To the Members of Elgi Equipments Limited
Report on the audit of the Standalone financial statements
1. We have audited the accompanying standalone financial statements of Elgi EquipmentsLimited ("the Company") which comprise the balance sheet as at March 31 2021the statement of Profit and Loss (including Other Comprehensive Income) statement ofchanges in equity and the statement of cash flows for the year then ended and notes tothe financial statements including a summary of significant accounting policies and otherexplanatory information in which are included the financial information of two jointoperations.
2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at March 31 2021 and total comprehensive income(comprising of profit and other comprehensive income) changes in equity and its cashflows for the year then ended.
Basis for opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditors Responsibilities for the Audit of the StandaloneFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Act and the Rules thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedand the audit evidence obtained by the other auditors in terms of their reports referredto in sub-paragraph 14 of the Other Matter paragraph below is sufficient and appropriateto provide a basis for our opinion.
Emphasis of Matter
4. We draw your attention to Note 51 to the standalone financial statements whichexplains the managements assessment of the impact of the outbreak of Coronavirus(COVID-19) pandemic on the business operations of the Company. In view of the uncertaineconomic environment a definitive assessment of the impact on the subsequent periods ishighly dependent upon circumstances as they evolve.
Our opinion is not modified in respect of this matter.
Key audit matters
5. Key audit matters are those matters that in our professional judgment were of mostsignificance 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 financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.
|Key Audit Matter ||How our audit addressed the key audit matter |
|Assessment of carrying value of investment in subsidiaries and joint ventures (Refer Note 6 to the standalone financial Statements) ||Our audit procedures included the following: |
|As at March 31 2021 the Company has equity investments of ` 1692.46 million in its subsidiaries and joint ventures. ||Understood and performed procedures to assess the design and tested the operating effectiveness of relevant controls related to the annual evaluation on assessment of carrying value of investments. |
|The Company reviews the carrying value of these investments at each reporting period. Where considered necessary the Company performs a detailed assessment as required under Ind AS 36 We considered the assessment of carrying value of investments as a key audit matter considering its significance to the standalone financial statements and where applicable the judgement involved in estimating future cash flows particularly with respect to factors such as discount rates cash flow projections and terminal growth rates. ||Obtained audited financial statements of the the subsidiaries and joint ventures and tested the Companys assessment with regard to key financial indicators including net worth of those respective subsidiaries and joint ventures with the carrying value of the investments made in those entities. |
| ||In relation to a subsidiary where future cash flow projections were prepared evaluated the reasonableness of these projections by discussing with the management understanding the assumptions involved and our knowledge and understanding of current business conditions. |
| ||Evaluated along with the auditors experts the key assumptions such as discount rate and growth rate used in the preparation of the cash flow projections. |
| ||Read the subsidiaries and joint ventures financial statements and auditors report and discussed with the auditors of the subsidiary companies in relation to the work performed by them on the subsidiary Company financial statements including any impairment evaluation carried out by them at the subsidiary level. |
| ||We evaluated the adequacy of the disclosures made in the standalone financial statements. |
| ||Based on above procedures performed the managements assessment of carrying value of investments in subsidiaries and joint ventures was reasonable. |
6. The Companys Board of Directors is responsible for the other information. Theother information comprises the information included in the Management Discussion andAnalysis Boards Report including Annexures to Board report and Report on CorporateGovernance but does not include the standalone financial statements and ourauditors report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed and the reports of the other auditors as furnished to us (Referparagraph 14 below) we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of management and those charged with governance for the standalonefinancial statements
7. The Companys Board of Directors is responsible for the matters stated insection 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the financial position financialperformance changes in equity and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.
8. In preparing the standalone financial statements management is responsible forassessing the Companys ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so. Those Board of Directors arealso responsible for overseeing the Companys financial reporting process.
Auditors responsibilities for the audit of the standalone financial statements
9. Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditors report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these standalone financial statements.
