To the Members of Hindustan Zinc Limited
REPORT ON THE AUDIT OF THE IND AS FINANCIAL STATEMENTS
We have audited the accompanying Ind AS financial statements of Hindustan ZincLimited ("the Company") which comprise of the Balance sheet as at March 312020 the Statement of Profit and Loss including the statement of Other ComprehensiveIncome the Cash Flow Statement and the Statement of Changes in Equity for the year thenended and notes to the Ind AS financial statements including a summary of significantaccounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Companies Act 2013 as amended ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2020 its profitincluding other comprehensive income its cash flows and the changes in equity for theyear ended on that date.
BASIS FOR OPINION
We conducted our audit of the Ind AS financial statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Ind AS Financial Statements' section of our report.We are independent of the Company in accordance with the Code of Ethics'
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 audit opinion on the Ind AS financial statements.
KEY AUDIT MATTERS
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Ind AS financial statements for the financial year endedMarch 312020. These matters were addressed in the context of our audit of the Ind ASfinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. For each matter below our description of how ouraudit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Ind AS financial statements section of ourreport including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the Ind AS financial statements. The results of our audit proceduresincluding the procedures performed to address the matters below provide the basis for ouraudit opinion on the accompanying Ind AS financial statements.
|Key audit matters ||How our audit addressed the key audit matter |
|Claims and exposure relating to taxation and litigation (as described in Note 3(III)(B) 28 and 30 of the Ind AS financial statements) || |
|The Company is subject to several legal and tax related claims which have been either been disclosed or accounted for in the accompanying financial statements. ||Our audit procedures included the following:- |
| || Gained an understanding of the process of identification of claims litigations and contingent liabilities and identified key controls in the process. For selected controls we have performed tests of controls. |
|Taxation and litigation exposures have been identified as a key audit matter due to complexities involved in these matters timescales involved for resolution and the potential financial impact of these on the financial statements. Further significant management judgement is involved in assessing the exposure of each case and thus a risk that such cases may not be adequately provided for or disclosed. || |
| || Obtained the summary of Company's legal and tax cases and critically assessed management's position through discussions with the Legal Counsel Head of Tax and operational management on both the probability of success in significant cases and the magnitude of any potential loss. |
| || Inspected external legal opinions and/or past judicial orders wherever considered necessary and other evidence to corroborate management's assessment of the risk profile in respect of legal claims. |
|Key audit matters ||How our audit addressed the key audit matter |
| || Engaged tax specialists to technically assess the management's positions on tax disputes. |
| || Assessed the relevant disclosures made within the financial statements to address whether they appropriately reflect the facts and circumstances of the respective tax and legal exposures as per the requirements of relevant accounting standards. |
|Revenue recognition (as described in Note 3.(I) (d) and 20 of the Ind AS financial statements) || |
|We have identified recognition of revenue in the appropriate period as a key audit matter since variety of terms define when a control has been transferred to the customer. Additionally restrictions had been put in place for movement of goods close to the year end due to the outbreak of Covid-19 pandemic. This gives rise to the risk that revenue may not be recognised in the correct period. ||Our audit procedures included the following:- |
| || Assessed the Company's accounting policy for revenue recognition and its compliance with Ind AS 115. |
| || Performed walkthroughs and test of controls assisted by IT specialists of the revenue recognition processes and assessed the design and operating effectiveness of key controls. |
| || Obtained from the management the details of goods that were dispatched after restrictions were imposed on movement of goods and agreed the same to the underlying documents. |
| || Selected samples of sales made pre and post year end and evaluated if the period of revenue recognition was as per the provisions of the relevant accounting standards and the contract terms with the customers and tested the same with the relevant third party documents. |
We have determined that there are no other key audit matters to communicate in ourreport.
INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe Ind AS financial statements and our auditor's report thereon.
Our opinion on the Ind AS financial statements does not cover the other information andwe do not express any form of assurance conclusion thereon.
