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Hindustan Aeronautics Ltd.

BSE: 541154 Sector: Engineering
NSE: HAL ISIN Code: INE066F01012
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VOLUME 73433
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Mkt Cap.(Rs cr) 48,015
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OPEN 1500.00
CLOSE 1480.00
VOLUME 73433
52-Week high 1568.45
52-Week low 660.00
P/E 14.64
Mkt Cap.(Rs cr) 48,015
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Hindustan Aeronautics Ltd. (HAL) - Auditors Report

Company auditors report

To

The Members of

Hindustan Aeronautics Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the Standalone Financial Statements of Hindustan Aeronautics Limited("the Company") which comprise the Balance Sheet as at 31st March2020 and the Statement of Profit and Loss (including Other Comprehensive Income)(Statement of Changes in Equity) and the Statement of Cash Flows for the year then endedand Notes to the Standalone Financial Statements including a summary of SignificantAccounting Policies and other explanatory information (hereinafter referred to as"the standalone financial statements") in which are included the returns of 27divisions for the year ended on that date audited by the Division Auditors of the company.

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 ("Act") in the manner so required and give a true andfair view in conformity with accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2020 and the Profit (Changes in Equity)and its 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 Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the Financial Statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.

Emphasis of Matter

Attention is invited to Notes to the Financial Results extracted below:

a) Note: 49 (33) (g)

"The Company has considered the possible effects that may result from COVID-19pandemic on the carrying amounts of Property Plant and Equipment (PPE) InvestmentsInventories Receivables and other current assets.

Impact due to Covid 19 will be minimal as major portion of company's revenue isgenerated from Defense services. Further Ministry of Defense vide letter no4(4)(d)(ACQ/20 dated 12.06.2020 have extended the contractual delivery date for a periodof 4 months i.e. 25th March 2020 to 24th July 2020 due to ForceMajeure.

Based on the business model there is no material impairment that needs to berecognised on Property Plant and Equipment (PPE) Investments Inventories Receivablesand other current assets."

b) Note no: 49 (1)(b)(i to vii)

"We have verified the adjustments as described in Notes No 49 (1) (b) (i to vi)to the Statements which have been made to the comparative financial information presentedfor the year ended 31st March 2019 in accordance with the requirements ofapplicable Ind AS. In our opinion such adjustments are appropriate and have been properlyapplied."

c) Note no: 49 (43) ( c)

"Consequent to settlement reached with workmen on 10th December 2019the differential 21195 lakhs for the period from 01.1.2017 to 31.03.2019 is recognized in"Employee benefit Expenses" for the year ended 31st March 2020.

Corresponding eligible sales of Rs.15291 lakhs' is included in revenue."