10. As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign 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 hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of managements use of the going concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompanys ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditors report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditors report. However future events or conditionsmay cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Obtain sufficient appropriate audit evidence regarding the financial informationof the Company and its joint operations to express an opinion on the Standalone financialstatements. We are responsible for the direction supervision and performance of the auditof the financial statements of the Company of which we are the independent auditors. Forthe joint operations included in the standalone financial statements which have beenaudited by other auditors such other auditors remain responsible for the directionsupervision and performance of the audits carried out by them. We remain solelyresponsible for our audit opinion.
11. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
12. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
13. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the standalone financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditors report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
14. We did not audit the financial statements of two joint operations included in thestandalone financial statements of the Company which constitute Companys share oftotal assets of ` 126.76 million and net assets of ` 124.40 million as at March 31 2021total revenue of ` Nil total net profit after tax of ` 0.05 million total comprehensiveincome (comprising of profit and other comprehensive income) of ` 0.05 million and netcash outflows amounting to ` 0.26 million for the year then ended. These financialstatements and other financial information have been audited by other auditors whosereports have been furnished to us and our opinion on the standalone financial statements(including other information) to the extent they have been derived from such financialstatements is based solely on the report of such other auditors.
Our opinion is not modified in respect of the above matter.
Report on other legal and regulatory requirements
15. As required by the Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure B a statement on the matters specified inparagraphs 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 bestof 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 theCompany so far as it appears from our examination of those books.
(c) The balance sheet the statement of profit and loss (including other comprehensiveincome) the statement of changes in equity and the statement of cash flow dealt with bythis Report are in agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors on April 12021 taken on record by the Board of Directors none of the directors is disqualified ason March 31 2021 from being appointed as a director in terms of Section 164 (2) of theAct.
(f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure A".
(g) With respect to the other matters to be included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact if any of pending litigations on itsfinancial position in its standalone financial statements - Refer Note 43 to thestandalone financial statements.
ii. The Company has long-term contracts including derivative contracts as at March 312021 for which there were no material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
iv. The reporting on disclosures relating to Specified Bank Notes is not applicable tothe Company for the year ended March 31 2021.
17. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct.
For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/N500016
Membership Number: 213126
Date: May 21 2021
Annexure A to Independent Auditors Report
Referred to in paragraph 16(f) of the Independent Auditors Report of even date tothe members of Elgi Equipments Limited on the standalone financial statements for the yearended March 31 2021
Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the Act
1. We have audited the internal financial controls with reference to financialstatements of Elgi Equipments Limited ("the Company") as of March 31 2021 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
Managements Responsibility for Internal Financial Controls
2. The Companys management is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India (ICAI). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to companys policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.
3. Our responsibility is to express an opinion on the Companys internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls with reference to financial statementswas established and maintained and if such controls operated effectively in all materialrespects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditorsjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Companys internal financial controlssystem with reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
6. A companys internal financial controls with reference to financial statementsis a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A companys internalfinancial controls with reference to financial statements includes those policies andprocedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the companys assets that could havea material effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference to financialstatements
7. Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
8. In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as atMarch 31 2021 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. Also refer paragraph 4 of themain audit report.
For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/N500016
Membership Number: 213126
Date: May 21 2021
Annexure B to Independent Auditors Report
Referred to in paragraph 15 of the Independent Auditors Report of even date tothe members of Elgi Equipments Limited on the standalone financial statements for the yearended March 31 2021
i. (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets are physically verified by the Management according to a phasedprogramme designed to cover all the items over a period of three years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. Pursuant to the programme a portion of the fixed assets has been physicallyverified by the Management during the year and no material discrepancies have been noticedon such verification.
(c) The title deeds of immovable properties as disclosed in Note 3(a) and 4 onProperty Plant and Equipment and Investment Property respectively to the financialstatements are held in the name of the Company.
ii. The physical verification of inventory excluding stocks with third parties havebeen conducted at reasonable intervals by the Management during the year. In respect ofinventory lying with third parties these have substantially been confirmed by them. Thediscrepancies noticed on physical verification of inventory as compared to book recordswere not material.
iii. The Company has granted unsecured loans to four parties being wholly-ownedsubsidiaries covered in the register maintained under Section 189 of the Act.
