ECE Industries Limited
Report on the audit of the Financial Statements
We have audited the accompanying financial statements of ECE Industries Limited ('the Company') which comprise the Balance Sheet as at 31st March 2019 the Statement of Profit and Loss the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended and 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 financial statements give the information required by the Companies Act 2013 in the manner so required and give a true and fair view in conformity with Indian Accounting Standards specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended (Ind AS) and other accounting principles generally accepted in India of the state of affairs (financial position) of the Company as at 31st March 2019 its Statement of Profit & loss (financial performance including other comprehensive income) the changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act (SAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of 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 independence requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules made thereunder we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgement 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. We have determined the matters 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|
|A) Valuation of Investments||Our key procedures included but not limited to the following:|
|Refer Note 2 to the Financial Statements|
|The Company's investment portfolio represents a significant portion of the Company's total assets which primarily consists of:||a) Assessed the appropriateness of the relevant accounting policies of the Company including those relating to recognition and measurement of financial instrument by comparing with the applicable accounting standards;|
|i. Non-convertible debentures;|
|ii. Equity Shares;||b) For instrument valued at fair value:|
|iii. Preference Shares;||i. Assessed the availability of quoted prices in liquid markets;|
|iv. Venture Capital Funds; and|
|v. Alternate Investments Funds||ii. Assessed whether the valuation process is appropriately designed and captures relevant valuation inputs;|
|The aforementioned instruments are valued at amortized cost or fair value through Other Compressive Income (FVOCI) or fair value through Profit and Loss (FVTPL) depending upon the nature as summarized below: ||iii. Performed testing of the inputs/assumptions used in the valuation; and|
|iv. Assessed pricing model methodologies and assumptions against industry practice and valuation guidelines|
|1. Instrument valued at amortized cost:|
|a) Non-convertible debentures; and|
|b) Preference Shares||c) For instrument valued at amortized cost: Assessed the instrument for impairment by evaluating if there is any significant increase in credit risk which mainly involves:|
|2. Instrument valued at fair value through Other Comprehensive Income ('FVOCI'):|
|a) Equity Shares||i. Evaluating the regularity of the interest payment and principal repayment as per agreed plan/term of issuance of instrument where applicable; and|
|3. Instrument valued at fair value through Profit & Loss ('FVTPL'):|
|a) Venture Capital Funds; and||ii. Obtained the valuations of instruments where required;|
|b) Alternate Investments Funds|
|This is considered to be a significant area in view of the materiality of amounts involved judgements involved in determining of impairment/ recoverability of instruments measured at amortized cost which includes assessment of market data/conditions and financial indicators of the investee and judgements in selecting the valuation basis and the complexities involved in the valuation of instruments carried at FVTPL and FVOCI which includes assessment of the available trading yield of relevant instruments.||d) Assessed the appropriateness of the Company's description of the accounting policy and disclosures related to investments and whether these are adequately presented in the financial statements.|
|B) Litigations and claims- Provisions and Contingent Liabilities Refer note 23.1 and 40.1 to the Financial Statements||Our key procedures included but not limited to the following:|
|The Company has ongoing litigations with various authorities and third parties which could have a significant impact on the results if the potential exposures were to materialise.||a) Assessed the appropriateness of the Company's accounting policies relating to provisions and contingent liability by comparing with the applicable accounting standards; |
|The amounts involved are significant and the application of accounting standards to determine the amount if any to be provided as a liability or disclosed as a contingent liability is inherently subjective.||b) Assessed the Company's process and the underlying controls for identification of the pending litigations and completeness for financial reporting and also for monitoring of significant developments in relation to such pending litigations;|
|The level of management judgement associated with determining the need for and the quantum of provisions for any liabilities arising from these litigations is considered to be high. This judgement is dependent on a number of significant assumptions and assessments which involves interpreting the various applicable rules regulations practices and considering precedents in the various jurisdictions.||c) Assessed the Company's assumptions and estimates in respect of litigations including the liabilities or provisions recognized or contingent liabilities disclosed in the financial statements. This involved assessing the probability of an unfavourable outcome of a given proceeding and the reliability of estimates of related amounts;|
|This matter is considered as a key audit matter in view of the uncertainty regarding the outcome of these litigations the significance of the amounts involved and the subjectivity involved in management's judgement as to whether the amount should be recognized as a provision or only disclosed as contingent liability in the financial statements.||d) Performed substantive procedures on the underlying calculations supporting the provisions recorded;|
|e) Assessed the management's conclusions through understanding relevant judicial precedents in similar cases and the applicable rules and regulations; and|
|f) Assessed the appropriateness of the Company's description of the accounting policy disclosures related to litigations and whether these are adequately presented in the financial statements.|
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis Board's Report including Annexures to Board's Report Business Responsibility Report Corporate Governance and Shareholder's Information 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 during the course of our audit or otherwise appears to be materially misstated.
We have nothing to report in this regard.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act 2013 ('the Act') with respect to the preparation of these 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 Indian Accounting Standards ('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 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.
In preparing the financial statements the respective Board of Directors of the Company are 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 financial reporting process of the Company.
Auditor's Responsibility for the audit of Financial Statements
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.
As part of an audit in accordance with SAs 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 financial controls 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 ability of the Company 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.
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 consider quantitative materiality 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 identified 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 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
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-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.
