To the Members of
Bharat Gears Limited
Report on the Audit of the Ind AS Financial Statements Opinion
We have audited the accompanying Ind AS financial statements of Bharat Gears Limited("the Company") which comprise the Balance sheet as at 31 March 2020 theStatement of Profit and Loss including the statement of Other Comprehensive Income theCash Flow Statement and the Statement of Changes in Equity for the year then ended andnotes to the Ind AS financial statements including a summary of significant accountingpolicies 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 31 March 2020 its loss includingother comprehensive loss its cash flows and the changes in equity for the yearended 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 bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the Ind AS financial statements.
Emphasis of Matter
We draw attention to Note 43 to the Ind AS Financial Statements which describes theuncertainties and the impact of continuing slowdown in the automotive industry andCOVID-19 pandemic on the Company's operations and financial performance as assessed by theManagement of the Company. The estimates as at the date of approval of these Ind ASFinancial Statements may differ based on the ongoing impact of the pandemic improvementin the economy and the automotive sector.
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 Ind AS financial statements for the financial year ended31 March 2020. 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 mattersdescribed below to be the key audit matters to be communicated in our report. We havefulfilled the responsibilities described in the Auditor's responsibilities for the auditof the Ind AS financial statements section of our report including in relation to thesematters. Accordingly our audit included the performance of procedures designed to respondto our assessment of the risks of material misstatement of the Ind AS financialstatements. The results of our audit procedures including the procedures performed toaddress the matters below provide the basis for our audit opinion on the accompanying IndAS financial statements.
|Key audit matter ||How our audit addressed the key audit matter |
|A. Assessment of recoverability of deferred tax asset || |
|(as described in note 2.17 and 32C to the Ind AS financial statements) || |
|As at 31 March 2020 the Company has recognized deferred tax asset (net) of Rs. 850.81 lakhs primarily on unabsorbed depreciation and other deductible temporary differences. ||Our audit procedures amongst others included the following: |
|The deferred tax asset is recognized to the extent it is reasonably certain that sufficient taxable profits will be available in the future against which unabsorbed depreciation and other deductible temporary differences can be utilized. This involves significant management judgment and estimation given that recognition is based on assumptions such as likely timing and level of future taxable profits which are affected by expected future market and economic conditions. ||- We obtained management's assessment of recognition of deferred tax asset and the assumptions made in determining the likelihood of recoverability of deferred tax asset through generation of sufficient future taxable profits; |
|Accordingly the same has been considered as a key audit matter. ||- We tested the computation of the amounts recognized as deferred tax asset; |
| ||- We evaluated management's assumptions by comparing them with the profit forecasts along with the Company's tax position the timing of forecast taxable profits. We considered our knowledge and experience of the application of relevant tax legislation to validate the recoverability assumptions; |
| ||- We assessed the disclosures made in the Ind AS financial statements. |
|B. Compensation claim filed with the Government Authorities as regards to compulsory acquisition of land || |
|(as described in note 14 and 42 of the Ind AS financial statements) ||Our audit procedures included the following: |
|A certain portion of Company's land at Mumbra is in the process of being acquired by Thane Municipal Corporation (TMC) and - Mumbai Metropolitan Region Development Authority (MMRDA) for the proposed widening of road. The Company is entitled to receive compensation in the form of Transferable Development ||Read the correspondences with the Government Authorities relating to land acquisition matter and compensation claims filed by the Company. |
|Rights (TDRs) against the transfer of abovementioned land and has filed compensation claim with respect to cost of shifting/re- locating/reconstruction of the facilities/structures/utilities set up on that land. The aforesaid compensation claims are yet to be finalized by the Government Authorities. Pending finalisation of the compensation claim the Company has not recognized the same in the Ind AS financial statements. ||-Enquired with management regarding any further developments during the year in this regard. |
|However the Company had written off the related assets/ utilities impacted by the aforesaid acquisition in the statement of profit and loss of previous year. ||-We assessed the disclosures made in the Ind AS financial statements. |
|Considering the uncertainty involved in the determination of the compensation amount and timing of such receipt the aforesaid matter has been considered as key audit matter in our audit of the Ind AS financial statements. || |
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 and Those Charged with Governance for the Ind ASFinancial 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 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 Ind AS financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud 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 Charged with Governance are also responsible for overseeing the Company'sfinancial reporting 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 infiuence 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:
Identify 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 to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct 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 reasonableness ofaccounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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 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 31 March 2020 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 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 specifiedin paragraphs 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 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
31 March 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2020 from being appointed as a director in terms of Section164(2) of the Act;
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these Ind AS financial statements and theoperating effectiveness of such controls refer to our separate Report in "Annexure2" to this report;
(g) In our opinion the managerial remuneration for the year ended 31 March 2020 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 Ind AS financial statements Refer Note 31.1(i) to the Ind ASfinancial statements; ii. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses; iii. There hasbeen no delay in transferring amounts required to be transferred to the InvestorEducation and Protection Fund by the Company.
