The Members of
HBL Power Systems Limited
REPORT ON THE AUDIT OF THE STANDALONE
We have audited the accompanying standalone Ind As financial statements of HBL PowerSystems Limited Hyderabad("the Company") which comprise the Balance Sheetas at March 31 2019 the statement of profit and loss statement of changes in equity andstatement of cash flows for the year then ended and notes to the financial statementsincluding a summary of significant accounting policies and other explanatoryinformation.(hereinafter referred to as " the financial statements")
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("the Act') in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 and its profit changes in equity andits cash flows for the year ended on that date.
Basis for opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143 (10) of the Companies Act 2013. Our responsibilities under thosestandards are further described in the Auditor's Responsibilities for the Audit of theFinancial 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 thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion on thestandalone financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificant in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
|Key Audit Matter ||Auditor's response |
|Recognition measurement estimation presentation and disclosures in view of adoption of new Ind AS 115 on "Revenue from contracts with Customers" ||We assessed the Company's internal process for adoption and evaluating the impact of new Ind AS. Our audit approach comprised of design and testing of effectiveness of internal controls and procedures which was as follows. |
|The application of the new Ind AS 115 from current year involves certain key judgments estimation identification of distinct performance obligations determination of transaction price measurement of revenue recognition and disclosures including presentations of balances in the financial statements. || Evaluated the process of implementation of the new Ind AS on revenue recognition and effectiveness of controls over the preparation of information that is designed to ensure completeness and accuracy. |
|Refer Note 42.3 to the financial statements. || Selected a sample of existing continuing contracts and new contracts and tested the operative effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price. |
| || Tested the relevant information accounting systems and change relating to contracts and related information used in recording and disclosing revenue and presentation of contract balances and trade receivables in accordance with the Ind AS |
| || Performed analytical procedures for reasonableness of revenue including the consideration of comparisons of the financial information population relationship and applying concept of materiality |
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 management report and chairman'sstatement 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 donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the standalonefinancial 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 standalone financial statements that give a true and fair view of the financialposition financial performance changes in equity and cash flows of the company inaccordance with the accounting principles generally accepted in India including theAccounting Standards (Ind AS) specified under Section 133 of the Act.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the financial statements the Board of Directors 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 unlessthe Board of Directors either intends to liquidate the Company or to cease operations orhas no realistic alternative but to do so.
Those Directors are also responsible for overseeing the Company's financial reportingprocess.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
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 Companies Act 2013 we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls system in place and theoperating 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 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 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'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financial statementsincluding the disclosures and whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.
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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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 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 A" a statement on the matters specified inparagraphs 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 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 and statement of changes inequity and the cash flow statement dealt with by this report are in agreement with thebooks of account.
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards prescribed under Section 133 of the Act read with rule 7 of theCompanies (Accounts) Rules 2014.
(e) On the basis of the written representations received from the Directors as on March31 2019 taken on record by the Board of Directors none of the Directors is disqualifiedas on March 31 2019 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 over financialreporting of the company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B" and
(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 38.2 to the standalone financialstatements.
ii. The company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
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.
| ||For Rao & Kumar |
| ||Chartered Accountants |
| ||Firm Registration No: 03089S |
|Place: Hyderabad ||S.S.Bharadwaj |
|Date: 30.05.2019 ||Partner |
| ||Membership No. 26113 |
Annexure - A
(Referred to in Paragraph 1 of 'Report on other Legal and Regulatory requirements' inour report of even date)
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The management has carried out physical verification of assets in accordance with adesigned programme. In our opinion the periodicity of the physical verification isreasonable. No material discrepancies were noticed on such verification.
(c) According to the information and explanations furnished to us and on the basis ofour examination of the records of the company and read together with Note no. 4.2 of thefinancial statements the details of title deeds of immovable properties not held in thename of the company for the reasons stated therein the said note are as follows:
|Fixed Asset ||No. of Cases ||Gross block as at March 312019 ||Net block as at March 312019 |
|Freehold Land ||8 ||508.83 ||508.83 |
|Non-Factory Buildings ||2 ||118.44 ||79.05 |
|Total ||10 ||626.27 ||587.88 |
(ii) The Inventories within the factory premises/stores and at branches have beenphysically verified by the management during the year and also at the year end. Formaterials lying with ancillary parties confirmations have been obtained in some cases. Inour opinion the frequency of verification is reasonable. The discrepancies noticed uponverification between physical stocks and book records were not material and suchdifferences have been properly dealt with in the books of account.
(iii) As at the year end there are no outstanding loans granted by the Company toparties covered in the register maintained under Section 189 of the Act. As there are nooutstanding loans as at March 31 2019 Paragraph 3 (iii) (a) to (c) of the Order isconsidered inapplicable.
(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 Act with respectto the loans investments guarantees and security.
(v) The company has not accepted any deposits to which provisions of Sections 73 to 76and other relevant provisions of the Act are 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 of the Act and are of the opinion that prima- facie the prescribed accountsand records have been made and maintained. We have not however made a detailedexamination of the same.
