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Finolex Cables Ltd.

BSE: 500144 Sector: Engineering
NSE: FINCABLES ISIN Code: INE235A01022
BSE 16:01 | 03 Jun 245.20 11.65
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NSE 15:57 | 03 Jun 246.05 11.70
(4.99%)
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OPEN 245.20
PREVIOUS CLOSE 233.55
VOLUME 3305
52-Week high 480.10
52-Week low 165.00
P/E 10.13
Mkt Cap.(Rs cr) 3,750
Buy Price 245.20
Buy Qty 5873.00
Sell Price 245.00
Sell Qty 3.00
OPEN 245.20
CLOSE 233.55
VOLUME 3305
52-Week high 480.10
52-Week low 165.00
P/E 10.13
Mkt Cap.(Rs cr) 3,750
Buy Price 245.20
Buy Qty 5873.00
Sell Price 245.00
Sell Qty 3.00

Finolex Cables Ltd. (FINCABLES) - Auditors Report

Company auditors report

To The Members of Finolex Cables Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of Finolex CablesLimited ("the Company") which comprise the Balance Sheet as at 31 March 2019and the Statement of Profit and Loss (including Other Comprehensive Income) the Statementof Cash Flows and the Statement of Changes in Equity for the year then ended and asummary of significant accounting policies and other explanatory information.

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 Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at 31 March 2019 and its profit totalcomprehensive income its cash flows and the changes in equity for the year ended on thatdate.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibility for the Audit of the Standalone Financial Statements section of our report.We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI) together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence obtained by us is sufficient and appropriate to provide abasis for our audit opinion on the standalone financial statements.

Key Audit Matters

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 period.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. We have determined the matter described below to be thekey audit matter to be communicated in our report.

Key Audit Matter Auditor's Response
Impairment of Investment in joint venture: (Refer Notes 2.3 (ii) 2.23 and 5 to the standalone financial statements.) Principal Audit Procedures
As at 31 March 2019 the Company held investment with a carrying amount of Rs. 52.01 crores (net of impairment Rs. 100.63 crores including Rs. 18.17 crores impaired during the year) in a joint venture - Finolex J-Power Systems Private Limited. This investment is carried at cost less impairment in the Company's standalone financial statements. We obtained an understanding of the Company's policies and procedures to identify impairment indicators for investment in joint venture and performed the following procedures in relation to the Company's management impairment assessment:
Due to continuous losses being incurred by the joint venture the Company's management has tested this investment for impairment in accordance with Ind AS 36 by comparing its recoverable amount with its carrying amount as at 31 March 2019 • We tested the design and operating effectiveness of the Company's management controls over review of the impairment assessment including those over the forecasts of future cash flows and the selection of the discount rate.
The recoverable amount of the investment in joint venture is assessed based on future discounted cash flows of the joint venture (Enterprise Value). • We evaluated the reasonableness of forecasts of future cash flows of the joint venture provided to us by the Company's management by comparing the forecasts to historical trend analysis.
• With the assistance of our fair value specialists we evaluated the reasonableness of the valuation methodology and discount rate.
We considered this as a key audit matter due to significant judgement involved in estimating future cash flows of the joint venture and in determining the discount rate to be used. Changes in these inputs and assumptions could impact the results of the impairment assessment. • We evaluated management's sensitivity analysis around the key assumptions to ascertain the extent of change in those assumptions that would be required for the investment in joint venture to be impaired further.

Information Other than the Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard's Report including Annexures to Board's Report Corporate Governance andShareholder's Information but does not include the consolidated financial statementsstandalone financial statements and our auditor's 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 during the course of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditor's Responsibility for the Audit of the Standalone Financial Statements

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 auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism 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 financial control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue 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.

Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone financial statements.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act based on our audit 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 Cash Flows and Statement of Changes in Equity dealt with by thisReport are in agreement with the books of account.

d) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under Section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2019 from being appointed as a director in terms of Section164(2) of the 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 A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.

g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended.

