[Issued Consequent to Provisional Comments by Director Indian Auditand Accounts Department Office of the Director General of Commercial Audit and Ex-officioMember Audit Board Hyderabad vide No.DGCA/Hyd/A/c/Desk/HMT/2021 -22/1.1 9/ 473 dated19.08.2022 and it supersedes our Independent Auditor's Report dated 22nd June 2022]
To the Members of HMT Limited
Report on Audit of the Standalone Ind AS Financial Statements
We have audited the Standalone Ind AS financial statements of HMTLimited ("the Company") which comprise of Standalone Balance Sheet as at 31stMarch 2022 the Standalone Statement of Profit and Loss Standalone Statement of Changesin Equity the Standalone Cash Flow Statement for the year then ended and notes to Ind ASfinancial statements including a summary of significant accounting policies and otherexplanatory information.
In our opinion and to the best of our information and according to theexplanations given to us except for effects of the matters described in the Basis ofQualified Opinion section of our report the aforesaid Standalone Ind AS financialstatements give the information required by the Act in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia:
(a) in the case of the Standalone Balance Sheet of the state ofaffairs of the Company as at 31 st March 2022 and
(b) in the case of the Standalone Statement of Profit and Lossincluding Other Comprehensive Income of the profit for the year ended on that date.
(c) in the case of the Standalone Statement of Change in Equity thechanges for the year ended on that date.
(d) in the case of Standalone Cash Flow Statement of the flow of cashin the Company for the year ended on that date.
Basis of Qualified Opinion:
1. Food Processing Machinery Unit Aurangabad:
As per information and explanation given to us with regard to Inventoryvaluation as stated in Note No. 1.9 stock of raw material it is valued by adoptingWeighted Average Cost method. However in the inventory statement provided forverification purpose the correctness of stock items rates could not be verified due toabsence of sufficient and appropriate audit evidence. Owing to the nature of Company'srecords and in the absence of sufficient audit evidence we are unable to ascertain ifthere is material departure from the Weighted Average Cost Method adopted by the company.We are also unable to ascertain its consequent impact if any on the Standalone Ind ASfinancial statements.
2. Auxiliary Business Division Bengaluru
Indian Accounting Standards
a. The inventory valuation as on 31.03.2022 include inventories valuedas per Valuation report dated 30.03.2020 amounting to Rs.261.80 Lakhs. Consequently weare unable to ascertain the impact due to deviation in inventory valuation on theStandalone Ind AS Financial statements as on 31.03.2022.
b. The unit has not carried out any assessment on Impairment ofProperty Plant & Equipment as required under Ind AS 36 Impairment of Assets.Consequently the impact if any on impairment
of Fixed assets on the Standalone Ind AS Financial statements cannot bequantified.
3. Corporate Head Office and Company as a whole:
a. Non-confirmation of balances of Trade Receivables Loans andAdvances Trade Payables and Other Current Liabilities and its consequential impact if anyon the Standalone Ind AS financial statements cannot be quantified.
b. The Company has not provided status quo of Nigeria Machine ToolsLtd. and Gujarat State Machine Tools Corporation Ltd as on 31st March 2022. Consequentlywe are unable to comment on the impact of the same on Standalone Ind AS financialstatements.
c. Non disclosure of Corporate Guarantee amounting to Rs.129.22 crores(fund and non fund based) under contingent liability in Note No 32 - Notes forming part ofaccounts issued to subsidiaries of the company. Against the said Corporate Guarantee thecredit facility utilized is Rs.82.70 crores (fund and non fund based limits)
d. During the year 2016-17 the company recognised the provision forthe impairment loss on investments of Rs.37.26 crores in respect of HMT Bearings Limited.During the year the Company received a total surplus of Rs.15.26 crores from HMT BearingsLimited as per NCLT order. Thus against the Company's investment in HMT Bearings Limitedamounting to Rs.37.46 crores only Rs.15.26 crores was realised by the Company. Howeverthe company reversed the entire provision in the accounts for the current year and insteadof separately disclosing the loss of Rs.22.20 crores the Company has shown only netamount of Rs.15.26 crores as other income. The disclosure does not adequately reflect thetransaction and the loss incurred amounting to Rs.22.20 crores on its investment in HMTBearings Limited.
