TO THE MEMBERS OF HMT Limited
Report on the Ind AS Standalone Financial Statements:
On completion of audit of accounts of HMT Limited ("the Company) for the year 2017 2018 we had rendered our audit report dated June 19 2018. 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; two observations have been added in Matter of Emphasis inrespect of Tractor Business Group Pinjore.We have audited the accompanying Ind ASstandalone financial statements of HMT Limited ("the Company") which comprisethe Balance Sheet as at March 31 2018 the Statement of Profit and Loss (including OtherComprehensive Income) the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and a summary of the significant accounting policies and otherexplanatory information.
Managements Responsibility for the Ind AS Standalone Financial Statements:
The Companys Board of Directors are responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese Ind AS standalone financial statements that give a true and fair view of the stateof affairs (financial position) loss (financial performance including other comprehensiveincome) cash flows and changes in equity of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)prescribed under section 133 of the Act read with relevant rules issued there under.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the Ind ASstandalone financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
Our responsibility is to express an opinion on these Ind AS standalone financialstatements based on our audit.
We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the rules made there under.
We conducted our audit of the Ind AS standalone financial statements in accordance withthe Standards on Auditing specified under section 143(10) of the Act. Those Standardsrequire that we comply with the ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the financial statements are free from materialmisstatements.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Ind AS standalone financial statements. The procedures selecteddepend on the auditors judgment including the assessment of the risks of materialmisstatement of the Ind AS standalone financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Companys preparation of the Ind AS standalone financial statementsthat give a true and fair view in order to design audit procedures that are appropriate inthe circumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by theCompanys Directors as well as evaluating the overall presentation of the Ind ASstandalone financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Ind AS standalone financialstatements.
Basis of our Qualified Opinion:
1. Food Processing Machinery Unit Aurangabad:
a) As per information and explanation given to us with regards to the valuation ofinventory as stated in Note No. 1.9) and 5) amounting to Rs. 317.47 lakhs stock ofmaterials (including stock considered in raw materials WIP and FG) are valued byadopting Weighted Average Cost Method. However in the inventory software for many stockitems rates were not updated because of which respective stocks were valued at Nil. Thesewere later manually updated based on the Purchase Orders available. Owing to the nature ofUnits 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.
b) With regards to provision for non-moving inventory as stated in Note No.5) amountingto Rs.89.90 lakhs the Company has relied on the report generated from the inventorysoftware however as discussed in the above paragraph even in this report the rates havenot been updated against many stock items.
Accordingly the value of non-moving inventory is understated consequently affectingthe provision for non-moving inventory and thereby profit of the Company.
The effects of the above on the Ind AS standalone financial statements is notascertainable.
2. Tractor Business Group Pinjore (including Hyderabad Assembly Project & Mohaliunit):
The unit has sought confirmations of most of Trade Receivables Trade Payables Loans& Advances although Balances are subject to confirmation and reconciliation if anyand the effect on the same on Ind AS Standalone financial statements is not ascertainable.
3. Common Services Division:
Attention is invited to note 45 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.
3. Corporate Head Office ("CHO"):
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 employers contribution.Effect on the same on Ind AS Standalone financial statements is not ascertainable.
In our opinion and to the best of our information and according to the explanationsgiven to us and based on the consideration of the reports of other Branch Auditorsexcept for the effects of the matter described in the " Basis of our QualifiedOpinion" paragraph the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs (financial position) of the Company as at March 31 2018 and its profits(financial performance including other comprehensive income) the changes in the equityand the cashflows for the year ended on that date.
Emphasis of Matter:In respect of the Company as a whole:
Attention of the members is invited to note 45 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 completely eroded. The appropriateness of the said basis is inter alia dependent on theCompanys ability to realise from sale of non-current assets held for sale supportfrom Government of India and other business plans. We have also relied on therepresentation of the Company in this respect.
In respect of Tractor Business Group Pinjore:
i) During the year the Company has received certain claim of Rs.2975.66 lacs from sixvendors who are reported as Micro Small & Medium Enterprises as defined in MicroSmall & Medium Enterprises Act 2006 which has not been reported in the aforesaidstandalone financial statements as contingent liabilities.
ii) Subsequent to year end the Companyhas entered into Settlement Agreement withGovernment of Haryana towards mutation of the land of 846.43 acres which was gifted toHMT Ltd in the year 1962 by the erstwhile Government of Punjab. HMT Ltd decided towithdraw the pending legal cases against each other. Further HMT Ltd shall receiveRs.24164.86 lakh from Haryana State Industrial Infrastructure Development Corporation(HSIIDC) for handing over the possession of land of 446.00 acres. HMT Limited shall alsoreceive compensation for the land of 4.98 acres acquired by Haryana State IrrigationDepartment (HSID) and for the land of 12.80 acres acquired by National Highway Authorityof India (NHAI) which has not been reported in the aforesaid standalone financialstatements.
