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Bharat Forge Ltd.

BSE: 500493 Sector: Engineering
NSE: BHARATFORG ISIN Code: INE465A01025
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NSE 10:29 | 07 May 643.60 0.70
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643.75

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650.70

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OPEN 644.50
PREVIOUS CLOSE 643.00
VOLUME 44202
52-Week high 676.10
52-Week low 263.15
P/E 231.43
Mkt Cap.(Rs cr) 29,847
Buy Price 641.10
Buy Qty 249.00
Sell Price 641.75
Sell Qty 55.00
OPEN 644.50
CLOSE 643.00
VOLUME 44202
52-Week high 676.10
52-Week low 263.15
P/E 231.43
Mkt Cap.(Rs cr) 29,847
Buy Price 641.10
Buy Qty 249.00
Sell Price 641.75
Sell Qty 55.00

Bharat Forge Ltd. (BHARATFORG) - Auditors Report

Company auditors report

To the Members of Bharat Forge Limited

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statements of Bharat ForgeLimited ("the Company") which comprise the Balance sheet as at March 31 2020the Statement of Profit and Loss including the statement of Other Comprehensive Incomethe Cash Flow Statement and the Statement of Changes in Equity for the year then endedand notes to the standalone 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 standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards 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 Standalone Ind AS Financial Statements' section ofour 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 standalone Ind AS financial statements.

Emphasis of Matter

We draw attention to note 44 of the Standalone Ind AS financial Statement whichdescribes the management's evaluation of impact of uncertainties related to COVID-19 andits consequential effects on the carrying value of its assets as at March 31 2020 and theoperations of the Company.

Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 31 2020. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying standalone Ind AS financialstatements.

