To the Members of Eastern Treads Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of Eastern Treads Limited (`the Company') which comprise the Balance Sheet as at 31 March 2019 the Statement of Profit and Loss (including Other Comprehensive Income) the Cash Flow Statement and the Statement of Changes in Equity for the year then ended and a summary of the 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 standalone financial statements give the information required by the Companies Act 2013 (`Act') in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Indian Accounting Standards (`Ind AS') specified under section 133 of the Act of the state of affairs (financial position) of the Company as at 31 March 2019 and its loss (financial performance including other comprehensive income) its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under ndards are further described in the Auditor's Responsibilities for the Audit ofthose sta 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 (`ICAI') 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 opinion.
Key Audit Matter
4. Key audit matters are those matters that in our professional judgment were of most significance in our audit of the standalone financial statements of the current period. These matters were addr ed in the context of our auditess of the financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters.
5. We have determined the matter described below to be the key audit matters to be communicated in our report.
|Key audit matter||How our audit addressed the key audit matter|
|Provision for doubtful receivables for overdue trade receivables||Our audit work included but was not limited to the following procedures:|
|(Refer note 1.17 of the accompanying standalone financial statements for significant accounting policy and note 2.31 for credit risk disclosures)|| Obtained an understanding of the process adopted by the Company in estimating provisions for doubtful receivables including the key inputs and assumptions. Since assumptions and parameters are based on historical data we assessed whether historical experience was representative of current circumstances and was relevant in view of the recent impairment losses incurred;|
|Trade receivables comprises a significant portion of the current assets of the Company. As at 31 March 2019 the Company has reported trade receivable of ?2655.17 lakhs (net of provision for doubtful receivables of ?62.13 lakhs).|| Assessed and tested the design and operating effectiveness of key controls over completeness and accuracy of the key inputs and assumptions considered for calculation recording and monitoring of the impairment loss recognized. Also evaluated the controls over the process validation of data and related approvals|
|These significant judgements in applying the expected credit loss (`ECL') method arises due to the nature of the customers that the Company deals with which mainly construed the state-owned road transportation entities and various dealers/traders from the unorganized sector. Further the payment plan varies from customer to customer resulting in complexity in estimation of amount to be recorded expected credit loss.|| For a selected sample performed procedures to evaluate:|
|- Appropriateness of exposure at default probability of default and loss given default in the calculation of ECL;|
|- Timely identification of exposures with a significant increase in credit risk and appropriateness of the Company's method of determining the stages; and|
|- arithmetic accuracy of ECL calculation|
| Tested the methodology applied in the credit loss provision calculation by comparing it to the requirements of Ind AS 109 Financial Instruments and appropriateness and reasonableness of the assumptions related to credit loss rate including the historical bad-debts applied in their assessment of the receivables allowance.|
|Considering the materiality of the amount involved and significant degree of judgement and subjectivity involved in the estimates and assumptions used in determining the expected credit loss we have determined this matter as a key audit matter.|| Evaluated responses to direct confirmation request circulated to customers and ensured the reconciling items have been adequately recorded in the books of account.|
| Tested the documents received as security against the trade receivables and amount received subsequent to year-end on sample basis.|
| Assessed the appropriateness and adequacy of the related presentation and disclosures of note 2.31 Financial risk management disclosed in the standalone financial statements in accordance with the applicable accounting standards.|
Information other than the Financial Statements and Auditor's Report thereon
6. 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 financial statements and our auditor's report thereon. The Annual Report is expected to be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and we will 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 identified above when it becomes available 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.
When we read the Annual Report if we conclude that there is a material misstatement therein we are required to communicate the matter to those charged with governance.
Responsibilities of Management and those Charged with Governance for the Standalone Financial Statements
7. 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 state of affairs (financial position) profit or loss (financial performance including other comprehensive income) changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Ind AS 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.
8. 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.
9. 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 Standards on Auditing 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 Standards on Auditing we exercise professional judgment and maintain professional skepticism 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 system 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 conc ern. onclude that a materialIf we c 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 im t ing 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 hose 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. The Company has not paid or provided for any managerial remuneration during the year. Accordingly reporting under section 197(16) of the Act is not applicable.
16. As required by the Companies (Auditor's Report) Order 2016 (`the Order') issued by the Central Government of India in terms of section 143(11) of the Act we give in the Annexure I a statement on the matters specified in paragraphs 3 and 4 of the Order.
17. Further to our comments in Annexure I 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 purpose 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;
c) the standalone financial statements dealt with by this report are in agreement with the books of account;
d) in our opinion the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) on the basis of the written representations received from the directors and taken on record by the Board of Directors none of the directors is disqualified as on 31 March 2019 from being appointed as a director in terms of section 164(2) of the Act;
f) we have also audited the internal financial controls over financial reporting (IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated 27 May 2019 as per Annexure II expressed unmodified opinion; and
g) 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 (as amended) in our opinion and to the best of our information and according to the explanations given to us:
i. the Company as detailed in note 2.30 to the standalone financial statements has disclosed the impact of pending litigations on its financial position as at 31 March 2019;
ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2019;
iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2019; and
iv. the disclosure requirements relating to holdings as well as dealings in specified bank notes were applicable for the period from 8 November 2016 to 30 December 2016 which are not relevant to these standalne financial statements. Hence reporting under this clause is not applicable.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 206229
Date: 27 May 2019
ANNEXURE I TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE TO THE MEMBERS OF EASTERN TREADS LIMITED ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019
Based on the audit procedures performed for the purpose of reporting a true and fair view on the standalone financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit and to the best of our knowl edge and belief we report that:
(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
(b) The fixed assets have been physically verified by the management during the year and no discrepancies were noticed on such verification. In our opinion the frequency of verification of the fixed assets is reasonable having regard to the size of the Company and the nature of its assets.