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance 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 Matters Response to Key Audit Matters & Conclusion
a) Revenue recognition Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
('Ind AS 115')
The revenue standard establishes a comprehensive framework for determining whether how much and when revenue is recognized. This involves certain key judgements relating to identification of distinct performance obligations determination of transaction price of identified performance obligation the appropriateness of the basis used to measure revenue recognized over a period. • Evaluated the appropriateness of the disclosures provided under the revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures.
Additionally the standard mandates robust disclosures in respect of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. • Evaluated the design of internal controls relating to implementation of the revenue accounting standard.
• Selected a sample of continuing and new contracts and tested the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation reperformance and inspection of evidence in respect of operation of these controls.
• Selected a sample of continuing and new contracts and performed the following procedures:
• Read analyzed and identified the distinct performance obligations in these contracts.
• Compared these performance obligations with that of identified and recorded by the group.
• Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable revenue.
• Examination of the correspondence relating to price revision and ascertained the reasonableness of the estimates.
• Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.
b) Impairment of Trade Receivables We have verified the
In respect of receivables from Government the company does not make any impairment provision based on past experience. i) Effectiveness of internal controls in place and procedures followed in identifying the recoverability of long outstanding dues.
The amount involved being significant balance and management judgement we consider this as a Key Audit Matter ii) The procedures and follow up actions in ascertaining the impairment of receivables.
Our audit procedures include evaluation of provisions made for impairment in earlier years. We also made test checks of invoice wise collection details provided made in respect of in the five preceding financial years and we concluded the management assumption is reasonable.
c) Recognition and Impairment of Intangible assets Our audit procedures involved the test check of verification of internal controls and incurrence of expenditure on intangible assets.
A significant degree of judgement is required to determine the Intangibles to be recognized and intangibles to be impaired. The company has substantial intangibles assets both under use and in progress. The recognition /impairment assessment involves technical and management estimates and Judgements. We also reviewed the report of the Technical committee constituted to review the Intangibles Assets - development expenditure who have given a recommendation of the Intangible assets to be recognized and assets to be impaired in the Financial year.
In respect of intangible Assets which are under development and whose life is infinite the same was reviewed by internal technical team as at the end of the reporting period and necessary impairment if any is recognized. Based on the audit procedures as above we find the recognition and impairment provision have been made accordingly.
d) Work - in - Progress (WIP) - Inventories Our Audit Procedures include review of
Inventories include Work in Progress which have been physically verified by the management based on physical verification instructions. Due to COVID - 19 lockdown we were not present during physical verification. • Physical Verification instructions
• Physical verification reports
• Roll back procedures
• Examining the basis of valuation on a test check basis
Based on the above audit procedures we conclude that the valuation of WIP is proper.
e) Deferred Tax Asset on Provision We have verified the Deferred Tax Asset computations for the respective periods and the restatements made and found them to be in line with Ind AS.
Hitherto Deferred Tax Assets on Provisions for warranty replacements doubtful debts etc. amounting to Rs.106600 lakhs as on 31st March 2019 (31st March 2018- Rs.107637 lakhs) and (-) Rs.1037 lakhs for the year ended 31st March 2019 were not recognized since the temporary differences were not likely to reverse in the foreseeable future. The issue was referred to the Expert Advisory Committee (EAC) of Institute of Chartered Accountants of India for their Expert Opinion. Pursuant to the EAC opinion and as advised by them the deferred tax assets have been recognized by re-statement of the previous year financial statements in accordance with Ind AS 8.
f) Remeasurement of Employee Benefits Provident Fund We have verified the inputs given to the Actuary for valuation and the disclosures made.
The exempt provident fund set up by the company is a defined benefit plan under Ind AS 19 Employee Benefits.
Provident Fund for eligible employees is managed by the Company through a trust in line with the Provident Fund and Miscellaneous Provision Act 1952. The plan guarantees interest at the notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of separation from the Company or retirement whichever is earlier. The benefits vests immediately on rendering of the services by the employee.
Key Audit Matters Response to Key Audit Matters & Conclusion
The minimum interest rate payable by the trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall if any between the return from the investments of the trust (including investment risk fall) and the notified interest rate.
The Company has obtained actuarial valuation report on the determination and disclosure of interest rate Guarantee & Diminution of Asset Values as per IND AS19 of Employees Exempt Provident Fund of HAL for the period ended 31st March 2020.
In view of uncertainties regarding recoverability of certain investment in ILFS Dewan Housing Reliance Capital syntax etc. during the current year ended 31st March 2020 the Company has provided ' 32717 lakhs being the shortfall arising on account of asset diminution and change in re-measurement of the defined benefit plans etc. which has been recognized in "other Comprehensive Income" and Other Financial Liabilities.
g) Recognition & Restatement of Revenue-Variable consideration in FPQ Contract relating to Vacation leave Performance related pay & Gratuity We have verified the correspondence from customer regarding the determination of variable consideration. We have also verified the estimation made by the management for the respective financial years and the restatement made as per Ind AS - 8.
In the previous financial years 2016-17 to 2018-19 the company had not recognised Variable consideration due to Uncertainty in the basis of measurement of revenue which has been recognized in this Financial year.
h) Current Tax and Deferred Tax We have verified the management computation of Current
The Company elected to exercise the option permitted under section 115BAA of the Income Tax Act 1961 as introduced by the Taxation Laws (Amendment) Act 2019. Accordingly the Company has recognized provision for Income Tax and re-measured its Deferred Tax Assets basis the rate prescribed in the said section and an amount of ' 7254 lakhs has been provided to tax expense for the year ended 31st March 2020. Tax Deferred Tax as on 31st March 2020 as well as the calculation of write off by applying the rate of tax under section 115 BAA of the Income Tax Act 1961 and the amount determined charged to Tax Expenses.

Information Other than the Financial Statements and Auditors Reports Thereon

The company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in Board's Report Management Discussion& Analysis Report Business Responsibility Report but does not include the financialstatements and our auditor's report thereon. The Board's Report Management Discussion& Analysis Report Business Responsibility Report is expected to be made available tous after the date of this auditor's report.

Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.

When we read the report if we conclude that there is a material misstatement there inwe are required to communicate the matter to those charged with governance.

Responsibility 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 specified under Section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation 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 Financial Statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

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

Auditor's Responsibilities 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 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 on whetherthe company 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 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 financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements thatindividually 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 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.