Key audit matters How our audit addressed the key audit matter
Completeness of revenue in relation to determination of point of time when revenue should be recognized [as described in Note 2.2(e) (Summary of significant accounting policies) and note 24 of notes forming part of the standalone Ind AS financial statements)
The Company has revenue from sale of products which includes finished goods and tooling income and sale of services in the form of job work charges. The Company manufactures highly specialized forged and machined finished goods as per specification provided by the customers and based on the schedules from the customers. Our audit procedures included the following:
We focused on our understanding of the Company's sales process including design and implementation of controls and tested the operating effectiveness of these controls.
The Company recognizes revenue from sale of finished goods at a point in time based on the terms of the contract with customers which varies for each customer. Determination of point in time includes assessment of timing of transfer of significant risk and rewards of ownership establishing the present right to receive payment for the products delivery specifications including inco terms timing of transfer of legal title of the asset and determination of the point of acceptance of goods by customer. Further the pricing of the products is dependent on metal indices and foreign exchange fluctuation making the price volatile including variable considerations. Due to judgments relating to determination of point in time in satisfaction of performance obligations with respect to sale of products this matter has been considered as key audit matter. We evaluated the Company's accounting policies pertaining to revenue recognition and assessed compliance with Ind AS 115 - Revenue from Contracts with Customers.
We obtained and read the terms of customer contracts on sample basis to assess various performance obligations in the contract the point in time of transfer of control and pricing terms.
We tested on a sample basis sales invoices for identification of point in time for transfer of control and terms of contract with customers.
We performed cut off testing for revenue at/near the reporting date including considerations due to closure of operations on account of COVID-19 and tested whether the revenue was recognized in the appropriate period by testing shipping records good inwards receipt of customers sales invoices etc for sample transactions and testing the management assessment involved in this process wherever applicable.
We assessed if the disclosure is in accordance with applicable accounting standards.
We also performed various analytical procedures to identify any unusual sales trends for further testing.
Key audit matters How our audit addressed the key audit matter
Significant estimate and judgement in Hedge accounting including valuations thereof (as described in Note 2.2(r) (Summary of significant accounting policies) and note 19(a) and 50 of notes forming part of the standalone Ind AS financial statements)
Our audit procedures included the following:
The Company enters into derivative financial instruments which are mainly plain vanilla forward contracts and range forward contracts to manage its exposure of foreign currency risk of highly probable forecasted transactions which arise during the normal course of its business. These contracts are measured at fair values leading to derivative financial liabilities of INR 733.39 million as at March 31 2020. The net movement of cashflow hedge reserve for the year is INR (1676.12) million net of taxes which is recorded in other comprehensive income. The gain / loss on maturity of such derivative instruments is recorded in the statement of profit and loss along with the relevant hedged item. We obtained understanding of the Company's overall hedge accounting strategy forward contract valuation and hedge accounting process from initiation to settlement of derivative financial instruments including assessment of the design and implementation of controls and tested the operating effectiveness of these controls.
We assessed Company's accounting policy for hedge accounting in accordance with Ind AS.
Due to the changes in risks and estimates during the lifecycle of the customer contracts in order to apply hedge accounting management is required to demonstrate that the underlying contract is considered to be a highly probable transaction that the hedges are highly effective and maintain hedge documentation. A degree of subjectivity is also required to determine when hedge accounting is to be considered as ineffective. Fair value movements of the forward contracts are driven by movements in financial markets. We tested the existence of hedging contracts by tracing to the confirmations obtained from respective banks.
We tested management's hedge documentation and contracts on a sample basis.
We tested on a sample basis the fair values of derivative financial instruments recorded by the Company with the independent balance confirmations obtained from banks.
Due to outbreak of COVID 19 there are uncertainties involved in estimating the highly probable forecasted sales estimating future foreign exchange rates and accordingly have an impact on hedge effectiveness and impact to statement of profit and loss account. These transactions may have a significant financial effect and have extensive accounting and reporting obligations and accordingly this is considered as a key audit matter. We involved our valuation specialists to assist in reperforming the year-end fair valuations of derivative financial instruments on a sample basis and compared these valuations with those recorded by the Company including assessing the valuation methodology and key assumptions used therein.
We involved our valuation specialists to assist in evaluating the hedge effectiveness basis revised management estimates due to outbreak of COVID 19
We assessed if the disclosure of hedge transactions is in accordance with applicable accounting standards.
Key audit matters How our audit addressed the key audit matter
Significant judgement relating to impairment assessment of investments in subsidiaries associates and joint ventures (as described in Note 2.2(n) (Summary of significant accounting policies) and note 6 of notes forming part of the standalone Ind AS financial statements)
Our audit procedures included the following:
The Company has investments in subsidiaries associates and joint ventures as at March 31 2020. Management assesses at least annually the existence of impairment indicators of each shareholdings in such subsidiaries associates and joint ventures. We obtained understanding of the Company's policy on assessment of impairment of investment in subsidiaries associates and joint ventures and assumptions used by the management including design and implementation of controls. We have tested the operating effectiveness of these controls.
The processes and methodologies for assessing and determining the recoverable amount of each investments are based on complex assumptions that by their nature imply the use of the management's judgment in particular with reference to identification of impairment indicators forecast of future cash flows relating to the period covered by the Company's strategic business plan normalized cash flows assumed as a basis for terminal value as well as the long-term growth rates and discount rates applied to such forecasted cash flows. We assessed the methodology used by management to estimate the recoverable value of each investment and consistency with accounting standards.
We compared the carrying values of the Company's investment in these subsidiaries associates and joint ventures with their respective net worth as per audited financial statements.
We have seen valuation reports provided by the management experts on investments where investment amount is material and indicators of impairment exists. We assessed the objectivity and independence of Company's specialists involved in the process.
Further considering the outbreak of COVID 19 and uncertainties around forecast of future cash flows management involved specialists in understanding and evaluating net cash flows to evaluate impairment for specific cases where there are impairment indicators. Considering the judgment required for estimating the cash flows and the complexity of the assumptions used this is considered as a key audit matter. We involved our valuation specialists to evaluate methodology assumptions and estimates used in the calculations. We discussed changes in key drivers as compared to previous year / actual performance with management to evaluate whether the inputs and assumptions used in the cash flow forecasts were suitable. We also evaluated the assumptions around the key drivers of the cash flow forecasts including estimated revenue discount rates expected growth rates and terminal growth rates used considering the outbreak of COVID 19.
We also assessed the changes in recoverable value by performing sensitivity testing of key assumptions used.
We analyzed and examined the business plans approved along with assumptions and estimates used by management including the effect of COVID-19 on the projections.
We evaluated the accounting and disclosure of impairment of investment in the financial statements of the Company.
We tested the arithmetical accuracy of the models.

