To the Members of Automotive Axles Limited
Report on the Audit of the Ind AS Financial Statements
We have audited the accompanying Ind AS financial statements of Automotive AxlesLimited ("the Company") which comprise the Balance sheet as at March 312021the Statement of Profit and Loss including the statement of Other ComprehensiveIncome/Loss the Cash Flow Statement and the Statement of Changes in Equity for the yearthen ended and notes to the Ind AS financial statements including a summary ofsignificant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Companies Act 2013 as amended ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2021 its profitincluding other comprehensive income/loss its cash flows and the changes in equity forthe year ended on that date.
Basis for Opinion
We conducted our audit of the Ind AS financial statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Ind AS Financial Statements' section of our report.We are independent of the Company in accordance with the 'Code of Ethics' issued
by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Ind AS financial statements for the financial year endedMarch 31 2021. These matters were addressed in the context of our audit of the Ind ASfinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. For each matter below our description of how ouraudit addressed the matter is provided in that context.
We have determined the matter described below to be the key audit matter to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Ind AS financial statements section of ourreport including in relation to this matter. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the Ind AS financial statements. The results of our audit proceduresincluding the procedures performed to address the matter below provide the basis for ouraudit opinion on the accompanying Ind AS financial statements.
|Key audit matters ||How our audit addressed the key audit matter |
|(a) Valuation of Inventories (as described in Note 7 of the Ind AS financial statements) || |
|We have identified valuation of inventories as a key audit matter due to the critical judgement exercised by the Company's management in identifying the obsolete and slow-moving/ non-moving items of inventories and assessing the amount of allowance for inventories. ||Our audit procedures in relation to identification of slow moving/ non-moving and obsolete inventory included the following: |
|The gross balance of inventories as at March 312021 is ' 2092.71 million against which provision amounting to ' 86.97 million was made. Inventories comprise raw material work in progress finished products and stores and spares. || Understood Company's internal control environment over receipts consumption and dispatch of inventories and controls over valuation of inventories and determination of provision required for slow and non-moving inventories; |
|The determination of provision in respect of inventories requires management to exercise judgment in identifying the obsolete and slow-moving/non-moving inventories and make estimates of the appropriate level of provision required. || We understood and evaluated the basis of identification of the obsolete and slow-moving/non-moving inventories; |
| || We tested the accuracy of the report on aged inventories on a sample basis; |
| || We evaluated the historical accuracy of allowance for inventories by comparing the actual loss on account of write off of obsolete and slow-moving/non-moving inventories to the historical allowance recognized; |
| || We have tested the utilisation pattern of the aged inventory on a sample basis; and |
| || We assessed the realizable value on a sample basis by comparing the inventory value with the subsequent sales prices of the finished goods. |
We h lined that there are no other key audit matters
to communicate in our report.
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe Ind AS financial statements and our auditor's report thereon.
Our opinion on the Ind AS financial statements does not cover the other information andwe do not express any form of assurance conclusion thereon.
In connection with our audit of the Ind AS financial statements our responsibility isto read the other information and in doing so consider whether such other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Responsibilities of Management for the Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these Ind AS financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income/ loss cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with sthe Companies (Indian Accounting Standards) Rules 2015 as amended. Thisresponsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe Ind AS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the Ind AS financial statements management is responsible for assessingthe Company'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.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the Ind AS 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 with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
I dentify and assess the risks of material misstatement of the Ind AS 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 Companyhas adequate internal financial controls with reference to financial statements in placeand the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe Ind AS financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the Ind AS financialstatements including the disclosures and whether the Ind AS financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the Ind AS financial statements forthe financial year ended March 31 2021 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory
1. 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 ofthe Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.
2. 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 the Statement ofOther Comprehensive Income/Loss the Cash Flow Statement and Statement of Changes inEquity dealt with by this Report are in agreement with the books of account;
(d) I n our opinion the aforesaid Ind AS financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312021 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 with reference tothese Ind AS financial statements and the operating effectiveness of such controls referto our separate Report in "Annexure 2" to this report;
(g) I n our opinion the managerial remuneration for the year ended March 31 2021 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note 36 (b) to the Ind 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
Annexure 1 referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of our report of even date
Re: Automotive Axles Limited ('the Company')
(i) (a) The Company has maintained proper records
showing full particulars including quantitative details and situation of propertyplant and equipment.