As more fully stated in Note 28.1 the reappointment and remuneration of the twoexecutive directors is pending before the Hon'ble High Court. Subject to the aforesaid inour opinion and to the best our information and according to the explanations given to usthe remuneration paid by the Company to its directors during the year is in accordancewith the provision of Section 197 of the Act.

h) 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 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone 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 except in respect of transfer ofequity shares as the Company is in process of ascertaining the quantum of shares to betransferred in terms of Investor Education and Protection Fund Authority (AccountingAudit Transfer and Refund) Rules 2016 as amended from time to time to the InvestorEducation and Protection Fund by the Company.

2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

For Deloitte Haskins & Sells LLP
Chartered Accountants
(Firm's Registration No. 1 17366W/W-100018)
Place: Pune R. A. Banga
Date: 29 May 2019 Partner
Membership Number: 037915

Annexure "A" to the Independent Auditor's Report

(Referred to in paragraph 1 (f) under 'Report on Other Legal and RegulatoryRequirements' section of our report of even date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of FinolexCables Limited ("the Company") as of 31 March 2019 in conjunction with ouraudit of the standalone Ind AS financial statements of the Company for the year ended onthat 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 company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting of the Company based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the Guidance Note) issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under Section 143(10) of the Act to theextent applicable to an audit of internal financial controls. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively 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 Company's internal financial controls systemover financial 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.

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31 March 2019 based on criteria for theinternal control over financial reporting established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For Deloitte Haskins & Sells LLP
Chartered Accountants
(Firm's Registration No. 1 17366W/W-100018)
R. A. Banga
Place: Pune Partner
Date: 29 May 2019 Membership Number: 037915

Annexure "B" to the Independent Auditors' Report

(Referred to in paragraph 2 under 'Report on Other Legal and Regulatory Requirements'section of our report of even date)

(i) In respect of its fixed assets (Property Plant and equipment):

(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The company has a program of verification to cover all the items of Property plantand equipment in a phased manner over a period of 3 years which in our opinion isreasonable having regard to the size of the Company and the nature of its assets. Pursuantto the program certain fixed assets were physically verified by the management during theyear. According to the information and explanations given to us no material discrepancieswere noticed on such verification.

(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed/ transfer deed/conveyancedeed/Possession Certificate/Lease agreement/Encumbrance Certificate provided to us wereport that the title deeds comprising all the immovable properties of land andbuildings which are freehold are held in the name of the Company as at the balance sheetdate except the following:

(Rs. In Crore)
Particulars of the land and building Gross Block as at the Balance Sheet date Net Block as at the Balance Sheet date Remarks
Freehold land located at Urse Taluka Maval Dist-Pune. PIN code-410506 1.93 1.93 As per the information given to us the title deed of the land is in the name of erstwhile AT & T Finolex Fibre Optic Cables Limited. The Company is in the process of updating the title deeds in the name of the Company.

In respect of immovable properties of land that have been taken on lease and disclosedas property plant and equipment in the financial statements the lease agreements are inthe name of the Company where the Company is the lessee in the agreements.

(ii) As explained to us the inventories lying with the Company were physicallyverified during the year by the Management at reasonable intervals and no materialdiscrepancies were noticed on physical verification. For inventory lying with thirdparties at the year-end written confirmations have been obtained.

(iii) The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Act. Accordingly the provisions of Clause (iii) of paragraph 3 of theOrder are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 185 and 186 of the Companies Act2013 in respect of grant of loans making investments and providing guarantees andsecurities as applicable.

(v) According to the information and explanations given to us the Company has notaccepted any deposits during the year. Therefore the provisions of the clause(v) ofparagraph 3 of the Order is not applicable to the Company.

(vi) The maintenance of cost records has been specified by the Central Government underSection 148(1) of the Companies Act 2013 in respect of its products. We have broadlyreviewed the cost records maintained by the Company pursuant to the Companies (CostRecords and Audit) Rules 2014 as amended prescribed by the Central Government undersub-section (1) of Section 148 of the Companies Act 2013 and are of the opinion thatprima facie the prescribed cost records have been made and maintained. We have howevernot made a detailed examination of the cost records with a view to determine whether theyare accurate or complete.

