To the Members of Cimmco Limited
Report on the Audit of Financial Statements
1. We have audited the accompanying financial statements of Cimmco Limited (the Company) which comprise the Balance Sheet as at March 31 2019 the Statement of Profit and Loss (including Other Comprehensive Income) Statement of Changes in Equity and Statement of Cash Flows for the year then ended and notes to the financial statements including a summary of significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us the aforesaid financial statements give the information required by the Companies Act 2013 (the Act) in the manner so required and except for the indeterminate impact of the matter referred in the Basis for Qualified Opinion section of our report give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at March 31 2019 and total comprehensive income (comprising of profit and other comprehensive income) changes in equity and its cash flows for the year then ended.
Basis for Qualified Opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
4. We draw your attention to Note 45 to the Financial Statements regarding public shareholding in the Company being 20.512% as at March 31 2019 which is below the minimum requirement of 25% under Rule 19A(2) of the Securities Contracts (Regulation) Rules 1957. The consequential impact of the aforesaid non-compliance if any is presently not ascertainable.
Emphasis of Matter
5. We draw your attention to Note 6(a) to the financial statements regarding the Company's claim of Rs. 2361.23 lacs towards lease rental and interest thereon receivable from the Indian Railways which is recognised based on the order from the Hon'ble High Court of Delhi dated March 15 2019 reaffirming the Arbitration Award dated February 3 2016 and based on the legal advice obtained by the Company in this regard. Our opinion is not modified in respect of this matter.
Key Audit Matter
6. Key audit matters are those matters that in our professional judgment were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters.
|Key audit matter||How our audit addressed the key audit matter|
|Assessment of recoverability of Deferred tax assets||Our audit procedures included the following:|
|[Refer to Note 2.20 - Income Taxes Refer Note 2.28 - Critical Estimates and Judgements - Valuation of Deferred Tax Assets and Note 7 - Deferred Tax Assets (Net)]|| Assessed and tested the design and operating effectiveness of the Company's key controls relating to taxation including the assessment of carrying amount of deferred tax assets the preparation of the forecast and its related inputs/ assumptions.|
|The Company has recognised deferred tax assets including those on unabsorbed tax losses comprising of unabsorbed depreciation and business losses pertaining to the earlier assessment years. The balance of such deferred tax asset as at March 31 2019 was Rs. 2563.98 Lakhs which is included in the balance sheet under Deferred tax assets (net) amounting to Rs.260.90 Lakhs. The deferred tax asset are considered to be recoverable based on the Company's projected taxable profits in the forthcoming years. The carrying amount of deferred tax assets is reviewed at the end of each reporting period.|| Agreed the relevant input data with the latest budgets and other supporting documents as appropriate.|
| Tested the reasonability of key management assumptions such as growth rate estimated percentage of gross profit used in the management projections of the future taxable profits and also considered historical performance vis-vis the budgets the change in the business performance over the years.|
| Applied sensitivity to the forecasts and assessed whether tax losses can be utilised within the available period as per the tax laws. |
|This was considered as a key audit matter as the amount is material to the financial statements and significant judgement is required by the Company's Management in determining future taxable profits as there are inherent uncertainties involved in forecasting such profits.|| Evaluated the adequacy of the disclosures made in the financial statements.|
|Based on the above procedures we noted that the management's assessment of recoverability of deferred tax assets is reasonable.|
7. The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Director's report but does not include the financial statements and our auditor's report thereon.Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.In connection with our audit of the financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If based on the work we have performed we conclude that there is a material misstatement of this other information we are required to report that fact.We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the financial statements
8. The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these financial statements that give a true and fair view of the financial position financial performance changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.
9. In preparing the financial statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's responsibilities for the audit of the financial statements
10. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
11. As part of an audit in accordance with SAs we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design 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 has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the 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's report. However future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the financial statements including the disclosures and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
12. We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.
13. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards.
14. From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
15. 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 B a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
16. 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 best of our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion except for the indeterminate impact of the matter referred in the Basis for Qualified Opinion section of our report proper books of account as required by law have been 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 other comprehensive income) the Statement of Changes in Equity and Cash Flow Statement dealt with by this Report are in agreement with the books of account.
d) In our opinion the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act.
e) On the basis of the written representations received from the directors as on March 31 2019 taken on record by the Board of Directors none of the directors is disqualified as on March 31 2019 from being appointed as a director in terms of Section 164(2) of the Act.
f) With regard to maintenance of accounts reference is made to our comment in paragraphs 16(b) above.
g) With respect to the adequacy of the internal financial controls with reference to financial statement of the Company and the operating effectiveness of such controls refer to our separate Report in Annexure A.
h) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of our information and according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 16 and Note 34 to the financial statements;
(ii) The Company has long-term contracts contracts as at March 31 2019 for which there were no material foreseeable losses. The Company did not have any derivative contracts as at March 31 2019.
(iii) There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company.
(iv) The reporting on disclosures relating to Specified Bank Notes is not applicable to the Company for the year ended March 31 2019.
For Price Waterhouse & Co Chartered Accountants LLP
Firm Registration Number: 304026E/E-300009
Membership Number 099903
Date: May 30 2019
Annexure A to Independent Auditors' Report
Referred to in paragraph 16(g) of the Independent Auditors' Report of even date to the members of Cimmco Limited on the Ind AS financial statements for the year ended March 31 2019.
Report on the Internal Financial Controls with reference to financial statements under Clause (i) of Sub-section 3 of Section 143 of the Act
1. We have audited the internal financial controls with reference to financial statements of Cimmco Limited (the Company) as of March 31 2019 in conjunction with our audit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
2. The Company's management is responsible for establishing and maintaining internal financial controls based on the internal control with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Act.