Our report has not been modified in this respect.
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. 9159.13lakhs as at March 31 2018 and totalrevenues of Rs. 6083.50 lakhs (including amount included in discontinued operations ofRs.4948.82 lakhs) for the year ended on that date. The financial statements/ informationof these branches has been audited by the branch auditors i.e. Goel Subhash &Associates Chartered Accountants Ambala Cantt 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 Years Financial statements of CHOaccounts except payment of Rs.67.84 lakhs towards due to Greater Hyderabad MunicipalCorporation and Commercial Tax Officer Hyderabad. Further the Company has expensed offother advances amounting to Rs.9.42 lakhs and reversal of liability no longer requiredamounting to Rs.235.11 Lakhs.
iii) The physical share certificates for 260899037 equity shares and 44300000preference shares of HMT
Machine Tools Ltd whose costs is Rs.26089.90 Lakhs and Rs.44300.00 lakhs respectivelyare not in the possession of the Company as at March 31 2018.
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.618.43lakhs 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) 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.10873.60lakhs has been shown as continuous defaults of Government of India Loans.
b) The Unit has made a provision of Rs.5883.39 lakhs for allowance of tradereceivables the Unit auditors have relied based on the certificate furnished by themanagement.
c) During the previous year the Unit has discontinued its operations and is in theprocess of making settlement for all its receivables and payables. The Company need tocarry out proper review of following balances and take necessary action:
|Particulars ||Amount (` In lakhs) ||Remarks |
|Amount due to PWD ||22.18 ||Due for more than 10 years |
|Claim recoverable ||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.317.47 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.
c. The Unit has sought the confirmation of balances from parties with whom it hastransactions (trade payables & trade receivables) which are subject to confirmation.
Report on Other Legal & Regulatory Requirements:
1. As required by the Companies (Auditors 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 dont 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 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 29 of the Ind AS standalone financial statements.
ii) The Company did not have any long-term contracts as required under the applicablelaw or accounting standards and also not entered into any derivative contractsaccordingly no 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
Firm Registration No. 002878S/S200021
(CA C R Deepak)
Membership No. 215398
Date: August 30 2018
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.
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 for year 2017 18 outstanding as at the end of theyear.
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 as the Company to Tractor division. In theopinion of the unit auditor prescribed cost records have been maintained by the Unit.
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 2018 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 ||86.47 ||For the year 2016 17 and first half of 2017 - 18 || || |
|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 except for the following in respect of FoodProcessing Division.
|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 loan amounting to Rs.986.50 lakhs and interestof Rs.2010 lakhs.The Company has also defaulted in repayment of Government of India Loanamounting to Rs.10873.60 Lakhs. However it has not borrowed any amount from financialinstitution or issued the debentures.
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 the provisions 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
Firm Registration No. 002878S/S200021
(CA C R Deepak)
Membership No. 215398
Date: August 30 2018
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 2018 in conjunction with our audit of thefinancial statements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls:
The Companys 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 companys 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").
Our responsibility is to express an opinion on the Companys 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 auditors judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Companys internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting:
A companys 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 companys 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 thecompanys 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 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 companysconsumption 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 companys annual or interim financialstatements will not be prevented or detected on a timely basis.In our opinion because ofthe possible effects of the material weaknesses described above on the achievement of theobjectives of the control criteria the company has maintained in all material respectsadequate internal financial controls over financial reporting were operating effectivelyas of March 31 2018 based on the internal control over financial reporting criteriaestablished by the company considering the essential components of internal control statedin Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issuedby the Institute of Chartered accountants of India.
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 2018 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 Corporate Head Office Bangalore Common Services Division Bangalore andTractor Division Pinjore:
The system of internal financial controls over financial reporting with respect ofTractor Division Pinjore Common services division and Corporate Head Office Bangalorewere not made available to us to enable us to determine if the Company has established theadequate internal financial control over financial reporting at the aforesaid divisionsand whether such internal financial controls were operating effectively as at March 312018.
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 doesnt affect our opinion on the Ind ASstandalone financial statements of the Company.
For B.K.RAMADHYANI & CO LLP
Firm Registration No. 002878S/S200021
(CA C R Deepak)
Membership No. 215398
Date: August 30 2018