to the Members of ESAB INDIA LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of ESAB India Limited ("theCompany") which comprise the Balance Sheet as at March 31 2017 the Statement ofProfit and Loss and Cash Flow Statement for the year then ended and a summary ofsignificant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with accountingprinciples generally accepted in India including the Accounting Standards specified underSection 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014 and theCompanies (Accounting Standards) Amendment Rules 2016. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and the design implementationand maintenance of adequate internal financial control that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder. We conducted our audit in accordancewith the Standards on Auditing issued by the Institute of Chartered Accountants of Indiaas specified under Section 143(10) of the Act. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion on the financialstatements.
In our opinion and to the best of our information and according to the explanationsgiven to us the financial statements give the information required by the Act in themanner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2017 its profit and its cash flows for the year ended on that date.
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 ofthe Act we give in the Annexure 1 a statement on the matters specified in paragraphs 3and 4 of the Order.
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 bestof our knowledge and belief were necessary for the purpose of our audit; (b) In ouropinion proper books of account as required by law have been kept by the Company so far asit appears from our examination of those books; (c) The Balance Sheet Statement of Profitand Loss and Cash Flow Statement dealt with by this Report are in agreement with thebooks of account;
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014 and the Companies (Accounting Standards) Amendment Rules 2016;
(e) On the basis of written representations received from the directors as on March 312017 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2017 from being appointed as a director in terms of Section 164 (2) ofthe Act;
(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure 2" to this report;
(g) With respect to the other matters to be included in the Auditor's 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 of pending litigations on its financialposition in its financial statements - Refer Note 33 to the financial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any 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 Company has not provided certain disclosures in the financial statements as tothe holdings of Specified Bank Notes on November 8 2016 and December 30 2016 as well asdealings in Specified Bank Notes during the period from November 8 2016 to December 302016. Accordingly in the absence of information regarding denomination wise details weare unable to comment on the reporting to the extent stated in Note 32 of the financialstatements relating to opening balance as at November 8 2016 and the dealings inSpecified Bank Notes during the period from November 8 2016 to December 30 2016 andconsequently do not report on the same. However the disclosures given in the total columnis in accordance with the books of account.
Annexure 1to the Independent Auditors' Report of even date on the financialstatements of ESAB India Limited
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) Fixed assets have been physically verified by the management during the year and nomaterial discrepancies were identified on such verification. (c) According to theinformation and explanations given by the management the title deeds of immovableproperties included in fixed assets are held in the name of the Company.
(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification.
(iii) (a) According to the information and explanations given to us the Company hasnot granted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii)(a)(b) and (c) of theOrder are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities granted in respect of whichprovisions of Section 185 and 186 of the Companies Act 2013 are applicable and hence notcommented upon.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of 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 pursuantto the rules made by the Central Government for the maintenance of cost records underSection 148 (1) of the Companies Act 2013 related to the products of the Company andare of the opinion that prima facie the specified accounts and records have been made andmaintained. We have not however made a detailed examination of the same. (vii) (a)Undisputed statutory dues including provident fund employees' state insurance sales taxduty of custom duty of excise value added tax income tax service tax cess and othermaterial statutory dues have generally been regularly deposited with the appropriateauthorities though there have been slight delays in few cases relating to provident fundservice tax and tax deducted at source.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxsales tax duty of custom duty of excise value added tax cess and other materialstatutory dues were outstanding at the year end for a period of more than six monthsfrom the date they became payable.
(c) According to the records of the Company the dues outstanding of income-taxsales-tax service tax value added tax excise duty and cess on account of any disputeare as follows:
|Name of the Statute ||Nature of Dues ||Amount * ($ in lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
| || ||1036 ||1991 - 00 ||Revision Board Tribunal |
|Sales Tax ||Non Submission of Sales tax Forms ||22 ||2012 - 13 ||Joint Commissioner Sales tax (Appeals) |
| || ||105 ||2011 - 15 ||Madras High Court |
|VAT ||Disputed VAT Credit ||7 ||2012-13 ||Joint Commissioner Sales tax (Appeals) |
| || ||1010 ||1997-00 ||Hon'ble High Court of Kolkata. |
| || ||456 ||1996-00 ||Central Excise & Service Tax |
| || || || ||Appellate Tribunal |
|Central Excise Act 1944 ||Excise duty || || || |
| || ||410 ||2007-11 ||Commissioner of Central Excise (Appeals) |
| || ||1 ||2011-13 ||Commissioner of Central Excise |
| || ||44 ||Various periods ||Various forums |
| || ||1 ||2012 - 13 ||Central Excise & Service Tax |
| || || || ||Appellate Tribunal |
|Finance Act 1994 ||Service Tax ||107 ||2006-11 ||Commissioner of Central Excise (Appeals) |
| || ||6 ||2008-11 ||Central Excise & Service Tax |
| || || || ||Appellate Tribunal |
| || ||1 ||AY 1997-98 ||Income Tax Appellate Tribunal |
|Income Tax Act 1961 ||Income Tax || || || |
| || ||50 ||AY 2004-05 ||Commissioner of Income Tax (Appeals) |
| || ||6 ||AY 2013-14 ||Commissioner of Income Tax (Appeals) |
* Out of the total disputed dues an amount of $.40.0 lakhs for excise andservice tax related matters $. 5.7 lakhs for income tax matters and $.81.0lakhs for sales tax matters was pre-deposited by the Company.
(viii) The Company did not have any outstanding loans or borrowing dues in respect of afinancial institution or bank or to government or dues to debenture holders during theyear.
(ix) According to the information and explanations given by the management the Companyhas not raised any money by way of initial public offer / further public offer / debtinstruments and term loans hence reporting under Clause (ix) is not applicable to theCompany and hence not commented upon.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or no fraud on the Companyby the officers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the CompaniesAct 2013.
(xii) In our opinion the Company is not a nidhi company.
Therefore the provisions of Clause 3 (xii) of the order are not applicable to theCompany and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with Section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under Clause 3 (xiv) are not applicable tothe Company and not commented upon.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in Section 192 of Companies Act 2013.
(xvi) According to the information and explanation given to us the provisions ofSection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
Annexure 2to the Independent Auditors' Report of even date on the financialstatements of ESAB India Limited
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of ESAB IndiaLimited ("the Company") as of March 31 2017 in conjunction with our audit ofthe 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 internalfinancial controls 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing as specified under Section143 (10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls and both issued by the Institute of Chartered Accountants of India.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls system overfinancial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of theCompany'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 financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2017 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
| ||For S R BATLIBOI & ASSOCIATES LLP |
| ||Chartered Accountants |
| ||ICAI Firm Registration No. 101049W / E300004 |
| ||per S Balasubrahmanyam |
|Place : Chennai ||Partner |
|Date : May 25 2017 ||Membership No. 053315 |