To the Members of Bharat Seats Limited
Report on the Audit of the Ind AS Financial Statements
We have audited the accompanying Ind AS financial statements of BharatSeats Limited ("the Company") which comprise the Balance sheet as at March 312020 the Statement of Profit and Loss including the statement of Other ComprehensiveIncome the Cash Flow Statement and the Statement of Changes in Equity for the year thenended and notes to the Ind AS financial statements including a summary of significantaccounting policies and other explanatory information.
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid 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 312020its 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 Ind AS financial statements in accordancewith the 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 Ind AS Financial Statements' section of our report.We are independent of the Company in accordance with the 'Code of Ethics' issued by theInstitute of Chartered Accountants of India together with the ethical requirements thatare relevant to our audit of the financial statements under the provisions of the Act andthe 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 37(l) to the accompanying Ind AS financialstatements which describes the management's assessment of the impact of uncertaintiesarising because of Covid-19 pandemic and its consequential effects on the Company'soperations and results.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the Ind AS financial statements for thefinancial year ended March 31 2020. These matters were addressed in the context of ouraudit of the Ind AS financial statements as a whole and in forming our opinion thereonand we 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 auditmatters to be communicated in our report. We have fulfilled the responsibilities describedin the Auditor's responsibilities for the audit of the Ind AS financial statements sectionof our report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the Ind AS financial statements. The results of our audit proceduresincluding the procedures performed to address the matters below provide the basis for ouraudit opinion on the accompanying Ind AS financial statements.
|Key audit matters ||How our audit addressed the key audit matter |
|Contingent Liabilities (as described in note 26 of the Ind AS financial statements) || |
|As of March 31 2020 the Company has disclosed contingent liabilities of Rs.382.18 lakhs relating to tax and legal claims. ||Our audit procedures included the following:. |
|Due to complexity of cases timescales for resolution and need to negotiate with various authorities there is significant judgement required by management in assessing the exposure of each case and thus a risk that such cases may not be adequately provided for or disclosed in the Ind AS financial statements. || Gained an understanding of the process of identification of claims litigations arbitrations and contingent liabilities and evaluated the design and tested the operating effectiveness of key controls |
|Accordingly claims litigations arbitrations and contingent liabilities was determined to be a key audit matter in our audit of the Ind AS financial statements. || Obtained the Company's legal and tax cases summary and critically assessed management's position through discussions with the legal head tax head and Company management on both the probability of success in significant cases and the magnitude of any potential loss. |
| || Obtained confirmation where appropriate from relevant third party legal counsel and conducted discussions with them regarding material cases. Evaluated the objectivity independence competence and relevant experience of third party legal counsel. |
| || Engaged our tax specialists to assess management's application and interpretation of tax legislation affecting the Company and to consider the quantification of exposures and settlements arising from disputes with tax authorities in the various tax jurisdictions. |
| || Assessed in accordance with accounting standards the provisions in respect of taxes on income and assessed disclosures relating thereto including those for contingencies with regard to facts and circumstances of the legal and litigation matters |
|Impairment assessment of property plant and equipment and intangible assets due to Covid-19 (as described in note 37(l) of the Ind AS financial statements) ||Our audit procedures include the following: |
|Due to Covid - 19 impact there is a risk of losses or negative cash flows in the future which give rise to impairment indicators. This had an impact on the earnings of the Company however the impact is not very significant for FY 19-20 since the lock-down happened only in the last week of March 2020 but may have significant impact for FY 20-21. || We obtained from management the impairment assessment of property plant and equipment and intangible assets at year end and discussed with management and evaluated the key assumptions underlying management's assessment of potential impairment of these assets. |
|The Company has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of property plant and equipment. The Company prepared its cash flow projections by applying assumptions and sensitivities for the likely impact of disruption relating to COVID -19. || We evaluated the management's impairment assessments and the assumptions adopted therein including revenue assumptions with reference to the actual revenue levels achieved in the current year and future operating plans. |
|We identified impairment of property plant and equipment as a key audit matter because it involved significant judgment and estimates in calculating the recoverable value. || We tested the input data such as expected revenue costs terminal growth and discount rate used in estimating the recoverable value by comparing them to external and internal sources of information. |
| || We performed the stress test pursuant to change in underlying budget assumptions for future years. |
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the Annual reportbut does not include the Ind AS financial statements and our auditor's report thereon.