Other Information

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 standalone Ind AS financial statements and our auditor's report thereon.

Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.

Responsibilities of Management and Those Charged with Governance for the Standalone IndAS 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 standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income 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 theCompanies (Indian Accounting Standards] Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Those charged with governance are also responsible for overseeing the Company'sfinancial reporting process.

Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial statements as a whole are 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 are 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 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:

• Identify and assess the risks of material misstatement of the standalone Ind ASfinancial 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 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 standalone IndAS financial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.

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 standalone Ind AS financialstatements for the financial year ended March 31 2020 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

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 "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 the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;

(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;

(e) The matter described in Emphasis of Matter paragraph above in our opinion may nothave an adverse effect on the functioning of the Company;

(f) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct;

(g) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these standalone Ind AS financial statementsand the operating effectiveness of such controls refer to our separate Report in"Annexure 2" to this report;

(h) In our opinion the managerial remuneration for the year ended March 31 2020 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;

(i) 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 standalone Ind AS financial statements - Refer Note 38 to the standaloneInd AS financial 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 - Refer Note 20 to the standalone Ind AS financial statements;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003

per Tridevlal Khandelwal

Partner

Membership Number: 501160

UDIN: 20501160AAAABU9045

Place of Signature: Pune

Date: June 29 2020

Annexure 1 referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirements" of our report of even date.

Re: Bharat Forge Limited ('the Company')

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

(b) All fixed assets have not been physically verified by the management during theyear but there is a regular programme of verifying them once in three years 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 except two immovable properties aggregating gross block of INR 0.01million and net block of INR 0.01 million as at March 31 2020 for which title deeds werenot available with the Company and hence we are unable to comment on the same.

(ii) Pursuant to outbreak of Coronavirus (COVID-19) and resultant nationwide lock-downin India (since March 24 2020) the management has conducted physical verification ofinventory subsequent to the year-end (post partial relief from lock-down) and hasperformed roll back procedures from the stock count dates to the year-end date. Nomaterial discrepancies were noticed on such physical verification. Inventories lying withthird parties have been confirmed by them as at March 31 2020 and no materialdiscrepancies were noticed in respect of such confirmations.

(iii) (a) The Company has granted loans to four companies covered in the registermaintained under section 189 of the Act. In our opinion and according to the informationand explanations given to us the terms and conditions of the loans are not prejudicial tothe Company's interest.

(b) In respect of loans granted to companies covered in the register maintained undersection 189 of the Act repayment of the principal amount is as stipulated and payment ofinterest has been regular except for loans granted by the Company to two of itssubsidiaries wherein loans are repayable on demand. The Company has not demanded therepayment of such loans and payment of interest has not been regular.

(c) The Company has a sum of INR 10.93 million which is overdue for more than ninetydays from a Company covered in the register maintained under section 189 of the Act and inour opinion and according to the information and explanations given by the management theCompany has taken reasonable steps for recovery of this overdue interest.

Details of overdue cases mentioned below:

INR in million
Name of Company Interest Overdue
BF Elbit Advanced Systems Private Limited* 10.68
Bharat Forge Global Holdings GmbH# 0.25

* Amount has been converted to loan as on March 31 2020 as per understanding withsubsidiary.

# Amount recovered subsequently.

(iv) In our opinion and according to the information and explanations given to usprovisions of section 185 and 186 of the Act in respect of loans to directors includingentities in which they are interested and in respect of loans and advances giveninvestments made and guarantees and securities given have been complied with by theCompany.

(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. Howeveraccording to the information and explanations given to us in respect of deposits acceptedearlier under relevant provisions of the erstwhile Companies Act 1956 and the rulesframed thereunder there are certain unclaimed deposit amounting to INR 0.04 millionincluding interest thereon which are subject to litigation.

(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 Act related to the manufacture of forged products and otherproducts and are of the opinion that prima facie the specified accounts and records havebeen made and maintained. We have not however made a detailed examination of the same.

(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax duty of custom duty of excise goods and service tax cess andother material statutory dues have generally been regularly deposited with the appropriateauthorities though there has been slight delay in few cases.

