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Hindustan Aeronautics Ltd.

BSE: 541154 Sector: Engineering
NSE: HAL ISIN Code: INE066F01012
BSE 00:00 | 27 Mar 525.00 29.35
(5.92%)
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538.00

HIGH

594.75

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516.00

NSE 00:00 | 27 Mar 525.15 27.90
(5.61%)
OPEN

505.00

HIGH

595.00

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OPEN 538.00
PREVIOUS CLOSE 495.65
VOLUME 15688
52-Week high 896.35
52-Week low 448.00
P/E 6.47
Mkt Cap.(Rs cr) 17,555
Buy Price 520.00
Buy Qty 10.00
Sell Price 525.00
Sell Qty 30.00
OPEN 538.00
CLOSE 495.65
VOLUME 15688
52-Week high 896.35
52-Week low 448.00
P/E 6.47
Mkt Cap.(Rs cr) 17,555
Buy Price 520.00
Buy Qty 10.00
Sell Price 525.00
Sell Qty 30.00

Hindustan Aeronautics Ltd. (HAL) - Auditors Report

Company auditors report

To

The Members of M/s. Hindustan Aeronautics Limited

15/1 Cubbon Road Bengaluru- 560 001

Report on the Consolidated Ind AS Financial Statements:

1. We have audited the accompanying consolidated Ind AS financial statements of M/s.Hindustan Aeronautics Limited (hereinafter referred to as the “HoldingCompany”) and its subsidiaries (the Holding Company and its subsidiaries togetherreferred to as “the Group”) and its Joint ventures comprising the ConsolidatedBalance Sheet as at 31st March 2018 and the Consolidated Statement of Profitand Loss (including Other Comprehensive Income) the Consolidated Statement of Cash FlowsConsolidated Statement of Changes in Equity for the year then ended and a summary of thesignificant accounting policies and other explanatory information (hereinafter referred toas “the consolidated Ind AS financial statement”).

Management's Responsibility for the Consolidated Ind AS Financial Statements:

2. The Holding Company's Board of Directors is responsible for the preparation of theseconsolidated Ind AS financial statements in terms of the requirements of the CompaniesAct 2013 (hereinafter referred to as “the Act”) that give a true and fair viewof the consolidated financial position consolidated financial performance (includingother comprehensive income) consolidated cash flows and consolidated statement of changesin equity of the Group including its joint ventures in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)prescribed under Section 133 of the Act read with relevant rules issued thereunder. Therespective Board of Directors of the companies included in the Group and its jointventures are responsible for maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Group and its joint venturesand for preventing and detecting frauds and other irregularities; the selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe consolidated Ind AS financial statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error which have been used for thepurpose of preparation of the consolidated Ind AS financial statements by the Directors ofthe Holding Company as aforesaid.

Auditor's Responsibility:

3. Our responsibility is to express an opinion on these consolidated Ind AS financialstatements based on our audit. While conducting the audit we have taken into account theprovisions of the Act the accounting and auditing standards and matters which arerequired to be included in the audit report under the provisions of the Act and the Rulesmade thereunder.

4. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe consolidated Ind AS financial statements are free from material misstatement.

5. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the consolidated Ind AS financial statements. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the consolidated Ind AS financial statements whether due tofraud or error. In making those risk assessments the auditor considers internal financialcontrol relevant to the Holding Company's preparation of the consolidated Ind AS financialstatements that give a true and fair view in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness ofthe accounting policies used and the reasonableness of the accounting estimates made bythe Holding Company's Board of Directors as well as evaluating the overall presentationof the consolidated Ind AS financial statements.

6. We believe that the audit evidence obtained by us and the audit evidence obtained bythe other auditors in terms of their reports referred to in para 13 of the Other Mattersparagraph below is sufficient and appropriate to provide a basis for our audit opinion onthe consolidated Ind AS financial statements

Opinion:

7. In our opinion and to the best of our information and according to the explanationsgiven to us and based on the consideration of reports of other auditors on separate Ind ASfinancial statements and on the other financial information of the subsidiaries and jointventures the aforesaid consolidated Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India including the Ind AS of theconsolidated financial position of the Group and its joint ventures as at 31stMarch 2018 and their consolidated financial performance including other comprehensiveincome their consolidated cash flows and consolidated statement of changes in equity forthe year ended on that date.