Indian Accounting Standards
e. The company for Impairment on Financial Assets as per Ind-AS 109 hasto apply expected credit loss (ECL) model for measurement and recognition of impairmentloss. However as per the information and explanation given to us no ECL matrix wasprepared for the period under audit for creating provision for loss allowance. Hence weare unable to ascertain its impact if any on the Standalone Ind AS financial statements.
The effect on revenue on all the above transactions are notascertained.
We conducted our audit in accordance with the Standards on Auditing("SAs") specified under section 143(10) of the Companies Act 2013 ("theAct"). Our responsibilities under those Standards are further described in theAuditor's Responsibilities for the Audit of the Standalone Ind AS financial statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the Standalone Ind AS financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified opinion.
Material Uncertainty Related to Going Concern:
Attention of the members is invited to Note 44 of the Standalone Ind ASfinancial statements regarding the reasons for preparing these Standalone Ind AS financialstatements of the Company on going concern basis. The appropriateness of the said basis isinter-alia dependent on the Company's ability to realise from sale of non-current assetsheld for sale support from Government of India and other business plans. We have reliedon the representation of the Company in this respect. Our opinion is not modified inrespect of this matter.
Key Audit Matters:
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the Standalone Ind AS financial statements forthe financial year ended March 31 2022. These matters were addressed in the context ofour audit of the Standalone Ind AS financial statements as a whole and in forming ouropinion thereon and we do not provide a separate opinion on these matters. For eachmatter below our description of how our audit addressed the matter
is provided in that context.
We have determined the matters described below to be the key auditmatters to be communicated in our report. We have fulfilled the responsibilities describedin the Auditor's responsibilities for the audit of the Standalone Ind AS financialstatements section of our report including in relation to these matters. Accordingly ouraudit included the performance of procedures designed to respond to our assessment of therisks of material misstatement of the Standalone Ind AS financial statements. The resultsof our audit procedures including the procedures performed to address the matters belowprovide the basis for our audit opinion on the accompanying Standalone Ind AS financialstatements.
|Key audit matters ||How our audit addressed the key audit matter |
|Revenue Recognition from operating leases || |
|Revenue Recognition from operating leases as per Ind AS 116 Leases ||Our Audit Procedures included the following:. |
|Reference to Sl.No 2(k)(ii) of notes forming part of the financial statements || We have verified the Lease agreements on sample basis. |
|The Company's total income includes a major portion of income from operating leases || We have verified the journal entries posted with the invoices and assessed their appropri- ateness. |
| || We have verified the income from operating leases recognized by the Company in accord- ance with Ind AS 116 Leases. |
| || We conclude that there are no material non compliances in the recognition of income from operating leases. |
|Winding up of HMT Bearings Ltd || |
|Pursuant to winding up order passed by Honourable National Company Law Tribunal vide its order dated 20th April 2022 ||Our Audit Procedures included the following:. |
|Upon winding up of the subsidiary company the outstanding Assets and Liabilities have been taken over by the holding company || We have verified the minutes of the board meeting of HMT Limited dated 10th November 2021. |
|Reference to Note No. 48 of notes forming part of Standalone Financial Statements. || We have verified the order of Honorable National Company Law Tribunal dated 20th April 2022 and its impact on Standalone Financial Statements. |
|Winding up of HMT Bearings Ltd || |
| || We have verified the entries passed in the books of account of the company to give effect to takeover of Assets & Liabilities as per National Company Law Tribunal order. |
| || We have verified the Audit Report and Financial statements dated 03rd March 2022 submitted by the Insolvency Professional. |
| || We conclude that there are no material non compliances in taking over of Assets and Liabilities of HMT Bearings Ltd. |
Emphasis of Matter Paragraph
1. We draw your attention to Note No.49 of Standalone Ind AS financialstatements for the financial year ended 31st March 2022 on the impact of COVID -19 on theBusiness operations of the Company and its Financial Statements pursuant to the Accounting& Auditing Advisory issued by Institute of Chartered Accountants of India (The ICAI)on impact of Corona Virus on Financial Reporting and the Auditor's Consideration. TheCompany is of the view that the impact of Covid-19 lockdown is temporary and does not haveany material impact on its Standalone Ind AS Financial Statements as at 31 .03.2022 andhence has not made any provision in its books of account.