(b) According to the information and explanations given to us undisputed dues inrespect of provident fund employees' state insurance income-tax duty of custom duty ofexcise goods and service tax cess and other statutory dues which were outstanding atthe year end for a period of more than six months from the date they became payable areas follows:

Statement of arrears of statutory dues outstanding for more than six months

Name of the statute Nature of the dues Amount (INR in million) Period to which the amount relates Due date Date of payment Remarks if any
Maharashtra municipal Corporation Act 1949 and Bombay Provincial Municipal Corporation (Local Body Tax) Rules 2010 (LBT rules) Local Body Tax (LBT) 39.80 PY 2015- 16 2016- 17 & 2017-18 Various dates Not paid

(c) According to the records of the Company the dues outstanding of income-taxsales-tax service tax duty of custom duty of excise value added tax goods and servicetax and cess on account of any dispute are as follows:

Name of the statute Nature of the dues Amount (INR in million)# Period to which the amount relates Forum where the dispute is pending
Income Tax Act 1961 Non deduction of withholding taxes u/s 195 (net of INR 54.92 million paid under protest) AY 2014-15 ITAT
Property tax# Demand received for various cases (net of INR 162.37 million paid under protest) 180.58 AY 2005-06 to 2019-2020 High Court
Central Excise Act 1944 Demand received for various cases (net of INR 5.50 million paid under protest) 38.31 AY 2003-04 to 2013-14 CESTAT
Customs Act 1962 Demand received for wrong availment of duty drawback [net of INR 157.40 million paid under protest) AY 2012-13 and 2013-14 Principal Commissioner (RA) and Ex-Officio Additional Secretary to the Government of India

# Excludes interest and penalty

(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowing to afinancial institution bank or government or dues to debenture holders. The Company didnot have any outstanding dues in respect of a financial institution and debenture holders.

(ix) In 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 does not have any unutilised money out ofinitial public offer / further public offer.

(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 material fraud by the Company or no materialfraud on the Company by the officers and employees of the Company has been noticed orreported 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 Act.

(xii) In 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 of theAct where applicable and the details have been disclosed in the notes to the financialstatements as required by the 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 year andhence reporting requirements under clause 3(xiv) are not applicable to the company andhence not commented upon.

(xv) According to the information and explanations given by the management the Companyhas not entered into any noncash transactions with directors or persons connected with himas referred to in section 192 of the Act.

(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 andhence not commented upon.

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003

per Tridevlal Khandelwal

Partner

Membership Number: 501160

UDIN: 20501160AAAABU9045

Place of Signature: Pune

Date: June 29 2020

Annexure 2 referred to in paragraph 2(g) under the heading "Report on Other Legaland Regulatory Requirements" of our report of even date.

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 over financial reporting of BharatForge Limited ("the Company") as of March 31 2020 in conjunction with our auditof the standalone Ind AS financial statements of the Company for the year .ended on thatdate

Management's Responsibility for Internal Financial Controls

The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements based on our audit. We conducted our audit in accordance with the Guidance Noteon Audit of Internal Financial Controls Over Financial Reporting (the "GuidanceNote") and the Standards on Auditing as specified under section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements was established and maintained and if such controls operated effectively in allmaterial respects

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to thesestandalone Ind AS financial statements and their operating effectiveness. Our audit ofinternal financial controls over financial reporting included obtaining an understandingof internal financial controls over financial reporting with reference to these standaloneInd AS financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the standalone Ind AS financialstatements 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 internal financial controls over financialreporting with reference to these standalone Ind AS financial statements.

Meaning of Internal Financial Controls over Financial Reporting with Reference to thesestandalone Ind AS Financial Statements

A company's internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation ofstandalone Ind AS financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting with reference to these standalone Ind AS financial statements includes thosepolicies and procedures that (1) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe company; (2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of standalone Ind AS financial statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of thecompany are being made only in accordance with authorisations of management and directorsof the company; and (3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assets thatcould have a material effect on the standalone Ind AS financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting withreference to these Standalone Ind AS Financial Statements

Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone Ind AS financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these standalone Ind AS financial statements to future periods are subject to the riskthat the internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements and such internal financial controls over financial reporting with reference tothese standalone Ind AS financial statements were operating effectively as at March 312020 based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003

per Tridevlal Khandelwal

Partner

Membership Number: 501160

UDIN: 20501160AAAABU9045

Place of Signature: Pune

Date: June 29 2020

.