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HMT Ltd.

BSE: 500191 Sector: Engineering
NSE: HMT ISIN Code: INE262A01018
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VOLUME 941
52-Week high 20.25
52-Week low 7.50
P/E 2.13
Mkt Cap.(Rs cr) 528
Buy Price 14.27
Buy Qty 100.00
Sell Price 14.74
Sell Qty 257.00
OPEN 15.00
CLOSE 14.80
VOLUME 941
52-Week high 20.25
52-Week low 7.50
P/E 2.13
Mkt Cap.(Rs cr) 528
Buy Price 14.27
Buy Qty 100.00
Sell Price 14.74
Sell Qty 257.00

HMT Ltd. (HMT) - Auditors Report

Company auditors report

TO THE MEMBERS OF HMT Limited

Report on Audit of the Standalone Financial Statements

Qualified Opinion:

On completion of audit of accounts of HMT Limited ("the Company") for theyear 2018-19 we had rendered our audit report dated May 28 2019. Subsequent to ourreport in light of the observations arising from the audit by the Comptroller & AuditGeneral of India the said report has been revised. This supersedes our previousindependent Audit Report one observation has been amended in para viii. a. of othermatters in respect of Food Processing Machinery division.

We have audited the standalone Ind AS financial statements of HMT Limited ("theCompany") which comprise of balance sheet as at March 31 2019 the statement ofprofit & loss statement of changes in equity the cashflow statement for the yearthen ended and notes to 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 except for the matters described in the Basis of Qualified Opinion section ofour report the aforesaid standalone Ind AS financial statements give the informationrequired by the Act in the manner sorequired and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at March 31 2019 profit changes inequity and its cash flows for the yearended on that date.

Basis of our Qualified Opinion:

1. Food Processing Machinery Unit Aurangabad:

As per information and explanation given to us with regards to the valuation ofinventory as stated in Note No. 1.9 stock of raw material is valued by adopting WeightedAverage Cost Method. However in the inventory software for many stock items rates werenot updated because of which respective stocks were valued at Nil. These were latermanually updated based on the Purchase Orders available. Owing to the nature ofUnit’s records and in the absence of sufficient audit evidence we are unable toascertain if there is material departure from the Weighted Average Cost Method followed bythe Company. We are also unable to ascertain its consequent impacts if any on the Ind ASstandalone financial instruments.

2. Tractor Business Group Pinjore (including Hyderabad Assembly Project & Mohaliunit):

Lease rental income from leased out portions of land apartments school etc. lyingwithin the premises of HMT Limited Pinjore has not been accounted as "OtherIncome" in the books of HMT Limited (Tractor Division) since financial year2017-18. During financial year 2016-17 a sum of Rs.143.90 lakhs depicted as rentalincome. In our opinion such income during financial year 2017-18 and 2018-19 should havebeen accounted in its books and suitable expenses relating to Estate Operation should havebeen accounted. However management has informed us that these transactions have beenaccounted by HMT Machine Tools Limited. We are unable to ascertain the impact on these IndAS financial statements due to absence of the information. To this extent the revenue isunderstated.

3. Common Services Division Bangalore:

Attention is invited to note 46 in respect of reconciliation of GST collected on salesinput tax credit availed which is subject to reconciliation. We are unable to express anyindependent opinion on the same.

4. Corporate Head Office & Company as a Whole:

a. The Company contributes provident fund to its employees to a provident fund trustwhich is a defined benefit plan. As per Ind AS – 19 the Company as a whole has notobtained the actuarial valuation report and accounted for employer’s contribution.

b. Attention is invited to note 45 regarding confirmation and reconciliation of balancewith whom it has transactions.

The effect revenue on all the above transactions are not ascertained.

We conducted our audit in accordance with the Standards on Auditing ("SAs")specified under section 143 (10) of the Companies Act 2013 ("the Act"). Ourresponsibilities under those Standards are further described in the Auditor’sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the Ind AS financial statements under the provisions of the Act and theRules thereunder and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our qualified opinion.

