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Hindustan Composites Ltd.

BSE: 509635 Sector: Auto
NSE: HINDCOMPOS ISIN Code: INE310C01029
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OPEN 285.00
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VOLUME 327
52-Week high 387.45
52-Week low 115.25
P/E 23.00
Mkt Cap.(Rs cr) 420
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 285.00
CLOSE 280.95
VOLUME 327
52-Week high 387.45
52-Week low 115.25
P/E 23.00
Mkt Cap.(Rs cr) 420
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Hindustan Composites Ltd. (HINDCOMPOS) - Auditors Report

Company auditors report

To The Members of Hindustan Composites Limited

Opinion

Report on the Audit of Standalone Financial Statements

We have audited the accompanying standalone financial statements of HindustanComposites Limited ("the Company") which comprises of Balance Sheet as at March31 2020 the Statement of Profit and Loss Other Comprehensive Income the Statement ofChanges in Equity and the Statement of Cash Flow for the year than ended and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory 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 true and fairview in conformity with the Indian Accounting Standards prescribed under section 133 ofthe Act read with Companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2020its profits other comprehensiveincome 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 (ICAI) together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules made thereunder and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the Code ofEthics.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Emphasis of Matter :

We draw your attention to note no 45(d) of the standalone financial statements withregards to Management's assessment of inter-alia realisability of financial InvestmentsInventories and recoverability of Trade receivables measured at amortised cost due toCOVID 19 pandemic outbreak. The management apart from considering the internal andexternal information upto the date of approval of this standalone financial statementsthe management has also performed sensitivity analysis on the assumptions used and basedon current indicators of future economic conditions the management expects to recover thecarrying amount of these assets.

The impact of the global health pandemic may be different from that estimated as at thedate of approval of these standalone financial statements. Considering the continuinguncertainties the management will continue to closely monitor any material changes tofuture economic conditions.

Our opinion is not modified in respect of this matter.

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.

Sr. No Key Audit Matters Auditor's response
1 Valuation and Impairment of unquoted equity instruments /Debt Instruments: Principal Audit Procedures
We focused on the valuation of unquoted equity instruments/ Debt Instruments due to the materiality of the instruments and the nature of their valuation which involve the use of judgmental assumptions. As disclosed in note no 40 and 41 as at 31 March 2020 the Company has unquoted equity instruments/debt Instruments of ` 29748.63 Lakhs. These instruments are classified and measured at fair value through other comprehensive income We assessed and tested the design and the operating effectiveness of the key controls that management has established to support the review and approval of the model design key model inputs and valuation.
We assessed the appropriateness of the valuation method used by management by verifying the key inputs used in determining the assumptions as also corroborating the information.
2 Inventory existence and valuation Audit procedures performed:
As at March 31 2020 the Company held inventories of ` 1256.65 lakhs. [Also refer Note no. 7 of the standalone financial statements] We have performed following alternative audit procedures over inventory existence and valuations.
Inventories existence and valuation was an audit focus area because of nationwide lockdown imposed by the Government of India in view of pandemic coronavirus (COVID 19). (a) Ensuring the effectiveness of the design implementation and maintenance of controls over changes in inventory to determine whether the physical and valuation considered appropriately.
As explained by the Management due to COVID 19 related restriction on account of nationwide lockdown physical verification of inventories as on the Balance sheet date couldn't be carried out. (b) Performing procedures to ensure that the changes in inventory between the last verification date namely 31st December 2019 and date of the Balance sheet are properly recorded (Roll forward procedures)
We have accordingly designated this as a focus area of the audit. (c) Performing substantive analytical procedures to test the correctness of inventory existence and valuation
(d) Testing of accuracy of inventory reconciliations with the general ledgers at period end including test of reconciling items
The procedures performed gave us a sufficient evidence to conclude about the inventory existence and valuation.

Information Other than the Standalone Financial Statements and Auditor's report thereon

The Companys' Board of Directors is responsible for the preparation of otherinformation.The Other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to the Board report CorporateGovernance report and Shareholder's information but does not include the standalonefinancial statement 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 required to report that fact. We have nothingtoreport in this regard.

Responsibilities of Management and those charged with Governance for the StandaloneFinancial Statements

The Companys' 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 othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the accounting Standardsspecified under section 133 of the Act read with Rule 7 of the Companies (Account) Rules2014.

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 Management is responsible for assessing theCompanys' ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

The Board of Directors are also responsible for overseeing the Companys' financialreporting process.

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

Our objectives are to obtain reasonable assurance about whether the financialstatements are free from material misstatement whether due to fraud or error and toissue an auditor's report that includes our opinion. Reasonable assurance is a high levelof assurance but is not a guarantee that an audit conducted in accordance with SAs willalways detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken 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 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 Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial control system in place and the operating effectiveness ofsuch 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 entity'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 entity to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the financial statementsrepresent 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 financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope pf our auditwork and in evaluating the results of our work and (ii) too evaluate the effect of antidentified 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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships 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. Pursuant to the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of subsection (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.

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 records.

(c) The Balance sheet the Statement of Profit & Loss Other Comprehensive IncomeStatement of Changes in Equity and the Cash Flow Statement dealt with by this Report arein agreement with the books of account.

(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Account) Rules 2014.

(e) On the basis of the written representation received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a Directors 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".