(c) The title deeds of all the immovable properties (which are included under the head `Property plant and equipment') are held in the name of the Company.
(ii) In our opinion the management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies between physical inventory and book records were noticed on physical verification.
(iii) The Company has granted unsecured loan to a company covered in the register maintained under Section 189 of the Act; and with respect to the same:
(a) in our opinion the terms and conditions of grant of such loans are not prima facie prejudicial to the Company's interest.
(b) The schedule of repayment principal and interest has been stipulated wherein the principal and interest amounts are repayable on demand and since the repayment of such loans has not been demanded in our opinion repayment of principal and interest amount is regular.
(c) there is no overdue amount in respect of loans granted to such Company.
(iv) In our opinion the Company has complied with the provisions of section 185 and 186 of the Act in respect of loans.
(v) In our opinion the Company has not accepted any deposits within the meaning of Sections 73 to 76 of 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 pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act in respect of Company's products and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
(vii) (a) Undisputed statutory dues including provident fund employee's state insurance income tax duty of customs goods and service tax cess and other material statutory dues as applicable have generally been regularly deposited to the appropriate authorities though there has been a slight delay in a few cases. Undisputed amounts payable in respect of professional tax which was outstanding at the year end for a period more than six months from the date they became payable are as follows.
|Nature of the dues||Amount (? in lakhs)||Period to which the amount relates||Remarks|
|Professional Tax||0.90||April 2018 to September 2018||Payment is overdue on account of pending registration|
Annexure I to the Independent Auditor's Report of even date to the members of Eastern Treads Limited on the standalone financial statements for the year ended 31 March 2019
(b) The dues outstanding in respect of income-tax sales-tax service-tax duty of customs duty of excise and value added tax on account of any dispute are as follows: Statement of Disputed Dues:
|Nature of statute ||Nature of dues||Amount (in lakhs)||Amount paid under protest (in lakhs)||Period to which amount pertains to||Forum where dispute is pending|
|Central Sales Tax Act 1956||Central Sales Tax||1.76||1.76||FY 2004-05||Deputy Commissioner of Sales Tax (Appeals)|
|Central Sales Tax Act 1956||Central Sales Tax||7.88||2.78||FY 2010-11 and 2011-12||Deputy Commissioner of Sales Tax (Appeals)|
|Central Sales Tax Act 1956||Central Sales Tax||18.03||3.22||FY 2012-13 2013-14 2014 -15 2015-16 2016-17 and 2017-18||Assistant Commissioner Special Circle|
|Kerala Value Added Tax Act 2003||Value Added Tax||3.80||1.25||FY 2008-09 2009-10 2011-12 2013-14 and 2015-16||Deputy Commissioner of Sales Tax (Appeals)|
|Kerala Value Added Tax Act 2003||Value Added Tax||2.14||0.43||FY 2012-13 2013-14 and 2014-15||Assistant Commissioner Special Circle|
|Kerala Value Added Tax Act 2003||Value Added Tax||0.66||0.66||FY 2015-16 and 2016-17||Assessing Officer of Sales Tax|
|Income-tax Act 1961||Income Tax||20.97||0.00||AY 2012-13||Assessing Officer Income Tax|
(viii) The Company has not defaulted in repayment of loans or borrowings to any financial institution or bank or government or any dues to debenture-holders during the year.
(ix) The Company did not raise moneys by way of initial public offer or further public offer (including debt instruments).
In our opinion the term loans were applied for the purposes for which the loans were obtained.
(x) No fraud by the Company or on the Company by its officers or employees has been noticed or reported during the period covered by our audit.
(xi) The Company has not paid or provided for any managerial remuneration. Accordingly the provisions of Clause 3(xi) of the order are not applicable.
(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions of clause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parti es are in compliance with Sections177 and 188 of Act where applicable and the requisite details have been disclosed in the standalone financial statements etc. as required by the applicable Ind AS.
(xiv) During the year the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures.
(xv) In our opinion the Company has not entered into any non-cash transactions with the directors or per ons s connected with them covered under Section 192 of the Act.
(xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No. 206229
27 May 2019
ANNEXURE II TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE TO THE MEMBERS OF EASTERN TREADS LIMITED ON THE STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019
Independent Auditor's Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (`the Act')
1. In conjunction with our audit of the standalone financial statements of Eastern Treads Limited (`the Company') as at and for the year ended 31 March 2019 we have audited the internal financial controls over financial reporting (`IFCoFR') of the Company as at that date.
Management's Responsibility for Internal Financial Controls
2. The Company's Board of Directors is responsible for establishing and maintaining internal financial controls based on 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. 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 the Company's 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 IFCoFR based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India (`ICAI') and deemed to be prescribed under Section 143(10) of the Act to the extent pplicable to ana audit of IFCoFR and the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (`the Guidance Note') 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 IFCoFR were 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 IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining an understanding of IFCoFR 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 IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A company's IFCoFR 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 IFCoFR include 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 prepara tion of financial statements in accordance generally accepted accounting principles and thatwith 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 over Financial Reporting
7. Because of the inherent limitations of IFCoFR 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 IFCoFR to future periods are subject to the risk that the IFCoFR 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 adequate internal financial controls over financial reporting and such controls were operating effectively as at 31 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 on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Membership No.: 206229
Date: 27 May 2019