Key Audit Matters:

Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the Ind AS financial statements for the financial year endedMarch 31 2019. 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 sectionof our report 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
Adoption of Ind AS 115 - Revenue from Contract with Customers as described in note 2 i. and note 17 of the financial statements:
The Company has adopted Ind AS 115 - Revenue from Contracts with Customers mandatory for reporting periods beginning on or after April 1 2018. As part of our audit procedures our procedures included the following:
- We have read the accounting policy for revenue recognition and assessed compliance of the policy in terms of principles enunciated under Ind AS 115.
Application of Ind AS 115 including selection of transition method involves significant judgment in determining when ‘control’ of the goods or services underlying the performance obligation is transferred to the customer and the transition method to be applied. - We obtained and understood the revenue recognition process including determination of point of transfer of control and completion of performance obligation.
As the revenue recognition due to the significance of the balance to the financial statements as a whole we regard this as a key audit matter. - We performed test of details on a sample basis and examined the underlying customer contracts.
- We examined the disclosures made by management in compliance with the requirements of Ind AS 115. Conclusion:
Our procedures did not identify any material exceptions.

Material Uncertainty Related to Going Concern:

Attention of the members is invited to Note 43 of the standalone financial statementsregarding reasons for preparing these standalone Ind AS financial statements of theCompany on going concern basis notwithstanding the fact that the net-worth of the Companyis substantially eroded. The appropriateness of the said basis is inter-alia dependent onthe Company’s ability to realise from sale of non-current assets held for salesupport from Government of India and other business plans. We have also relied on therepresentation of the Company in this respect. Our opinion is not modified in thisrespect.

Other Information ["Information Other than the Financial Statements andAuditor’s Report Thereon"]

The Company’s Board of Directors are responsible for the other information. Theother information comprises the information included in the board report but does notinclude the financial statements and our auditor’s report thereon. The board reportis expected to be made available to us after the date of auditor’s report.

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

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated.

Management’s Responsibility for Standalone 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 standalone Ind AS financialstatements that give a true and fair view of the financial position financialperformance changes inequity and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the accounting standardsspecified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate implementation and maintenance ofaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecordsrelevant to the preparation and presentation of the Ind AS financial statementthat give a true and fair viewand are free from material misstatement whether due tofraud or error.

In preparing the financial statements management is responsible for assessing theCompany’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’sfinancial reporting process.

Auditor’s Responsibilities for the Audit of the standalone Ind AS FinancialStatements:

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor’s report that includes our opinion. Reasonable assurance is ahigh level of assurance but is not a guarantee that an audit conducted in accordance withSAs will always detect a material misstatement when itexists. Misstatements can arise fromfraud or error and are considered material if individually or in theaggregate they couldreasonably be expected to influence the economic decisions of users taken onthe basis ofthese financial statements.

As part of an audit in accordance with SAs we exercise professional judgement andmaintain professional scepticism through the audit. We also:

• Identify and assess the risks of material misstatement of the standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• 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 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 management.

• Conclude on the appropriateness of management’s use of the going concernbasis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theability of the Company to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor’s report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor’s report. However future events or conditionsmay cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of the consolidatedfinancial statements including the disclosures and whether the consolidated financialstatements represent 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.

Other Matters:

i) We did not audit the financial statements/information of 2 units i.e. TractorBusiness Group Pinjore and Food Processing Machinery Unit Aurangabad included in thesestandalone Ind AS financial statements of the Company whose financial statements/financialinformation reflect total assets of Rs. 6816.37 lakhs as at March 31 2019 and totalrevenues of Rs. 6022.898 lakhs (including amount included in discontinued operations ofRs.4318.94 lakhs) for the year ended on that date. The financial statements/ informationof these branches has been audited by the branch auditors i.e. S P Babuta &Associates Chartered Accountants Chandigarh and CA AG & Associates CharteredAccountants Aurangabad respectively whose reports have been furnished to us and ouropinion in so far as it relates to the amounts and disclosures included in respect ofthese units are based solely on the report of such branch auditors.

ii) The financial statements of Lamp Division have been merged with CHO Accounts andour report insofar as it relates to the amounts included in respect of this Division isbased solely on the Closing Balances of Last Year’s Financial statements of CHOaccounts except payment of Rs.73.67 lakhs towards due to Greater Hyderabad MunicipalCorporation.

iii) The physical share certificates for 260899037 equity shares and 44300000preference shares of HMT Machine Tools Ltd whose costs is Rs.26089.90 Lakhs andRs.44300.00 lakhs respectively are not in the possession of the Company as at March 312018.

iv) The Company has discharged the debt of State Bank of India but the discharge ofloan is not reflected in the charge Index of charges registered with Registrar ofCompanies of its Index Number 80046855.

