenanceof adequate accounting records in accordance with the provisions of the Act forsafeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; 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 financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.

9. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

10. Those Board of Directors is also responsible for overseeing the Company's financialreporting process.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

11. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.

12. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of 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 with reference to financial statements in place andthe 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern;

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation;

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

14. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.

15. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror 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.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

16. As required by section 197(16) of the Act based on our audit we report that theCompany has paid and provided for remuneration to its directors during the year inaccordance with the provisions of and limits laid down under section 197 read withSchedule V to the Act.

17. As required by the Companies (Auditor's Report) Order 2016 (‘the Order')issued by the Central Government of India in terms of section 143(11) of the Act we givein the Annexure I a statement on the matters specified in paragraphs 3 and 4 of the Order.

18. Further to our comments in Annexure I as required by section

143(3) of the Act based on our audit we report to the extent applicable that:

a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit of theaccompanying standalone financial statements;

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 standalone financial statements dealt with by this report are in agreement withthe books of account;

d) in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under section 133 of the Act;

e) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2020 from being appointed as a director in terms of section 164(2) of the Act;

f) we have also audited the internal financial controls with reference to financialstatements of the Company as on 31 March 2020 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 19 May 2020 as per Annexure II expressed unmodified opinion; and

g) 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 as detailed in note C16 to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position as at 31 March 2020;

ii. the Company has made provision as required under the applicable law or Ind AS formaterial foreseeable losses if any on long-term contracts including derivativecontracts;

iii. t here has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company other than Rs 4.30 million (31March 2019: Rs 3.74 million) pertaining to amount of dividend which has not beentransferred as per the orders/ instructions under the Special Court (Trial of OffencesRelating to Transactions in Securities) Act 1992; and

iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
David Jones
Partner
Membership No.: 98113
UDIN: 20098113AAAAAF9181
Place: Gurgaon
Date: 19 May 2020

ANNEXUREI

Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:

(i) (a) The Company has maintained proper records showing full

particulars including quantitative details and situation of property plant andequipment.

(b) The Company has a regular program of physical verification of its property plantand equipment under which property plant and equipment are verified in a phased mannerover a period of three years which in our opinion is reasonable having regard to thesize of the Company and the nature of its assets. In accordance with this program certainproperty plant and equipments were verified during the year and no material discrepancieswere noticed on such verification.

(c) The title deeds of all the immovable properties are held in the name of theCompany except for certain lands included under the head ‘Capital work in progress'{admeasuring 8836150 square feet and carrying a cost of Rs 248 million} the title deedsto which according to the information and explanation given to us are yet to betransferred in the name of the Company. Immovable properties in the nature of land whosetitle deeds have been pledged as security for loans are held in the name of the Companywhich is verified from confirmations directly received by us from lenders. In respect ofimmovable properties in the nature of land and building that have been taken on lease anddisclosed under the head property plant and equipment in the standalone financialstatements the lease agreements are in the name of the Company where the Company is thelessee as per the agreement.

(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year and no material discrepancies between physicalinventory and book records were noticed on physical verification.

(iii) The Company has not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships (LLPs) or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly the provisions of clauses 3(iii) (a) 3(iii)(b)and 3(iii)(c) of the Order are not applicable.

(iv) In our opinion the Company has complied with the provisions of Sections 185 and186 of the Act in respect of investments and guarantees. There are no loans and securitygiven by the Company.

(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of cost records undersubsection (1) of Section 148 of the Act in respect of Company's products and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.

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

statutory dues including provident fund employees' state insurance income-taxsales-tax service tax duty of customs duty of excise value added tax cess and othermaterial statutory dues as applicable to the appropriate authorities. Further noundisputed amounts payable in respect thereof were outstanding at the year- end for aperiod of more than six months from the date they become payable.

(b) The dues outstanding in respect of income-tax sales-tax service-tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows

Statement of Disputed Dues

Name of the statute Nature of dues Amount (' million) Amount paid under protest (Rs million) Period to which the amount relates Forum where dispute is pending
Sales Tax Act applicable to various states Sales tax 566.70 149.40 1992-93 to 2017-18 Various appellate authorities/ Revenue board/ High Court
Central Excise Act 1944 Excise duty and additional excise duty 567.92 11.48 2002-03 to 2018-19 Various appellate authorities/ Supreme Court
Finance Act 1994 Service tax 528.59 33.80 2004-05 to 2015-16 Various appellate authorities
Income-tax Act 1961 Income tax 1748.36 110.71 1988-89 to 2013-14 Various appellate authorities/ High Court

(viii) The Company has not defaulted in repayment of loans or borrowings to anyfinancial institution or a bank or any dues to debenture-holders during the year. TheCompany has no loans or borrowings payable to government.

(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). In our opinion the term loans were applied for thepurposes for which the loans were obtained though idle/surplus funds which were notrequired for immediate utilisation have been invested in liquid investments payable ondemand.

(x) No fraud by the Company or on the company by its officers or employees has beennoticed or reported during the period covered by our audit.

(xi) Managerial remuneration has been paid and provided for by the Company inaccordance with the requisite approvals mandated by the provisions of Section 197 of theAct read with Schedule V to the Act.

(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.

(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable Ind AS.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.

(xv) In our opinion the Company has not entered into any noncash transactions with thedirectors or persons connected with them covered under Section 192 of the Act.

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

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
David Jones
Partner
Membership No.: 98113
UDIN: 20098113AAAAAF9181
Place: Gurgaon
Date: 19 May 2020

ANNEXUREII

Independent Auditor's Report on the internal financial controls with reference to thestandalone financial statements under Clause (i) of Sub-section 3 of Section 143 of theCompanies Act 2013 (‘the Act')

1. In conjunction with our audit of the standalone financial statements of Apollo TyresLimited (‘the Company') as at and for the year ended 31 March 2020 we have auditedthe internal financial controls with reference to financial statements of the Company asat that date.

RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR INTERNAL FINANCIALCONTROLS

2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (‘the Guidance Note') issued by the Institute of Chartered Accountants ofIndia (‘ICAI'). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of the Company's business including adherenceto the Company'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 Act.

AUDITOR'S RESPONSIBILITY FOR THE AUDIT OF THE INTERNAL FINANCIAL CONTROLS WITHREFERENCE TO FINANCIAL STATEMENTS

3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Standards on Auditing issued by the ICAI prescribed under Section143(10) of the Act to the extent applicable to an audit of internal financial controlswith reference to financial statements and the Guidance Note issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to financial statements were established and maintainedand if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements includes obtaining an understanding of such internal financialcontrols assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.

5. 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 withreference to financial statements.

MEANING OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS

6. A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include 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 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 the financialstatements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIALSTATEMENTS

7. Because of the inherent limitations of internal financial controls with reference tofinancial statements 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 withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

OPINION

8. In our opinion the Company has in all material respects adequate internalfinancial controls with reference to financial statements and such controls were operatingeffectively as at 31 March 2020 based on internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note issued by the ICAI.

For Walker Chandiok & Co LLP

Chartered Accountants

Firm's Registration No.: 001076N/N500013

David Jones
Partner
Membership No.: 98113
UDIN: 20098113AAAAAF9181
Place: Gurgaon
Date: 19 May 2020

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