Other Matter

a) We did not audit the financial statements/ information of 27 Divisions included inthe financial statement of the company whose financial statements/financial informationreflect total assets of ' 4669369 Lakhs as at 31st March 2020 and thetotal revenue of ' 2042601 lakhs for the year ended on that date as considered inthe standalone financial statements/ information of these divisions have been audited bythe division auditors whose reports have been furnished to us and our opinion in so faras it relates to the amounts and disclosures included in respect of divisions is basedsolely on the report of such division auditors.

b) Pursuant to supplementary audit by C&AG certain corrections were made in thefinancial statements adopted by the board of directors on 25.06.2020. The financialstatements adopted by the board of directors on 25.06.2020 have been revised. The revisedfinancial statements were adopted by the board on 18.08.2020. The impact of revision isstated in note no 49 (51) of the financial statements. This report supercedes our earlierreport dated 25th June 2020.

Our opinion is not modified in respect of these matters

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 Companies Act 2013 we give in the "Annexure-B" statement on thematters specified in paragraphs 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 and proper returnsadequate for the purposes of our audit have been received from the divisions not visitedby us.

c) The reports on the accounts of the divisions of the company audited under Section143 (8) of the Act by the division auditors have been sent to us and have been properlydealt with by us in preparing this report.

d) The Balance Sheet the Statement of Profit and Loss (the Statement of Changes inEquity) and Cash Flow Statement dealt with by this Report are in agreement with the booksof account and with the returns received from the divisions not visited by us.

e) 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.

f) Ministry of Corporate Affairs vide notification no 1/2/2014-CL-V dated 23rdFebruary 2018 has exempted the companies engaged in defense production to the extent ofapplication of relevant Accounting Standard on Segment Reporting. In view of the above nodisclosure is made by the company as required by Ind AS 108. Subject to the above westate that in our opinion the aforesaid standalone financial Statements comply with theAccounting Standards specified under Section 133 of the Act

g) In terms of circular NO. GSR 463(E) dated 05th June 2015 issued by theMinistry of Corporate Affairs Government of India the company being Government Companyis exempt from the provisions of section 164(2) of the Act regarding disqualification ofDirectors.

h) The provisions of Section 197 are not applicable to a government Company (in termsof MCA Notification NO. GSR 463 (E) dated 05th June 2015) as the managerialremuneration is paid as per the appointment letter from the Government of India.

i) 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"

j) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its Financial Statements -Refer Note 49 (2) (b) to the financial statements.

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses on long-term contracts. The company does nothave any derivative contracts.

iii. There were no amounts which were required to be transferred to the Investoreducation and protection fund by the company.

iv. As required by section 143 (5) of the Act we give in "Annexure-C" astatement on the matters specified by the Comptroller and Audit General of India for theCompany.

For MAHARAJ N R SURESH AND CO
Chartered Accountants
FRN No: 001931S
N R Suresh
Partner
Place: Chennai MNO: 021661
Date: August 18th 2020 UDIN: 2002166AAAABX6577

ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THESTANDALONE FINANCIAL STATEMENTS OF HINDUSTAN AERONAUTICS 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 HINDUSTANAERONAUTICS LIMITED ("the Company") as of March 31 2020 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 Controlstated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India (ICAI). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors' Responsibility

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 issued by ICAI and deemedto be prescribed under Section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of Internal Financial Controls both applicable to an audit ofInternal Financial Controls and both issued by ICAI. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate Internal Financial Controls over FinancialReporting was established and maintained and if such controls operated effectively in allmaterial 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 Auditors' 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:

(i) Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(ii) Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Company are being made only inaccordance with authorisations of Management and Directors of the Company; and

(iii) Provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the Company's assets that could have amaterial 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 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 2020 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 ICAI.

For MAHARAJ N R SURESH AND CO
Chartered Accountants
FRN No: 001931S
N R Suresh
Partner
Place: Chennai MNO: 021661
Date: August 18th 2020 UDIN: 2002166AAAABX6577

ANNEXURE "B" TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THESTANDALONE FINANCIAL

STATEMENTS OF HINDUSTAN AERONAUTICS LIMITED.

The Annexure referred to in Paragraph 1 under the heading 'Report on Other Legal andRegulatory Requirements' of our Report of even date:

(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets;

(b) These fixed assets have been physically verified by the management in accordancewith its phased programme designed to cover the assets of all locations/units by physicalverification over a period of one to five years which in our opinion is reasonable havingregard to the size of the company and nature of the assets

(c) The title deeds of immovable properties are held in the name of the Company exceptas stated as per Note 49 Clause 14.1 to 14.6.

(ii) The Management has conducted physical verification of inventory at reasonableintervals and no material discrepancies were noticed.

(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 Companies Act 2013.