(c) The Balance Sheet the Statement of Profit and Loss and Statement of Cash Flow and the statement in changes in equity dealt with by this Report are in agreement with the books of account.
(d) In our opinion the aforesaid financial statements comply with the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act.
(e) On the basis of 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.
(f) With respect to the adequacy of the internal financial controls over financial reporting of the company and the operation effectiveness of such controls refer to our separate report in Annexure- B. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting.
(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 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 statements as detailed in Note 23 and 40 to the Financial Statements.
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company.
|For VSD & Associates|
|Firm Registration No.: 008726N|
|Place : New Delhi||Partner|
|Dated: 10th June 2019||M.No.086666|
ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT
The Annexure referred to in our Independent Auditor's Report of even date to the members of the Company on the financial statements for the year ended 31st March 2019 we report that:
i) a) The Company has maintained proper records showing full particulars including quantitative details and situation of Property Plant & Equipment.
b) The company has planned program to physically verify assets in alternative years which in our opinion is reasonable having regards to the size of the company and the nature of the assets. In accordance with the said program certain property plant & equipment were verified during the year and no material discrepancies were noticed on such verification.
c) According to the information and explanations given to us and on the basis of our examination of the records of the Company the title deeds of immovable properties are held in the name of the Company.
ii) As per the explanations given to us inventories were physically verified during the year by the management at reasonable intervals and no material discrepancy was noticed on such verification.
iii) According to the information and explanations given to us the company has not granted any loans secured or unsecured to companies firms or other parties covered in the register maintained under section 189 of the Companies Act.
iv) In our opinion and according to the information and explanations given to us the Company has complied with the provisions of section 185 and 186 of the Act with respect to the loans and investments made.
v) The Company has not accepted any deposits from public.
vi) According to the information and explanations given to us the company is maintaining its cost records as per the form prescribed by the Central Government under sub-section (1) of section 148 of the Companies Act 2013 for the activities of the company. We have broadly reviewed the cost records made and maintained by the company and are of the opinion that prima facie the prescribed records have been made and maintained. We however not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
vii) a) The company is regular in depositing undisputed statutory dues including provident fund employees' state insurance income-tax sales-tax service tax duty of customs duty of excise value added tax and any other statutory dues with the appropriate authorities. There are no arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than six months from the date they became payable except as given below:
|S. No.||Name of the Statue||Nature of Due||Period to which it Relates||Amount (Rs. in lakh)||Date of Payment|
|1.||Jharkhand Value Added Tax Act 2005||VAT Liability||2013-14 & 2014-15||3.54||Not Paid|
(b) According to the records of the company there are no dues outstanding of Sales tax Wealth tax Service tax Custom duty Excise duty VAT and Cess on account of any dispute other than the following:-
|Name of The Statute||Nature of Dues||Year||Amount (Rs. in Lakh)*||Forum where dispute is Pending|
|Delhi Works Contract Act 1999||Demand Towards Work Contract Tax||2002-03||12.00||Deputy Commissioner (Appeals) Delhi|
|Andhra Pradesh General Sales Tax Act 1957(Central)||Demand towards Works Contract Tax||2001-02 2003-04||10.94||Commercial Tax Officer Andhra Pradesh|
|Gujarat State Sales Tax Act 1969||Demand towards work contract tax||1993-94||2.78||Deputy Commissioner (Appeals) Gujarat|
|Central Excise Act 1944||Demand towards Excise Duty||1998-99||5.82||Andhra Pradesh High Court|
|U P Municipal Laws (Cess Act)||Demand towards Water Cess||1992-93||0.60||Tehsildar Gaziabad (U.P.)|
|Central Excise Act 1944||Demand towards Excise Duty||2007-08||1.17||Additional Commissioner (Excise) Rohtak|
* Net of payments
viii) The company has not defaulted in repayment of loans or borrowing to a financial institution bank or Government. According to the information and explanations given to us there are no dues outstanding in respect of any debenture during the current financial year or any previous year.
ix) During the year the Company has not raised any funds through Initial/Further Public offer (including debt instruments) and the term loans were applied for the purpose for which they were obtained.
x) According to the information and explanations given to us no fraud on or by the Company has been noticed or reported during the course of our audit.
xi) According to the information and explanations give to us and based on our examination of the records of the Company the Company has paid or 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) The Company is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is not applicable.
xiii) According to the information and explanations given to us and based on our examination of the records of the Company transactions with the related parties are in compliance with section 177 and 188 of Companies Act 2013 and the details have been disclosed in the financial statements as required by the applicable accounting standards.
xiv) According to the information and explanations give to us and based on our examination of the records of the Company the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.
xv) According to the information and explanations given to us the company has not entered into any noncash transactions with directors or persons connected with him. Accordingly paragraph 3(xv) of the Order is not applicable.
xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.
|For VSD & Associates|
|Firm Registration No.: 008726N|
|Place : New Delhi||Partner|
|Dated: 10th June 2019||M.No.086666|
ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT
Report on the Internal Financial Controls under Clause (i) of Sub -section 3 of Section 143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls over financial reporting of ECE Industries Limited 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
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 as required under the Act.
Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with 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 and 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 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 financial 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 judgment including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate 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 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 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 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 and 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 at 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 Institute of Chartered Accountants of India.
|For VSD & Associates|
|Firm Registration No.: 008726N|
|Place : New Delhi||Partner|
|Dated: lOthJune 2019||M.No.086666|