Our opinion on the 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 Ind AS financial statements ourresponsibility is to read the other information identified above and in doing soconsider whether such other information is materially inconsistent with the Ind ASfinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated. If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
Responsibilities of Management for the Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these 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 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 responsiblefor assessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Auditor's Responsibilities for the Audit of the Ind AS FinancialStatements
Our objectives are to obtain reasonable assurance about whether the IndAS financial statements as a whole are free from material misstatement whether due tofraud or error and to issue an auditor's report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of theInd AS financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls with respect to financialstatements in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of theInd AS financial statements including the disclosures and whether the Ind AS financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the Ind ASfinancial statements for the financial year ended March 31 2020 and are therefore the keyaudit matters. 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 of the Act we give in the "Annexure 1" a statement on thematters specified in 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 explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;
(b) In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;
(c) The Balance Sheet the Statement of Profit and Loss including theStatement of Other Comprehensive Income the Cash Flow Statement and Statement of Changesin Equity dealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid Ind AS financial statements complywith the Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from thedirectors as on March 31 2020 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2020 from being appointed as a director in termsof Section 164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controlsover financial reporting of the Company with reference to these Ind AS financialstatements and the operating effectiveness of such controls refer to our separate Reportin "Annexure 2" to this report;
(g) The remuneration paid to directors for the year ended March 312020 being in excess of the limits prescribed within the provisions of section 197 readwith Schedule V to the Act by Rs.39 lakhs is subject to the approval by a specialresolution by the shareholders in the ensuing Annual General Meeting - Refer Note.37(m) tothe Ind AS financial statements;
(h) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended in our opinion and to the best of our information and according to theexplanations given to us:
i. The Company has disclosed the impact of pending litigations on itsfinancial position in its Ind AS financial statements - Refer Note.26 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 has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
Annexure 1 referred to in paragraph 1 under the heading "Report onOther Legal and Regulatory Requirements" of our report of even date.
Re: Bharat Seats Limited (the Company')
i) a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) All fixed assets have not been physically verified by themanagement during the year but there is a regular programme of verification which in ouropinion is reasonable having regards to the size of the Company and the nature of theassets. No material discrepancies were noticed on such verification.
(c) According to the information and explanations given by themanagement the title deeds of immovable properties included in property plant andequipment/ fixed assets are held in the name of the Company.
ii) The inventory has been physically verified by the management duringthe year. In our opinion the frequency of verification is reasonable. No materialdiscrepancies were noticed on such physical verification. Inventories lying with thirdparties have been confirmed by them as at May 09 2020 and no material discrepancies werenoticed in respect of such confirmations.
iii) According to the information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under section189 of the Companies Act 2013. Accordingly the provisions of clause 3(iii) (a) (b) and(c) of the Order are not applicable to the Company and hence not commented upon.
iv) In our opinion and according to the information and explanationsgiven to us provisions of section 185 and 186 of the Companies Act 2013 in respect ofloans to directors including entities in which they are interested and in respect of loansand advances given investments made and guarantees and securities given have beencomplied with by the company.
v) The Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
vi) We have broadly reviewed the books of account maintained by theCompany pursuant to the rules made by the Central Government for the maintenance of costrecords under section 148(1) of the Companies Act 2013 related to the manufacture ofseating system and interior component for the automotive and surface transport and are ofthe opinion that prima facie the specified accounts and records have been made andmaintained. We have not however made a detailed examination of the same.
vii) (a) The Company is regular in depositing with appropriateauthorities undisputed statutory dues including provident fund employees' stateinsurance income-tax goods and service tax cess and other statutory dues applicable toit.
(b) According to the information and explanations given to us noundisputed amounts payable in respect of provident fund employees' state insuranceincome-tax goods and service tax cess and other statutory dues were outstanding at theyear end for a period of more than six months from the date they became payable.
