Crompton Greaves Consumer Electrical Ltd.
|BSE: 539876||Sector: Engineering|
|NSE: CROMPTON||ISIN Code: INE299U01018|
|BSE 11:29 | 01 Apr||207.30||
|NSE 11:24 | 01 Apr||206.20||
|Mkt Cap.(Rs cr)||13,004|
|Mkt Cap.(Rs cr)||13003.93|
Crompton Greaves Consumer Electrical Ltd. (CROMPTON) - Auditors Report
Company auditors report
To the Members of Crompton Greaves Consumer Electricals Limited
Report on the Audit of the Standalone Financial Statements
We have audited the standalone financial statements of Crompton Greaves Consumer Electricals Limited (the `Company') which comprise the Balance Sheet as at 31st March 2019 and the Statement of Profit and Loss the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended and notes to the Standalone financial statements including a summary of the significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us the aforesaid standalone financial statements give the information required by the Companies Act 2013 (the `Act') in the manner so required and 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 31st March 2019 and profit changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
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 Standalone 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 (ICAI) together with ethical requirements that are relevant to our audit of the standalone 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 opinion.
Key Audit Matters
Key audit matters are those that in our professional judgement were of most significance in our audit of the standalone financial statements of the current year. These matters were addressed in the context of our audit of the standalone financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters.
On the demerger of the Consumer Business from Crompton Greaves Limited (CGL) (now CG Power and Industrial Solutions Limited) and in terms of `Scheme of Arrangement' the assets and liabilities of the Consumer Business along with certain brand usage rights were transferred to Crompton Greaves Consumer Electricals Limited (CGCEL). The excess of liabilities over net assets based on fair value and the share capital amounting to ? 779.41 crore was shown as Goodwill in the books of CGCEL. The Company has adopted the policy of amortising the goodwill in the books of account on the basis of impairment test only if there is an indication of impairment as at the reporting date. Based on the valuation done by the management's consultant the value of the goodwill is more than book value of goodwill as at 31st March 2019 and hence there is no indication of impairment.
Due to the inherent uncertainty involved in forecasting and discounting future cash flows determination of discount and terminal growth rates which are the basis for computing the value of goodwill and the assessment of recoverability these are the key judgement areas. In view of the above the Company has carried out an impairment assessment of goodwill using a value-in-use model which is based on the net present value of the forecast earnings of the cash generating units. The calculation involved using certain assumptions around discount rates growth rates and cash flow forecasts. This is considered as the key audit matter.
We have performed the audit procedures including:
a) Critically reviewing the Company's assumptions pertaining to externally derived data in relation to key inputs such as long-term growth rates and discount rates;
b) Assessed the appropriateness of the forecasted cash flows based on our understanding of the business and sector experience;
c) Recalculated the weighted average cost of capital (WACC) used to discount the cash flows and assessed those rates to be reasonable based on knowledge of the economic environment and the risk premium associated with respective industries and countries.
d) Compared the cash flow forecasts used in the impairment assessment prepared by management consultant with the budgeted numbers to the extent available;
e) Evaluated the reasonableness of the forecasts made by the management by comparing past forecasts to historical results where this was available and by comparing to the current year results of the Company;
f) Subjected related key assumptions to sensitivity analysis;
g) Evaluated whether the Company's disclosures concerning the sensitivity of the impairment assessment to changes in key assumptions reasonably reflected the risks inherent in the valuation of goodwill;
h) Skeptically reviewed management's assumptions judgement and the appropriateness of the valuation model used;
i) Tested the mathematical accuracy of management's calculations.
Our audit procedures did not reveal in any material variations.
2. Ongoing tax matters including provision for tax The Company's unsettled tax positions includes matters under dispute which involves significant judgment to determine the possible outcome of these disputes. These provisions are estimated using a significant degree of interpreting the various relevant rules regulations and practices. Provision for tax is also based on the presumption of significant on the allowability / disallowablilty of claims. Hence it is considered as a Key Audit Matter.