3. Our responsibility is to express an opinion on the Company's internal financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note) and the Standards on Auditing deemed to be prescribed under section 143(10) of the Act to the extent applicable to an audit of internal financial controls both applicable to an audit of internal financial controls and both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with reference to financial statements was established and maintained and if such controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements included obtaining an understanding of internal financial controls with reference to financial statements assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls system with reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
6. A company's internal financial controls with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial controls with reference to financial statements includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition use or disposition of the company's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference to financial statements
7. Because of the inherent limitations of internal financial controls with reference to financial statements including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls with reference to financial statements to future periods are subject to the risk that the internal financial control controls with reference to financial statements may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
8. In our opinion the Company has in all material respects an adequate internal financial controls system with reference to financial statements and such internal financial controls with reference to financial statements were operating effectively as at March 31 2019 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
For Price Waterhouse & Co Chartered Accountants LLP
Firm Registration Number: 304026E/E-300009
Membership Number 099903
Date: May 30 2019
Annexure B to Independent Auditors' Report
Referred to in paragraph 15 of the Independent Auditors' Report of even date to the members of Cimmco Limited on the financial statements as of and for the year ended March 31 2019.
i. (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.
(b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of three years which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.
(c) The title deeds of immovable properties as disclosed in Note 3(i) on property plant and equipment and Note 3(iii) on investment properties to the financial statements are held in the name of the Company except for the following (details of which are are set out in Notes 3(i) and 3(iii) to the financial statements):
|Sl. No.||Particulars||Gross Block||Net Block||Remarks|
|(Rs in lacs)||(Rs in lacs)|
|1||Freehold Land||4734.83||4734.83||Original Copy of title deed not available with the company|
|2||Investment Properties - Freehold Land||821.24||821.24||Original Copy of title deed not available with the company|
ii. The physical verification of inventory (excluding stocks with third parties) have been conducted at reasonable intervals by the Management during the year. In respect of inventory lying with third parties these have substantially been confirmed by them. The discrepancies noticed on physical verification of inventory as compared to book records were not material and have been properly dealt with in the books of accounts.
iii. The Company has not granted any loans secured or unsecured to companies firms Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Act. Therefore the provisions of Clause 3(iii) (iii)(a) (iii)(b) and (iii)(c) of the said Order are not applicable to the Company.
iv. The Company has not granted any loans or made any investments or provided any guarantees or security to the parties covered under Section 185 and 186. Therefore the provisions of Clause 3(iv) of the said Order are not applicable to the Company.
v. The Company has not accepted any deposits from the public within the meaning of Sections 73 74 75 and 76 of the Act and the Rules framed there under to the extent notified.
vi. Pursuant to the rules made by the Central Government of India the Company is required to maintain cost records as specified under Section 148(1) of the Act in respect of its products. We have broadly reviewed the same and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not however made a detailed examination of the records with a view to determine whether they are accurate or complete.
vii. (a) According to the information and explanations given to us and the records of the Company examined by us in our opinion the Company is regular in depositing the undisputed statutory dues including provident fund employees' state insurance income tax sales tax service tax duty of customs duty of excise value added tax cess goods and service tax and other material statutory dues as applicable with the appropriate authorities. Also refer note 44 to the financial statements regarding management's assessment on certain matters relating to provident fund.
(b) According to the information and explanations given to us and the records of the Company examined by us there are no dues of service-tax value added tax and goods and service tax which have not been deposited on account of any dispute. The particulars of dues of income tax sales tax duty of customs and duty of excise as at March 31 2019 which have not been deposited on account of a dispute are as follows:
|Name of the Statute||Nature of Dues||Amount ( Rs. in lacs)||Period to which the amount relates||Forum where dispute is pending|
|The Central Excise Act 1944||Excise Duty||126.27||1989-1994||Supreme Court|
|Jan-2011 to Mar-2015|
|5.49||Apr-2015- Dec-2016||Commissioner of Cental Excise (Appeal)|
|The Custom Act 1962||Custom Duty||30.63||1992-93||Additional Commissioner Customs|
|58.8||1986-1987 1998-1999 2000-2001||Deputy Director of Enforcement|
|The Orrisa Sales Tax Act||Sales Tax||117.60||1999-2001||High Court|
|The Rajasthan Sales Tax Act||Sales Tax||383.52||1998-99||Deputy Commissioner Appeal|
|The Income-Tax Act 1961||Income Tax||79.94||2004-2005||Income Tax Appellate Tribunal|
viii. According to the records of the Company examined by us and the information and explanation given to us the Company has not defaulted in repayment of loans or borrowings to any bank as at the balance sheet date. The Company does not have any loans or borrowings from any financial institution or Government nor has it issued any debentures as at the balance sheet date.
ix. In our opinion and according to the information and explanations given to us the moneys raised by way of term loans have been applied on an overall basis for the purposes for which they were obtained. The company has not raised any moneys by way of initial public offer and further public offer (including debt instruments).
x. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us we have neither come across any instance of material fraud by the Company or on the Company by its officers or employees noticed or reported during the year nor have we been informed of any such case by the Management.
xi. The Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.
xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicable to it the provisions of Clause 3(xii) of the Order are not applicable to the Company. xiii. The Company has entered into transactions with related parties in compliance with the provisions of Sections 177 and 188 of the Act. The details of such related party transactions have been disclosed in the Ind AS financial statements as required under Indian Accounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 of the Act.
xiv. The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly the provisions of Clause 3(xiv) of the Order are not applicable to the Company.
xv. The Company has not entered into any non cash transactions with its directors or persons connected with him. Accordingly the provisions of Clause 3(xv) of the Order are not applicable to the Company. xvi. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are not applicable to the Company.
For Price Waterhouse & Co Chartered Accountants LLP
Firm Registration Number: 304026E/E-300009
Membership Number 099903
Date: May 30 2019