(iv) In terms of Circular No. GSR 463(E) dated 05th June 2015 issued byMinistry of Corporate Affairs Government of India the Company being a Government Companyengaged in Defense production is exempt from Section 185 and 186 of Companies Act 2013.

(v) The Company has not accepted any deposits from the public.

(vi) We have broadly reviewed the books of account relating to materials labor andother items of cost maintained by the Company pursuant to the Rules made by the CentralGovernment for the maintenance of cost records under Section 148(1) of the Act and we areof the opinion that prima facie the prescribed accounts and records have been made andmaintained. We have not however made a detailed examination of the records with a view todetermine whether they are accurate or complete.

(vii) According to the information and explanations given to us in respect of Statutorydues:

(a) The Company is regular in depositing undisputed statutory dues including ProvidentFund Employees' State Insurance Income Tax Sales Tax Service Tax Duty of CustomsDuty of Excise Value Added Tax Cess Goods and Service Tax and any other Statutory Duesto the appropriate authorities and there were no undisputed amounts payable which were inarrears as at 31st March 2020 for a period of more than six months from thedate they became payable.

(b) Details of dues of Income Tax or Sales Tax or Service Tax or Duty of Customs orDuty of Excise or Value Added Tax Cess and Goods and Service Tax have not been depositedas on 31st March 2020 on account of disputes are given below:

Sales Tax #

Assessment Year Amount (In Lakhs) Appeal by Forum Where dispute is pending
1986-87 3340 The Company 1st Appellate Authority
1988-90 10571 The Company 1st Appellate Authority
1991-92 4279 The Company 1st Appellate Authority
1996-97to 2012-13 33034 UP Sales Tax Dept Pending for hearing at High Court Allahabad
1997-99 648 The Company 1st Appellate Authority
1999-00 151 The Company Maharashtra Sales Tax Tribunal
2000-01 9 The Company Dy. Com Of Sales Tax Nasik
2000-02 537 The Company 1st Appellate Authority
2002-03 to 2004-05 11313 The Company Maharashtra Sales Tax Tribunal Mumbai
2004-05 270 The Company Sr. Dpty Commissioner of Sales Tax Nasik
2004-12 3659 The Company Assessing officer (For revision)
2004-16 21432 The Company Additional Commissioner (Appeals)
2005-06 138 The Company CCT J & K
2005-06 to 2013-14 715761 The Company Ist Appellate Authority Nasik
2005-09 1750 The Company WB Commercial Taxes Appellate and Revisional Board Kolkata
2008-09 12 The Company Additional Commissioner (Appeals)
2010-11 349 The Company Joint Commissioner Sales Tax
2011-15 17475 The Company High Court
2013-15 6905 The Company Pending for hearing at Tribunal
2014-15 67170 The Company Writ petition is filed before the High Court on 03.06.2019
2015-16 12191 The Company Appellate Tribunal Lucknow
2016-17 4325 The Company Order passed by JT commissioner. Appeal for stay proceedings to be initiated.
2016-17 209 The Company Ld. Senior Joint Commissioner of Sales Tax
2015-16 48 The Company Appellate Tribunal Lucknow
Total 915576

# Sales Tax Paid against Disputed Tax ' 6500 lakhs

Service Tax #
Assessment Year Amount (In Lakhs) Appeal by Forum Where dispute is pending
2003-04 to 2010-11 444 The Company CESTAT Bangalore
2004-05 to 2008-09 426 The Company Central Excise and Service Tax Appellate New Delhi
2005-06 62 The Company Commissioner of Service Tax
2005-06 to 2009-10 1757 The Company CESTAT
2006-07 to 2007-08 5628 Service tax department Supreme Court
2006-07 to 2017-18 62860 The Company CESTAT Mumbai
2007-08 & 2010-11 11235 The Company Service Tax Department
2007-08 to 2011-12 5096 The Company Tribunal Banglore
2007-08 to 2011-12 9151 The Company CESTAT EZB Kolkata
2008-09 to 2010-11 525 The Company Service Tax Department Nasik
2009-10 282 The Company Commissioner of Service Tax
2009-13 465 The Company CESTAT
2010-11 38 Commissioner of Customs Central Excise & Service Tax-Hyd-IV Commissionerate. CESTAT
2010-11 421 The Company CESTAT
2010-11 57 The Company Commissioner of Service Tax
2011-12 to 2014-15 10633 The Company CESTAT Allahabad
2011-12 to 2017-18 4970 The Company Service Tax Department
2013-14 to 2017-18 56 The Company Commissioner of Central Tax (Appeals) East Commissionerate Domlur
2013-14 to 2017-18 72 The Company Commissionerate of GST Banglore
2015-16 936 The Company Commissioner of CGST & Central Excise Audit Commissionerate Bhubaneswar
2015-16 to 2017-18 522 The Company CESTAT
2016-17 228 The Company Commissioner of Service Tax
March 2012 to March 2014 182 The Company Commissioner of Appeals
October 2013 to June 2017 310 The Company Commissioner of Appeals
2013-14 to 2017-18 6 The Company Commissioner of Appeals Bangalore
2011-12 to 2014-15 3523 The Company CESTAT Allahabad
Total 119885

