To the Members of Bharat Dynamics Limited
1. Report on the Standalone Financial Statements
We have audited the accompanying standalone Ind AS financial statements of BharatDynamics Limited (the Company') which comprise the Balance Sheet as at March 312019 and the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Cash Flow Statement for the year then ended andother explanatory information and a summary of the significant accounting policies (hereinafter referred to as "Standalone Ind AS financial statements").
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 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in Indiaincluding Ind AS of the state of affairs of the Company as at 31 March 2019 and profit(including other comprehensive income) changes in equity and its cash flows for the yearended on that date.
3. Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder Section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We arc independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.
4. Key Audit Matters
Key audit matters (KAM') are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.
|The key audit matters ||How the matter was addressed in our audit |
|1. Ind As 115 || |
|As described in Note 37(21) to the standalone financial statements the Company has adopted Ind AS 115 Revenue from Contracts with Customers (Ind AS 115') which is the new revenue accounting standard. The application and transition to this accounting standard is complex and is an area of focus in the audit. ||We assessed the company's process to identify the impact of adoption of the new accounting standard which includes |
|The revenue standard establishes a comprehensive framework for determining whether how much and when revenue is recognized. This involves certain key judgments relating to identification of distinct performance obligations determination of transaction price of identified performance obligation the appropriateness of the basis used to measure revenue recognized over a period. Additionally new revenue accounting standard contains disclosures which involve collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. || Evaluated the design and implementation of the processes and internal controls relating to implementation of the new revenue accounting standard; |
| || Evaluated the detailed analysis performed by management on revenue streams by selecting samples for the existing contracts with customers and considered revenue recognition policy in the current period in respect of those revenue streams |
| || Evaluated the cumulative effect adjustments as at 1 April 2018 for compliance with the new revenue standard; and |
|The Company adopted Ind AS 115 and applied the available exemption provided therein to not restate the comparative periods || Evaluated the appropriateness of the disclosures provided under the new revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures. |
|2. Onerous Contracts || |
|Accuracy of revenue and onerous obligations in respect of fixed-price contracts involves critical estimates ||Our audit approach was a combination of test of internal controls and substantive procedures which included the following: |
|Estimated effort is a critical estimate to determine revenues and liability for onerous obligations. This estimate has a high inherent uncertainty as it requires consideration of progress of the contract efforts incurred till date efforts required to complete the remaining contract performance obligations. || Evaluated the design of internal controls relating to recording of efforts incurred and estimation of efforts required to complete the performance obligations. |
|Refer Accounting policy No. 16.5 and Note no. 27 to the Standalone Financial Statements. || Tested the access and application controls pertaining to time recording allocation of planned and actual expenditure. |
| || Selected a sample of contracts and tested the operating effectiveness of the internal controls relating to efforts incurred and estimated through inspection of evidence of performance of these controls. |
| || Selected a sample of contracts and performed a retrospective review of efforts incurred with estimated efforts to identify significant variations and verify whether those variations have been considered in estimating the remaining efforts to complete the contract. |
| || Performed analytical procedures and test of details for reasonableness of incurred and estimated efforts. |
| ||Conclusion: Our procedures did not identify any material exceptions. |
5. Emphasis of Mailers:
We draw die attention to:
Note number 29 of the standalone Ind AS financial statements which accounting ofcertain sales based on acceptance of quality by the Customer and prices by therepresentative of the customer awaiting the amendments to the contract.
Our opinion is not modified in respect of the above matter.
6. Information other than the Standalone Financial Statements and Auditor's reportthere on
The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the standalone financial statements and our auditors'report thereon.
Our opinion on the standalone financial statements docs 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 the work we have performed we conclude that there is a materialmisstatement of this other information we arc required to report that fact. Based on theinformation we have received till date on the other information that may contain in theAnnual Report of the Company we have nothing to report in this regard.
7. 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 Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income changes inequity and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) prescribedunder Section 133 of the Act read with relevant rules issued thereunder.
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; the selection andapplication of appropriate accounting policies; making judgments and the estimates thatare reasonable 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 Standalone Ind AS financial statements that give a true and fair view and arc freefrom material misstatement whether due to fraud or error.
In preparing the standalone financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so. Board of Directors is alsoresponsible for overseeing the Company's financial reporting process.
8. Auditors' Responsibility for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole arc free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and arc considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
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 standalone financial statements inplace and 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 in preparation of Standalone Financial Statements and based on the auditevidence obtained whether a material uncertainty exists related to events or conditionsthat may cast significant doubt on the Company's ability to continue as a going concern.If we conclude that a material uncertainty exists we are required to draw attention inour auditor's report to the related disclosures in the standalone financial statements orif such disclosures are inadequate to modify our opinion. Our conclusions are based onthe audit evidence obtained up to the date of our auditors' report. However future eventsor conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors (i) in planning the scope of our auditwork and in evaluating the results of our work: and (ii)to evaluate the effect of anyidentified misstatements in the financial statements.
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.