v) The Company has made a provision for non-moving inventories amounting to Rs.443.23lakhs based on the certificate furnished by the management and relied upon by the auditorsof the respective units.

vii) The Branch Auditors of Tractor Business Group Pinjore ("the Unit") havereported the following other matters:

a) As per the Company’s accounting policy Inventories are valued at lower of costor net realisable value. The cost of material is ascertained by adopting "WeightedAverage Method" till the operations of the Unit continued its operations. The Unithas closed its operations in year 2016 – 17 and were meant for sale as spares and notfor manufacturing. During the year substantial portion of inventories were disposed offat prices lower than its realisable value.

The Unit during the year had outsourced valuation of inventories to an independentvaluer and based on his report we have considered the realisable value as under:

Store Inventory 60% of book value.
Tractor spare parts inventory 60% of book value.
Work in progress 60% of book value.
Finished tractors 23% of book value.

b) Balance in current maturities of VRS Loan from of India amounting to Rs.12831.60lakhs as reported in note 17 of the financial statements is reported based on thecertificate given by the management. Out of the above amount an amount of Rs.23705.20lakhs has been shown as continuous defaults of Government of India Loans.

c) During an earlier year the Unit has discontinued its operations and is in theprocess of making settlement for all its receivables and payables.

The Company need to carry out proper review of following balances and take necessaryaction:

Particulars Amount (Rs. In lakhs) Remarks
Amount due to PWD 22.18 Due for more than 10 years
Claim recoverable from Motokov Ltd 0.11 Outstanding since 1989 – 90
Customs Duty Deposit 0.22 Old balance
Bombay Port Trust 0.01 Old balance

viii) The Branch Auditors of Food Processing Machinery Division Aurangabad ("theUnit") have reported the following other matters:

a. Inventories of the unit has been valued by the Company and auditors have reliedbased on the certificate furnished by the unit amounting to Rs.460.14 lakhs and provisionfor non-moving inventory amounting to Rs. 89.90 Lakhs.

b. Disclosure in respect of contingent liabilities has been furnished based on theinformation and representations received from the management.

ix) In respect of Common Services Division Bangalore ("the Unit")

During the previous year the Unit had purchased certain watches and its components fromits subsidiary HMT Watches Limited based on the value determined by the independentvaluer. During the year the Company has determined estimated realisable value which islower than cost and reported as inventories of watches in its financial statements whichhas been relied upon by auditors.

Report on Other Legal & Regulatory Requirements:

1. As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the "Annexure-A" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.

2. As required by the 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 purpose of our audit.

b. Except for the possible effects of the matters described in the Basis for Qualifiedopinion paragraph in our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.

c. The Balance Sheet the statement of Profit and Loss the Cash Flow Statement andStatement of Changes in the Equity dealt with by this Report are in agreement with thebooks of account.

d. The Company has not obtained the actuarial valuation report in respect of ProvidentFund Trusts accordingly in our opinion the aforesaid Ind AS standalone financialstatements don’t comply with the Indian Accounting Standards specified under section133 of the Act.

e. The Company being a Government Company provisions of 164 (2) of the Act is notapplicable with respect to appointment of directors.

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 other matters to be included in the Auditor’s report inaccordance with requirement of Section 197(16) of the Act as amended :

In our opinion and to the best of our information and according to the explanationgiven to us the remuneration paid by the Company to its director’s during the yearis in accordance with the provisions of Section 197 of the Act.

h. With respect to other matters to be included in the Auditors report in accordancewith rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to thebest of our information and according to the explanations given to us

i) The Company has disclosed its pending litigations which would impact its financialposition in note 30 of the Ind AS standalone financial statements.

ii) The Company did not have any long-term contracts as required under the applicablelaw or accounting standardsand also not entered into any derivative contracts accordinglyno provision is required to be made in respect of material foreseeable losses.

iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

3. As required by Section 143 (5) of the Act our submissions are as under:

We give in the "Annexure-C" a statement on the compliance toDirections issued by the Comptroller and Audit General of India.

For B.K.RAMADHYANI & CO LLP
Chartered Accountants
Firm Registration No. 002878S/S200021
(CA C R Deepak)
Partner
Membership No. 215398
Place: Bangalore
Date: August 19 2019

ANNEXURE-A REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING REPORT ON OTHER LEGAL ANDREGULATORY REQUIREMENTS OF OUR REPORT TO THE MEMBERS OF HMT LIMITED.