(vii) According to the information and explanations given to us in respect ofstatutory dues:

(a) The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income-tax Sales Tax Excise dutyService Tax Customs Duty Value Added Tax Goods and Services Tax Cess and othermaterial statutory dues applicable to it with the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income-tax Sales Tax Service Tax Customs Duty Excise Duty ValueAdded Tax Goods and Services Tax Cess and other material statutory dues in arrears as at31 March 2019 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax Wealth Tax Sales Tax Entry Tax Value added taxCustoms Duty and Excise duty which have not been deposited as on 31 March 2019 on accountof disputes are given below:

Name of Statute Nature of Dues Forum where Dispute is pending Period to which the amount relates Amount Unpaid (Rs. In crore)
The Central Sales Tax Act and Local Sales Tax Act Sales Tax Sales Tax - Tribunal 1992-1993 2003-2004 and 2012-2013 to 2014-2015 1.43
Commissioner (Appeal) 2013-2014 to 2014-2015 0.33
Joint Commissioner Sales Tax (Appeal) 2006-2007 2012-2013 and 2013-2014 0.50
Joint Commissioner Commercial of Tax (Appeal) 2009-2012 2010-2011 and 2012-2013 to 2014-2015 5.44
Deputy Commissioner of Commercial Tax 2007-2008 to 2010-2011 28.27
Deputy Commissioner of Sales Tax 2007-2008 2011-2012 to 2014-2015 and 2016-2017 1.97
Assistant Commissioner Commercial of Tax (Appeal) 2002-2003 2004-2005 2006-2007 to 2009-2010 and 201 1-2012 to 2016-2017 79.67
Goa Entry Tax Act 2000 Entry Tax Assistant Commissioner Commercial of Tax (Appeal) 2005-2006 to 2006-2007 2008-2009 to 2009-2010 and 201 1-2012 to 2012-2013 12.39
Income-Tax Act 1961 Income Tax Hon'ble Supreme Court 2002-2003 2.81
Hon'ble High Court 1993-1994 to 1996-1997 2000-2001 to 2003-2004 2010-201 1 and 2011-2012 22.30
Commissioner of Income Tax (Appeal) 2008-2009 2010-2011 2011-2012 and 2013-2014 6.87
Wealth Tax Act1957 Wealth Tax High Court 2002-2003 to 2004-2005 0.25
Customs Act 1962 Customs Duty Commissioner 1999-2000 1.34
Central Excise Act 1944 Excise Duty Customs Excise and Service Tax Appellate Tribunal 2005-2006 to 2015-2016 32.32
Commissioner (Appeal) 2012-2013 to 2016-2017 6.07
Additional Commissioner 2004-2005 to 2007-2008 2009-2010 and 2012-2013 to 2015-2016 7.17

(viii) The Company has not taken any loans or borrowings from financial institutionsbanks and government or has not issued any debentures. Accordingly the provisions ofClause (viii) of paragraph 3 of the Order are not applicable to the Company.

(ix) The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause (ix) ofparagraph 3 of the Order is not applicable to the Company.

(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no material fraud on the Company by its officersor employees has been noticed or reported during the year.

(xi) As more fully stated in note no. 28.1 the reappointment and remuneration of thetwo executive directors is pending before the Hon'ble High Court. Subject to the aforesaidin our opinion and according to the information and explanations given to us the Companyhas paid / provided managerial remuneration in accordance with the requisite approvalsmandated by the provisions of section 197 read with Schedule V to the Act.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) ofparagraph 3 of the Order is not applicable.

(xiii) In our opinion and according to the information and explanations given to usthe Company is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for transactions with the related parties and the details of related partytransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause (xiv) of paragraph 3 of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or persons connected with them and hence provisions of section 192 of the Actare not applicable.

(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.

For Deloitte Haskins & Sells LLP
Chartered Accountants
(Firm's Registration No. 1 17366W/W-100018)
Place: Pune R. A. Banga
Date: 29 May 2019 Partner
Membership Number: 037915