(b) All property plant and equipment have not been physically verified by themanagement during the year but there is a regular programme of verification which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were noticed on such verification.
(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename of the company.
(ii) The management has conducted physical verification of inventory at the end of theyear covering certain class of inventories. Discrepancies noted on physical verificationof inventories have been properly dealt with in the books of account. In our opinion thefrequency and the coverage of the inventory verification needs to be further strengthened.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under Section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of theOrder are not applicable to the Company.
(iv) I n our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities given in respect of whichprovisions of Section 185 of the Companies Act 2013 apply. The Company has given loansand have made investments which are in compliance with the provisions of Section 186 ofthe Companies Act 2013.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).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 underSection 148(1) of the Companies Act 2013 related to the manufacture of axles and brakesand are of the opinion that prima facie the specified accounts and records have been madeand maintained. We have not however made a detailed examination of the same.
(vii) (a) The Company is generally regular in depositing with
appropriate authorities undisputed statutory dues including provident fund employees'state insurance income-tax duty of custom goods and services tax cess and otherstatutory dues applicable to it. Also Refer Note 38(A) to the financial statements withregards to provident fund dues.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax duty ofcustom goods and services tax cess and other statutory dues were outstanding at theyear end for a period of more than six months from the date they became payable. AlsoRefer Note 38(A) to the financial statements with regards to provident fund dues.
(c) According to the records of the Company and the information and explanations givento us by the Management there are no disputed dues on account of sales tax service taxduty of customs duty of excise value added tax and cess. The disputed dues on account ofincome-tax are as follows:
|Name of the statute ||Nature of dues ||Amount (?) ||Payment under protest (?) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income tax (disallowance of deduction u/s 80JJAA) ||207409 || ||AY 2018-19 ||Commissioner of Income Tax (Appeals) |
(viii) I n our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowings to bank ordues to a financial institution. The Company did not have any outstanding dues todebenture holders or government during the year.
(ix) I n our opinion and according to the information and explanations given by themanagement the Company has utilized the monies raised by way of term loans for thepurposes for which they were raised. The Company has not raised any money by way ofinitial public offer or further public offer (including debt instruments).
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the company or no fraud on the companyby the officers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the CompaniesAct 2013.
(xii) I n our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with Section 177 and 188 ofCompanies Act 2013 where applicable and the
details have been disclosed in the notes to the financial statements as required bythe applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe company.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in Section 192 of Companies Act 2013.
(xvi) According to the information and explanations given to us the provisions ofSection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
For S.R. Batliboi & Associates LLP
ICAI Firm Registration Number: 101049W/E300004
per Rajeev Kumar
Membership Number: 213803 UDIN: 21213803AAAABN5065
Place of Signature: Bengaluru
Date: May 14 2021
Annexure 2 To the Independent Auditor's Report of even date on the Ind AS FinancialStatements of Automotive Axles Limited
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls with reference to Ind AS financialstatements of Automotive Axles Limited ("the Company") as of March 31 2021 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 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 ("ICAI"). 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 the 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 Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to these Ind AS financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (the "Guidance Note") and the Standards onAuditing as specified under section 143(10) of the Act to the extent applicable to anaudit of internal financial controls both issued by ICAI. 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 controlswith reference to these Ind AS financial statements 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 with reference to these Ind AS financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference toInd AS financial statements included obtaining an understanding of internal financialcontrols with reference to these Ind AS financial statements assessing the risk that amaterial 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 Ind AS financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to these Ind AS financial statements.
Meaning of Internal Financial Controls With Reference to these Ind AS FinancialStatements
A company's internal financial controls with reference to Ind AS financial statementsis a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of Ind AS financial statements for externalpurposes in accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to Ind AS financial statements includes those policiesand procedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of Ind AS financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton the Ind AS financial statements.
Inherent Limitations of Internal Financial Controls With Reference to Ind AS FinancialStatements
Because of the inherent limitations of internal financial controls with reference toInd AS financial 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 Ind AS financial statements to future periods are subject to the risk thatthe internal financial control with reference to Ind AS financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to Ind AS financial statements and such internal financialcontrols with reference to Ind AS financial statements were operating effectively as atMarch 31 2021 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note issued by the ICAI.
For S.R. Batliboi & Associates LLP
ICAI Firm Registration Number: 101049W/E300004
per Rajeev Kumar
Membership Number: 213803
Place of Signature: Bengaluru
Date: May 14 2021