1. a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Property Plant & Equipment ("PPE").

b) Based on the information of explanation given to us by the Company physicalverification if carried out once in 3 years. However during the year none of the unitshave carried out such verification. Accordingly we are unable to comment on the same.

c) According to the information and explanation given to us by the Company read withfoot note c of note 3A foot note iii) of note 3B and foot notes to note 3C of the Ind ASstandalone financial statements title deed of all immovable properties are held in thename of the Company.

2. The management during the year has physically verified the inventory at reasonableintervals at respective units. The discrepancies that were noticed during the physicalverification of Inventory were not material and the same has been properly adjusted in therespective unit books of account. However it has been reported by the Food ProcessingMachinery unit auditor that documentary evidences to support the same were not availablefor their verification. In respect of Tractor division Pinjore it has been reported bybranch auditor that physical inventory has not been carried out for last 2 financialyears. Accordingly we are unable to comment on the same.

3. In respect of the unsecured loans granted by the Company to companies covered in theregister maintained under section 189 of the Act:

a) In our opinion and according to information and explanation furnished to us theterms and conditions of the loan given by the Company is prima facie not prejudicial tothe interest of the Company.

b) According to information and explanation furnished to us by the Company there is nospecific repayment specified by the Company.

c) There is an overdue interest from year 2017- 18 onwards is outstanding as at the endof the year.

4. In our opinion and according to information and explanation furnished to us theCompany has complied with the provisions of Section 185 and 186 of the Act with respectto loans and investment made.

5. The Company has not accepted any deposits as applicable under the directives issuedby the Reserve Bank of India and the provisions of sections 73 to 76 or any otherprovisions of the Act and rules framed under. Accordingly the provisions of clause 3(v)of the said Order are not applicable.

6. In our opinion and according to information and explanations furnished to us theCentral Government has prescribed the maintenance of cost records under clause (d) ofsub-section (1) of section 148 of the Act to Tractor division. In the opinion of the unitauditor the tractor division was covered by cost audit upto 2013 -14.

a) According to the records of the Company the Company is generally not regular indepositing undisputed statutory dues including Income Tax service tax duty of customsduty of excise value added tax cess GST and any other statutory dues to the appropriateauthorities.

b) The following undisputed amounts payable in respect of value added tax cess and anyother statutory dues in arrears as at March 31 2019 for a period of more than six monthsfrom the date they become payable.

In respect of Corporate Head Office:

Sl. No. Nature of the Statute Nature of Dues Amount (Rs. in lakhs) Period to which Amount related to Due Date Date of Payment
1. Greater Hyderabad Municipal Corporation Property tax 185.44 For the year 2016 – 17 2017 - 18 and first half of 2018 - 19
2. Sales Tax of various states Sales tax recovery of Lamps Division 62.93 Previous Years

c) According to the information and explanation given to us by the Company there areno dues outstanding on account of any disputes in respect of income tax service taxcustoms duty or excise duty or value added tax or goods & service tax as at March 312019.

Name of the Statute Nature of Dues Amount (Rs. in lakhs) Amount paid under protest (INR) Period to which the amount relates Forum where dispute is pending
Sales tax Sales tax liability 2.49 Nil 2012-13 Deputy Commissioner of Sales Tax Aurangabad

8. Based on the information and explanations given to us the Company had borrowed fromDena Bank and has defaulted in repayment of interest of Rs.2034.73 lakhs. The Company hasalso defaulted in repayment of Government of India Loan amounting to Rs.23705.20 Lakhs.However it has not borrowed any amount from financial institution or issued thedebentures.

9. In our opinion based on the information and explanation given to us the Company ithas not raised any moneys by way of initial public offer or further public offer(including debt instruments and term loans. Accordingly the provisions of clause 3(ix) ofthe said Order are not applicable.

10. According to the information and explanation given to us there are no fraudsreported by the Company or any fraud on the Company by its officers or employees has beennoticed or reported during the year. Accordingly the provisions of clause 3(x) of thesaid Order are not applicable.

11. According to the information and explanation given to us the Company haspaid/provided for managerial remuneration in accordance with the requisite approvalsmandated by the provisions of Section 197 read with Schedule V of the Act.