Annexure 1 referred to in paragraph 1 to Report on Other Legal and RegulatoryRequirements of our report of even date
Re: Bharat Gears Limited (the Company')
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) Allfixedassetshavenotbeenphysicallyverified by the management during the year butthere is a regular programme of verification which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. No material discrepancieswere noticed on such verification.
(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deeds provided to us we reportthat the title deeds comprising all the immovable properties of land and buildings areheld in the name of the Company as at the balance sheet date. Immovable properties of landand buildings whose title deeds have been pledged as security for loans taken by theCompany are held in the name of the Company based on the confirmations directly receivedby us from lenders. In respect of immovable property of land that has been taken on leaseand building constructed thereon the lease agreement is in the name of the Company wherethe Company is the lessee in the agreement. However in case of freehold land at one ofthe locations the Company observed that the area and name mentioned in the records of theGovernment does not match with the Indenture of Conveyance for which the Company hasinitiated necessary action for correction.
(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification.
(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 and hence not commented upon.
(iv) In 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 and 186 of the Companies Act 2013 are applicable and hence notcommented upon.
(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 certain productsof the Company and are of the opinion that prima facie the specified accounts andrecords have been made and maintained. We have not however made a detailed examinationof the same.
(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax customs duty goods and service tax cess and other statutory dueshave generally been regularly deposited with the appropriate authorities.
(b) Accordingtotheinformationandexplanations given to us no undisputed amounts payablein respect of provident fund employees' state insurance income-tax customs duty goodsand services tax cess and other statutory dues were outstanding at the year end for aperiod of more than six months from the date they became payable.
(c) According to the information and explanations given to us there are no dues ofincome tax sales-tax service tax customs duty excise duty value added tax and cesswhich have not been deposited on account of any dispute.
(viii) In our opinion and according to the information and based on explanationsprovided to us the Company has not defaulted in repayment of dues to a financialinstitution or banks. The Company has not taken any loan or borrowing from the governmentor by way of debentures.
(ix) In our opinion and according to the information and explanations given by themanagement money raised by way of rights issue of equity shares during the year and termloans have been applied by the Company for the purposes for which they were raised.
(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 requisite approvalsmandated by the provisions of section 197 read with Schedule V to the Companies Act 2013.
(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 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe Ind AS financial statements 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 yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe Company and not commented upon.
(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.
Annexure 2 to the Independent auditor's report of even date on the Ind AS FinancialStatements of Bharat Gears 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 over financial reporting of BharatGears Limited ("the Company") as of 31 March 2020 in conjunction with our auditof the Ind AS Financial Statements of the Company for the year ended 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. 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.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these Ind AS financial statementsbased on our audit. We conducted our audit in accordance with the Guidance Note on Auditof Internal Financial Controls Over Financial Reporting (the "Guidance Note")and the Standards on Auditing as specified under section 143(10) of the Companies Act2013 to the extent applicable to an audit of internal financial controls and both issuedby the Institute of Chartered Accountants of India. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting with reference to these Ind AS financial statements was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to these Ind ASfinancial statements and their operating effectiveness. Our audit of internal financialcontrols over financial reporting included obtaining an understanding of internalfinancial controls over financial reporting with reference to these Ind AS financialstatements assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.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 Ind AS financial statements.
Meaning of Internal Financial Controls Over Financial Reporting
A Company's internal financial control over financial reporting with reference to thesefinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A Company'sinternal financial control over financial reporting with reference to these financialstatements includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly refiect 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 andexpenditures of the Company are being made only in accordance with authorisations ofmanagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of theCompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting WithReference to these Ind AS Financial Statements
Because of the inherent limitations of internal financial controls over financialreporting with reference to these Ind AS financial statements including the possibilityof collusion or improper management override of controls material misstatements due toerror or fraud may occur and not be detected. Also projections of any evaluation of theinternal financial controls over financial reporting with reference to these Ind ASfinancial statements to future periods are subject to the risk that the internal financialcontrol over financial reporting with reference to these Ind AS financial statements maybecome inadequate because of changes in conditions or that the degree of compliance withthe policies or procedures may deteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these Ind AS financial statements andsuch internal financial controls over financial reporting with reference to these Ind ASfinancial statements were operating effectively as at 31 March 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
|ICAI Firm Registration Number: 324982E/E300003 ||For S R B C & CO LLP |
| ||Chartered Accountants |
| ||per Pramod Kumar Bapna |
| ||Partner |
|Place: Mumbai ||Membership Number: 105497 |
|Date: 28 June 2020 ||UDIN: 20105497AAAABN5567 |