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

In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act except excess managerialremuneration paid to its Executive Chairman for which necessary shareholders approval isbeing taken (Refer Note No. 47).

(h) With respect to the matters to be included in the Auditor's report in accordancewith the rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and tothe 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 standalone financial statements. [Refer Note No. 33]

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.
For Bagaria & Co. LLP
Chartered Accountants
Firm Registration No:
113447W/W-100019
Vinay Somani
Partner
Place: Mumbai Membership No. 143503
Date : 29 June 2020 UDIN :20143503AAAAGG4646

Annexure "A" referred to in "Report on Other Legal and RegulatoryRequirements" section of our report to the members of Hindustan Composites Limited ofeven date

On the basis of such checks as we considered appropriate and according to theinformation and explanations given to us during the course of our audit we state that:

i) a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Property Plant and Equipment.

b) According to the information and explanations given to us the Property Plant andEquipment have been physically verified by the management at the year end which in ouropinion is reasonable considering the size of the Company and nature of its PropertyPlant and Equipment. As explained no material discrepancies were noticed on suchverification.

c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.

ii) According to the information and explanations given to us the inventories havebeen physically verified during the year by the management at reasonable intervals and nomaterial discrepancies were noticed on such verification. Due to COVID 19 relatednationwide lockdown the Management was not able to perform year end physical verificationof inventory.

iii) According to the information and explanations given to us the Company has grantedsecured loans to a company covered in the register maintained under section 189 of theAct. The terms and conditions of the such loan is not prejudicial to the Companys'interest and schedule of repayment of principal and payment of interest has beenstipulated and repayment are regular.

iv) In our opinion and according to the information and explanations given to us theCompany has not entered into any transactions referred in section 185 of the Act. TheCompany has complied with the provisions of 186 of the Act with respect to the loans andinvestments made.

v) No deposits within the meaning of directives issued by RBI (Reserve Bank of India)and Sections 73 to 76 or any other relevant provisions of the Act and rules framedthereunder have been accepted by the Company.

vi) We have broadly reviewed the books of account maintained by the Company pursuant tothe rules made by the Central Government of India regarding the maintenance of costrecords under sub-section (1) of Section 148 of the Act and are of the opinion that primafacie the prescribed accounts and records have been maintained. We have however notmade a detailed examination of the records with a view to determine whether they areaccurate or complete.

vii) a) According to the information and explanations given to us and on the basis ofour examination of the records the Company is regular in depositing undisputed statutorydues including Provident Fund Employees' State Insurance Income Tax Duty of CustomsCess Goods and Service Tax and other material statutory dues applicable to the Companywith the appropriate authorities. No undisputed amounts in respect of the aforesaidstatutory dues were outstanding as at the last day of the financial year for a period ofmore than six months from the date they became payable.

b) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company there are no dues of Income Tax Goods andService Tax and Duty of Customs which have not been deposited on account of any dispute.

viii) In our opinion and according to the information and explanations given to usduring the year the Company has not defaulted in the repayment of dues to the banks andgovernment. The Company has not taken any loan from financial institution or debentureholders during the year or in the recent past.

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

x) According to the information and explanations given to us we have not come acrossany instance of material fraud by officers or employees of the Company noticed orreported during the year nor have we been informed of such case by the management.

xi) According to the information and explanations given to us and based on theexamination of the records the Company has paid / provided for managerial remuneration inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V to the Act except excess managerial remuneration paid to its ExecutiveChairman for which necessary shareholders approval is being taken (Refer Note No. 47).

xii) The provisions of Nidhi Company are not applicable to the Company. Therefore Para3 (xii) of the Order is not applicable to the Company.

xiii) According to the information and explanations given to us the provision ofSection 177 and 188 of Act to the extent applicable in respect of transactions with therelated parties have been complied by the Company and the details have been disclosed inthe Ind AS Financial Statements as required by the applicable accounting standards in noteno. 47 of the Standalone Financial Statements.

xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures. Therefore Para 3 (xiv) ofthe Order is not applicable to the Company.

xv) According to the information and explanations given to us during the year theCompany has not entered into any non-cash transactions with directors or persons connectedwith him under Section 192 of the Act.

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

For Bagaria & Co. LLP
Chartered Accountants
Firm Registration No:
113447W/W-100019
Vinay Somani
Partner
Place: Mumbai Membership No. 143503
Date : 29 June 2020 UDIN :20143503AAAAGG4646

Annexure "B" referred to in "Report on Other Legal and RegulatoryRequirements" section of our report to the members of Hindustan Composites Limited ofeven date

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

We have audited the internal financial controls over financial reporting of HindustanComposites 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 Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential component of internalcontrol stated 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 Companys' 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 Act.

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 deemed to be prescribedunder section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls both applicable to an audit of internal financial controls and bothissued by the ICAI. 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 judgment 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 Companys' internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A Companys' 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 entity are being made only in accordance with authorisations ofmanagement; (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the entity's assets that could have amaterial effect on the financial statements and (4) also provide us reasonable assuranceby the internal auditors through their internal audit reports given to the Company fromtime to time.

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 and to the best of our information and according to the explanationsgiven to us the Company has broadly 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 Component of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For Bagaria & Co. LLP
Chartered Accountants
Firm Registration No:
113447W/W-100019
Vinay Somani
Partner
Place: Mumbai Membership No. 143503
Date : 29 June 2020 UDIN :20143503AAAAGG4646

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