12. The Company is not a Nidhi Company. Accordingly the provisions of clause 3(xii) ofthe said Order are not applicable.

13. In our opinion and according to the information and explanation given to us and asrepresented to us by the management all transactions with the related parties are incompliance with section 177 and 188 of the Act and the details have been disclosed in theInd AS financial statements as required by the applicable Indian accounting standards.

14. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of clause 3(xiv) of the said Order are not applicable.

15. As represented to us by the management and according to the information andexplanation given to us the Company has not entered into any non-cash transactions withdirectors or persons connected with him. Accordingly the provisions of clause 3(xv) ofthe said Order are not applicable.

16. According to the information and explanation given the Company is not required tobe registered under section 45-IA of the Reserve Bank of India Act 1934.

Accordingly clause 3(xvi) of the Order is not applicable to the Company.

For B.K.RAMADHYANI & CO LLP
Chartered Accountants
Firm Registration No. 002878S/S200021
(CA C R Deepak)
Partner
Membership No. 215398
Place: Bangalore
Date: August 19 2019

ANNEXURE - B REFERRED TO IN PARAGRAPH 2 (f) UNDER THE HEADING "REPORT ON OTHERLEGAL AND REGULATORY REQUIREMENTS" OF OUR REPORT TO THE MEMBERS OF HMT 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 HMT Limited("the Company") as of March 31 2019 in conjunction with our audit of thefinancial 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 statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India". These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company’s policies the safeguarding of its assetsthe prevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013 ("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 issued by ICAI and deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor’s judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company’s internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting:

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized 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.

Disclaimer Opinion:

In case of Food Processing Machinery Unit Aurangabad the branch auditor has reportedin the following manner:

The Company did not have an appropriate internal control system for inventory withregard to inventory valuation as the process of mutual updating the purchase rates in theinventory software are not adequately getting updated in the system. Further the internalcontrol system for identification and allocation of overheads to inventory was also notadequate. These could potentially result in material misstatements in the company’sconsumption inventory and expense account balances.

The Physical verification of assets was carried out for the FY 2015-16 however wecould not find a reconciliation of such verification with the fixed assets register thusan effective internal financial control may be evolved to ensure that there should not beany mismatch between the fixed asset register and physical assets with respect to the makeof the asset serial number and location which could potentially result in a materialweakness in the process of verification of fixed assets.

The Company did not have adequate appropriate internal controls for reconciling andobtaining balance confirmation from sundry debtors sundry creditors and other parties.This could potentially result in a material weakness in the financial reporting processof debtors and creditors

The Company did not have appropriate internal controls for reconciliations andconfirmations of Earnest Money Deposits Security Deposits and other Deposits which couldpotentially result in a material weakness in financial reporting process of currentassets and current liabilities.

A "Material weakness" is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company’s annual or interim financialstatements will not be prevented or detected on a timely basis.

In our opinion because of the possible effects of the material weaknesses describedabove on the achievement of the objectives of the control criteria the company hasmaintained in all material respects adequate internal financial controls over financialreporting were operating effectively as of March 31 2019 based on the internal controlover financial reporting criteria established by the company considering the essentialcomponents of internal control stated in Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered accountants ofIndia.

We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the financialstatements of the company as at and for the year ended March 31 2019 and these materialweaknesses have affected our opinion on the financial statements of the company and wehave issued a qualified opinion on the financial statements.

In respect of Tractor Division Pinjore:

In our opinion the Company in all material respects has an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2019 based on"the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India".

In respect of Corporate Head Office Bangalore and Common Services Division Bangalore:

The system of internal financial controls over financial reporting with respect ofCommon services division and Corporate Head Office Bangalore were not made available tous to enable us to determine if the Company has established the adequate internalfinancial control over financial reporting at the aforesaid divisions and whether suchinternal financial controls were operating effectively as at March 31 2019.

We have considered the disclaimer reported above in determining the nature timing andextent of audit tests applied in our audit of the Ind AS standalone financial statementsof the Company and the disclaimer doesn’t affect our opinion on the Ind ASstandalone financial statements of the Company.

For B.K.RAMADHYANI & CO LLP
Chartered Accountants
Firm Registration No. 002878S/S200021
(CA C R Deepak)
Partner
Membership No. 215398
Place: Bangalore
Date: August 19 2019

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