Wc 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 wc determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditors' report unless law or regulation precludes public disclosure about thematter or 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.
9. Report on Other Legal and Regulatory Requirements
(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 Anncxurc A a statement on the matters specified in the Paragraph3 and 4 of the Order.
(2) As required under 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 purpose of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
(c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Changes in Equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of account.
(d) In our opinion the aforesaid Standalone Ind AS financial statements comply withthe Indian Accounting Standards prescribed under Section 133 of the Act and the Rules madethereunder.
(e) On the basis of written representations received from the directors as on March312019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct
(f) With respect to adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in Annexure B;
(g) With respect to Directions issued by the Comptroller and Auditor General of Indiaunder Section 143 (5) we give our report in Annexure C: and
(h) With respect to other matters to be included in the Auditors' Report in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to thebest 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 Ind AS financial statements vide Note No. 37(7) of Notes to the Ind ASFinancial Statements
(ii) The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.
(iii) No amounts arc required to be transferred to the Investor Education andProtection Fund by the Company.
ANNEXURE-A TO THE INDEPENDENT AUDITORS' REPORT
The Annexure referred to in Paragraph 9 (1) of Independent Auditors' Report to theMembers of Bharat Dynamics Limited On the standalone Ind AS financial statements for theyear ended on March 31 2019
1. (a) Subject to sub-clause (c) herein below the Company has maintained proper recordsshowing full particulars including quantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assets bywhich fixed assets are verified in phased manner over a period of five years. In ouropinion this periodicity of physical verification is reasonable having regard to the sizeof the Company and nature of its business. Pursuant to the program certain fixed assetswere physically verified by the Management during the year. In our opinion and accordingto the information and explanations given to us no material discrepancies were noticed onsuch verification.
(c) According to the information and explanations given to us and on the basis of ourexamination of records of the Company the title deeds of immovable properties are held inthe name of the Company except the following properties for which the title is yet to bereceived by the Company.
|Nature of Asset ||Amount (Rs.In Lakh) ||Reasons |
|Freehold Land at Kanchanbagh (including Investment Property valued at 0.97 Lakh) ||29.39 ||Land allotted free of cost by the State Government. No Title Deed is issued. Value is fair value as per Ind AS 16 |
|Freehold Land at IbrahimPatnam ||6316.90 ||Land is acquired through TSIIC. As per their rules Land will be registered only after setting up of the Factory. |
|Freehold Land at Visakhapatnam ||376.13 ||APIIC is yet to execute the title deeds. |
|Lease hold land at Visakhapatnam || ||Lease Deed is not executed by the Lessor. |
2. The Inventory of finished goods raw materials stores spare parts except those intransit and with third parties have been physically verified by the management during theyear. We consider that the frequency of the verification is reasonable having regard tothe nature of business and size of the Company discrepancies noticed on physicalverification arc appropriately dealt with in the accounts.
3. According to the information and explanations given to us the Company has not givenunsecured loans to companies/firms/partics covered in the register maintained undersection 189 of the Companies Act 2013 hence other matters relating to the loans andadvances to parties listed under Section 189 are not applicable.
4. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Companies Act2013 in respect of grant of loans making investments and providing guarantees asapplicable.
5. According to the information and explanations given to us the Company has notaccepted any deposits during the year and hence compliance with the provisions of Sections73 to 76 of the Act and the Companies (Acceptance of Deposit) Rules 2014 as amended withregard to acceptance of deposits are not applicable to the Company
6. According to the information and explanations given to us the Company is requiredto maintain cost records under Section 148 (1) of the Companies Act 2013. We have broadlyreviewed these records and are of the opinion that prima facie the prescribed accountsand records are made and maintained. We have not however made a detailed examination ofthese records with a view to determine whether they arc accurate and complete.
7. According to the information and explanations given to us in respect of statutorydues:
(a) The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employees State Insurance Income-tax Goods and Service taxSales Tax Service Tax Value Added Tax Customs Duty Excise Duty Cess and othermaterial statutory dues applicable to it to the appropriate authorities. According to therecords of the Company and information and explanations given to us none of theseundisputed taxes are in arrears as at March 31 2019 for a period exceeding six month fromthe date they become payable.
(b) According to the records of the Company and information and explanations given tous the following are the particulars of disputed amounts payable in respect of CentralSales Tax and Service Tax:
(Rs. In lakh)
|Name of the Statute ||Nature of Dues ||Disputed Amount(Rs. in Lakh) ||Paid under Protcst/Adj ust-ed as required under law ||Balance ||Period to which the amount relates ||Forum where dispute is pending |
|Central Sales Tax Act ||Central Sales Tax ||284.36 ||71.09 ||213.27 ||2007-08 ||TS VAT AT |
|Central Sales Tax Act ||Central Sales Tax ||5550.83 ||693.85 ||4856.98 ||2011-12 ||Writ pending with High Court at Hyderabad |
|Central Sales Tax Act ||Central Sales Tax ||5024.27 ||- ||5024.27 ||2012-13 ||Writ pending with High Court at Hyderabad |
|Central Sales Tax Act ||Central Sales Tax ||4266.81 ||- ||4266.81 ||2013-14 ||Writ pending with High Court at Hyderabad |
|Central Sales Tax Act ||Central Sales Tax ||6468.12 ||- ||6468.12 ||2014-15 ||Writ pending with High Court at Hyderabad |
|Finance Act 1994 ||Service Tax ||2355.50 ||1177.75 ||1177.75 ||2012-13 to 2014- 15 ||CETSTAT Hyderabad |
|TOTAL || ||23949.89 ||1942.69 ||22007.20 || || |
8. According to the information and explanations given to us we are of the opinionthat the Company has not defaulted in the repayment of dues to financial institutionsbanks government and the Company has not issued any debentures.