(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the company the company is regular in depositing theundisputed statutory dues including Provident Fund Employees' State InsuranceIncome-Tax Sales-Tax Service Tax Duty of Customs Duty of Excise Value Added TaxCess Goods and Services Tax (GST) and other statutory dues with the appropriateauthorities
(b) According to the information and explanations given to us the following demandshave not been deposited on account of disputes.
|Name of the Statute ||Nature of the dues and Period to which it relates ||Amount ' in Lakhs ||Forum where the dispute is pending as at March 312019 |
| || || || |
|Excise Act ||Duty on Intermediate goods for the period from 1994-95 to 1998-99. ||94.85 ||Departmental Appeal before High Court Mumbai |
|Excise Act ||Duty relating to irregular availment of benefit for the period 201011 Feb - May 2013 Dec-08 to March 13 and Feb-14 to Dec- 14 ||433.03 ||CESTAT Hyderabad |
|Excise Act ||Duty relating to irregular availment of CENVAT credit for 2014-15 and duty on receipt of sales tax reimbursement for years from 2012 to 2015 ||159.70 ||Commissioner Appeals Visakhapatnam |
|Finance Act ||Duty on classification of service as works contract service for 2017-18 ||2.91 ||CESTAT Hyderabad |
|Customs Act ||Duty and penalty on alleged wrong classification and claim for exemption ||488.70 ||Tribunal Chennai. |
|CST Act ||Tax on deemed exports for the year 2005-06 and 2007-08 ||71.91 ||TSVATAT Hyderabad |
|CST Act ||Tax demand due to non-submission of forms for the years 2010-11 and 2011-12 ||3.85 ||CT Appeals Lucknow |
|KVAT Act ||Tax on alleged variation in Stocks escaped turnover and nonfiling of forms for the years 2010-11 March 2012 2011-12 and 2015-16 ||87.35 ||Deputy Commissioner Appeals Ernakulum. |
|TS VAT Act ||Tax on disallowance of input tax credit for the years 2011-12 and 2012-13 ||5.79 ||TSAVATAT Hyderabad |
|TNVAT Act ||Tax alleged ineligible claim for the month of February 2011 ||46.05 ||TN Tribunal Chennai |
|Bihar VAT Act ||Tax on additions to turnover and non-reversal of entry tax credit for the years from 2011-12 to 2014-15 ||38.02 ||CCT Appeals Patna |
|Haryana VAT Act ||Tax on disallowance of input tax credit for the year 2011-12 ||16.22 ||JETC Appeals Faridabad |
|Entry Tax ||Tax on disallowance of imported goods used in manufacturing for the years from 2012-13 to 2016-17 ||201.78 ||ADC Hyderabad |
|Entry Tax ||Tax on disallowance of imported goods used in manufacturing for the years from 2014-15 to 2017-18 ||63.68 ||ADC Vijayawada |
|CST Act ||Tax on disallowance of exempted exports ||109.34 ||ADC Hyderabad |
|KVAT Act ||Tax and penalty demanded for defects in documents of transport ||3.02 ||DCCT Appeals Ernakulam |
|KVAT Act ||Tax and penalty demanded for defects in documents of transport ||3.39 ||DC Appeals Thiruvananthapuram |
|UP VAT Act ||Tax and penalty demanded for defects in documents of transport ||20.94 ||High Court Lucknow |
|UP VAT Act ||Tax and penalty demanded for defects in documents of transport ||2.20 ||DCCT Kanpur |
|Income Tax Act ||Tax on disallowance of warranty expenditure for the year 201516 ||190.57 ||CIT Appeals Hyderabad |
(viii) In our opinion and according to the information and explanations given to usthe company has not defaulted in repayment of loans or borrowings to a financialinstitution Bank or Government. The company had not issued any Debentures.
(ix) The Company had not raised any money by way of Initial Public Offer or furtherPublic Offer (including Debt Instruments). Based on review of the records of the term loandrawn and utilization thereof on an overall basis the term loans have been applied forthe purposes for which the loans were raised
(x) Based upon the audit procedures performed for the purpose of reporting true andfair view of the financial statements and as per the information and explanations given bythe management we report that no fraud by the Company or on the Company by its Officersor employees has been noticed or reported during the year.
(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid / provided for ManagerialRemuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly Paragraph 3 (xii) of the Order is notapplicable.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company the transactions with related parties are incompliance with Section 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableAccounting Standards.
(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into Non-Cashtransactions with Directors or persons connected with them. Accordingly Paragraph 3(xv) ofthe Order is not applicable.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
| ||For Rao & Kumar |
| ||Chartered Accountants |
| ||Firm's Registration Number 03089S |
| ||S.S.Bharadwaj |
| ||Partner |
| ||Membership Number 26113 |
|Place : Hyderabad || |
|Date: 30.05.2019 || |
Annexure - B
(Referred to in paragraph 2(f) of 'Report on other Legal and Regulatory requirements'in our report of even date)
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 HBL PowerSystems Limited ("the Company") as of March 31 2019 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.
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 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 to the extent applicable toan audit of internal financial controls both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls 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 qualified audit opinion on the Company's internal financialcontrols system over 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:: IFC 3 :: financial reporting may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.
In our opinion the unit has in all material respects an adequate internal financialcontrol system over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at March 31 2019 based on the internalcontrol over financial reporting criteria 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 Rao & Kumar |
| ||Chartered Accountants |
| ||Firm's Registration Number 03089S |
| ||S.S.Bharadwaj |
| ||Partner |
| ||Membership Number 26113 |
|Place : Hyderabad || |
|Date: 30.05.2019 || |