(a) In respect of the aforesaid loans the terms and conditions under which such loanswere granted are not prejudicial to the Companys interest.
(b) In respect of the loans to two parties the schedule of repayment of principal andpayment of interest has been stipulated. However in the absence of any amount falling dueduring the year the situation for commenting on the regularity of repayment of principaland payment of interest does not arise.
In respect of loans to other two parties loans and interest are repayable on demand.With respect to one of the above loan the Company has demanded repayment of loan andinterest during the year and the same has been duly repaid in full. With respect to otherloan relating to a wholly-owned subsidiary amounting to INR 73.56 million which is underliquidation the Company received the final settlement of INR 18.21 million and theremaining balance of loan amounting to INR 55.35 million has been provided for in thestandalone financial statements.
(c) In respect of the aforesaid loans there is no amount which is overdue for morethan ninety days.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of the loans and investments made and guarantees and security provided by it.
v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified.
vi. Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products. We have broadly reviewed the same and are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We have nothowever made a detailed examination of the records with a view to determine whether theyare accurate or complete.
vii. (a) According to the information and explanations given to us and the records ofthe Company examined by us in our opinion the Company is generally regular in depositingundisputed statutory dues in respect of provident fund though there has been a slightdelay in a few cases and is regular in depositing undisputed statutory dues includingemployees state insurance income tax duty of customs goods and service tax andother material statutory dues as applicable with the appropriate authorities.
Also refer note 43 to the financial statements regarding managements assessmenton certain matters relating to provident fund.
Further for the period April 01 2020 to April 30 2020 the Company has paidGoods and Services Tax and filed GSTR-3B after the due date but within the timelinesallowed by Central Board of Indirect Taxes and Customs under the Notification 31/2020 -Central Tax dated April 03 2020 and Notification 32/2020 - Central Tax dated April 032020 on fulfillment of conditions specified therein.
(b) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of income-tax duty of customs and goods andservice tax which have not been deposited on account of any dispute. The particulars ofdues of sales tax service tax duty of excise and value added tax as at March 31 2021which have not been deposited on account of a dispute are as follows:
|Name of the statute ||Nature of dues ||Amount (in Million)* ||Period to which the amount relates ||Forum where the dispute is pending |
|The Central Excise Act 1944 ||Excise Duty ||2.57 ||FY 2011-12 FY 2007-08 to ||Additional Commissioner Customs Excise Service |
|Finance Act1994 ||Service Tax ||3.56 ||FY 2012-13 ||tax Appellate Tribunal Joint Commissioner (CT) |
|The Central Sales Tax Act 1956 ||Central Sales Tax || ||FY 2015-16 ||Appeals |
|The Central Sales Tax Act 1956 ||Central Sales Tax || ||FY 2012-13 to FY 2014-15 ||Central Sales Tax Appellate Authority |
|The Central Sales Tax Act 1956 ||Central Sales Tax ||5.31 ||FY 2004-05 2011-12 ||Honourable High Court of Madras |
|Tamil Nadu Value Added Tax Act 2006 ||VAT ||7.70 ||FY 2004-05 2013-14 ||Honourable High Court of Madras |
*Net of amount paid under protest amounting to INR 44.08 Million.
viii. According to the records of the Company examined by us and the information andexplanation given to us the Company has not defaulted in repayment of loans or borrowingsto any financial institution or bank or Government as applicable at the balance sheetdate. The Company has not issued any debentures.
ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans. Accordingly the provisions ofClause 3(ix) of the Order are not applicable to the Company.
x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.
xi. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct. Also refer paragraph 17 of our main audit report.
xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto 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 withthe provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required under IndianAccounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 ofthe Act.
xiv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions 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 orpersons connected with him. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.
xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Orderare not applicable to the Company.
For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/N500016
Membership Number: 213126
Date: May 21 2021