# Service Tax paid against disputed tax ' 3533 Lakhs

GST #
Assessment Year Amount (In Lakhs) Appeal by Forum Where dispute is pending
2019 131 Department Supreme Court
2019 177 Department Supreme court
Total 308

# GST paid under Protest ' 13 lakhs Customs Duty *

Assessment Year Amount (In Lakhs) Appeal by Forum Where dispute is pending
2012-13 23474 The Company CESTAT
2012-13 95 The Company CCE Appeals
Total 23569

* Customs duty paid against disputed tax ' 3127 Lakhs Income Tax

Assessment Year Amount (In Lakhs) Appeal by Forum Where dispute is pending
2011-12 33 The Company Asst. Commissioner Income Tax Kanpur
2017-18 27670 The Company Commissioner of Appeals
2007-08 201 1-12 2012-13 2013-14 2014-15 2015-16 58076 The Company Income Tax Appellate Tribunal
Total 85779

(viii) The Company has not defaulted in repayment of loans or borrowing to a financialinstitution bank Government or dues to debenture holders.

(ix) The Company has not raised any moneys by way of initial public offer or furtherpublic offer (including debt instruments) during the year.

(x) No fraud by the Company or any fraud on the Company by its officers or employeeshas been noticed or reported during the year.

(xi) The provisions of Section 197 are not applicable to a Government Company (in termsof MCA Notification no. GSR 463(E) dated 05th June 2015) as the managerialremuneration is paid as per the appointment letter from Government of India.

(xii) The Company is not a Nidhi Company and hence complying with the provisions of theNidhi Rules 2014 does not arise.

(xiii) All transactions with the related parties are in compliance with Sections 177and 188 of the Companies Act 2013 where applicable and the details have been disclosedin the Financial Statements etc. as required by the applicable Accounting Standards.

(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review.

(xv) The Company has not entered into any non-cash transactions with Directors orpersons connected with him.

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

For MAHARAJ N R SURESH AND CO.
Firm Regn. No.: 001931S
lM2
N R Suresh
Membership No.: 021661
Partner
Place: Chennai Chartered Accountants
Date: August 18th 2020 UDIN: 2002166AAAABX6577

ANNEXURE - C TO THE INDEPENDENT AUDITOR'S REPORT

Directions indicating the areas to be examined by the Auditors during the course ofaudit of annual accounts of Hindustan Aeronautics Limited for the year 2019-20 issued bythe Comptroller & Auditor General of India under Section 143(5) of the Companies Act2013.

S. No. Areas Examined Observation/Finding
1. Whether the company has system in place to process all the accounting transactions through IT system• If yes the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications if any may be stated. Yes. The Company has ERP System in place and the accounting entries are generated in the System as and when transaction are made. The ERP system is not linked to Internet and the modules in the ERP system are not interlinked. In view of the same some Journal Entries are required to be made to account for certain adjustment / correction derived basically from the System and then fed in to the system through required accounting process with a maker and Checker concept to ensure the integrity of the System.
2. Whether there is any restructuring of an existing loan or cases of waiver/write off of debts/loans/interest etc. made by a lender to the company due to the company's inability to repay the loan• If yes the financial impact may be stated. Not applicable
3. Whether funds received/receivable for specific schemes from Central/State agencies were properly accounted for/utilized as per its term and conditions• List the cases of deviation. The Company has received a sum of ' 13229 lakhs from Ministry of Defence(MOD) Government of India (GOI) towards investments by the Company in M/s Multirole Transport Aircraft Ltd (MTAL). Out of the above the Company has till date invested a sum of ' 11347 lakhs (PY ' 11347 lakhs). The balance of ' 1882 lakhs (PY ' 1882 lakhs) is shown other Current liabilities. Interest @ 6.85% has been provided on the unutilized portion under other financial liabilities.
For MAHARAJ N R SURESH AND CO.
Firm Regn. No.: 001931S
IM1
N R Suresh
Membership No.: 021661
Partner
Place: Chennai Chartered Accountants
Date: August 18th 2020 UDIN: 2002166AAAABX6577

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