In connection with our audit of the Ind AS financial statements our responsibility isto read the other information and in doing so consider whether such 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 FOR THE IND AS FINANCIAL STATEMENTS
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these Ind AS financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. 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 the 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 Ind AS financial statements that give a trueand fair view and are free from material misstatement whether due to fraud or error.
In preparing the Ind AS financial statements management is responsible for assessingthe Company's 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.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE IND AS FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the Ind AS 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 Ind AS 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 Ind AS 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 from fraud is higher thanfor one resulting from error as fraud may involve collusion forgery intentionalomissions 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 controls with reference to financial
statements in place and the operating 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 uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern.
If we conclude that a material uncertainty exists we are required to draw attention inour auditor's report to the related disclosures in the financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the Ind AS financialstatements including the disclosures and whether the Ind AS financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
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 Ind AS financial statements forthe financial year ended March 312020 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.
REPORT ON OTHER LEGAL AND REGULATORY
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 1" 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;
(c) The Balance Sheet the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid Ind AS financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules
2015 as amended;
(e) On the basis of the written representations received from the directors as on
March 312020 taken on record by the Board of Directors none of the directors isdisqualified as on March 312020 from being appointed as a director in terms of Section164 (2) of the Act;
(f) With respect to the adequacy of the internal financial controls over financialreporting
of the Company with reference to these
[Ind AS financial statements and the operating effectiveness of such controls refer toour separate Report in "Annexure 2" to this report;
(g) In our opinion the managerial remuneration for the year ended March 312020 hasbeen paid / provided by the Company
to its directors in accordance with the provisions of section 197 read with Schedule Vto the Act;
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its Ind AS financial statements - Refer Note 28 and 30 to the Ind AS financialstatements;
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 S. R. Batliboi & Co. LLP
ICAI Firm Registration Number: 301003E/E300005 sd/-
per Sudhir Soni Partner
Membership Number: 41870 UDIN: 20041870AAAAAK7208
Place: Mumbai Date: May 21 2020
Referred to in Paragraph 1 under the heading "Report on other legal and regulatoryrequirement's of our report of even date
Re: Hindustan Zinc Limited (the Company')
(i) (a) The Company has maintained proper
records showing full particulars including quantitative details and situation of fixedassets.
(b) All fixed assets have not been physically verified by the management during theyear but there is a regular programme of verification which in our opinion is reasonablehaving regard to the size of the Company and the nature of its assets.
No material discrepancies were noticed on such verification.
(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment are held in thename
of the Company.
(ii) The inventory has been physically verified by the management during the year.
In our opinion the frequency of verification is reasonable. No material discrepancieswere noticed on such physical verification. Inventories lying with third parties have beenconfirmed by them as at March 312020 and no material discrepancies were noticed inrespect of such confirmations.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities given in respect of whichprovisions of sections 185 and 186 of the Companies Act 2013 are applicable and hence notcommented upon.
(v) The Company has not accepted any deposits within the meaning of sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not 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(1) of the Act related to the manufacture of products and generation ofelectricity and are of the opinion that prima facie the specified accounts and recordshave been made and maintained. We have not however made a detailed examination of thesame.
(vii) (a) The Company is regular in depositing with
appropriate authorities undisputed statutory dues including provident fund income-taxsales-tax duty of custom duty of excise goods and services tax cess and otherstatutory dues applicable to it. The provisions relating to employees' state insurance arenot applicable to the Company.
(b) According to the information and
explanations given to us no undisputed amounts payable in respect of provident fundincome-tax sales-tax duty of custom duty of excise goods and services tax cess ! andother statutory dues were outstanding
at the year end for a period of more than six months from the date they becamepayable. The provisions relating to employees' state insurance are not applicable to theCompany.