Emphasis of Matter:

8. The auditors of M/s. HATSOFF Helicopter Training Private Limited a joint venture ofthe Group have drawn attention to the following in their audit report vide dated 19thApril 2018 which has been reproduced by us as under:

a) Clause 10(i) of Note No 49 to the consolidated Ind AS financial statements whichindicate that though the Company has made a net profit of H917.80 lakhs during the yearended 31st March2018 (Previous Year - H1044.59 lakhs) and as of that date;the Company's current liabilities exceeded its current assets by H7820.14 Lakhs (previousyear - H7515.70 lakhs). In addition to this as at the balance sheet date the Companyhas accumulated losses which have resulted in erosion of the net worth. The net worth ofthe Company as at 31st March 2018 is negative by H2465.21 lakhs (PreviousYear: negative by H3383 lakhs). As per the management representation duly noted by theBoard at its 54th Board meeting held on the 19th April 2018 whereinthe management has assessed the entity as going concern despite the existence of abovestated uncertainties and has assessed its ability to meet the obligations that are fallingdue.

b) Clause 10(i) of Note No 49 to the consolidated Ind AS financial statements whereinExternal Commercial Borrowing Loan classified as a Non-Performing Asset is shown as LongTerm borrowings as proposal by the bank to restructure the loan is pending as the termsare yet to be complied by the company.

9. The auditors of M/s. Halbit Avionics Private Limited a joint venture of the Grouphave drawn attention to the following in their audit report vide dated 12thApril 2018 which has been reproduced by us as under:

a) Clause 10(iii)(a) of Note No 49 in the consolidated Ind AS financial statementswhich indicates that the Company has a net liability position net current liabilityposition as well as negative cash flow from operating activities for the year ended 31stMarch 2018. These conditions indicate the existence of a material uncertainty which maycast significant doubt about the Company's ability to continue as a going concern.However in view of company's future plans and other factors as brought out in the saidNote the financial statements have been prepared under the going concern assumptions.

b) Clause 10(iii)(b) of Note No 49 to the consolidated Ind AS financial statementswhich indicates that the Company has not appointed Company Secretary as required by theCompanies Act 2013;

c) Clause 10(iii)(c) of Note No 49 to the consolidated Ind AS financial statementswhich indicates that the Company has not remitted its tax dues of Central Excise andKarnataka VAT since August 2015;

d) Clause 10(iii)(d) of Note No 49 to the consolidated Ind AS financial statement whichindicates that the balances of trade receivables and trade payables are subject toconfirmation by the parties and reconciliation.

10. The auditors of M/s. Tata HAL Technologies Limited a joint venture of the Grouphas drawn attention to the following in their audit report vide dated 12thApril 2018 which has been reproduced by us as under:

a) The Company has incurred a net loss of H142.58 lakhs and other Comprehensive Loss ofH1.47 lakhs for the year ended March 31 2018 and as of that date the Company hasaccumulated losses of H990.02 lakhs and its net worth has been substantially eroded. Asstated in Clause 10(iv) of Note No 49 to the consolidated Ind AS financial statementthese events or conditions along with other matters as set forth in said note indicatethat a material uncertainty exists that may cast significant doubt on the Company'sability to continue as a going concern subject to the Company raising adequate financesfrom the promoters.

b) Clause 10(iv) of Note No 49 to the consolidated Ind AS financial statements whichdetails that the Company has recognised accrued income H26.50 lakhs towards sale ofservices for which Purchase Orders are not yet received and are accounted based on therates agreed with customer being continuing Service Contracts and H1.37 lakhs towards saleof services for which confirmation of delivery from the customer is awaited.

11. The auditors of M/s. HAL Edgewood Technologies Private limited a joint venture ofthe Group has drawn attention to the following in their audit report vide dated 27thApril 2018 which has been reproduced by us as under:

a) Clause 10(ii) of Note No 49 to the consolidated Ind AS Financial Statement that thestatements being prepared on a going concern basis since the Company is in researchphase notwithstanding the fact that the Company's Net Worth is Negative [reportednegative net worth as at 31st March 2018 of H443.33 lakhs (year ended 31stMarch 2017 H607.49 lakhs)]. The ability of the Company to continue as a going concern isinteralia dependent in the Company's ability to infuse requisite funds for meeting itsobligations (including statutory liabilities and those in respect of contracts enteredinto for purchase of goods and assets) rescheduling of debt / other liabilities.

b) Clause 10(ii) of Note No 49 of the consolidated Ind AS Financial statementsregarding the amortisation of intangible assets recognised on development of prototypeunits to the statement of profit and loss. The amortisation of intangible treatment isdone in the accordance units of production method. In the opinion of the management thatthe Company is confident of receiving Purchase Order from its Customer for further seriesupgrade for 154 OSAMC units on delivery of existing order of 11 prototype OSAMC units toits Customer and the intention of development of OSAMC units is to manufacture and deliverthe series upgrade 154 OSAMC units to Customer.

12. Our opinion above on the consolidated Ind AS financial statements and our reporton Other Legal and Regulatory Requirements below is not modified in respect of the abovematters with respect to our reliance on the work done and the reports of the otherauditors and the financial statements/financial information certified by the Management.