We have performed audit procedures which including:
a) Obtained information of completed tax assessments and demands / refunds received by the Company duringthefinancial 19; year 2018-
b) Critically reviewed the processes and controls in place over tax assessments and demands / refunds through discussions with the management's internal experts / external consultants and reviewed the communications with those charged with governance pertaining to this issue;
c) Involved our tax team to critically evaluate the assumptions in estimating the tax provisions and the possible outcome of the assessment / demands. Our tax team considered past precedence and other rulings in evaluating Company's position on these uncertain tax positions.
d) Assessed whether the Company's disclosures in Note 31 to the standalone financial statements the Contingent liabilities and commitments adequately disclose the relevant facts and circumstances and potential liabilities of the Company.
e) Also considered the effect of all the information in respect of uncertain tax positions as at 31st March 2019 and provision for tax to evaluate whether any review was necessary to Company's position on these uncertainties.
Our audit procedures did not reveal any negative observations in the matter.
3. Estimates - Provision for warranty
Computation of provision for warranties and returns involves critical evaluation of historical data with respect to the nature of repair and returns and estimation of costs in respect of future warranty claims and refunds. In view of the estimates being based on facts and circumstances that can change from period to period this is considered to be a significant judgement. Hence a Key Audit Matter. management judgement in Audit Procedures estimatesandassumptions We have performed audit procedures which includes:
a) Reviewed management's contract risk assessments by enquiries inspection of meeting minutes and review of correspondence with customers where available. As we have the knowledge gained through field involvement and feedback on review of the operation contract and project reviews we also assessed the justification for and the accuracy of provisions;
b) Reviewed the recognition and appropriateness of provisions by re-computing the amounts obtaining management statements evidence and supporting documents such as correspondence with clients or legal assessments of internal sources where available;
c) Considered the historical accuracy of estimates made by management through reviews of actual facts. In order to gain a complete and clear understanding additionally performed enquiry procedures and reviewed relevant documents. Our audit procedures did not reveal any observations of any material differences.
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the annual report but does not include the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone 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 standalone financial statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the standalone 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 Standalone Financial Statements
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 standalone 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 Indian Accounting Standards prescribed 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 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 standalone financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.
In preparing the standalone 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 Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone 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 aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
(a) 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;
(b) 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 system in place and the operating effectiveness of such controls;
(c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
(d) 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 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 standalone 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; and
(e) Evaluate the overall presentation structure and content of the financial statements including the disclosures and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Materiality is the magnitude of misstatements in the financial statements that individually or in aggregate makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We and qualitative factors in: (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
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.
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.
From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report where applicable and 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 doubt on the consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication
Reporton Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 (the `Order') issued by the Central Government in terms of Section 143(11) of the Act we give in the Annexure `A' a Statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
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 best of 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 the Company so far as it appears from our examination of those books; quantitative materiality
(c) the Balance Sheet the Statement of Profit and Loss the Statement of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the books of account;
(e) on the basis of the written representations received from the directors as on 31st March 2019 taken on record by the Board of Directors none of the directors is disqualified as on 31st March 2019 from being appointed as a director in terms of Section 164 (2) of the Act;
(g) with respect to the other matters to be included in the Auditors Report in accordance with the requirements of Section 197(16) of the Act as amended in our opinion and to the best of our information and according to the explanations given to us the remuneration paid by the Company to its directors is in accordance with the provisions of section 197 of the Act; and
(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:
(1) the Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - (Refer Note 31 to the standalone financial statements);
(2) the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses; and
(3) the requirements to transfer amounts to the Investor Education and Protection Fund is not presently applicable to the Company.
ANNEXURE `A' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1 of our report of even date)
(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation offixed . assets
(b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this 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. In our opinion this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.
(c) According to the information and explanations given to us the title deeds of immovable properties are in the name of the Company except in one case of freehold land acquired consequent to the `Scheme of Arrangement' with gross and net carrying amounts of ? 0.34 crore and ? 0.34 crore respectively - (Refer Note 2 to the standalone financial statements) in respect of which the deeds of conveyance is yet to be completed.