(c) According to the records of the Company the dues outstanding of income-tax salestax duty of custom duty of excise and cess on account of any dispute are as follows:
|Name of the statute ||Nature of the dues ||Amount (Rs. in Crore)* ||Period (Financial year) to which amount relates ||Forum where the dispute is pending |
|Income tax act ||Income tax ||2140 ||1997-98 to 2010-2011 ||Commissioner of Income Tax |
|1961 || || ||2013-14 2015-2016 ||(Appeals) |
| || ||4827 ||1988-1989 to 1990-1991 ||Income Tax Appellate |
| || || ||1992-1993 1997-98 ||Tribunal |
| || || ||2007-2008 2012-13 to 2014-15 || |
| || ||2765 ||1989-90 to 2011-12 ||High Court / Supreme Court |
|Customs Act ||Customs ||49 ||2009-10 to 2012-13 ||CESTAT |
|1962 ||duty ||0.03 ||2015-16 ||Commissioner (Appeals) |
|Name of the ||Nature of the ||Amount ||Period (Financial year) to which ||Forum where the dispute is |
|statute ||dues ||(Rs. in Crore)* ||amount relates ||pending |
|Central Excise Act 1944 ||Excise duty ||125 ||1991-92 to 1992-93 1995-96 to 2016-17 ||CESTAT |
| || ||12 ||1991-92 1998-99 to 2016-17 ||Commissioner (Appeals) |
| || ||11 ||1997-06 2008-09 to 2011-12 ||High Court |
|Rajasthan sales ||Sales tax ||86 ||1998-99 to 1999-00 2001-02 to ||Commissioner (Appeals) |
|tax act 1994 || ||4 ||2003-04 2009-10 to 2017-18 2007-08 ||High Court |
| || ||0.28 ||2018-19 ||CESTAT |
| || ||1 ||1985-86 ||Supreme Court |
|Finance Act ||Service tax ||17 ||2002-03 to 2017-18 ||Commissioner (Appeals) |
|1994 || ||21 ||1996-97 to 1997-98 2004-05 to 2015-16 ||CESTAT |
| || ||73 ||2004-05 2008-09 to 2011-12 2016-17 ||High Court |
*Net of amount paid under protest / adjusted against refunds
(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowing to banks. TheCompany did not have any outstanding dues in respect of financial institutions governmentand debenture holders during the year.
(ix) According to the information and explanations given by the management the Companyhas not raised any monies by way of initial public offer / further public offer / debtinstruments or term loans and accordingly reporting under clause 3(ix) of the Order isnot applicable to the Company and hence not commented upon.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no material fraud on the Company by the officersand employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.
(xii) In our opinion the Company is not a Nidhi company. Therefore the provisions ofclause 3(xii) of the Order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the
related parties are in compliance with sections 177 and 188 of Companies Act 2013where applicable and the details have been disclosed in the notes to the financialstatements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and accordingly reporting requirements under clause 3(xiv) of the Order arenot applicable to the Company and hence not commented upon.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected
with him as referred to in section 192 of Companies Act 2013.
(xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
For S. R. Batliboi & Co. LLP
ICAI Firm Registration Number: 301003E/E300005
per Sudhir Soni
Membership Number: 41870
Date: May 212020
To the Independent Auditor's Report of even date on the Financial Statements ofHindustan Zinc 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 HindustanZinc Limited ("the Company") as of March 312020 in conjunction with our auditof the financial statements of the Company for the year ended on that date.
MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedunder the Committee of Sponsoring Organisations of the Treadway Commission (2013framework) ("COSO 2013"). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to the Company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under theCompanies 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 as specified under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls over financial reporting was established and maintained and ifsuch 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 procedures selected depend on the auditor's judgement including the assessment ofthe risks of material misstatement of the financial statements whether due to fraud orerror.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls system overfinancial 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 and
expenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.
Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
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 312020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in COSO 2013.
For S. R. Batliboi & Co. LLP
ICAI Firm Registration Number: 301003E/E300005 sd/-
per Sudhir Soni Partner
Membership Number: 41870
Date: May 212020