9. The Company has not raised any money by way of initial public offer or furtherpublic offer or by way of term loans during the year hence other matter contained inCompanies (Auditor's Report) Order 2016 (CARO) is not applicable.
10. To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no fraud on the Company by its officers has beennoticed or reported during the year.
11. Provisions of Sec 197 of Companies Act 2013 is not applicable to the Company.
12. The Company is not NIDHI company hence matter relating to NIDH1 company in CARO isnot applicable to the Company
13. According to the information and explanations furnished to us and based on ourexamination of books and records we are of the opinion that all transactions with relatedparties are in compliance with sections 177 and 188 of the Companies Act 2013 and all thedetails have been disclosed in the financial statements as per applicable AccountingStandards.
14. The Company has not made any preferential offer of equity shares during the yearand accordingly other matters relating to preferential offer are not applicable.
15. In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transactions with its directors or personsconnected with them during the year and hence provisions of Section 192 of the CompaniesAct 2013 arc not applicable
16. The Company is not required to be registered under Section 45-1A of the ReserveBank of India Act.
ANNEXURE-B TO THE INDEPENDENT AUDITORS' REPORT
The Annexure referred to in Paragraph 9 (2) (f) of Independent Auditors' Report to theMembers of Bharat Dynamics Limited On the standalone Ind AS financial statements for theyear ended on March 31 2019
Report on the Internal Financial Controls over Financial Reporting under clause (i) ofsub section 3 of Section 143 of the Companies Act 2013
1. We have audited the internal financial controls over financial reporting of BharatDynamics Limited (the Company) as at March 31 2019 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date.
2. Management's Responsibility:
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal financial control over financial reportingcriteria established by the Company considering the essential components of control statedin the "Guidance Note on Audit of Internal Financial Controls Over FinancialReporting" issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets and the timely preparation of reliable financial information as requiredunder the Companies Act 2013.
3. 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 FinancialReporting" (Guidance Note) issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing prescribed under Section 143 (10) of the Companies Act2013 to the extent applicable to an audit of Internal Financial Controls. Those Standardsand the Guidance Note require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls 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 material weakness exists and testing and evaluating the designand operating effectiveness of internal financial control based on assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatements 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 overfinancial reporting.
4. Meaning of Internal Financial Controls Over Financial Reporting:
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditure of the company are being made only in accordance with authorisations ofmanagement and directions of the company.; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have material effect on the financial statements. .
5. 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 future periods are subject to the risk that the internal financial controlsover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlsover financial reporting and such internal financial controls over financial reportingwere operating effectively as at March 31 2019 based on "the internal control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal controls stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia".
ANNEXURE-C TO THE INDEPENDENT AUDITORS' REPORT
The Annexure referred to in Paragraph 9 (2) (g) of Independent Auditors' Report to theMembers of Bharat Dynamics Limited On the standalone financial statements for the yearended on March 31 2019
Report on the directions under sub-section 5 of Section 143 of the Companies Act 2013
According to the information and explanations furnished to us and based on audit of theaccounts of the Company Bharat Dynamics Limited. We report hereunder on the directionsgiven by the Comptroller and Auditor General of India.
|Direction ||Report ||Impact |
|1. Whether the company has system in place to process all the accounting transactions through IT system? If yes the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications if any may be stated.. ||According to the information and explanations furnished to us and based on our examination of books of account we are of the opinion that the company has necessary system in place to process all the accounting transactions through IT system. There are no accounting transactions that are processed outside the IT system during the year. ||Nil |
|2. Whether there is any restructuring of an existing loan or cases of waiver /write off of debts /loans/interest etc. made by a lender to the company due to the company's inability to repay the loan? If yes the financial impact may be stated ||According to the information and explanations furnished to us and based on our examinations of books of account we are of the opinion that there arc no such cases of restructuring of an existing loan or cases of waiver/write off of debts /loans/interest etc. made by a lender to the company due to the company's inability to repay the loan during the year. ||Nil |
|3. Whether funds received/receivable for specific schemes from central/ state agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation. ||Based on the examination of the books and records of the Company we are of the opinion that the company has received funds for setting up of a solar power plant. These amounts were utilized for the purpose for which these are granted and properly are accounted. ||Nil |