(c) According to the records of the Company the dues outstanding ofincome-tax sales-tax service tax duty of custom duty of excise value added tax goodsand service tax and cess on account of any dispute are as follows:
|Name of the statute ||Nature of the dues ||Amount (In Lacs) ||Period to which the amount relates ||Forum where the dispute is pending |
|Central Excise Act 1994 ||Show cause notice - Transaction value ||27.69 ||2004-2006 ||Assistant Commissioner Delhi |
|Central Excise Act 1994 ||Disallowance of input tax credit on account of difference between physical stock of inputs and stock as reflected in statutory records ||228.20 ||1997-1999 ||CESTAT Delhi |
viii) In our opinion and according to the information and explanationsgiven by the management the Company has not defaulted in repayment of loans or borrowingsto a financial institution and bank. The Company did not have any outstanding dues fromdebenture holders or Government.
ix) According to the information and explanations given by themanagement the Company has not raised any money by way of initial public offer / furtherpublic offer / debt instruments and term loans hence reporting under clause (ix) is notapplicable to the Company and hence not commented upon.
x) Based upon the audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and according to theinformation and explanations given by the management we report that no frauds/ materialfraud by the Company or on the Company by the officers and employees of the Company hasbeen noticed or reported during the year.
xi) According to the information and explanation given by themanagement we report that remuneration of the Managing Director for the year ended March31 2020 is in excess of the limits applicable under section 197 of the Act read withSchedule V thereto by Rs 39 lakhs. We are informed by the management that it proposes forshareholder approval in the ensuing Annual General Meeting to ratify/approve the excessremuneration paid - Refer note 37(m) to the financial statements.
xii) In our opinion the Company is not a nidhi Company. Therefore theprovisions of clause 3(xii) of the order are not applicable to the Company and hence notcommented upon.
xiii) According to the information and explanations given by themanagement transactions with the related parties are in compliance with section 177 and188 of Companies Act 2013 where applicable and the details have been disclosed in thenotes to the financial statements as required by the applicable accounting standards.
xiv) According to the information and explanations given to us and onan overall examination of the balance sheet the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year under review and hence reporting requirements under clause 3(xiv) are notapplicable to the Company and not commented upon.
xv) According to the information and explanations given by themanagement the Company has not entered into any non-cash transactions with directors orpersons connected with him as referred to in section 192 of Companies Act 2013.
xvi) According to the information and explanations given to us theprovisions of section 45-IA of the Reserve Bank of India Act 1934 are not applicable tothe Company.
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THEFINANCIAL STATEMENTS OF BHARAT SEATS LIMTED
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financialreporting of Bharat Seats Limited ("the Company") as of March 31 2020 inconjunction with our audit of the financial statements of the Company for the year endedon that date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting 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 the Company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting with reference to these 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 financial statements was established and maintained andif such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls over financial reporting with reference tothese financial statements and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting with reference to these 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 andappropriate to provide a basis for our audit opinion on the internal financial controlsover financial reporting with reference to these financial statements.
Meaning of Internal Financial Controls Over Financial Reporting WithReference to these Financial Statements
A company's internal financial control over financial reporting withreference to these financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles. A company's internal financial control over financial reportingwith reference to these financial statements includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; 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 financial statements.
Inherent Limitations of Internal Financial Controls Over FinancialReporting With Reference to these Financial Statements
Because of the inherent limitations of internal financial controls overfinancial reporting with reference to these 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 financial statements to future periods are subject to the risk that the internalfinancial control over financial reporting with reference to these financial statementsmay become inadequate because of changes in conditions or that the degree of compliancewith the policies or procedures may deteriorate.
In our opinion the Company has in all material respects adequateinternal financial controls over financial reporting with reference to these financialstatements and such internal financial controls over financial reporting with reference tothese financial statements were operating effectively as at March 31 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.
|For S.R. Batliboi & CO. LLP |
|Chartered Accountants |
|ICAI Firm |
|Registration Number: 301003E/E300005 per Amit Chugh Partner |
|Membership Number: 505224 |
|UDIN: 20505224AAAAEE5092 |
|Place of Signature: Gurugram |
|Date: June 12 2020 |