Other Matters:

13. We did not audit the Ind AS financial statements of two subsidiaries whose Ind ASfinancial statements reflect total assets of H3643 lakhs and net assets of H2718 lakhsas at 31st March 2018 total revenues of H251 lakhs and net cash outflowsamounting to H732 lakhs for the year ended on that date as considered in the consolidatedInd AS financial statements. The consolidated Ind AS financial statements also include theGroup's share of net profit of H1393 lakhs for the year ended 31st March2018 as considered in the consolidated Ind AS financial statements in respect of 13joint ventures whose Ind AS financial statements have not been audited by us. These Ind ASfinancial statements have been audited by other auditors whose report have been furnishedto us by the Management and our opinion on the consolidated Ind AS financial statementsin so far as it relates to the amounts and disclosures included in respect of thesesubsidiaries and joint ventures and our report in terms of sub-sections (3) of Section143 of the Act in so far as it relates to the aforesaid subsidiaries and joint venturesis based solely on the reports of the other auditors.

14. Our opinion above on the consolidated Ind AS financial statements and our reporton Other Legal and Regulatory Requirements below is not modified in respect of the abovematters with respect to our reliance on the work done and the reports of the otherauditors and the financial statements/financial information certified by the Management.

Report on Other Legal and Regulatory Requirements:

15. As required by Section 143(3) of the Act based on our audit and on theconsideration of report of the other auditors on separate financial statements and theother financial information of subsidiaries and joint ventures as noted in Para 13 of theother matter paragraph we report to the extent applicable 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 of the aforesaidconsolidated Ind AS financial statements.

b) In our opinion proper books of account as required by law relating to preparationof the aforesaid consolidated Ind AS financial statements have been kept so far as itappears from our examination of those books and the reports of the other auditors.

c) The consolidated Balance Sheet the consolidated Statement of Profit and Loss theconsolidated Statement of Cash Flows and consolidated Statement of Changes in Equity dealtwith by this Report are in agreement with the relevant books of account maintained for thepurpose of preparation of the consolidated Ind AS financial statements.

d) Ministry of Corporate Affairs vide notification no 1/2/2014-CL-V dated 23rdFebruary 2018 has exempted the Companies engaged in defence production to the extent ofapplication of relevant Accounting Standard on Segment Reporting. In view of the above nodisclosure is made by the Holding Company as required under Ind AS 108. Subject to theabove we state that in our opinion the aforesaid Consolidated Ind AS FinancialStatements comply with the Indian Accounting Standards specified under Section 133 of theAct.

e) In terms of Circular No. GSR 463(E) dated 05th June 2015 issued by theMinistry of Corporate Affairs Government of India the Holding Company being GovernmentCompany is exempt from the provisions of section 164(2) of the Act regardingdisqualification of Directors. On the basis of the reports of the statutory auditors ofits subsidiary companies and joint ventures incorporated in India none of the directorsof its subsidiary companies and joint ventures incorporated in India is disqualified as on31st March 2018 from being appointed as a director in terms of section 164(2)of the Act.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Holding Company its subsidiary companies and joint ventures incorporatedin India and the operating effectiveness of such controls refer to our separate Report inAnnexure - A. Our report expresses an unmodified opinion on the adequacy and operatingeffectiveness of the internal financial controls over financial reporting of thosecompanies for the reasons stated therein.

g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditor's) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous and based on the consideration of the report of the other auditors on separatefinancial statements as also the other financial information of the subsidiaries andjoint ventures as noted in the para 13 of the Other matter paragraph :

i. The consolidated Ind AS financial statements disclose the impact of pendinglitigations on the consolidated financial position of the Group and its joint ventures. -Refer clause 5 of Note No. 49 to the consolidated Ind AS financial statements;

ii. Provision has been made in the consolidated Ind AS financial statements asrequired under the applicable law or accounting standards for material foreseeablelosses if any on long term contracts - Refer clause 6 of Note No.49 of the consolidatedInd AS financial statement in respect of such items as it relates to the Holding Companyand clause 7 of Note No. 49 of the consolidated Ind AS financial statement in respect ofthe Group's share of net profit/ loss in respect of its joint ventures. The Group does nothave any derivative contracts.

iii. There are no amounts which are required to be transferred to the InvestorEducation and Protection Fund by the Holding Company and its subsidiary companies andjoint ventures incorporated in India during the year 31st March 2018.

For S. Venkatram and Co. LLP
Chartered Accountants
Firm Registration No: 004656S/S200095
S. Sundarraman
Place : Bengaluru Partner
Date : 30th May 2018 Membership No. 201028