(ii) As explained to us inventories have been physically verified by the management during the year. In our opinion the frequency of such verification is reasonable. No material discrepancies were noticed on verification between the physical stocks and the book records.
(iii) According to the information and explanations give to us the Company has not granted loans secured or unsecured to companies firms limited liability partnerships or other parties covered in the register maintained under Section 189 of the Act. Accordingly the Paragraph 3(iii) of the Order is not applicable to the Company.
(iv) According to the information and explanations given to us the Company has not granted any loan or given any guarantees or provided any security to the parties covered under Section 185 of the Act. Further the Company has not made any investment or given any loan or given any guarantee or provided any security within the meaning of Section 186 of the Act. Accordingly the Paragraph 3(iv) of the Order is not applicable to the Company.
(v) The Company has not accepted any deposits from the public during the year to which the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 and other relevant provisions of the Act and the rules framed thereunder apply..
(vi) The maintenance of cost records has been specified by the Central Government under Section 148(1) of the Act. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014 as amended prescribed by the Central Government under Section 148(1) of the Act and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have however not made a detailed examination of these accounts and records with a view to determine whether they are accurate or complete.
(vii) (a) According to the information and explanations given to us the Company is generally regular in depositing undisputed statutory dues including provident fund employees' state insurance income tax duty of customs goods and services tax cess and any other statutory dues where applicable to the appropriate authorities. According to the information and explanations given to us there are no arrears of outstanding statutory dues as at the last day of the financial year for a period of more than six months from the date they became payable.
(b) According to the information and explanations given to us and the records examined by us the particulars of income tax sales tax service tax duty of customs duty of excise and value added tax as at 31st March 2019 which have not been deposited on account of a dispute pending are as under:
(*net of pre-deposit paid in getting the stay / appeal admitted)
(viii) According to the information and explanations given to us the Company has not defaulted in repayment of loans or borrowings to financial institutions and banks. The Company has not taken any loans or borrowings from Government. The Company has issued redeemable non-convertible debentures however there are no dues for repayment.
(ix) According to the information and explanations given to us the Company has not raised monies by way of initial public offer or further public offer (including debt instruments). In our opinion and according to the information and explanations given to us on an overall basis the term loan has been applied for the purpose for which the term loan was obtained.
(x) During the course of our examination of the books and records of the Company carried out in accordance with generally accepted auditing practices in India and according to the information and explanations given to us we have neither come across any fraud by the Company or any fraud on the Company by its officers or employees noticed or reported during the year nor have we been informed of such case by management.
(xi) According to the information and explanations given to us the managerial remuneration has been paid / provided in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.
(xii) According to the information and explanations given to us the Company is not a Nidhi company. Accordingly the Paragraph 3(xii) of the Order is not applicable to the Company.
(xiii) According to the information and explanations given to us all the transactions with the related parties are in compliance with Sections 177 and 188 of the Act where applicable. The relevant details of such related party transactions have been disclosed in the standalone financial statements etc. as required under Indian Accounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 of the Act.
(xiv) According to the information and explanations given to us the Company had not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly the Paragraph 3(xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us the Company has not entered into any non-cash transactions with directors or persons connected with him during the year. Accordingly the Paragraph 3 (xv) of the Order is not applicable to the Company.
(xvi) According to the information and explanations given to us the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934.
ANNEXURE `B' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2(f) of our report of even date)
Report on the Internal Financial Controls under Section 143(3)(i) of the Companies Act 2013
We have audited the internal financial controls over financial reporting of Crompton Greaves Consumer Electricals Limited (the `Company') as of 31st March 2019 in conjunction with our audit of the standalone 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 internal financial controls 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 (the `Guidance Note') 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 required under the Companies Act 2013 (the `Act').
Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. conducted our audit in accordance with the Guidance Note and the Standards on Auditing issued by ICAI and 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 over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over reporting 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 standalone financial statements whether due to fraud or error.
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 over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting 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 standalone 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 standalone financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting 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 over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations given to us the Company has in all material respects an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as of 31st March 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 issued by the ICAI.