2. HMT Limited has invested '15 lakh (50% of equity shares) comprising1 50000 equity shares of '10 each fully paid up in Sudmo HMT Process Engineers (India)Ltd. Bengaluru (M/s.Sudmo - HMT). M/s.Sudmo-HMT has no operations. The Board of HMT Ltdhas approved (February 2020/ July 2021) for closure of the defunct joint venture company(M/s.Sudmo- HMT) and submitted the closure proposal to Administrative Ministry (July 2021)for approval.
3. HMT Limited has invested '20.84 lakh (39% of equity shares)comprising 2084050 equity shares of '1 each fully paid up in Gujarat State Machine ToolsCorporation Ltd. Bhavanagar (M/s.GSMTC). The Board of HMT Ltd gave (March 2021) inprinciple approved for liquidation of M/s.GSMTC and issued the consent letter to GujaratIndustrial Investment Corporation Limited (GIIC) GIIC approved (September 2021)liquidation of M/s.GSMTC and submitted (October 2021) the proposal to Industries &Mines Department. HMT Ltd submitted (April 2022) the liquidation proposal toAdministrative Ministry.
4. HMT Limited has invested 3000000 equity shares of 1 Naira eachfully paid up in Nigeria Mchine Tools Limited Nigeria (M/s.NMTL). The Board of HMT Ltdgave (February 2020) approval for divestment of stake in M/s.NMTL and sought approval fromAdministrative Ministry.
Our opinion on the above matters is not modified.
Other Information ["Information Other than the Standalone Ind ASFinancial Statements and Auditor's Report Thereon"]
The Company's Board of Directors are responsible for the Otherinformation. The other information comprises the information included in the Company'sAnnual Report but does not include the Standalone Ind AS financial statements and ourAuditor's report thereon. The Other information is expected to be made available to usafter the date of Auditor's report.
Our opinion on the Standalone Ind AS financial statements does notcover the Other information and we do not express any form of assurance conclusionthereon.
In connection with our audit of the Standalone financial statementsour responsibility is to read the other information identified above when it becomesavailable and in doing so consider whether the other information is materiallyinconsistent with the financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated. If based on the work we have performed weconclude that there is a material misstatement of this other information we are requiredto report that fact. However as the Board's Report is not made available to us we havenothing to report.
Management's Responsibility for Standalone Ind AS Financial Statements:
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these Standalone Ind ASfinancial statements that give a true and fair view of the financial position financialperformance changes in equity 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 accountingrecords relevant to the preparation and presentation of the Standalone Ind AS financialstatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the Standalone Ind AS financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind ASFinancial Statements:
Our objectives are to obtain reasonable assurance about whether theStandalone Ind AS financial statements as a whole are free from material misstatementwhether due to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these Standalone Ind AS financialstatements.
As part of an audit in accordance with SAs we exercise professionaljudgement and maintain professional scepticism through the audit. We also:
Identify and assess the risks of material misstatement of theStandalone Ind AS financial statements whether due to fraud or error design and performaudit procedures responsive to those risks and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls system in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis 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 Ind AS financial statements or if such disclosuresare inadequate 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 conditions maycause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of theStandalone Ind AS financial statements including the disclosures and whether theStandalone Ind AS financial statements represent the underlying transactions and events ina manner that achieves fair presentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
i) We did not audit the financial statements/infor- mation of FoodProcessing Machinery Unit Au- rangabad included in these Standalone Ind AS financialstatements of the Company whose fi- nancial statements/financial information reflect totalassets of Rs. 2986.69 lakhs as at March 31 2022 and total revenues of Rs. 728.25 lakhsfor the year ended on that date. The financial state- ments/ information of this branchhas been au- dited by the branch auditor M/s Modi & Agrawal Chartered AccountantsAurangabad whose report has been furnished to us and our opinion in so far as it relatesto the amounts and disclo- sures included in respect of this unit are based solely on thereport of such branch auditor.
ii) The physical share certificates for 260899037 equity shares and44300000 preference shares of HMT Machine Tools Ltd whose costs is Rs.26089.90 Lakhsand Rs.44300.00 lakhs respectively are not in the possession of the Company as at March312022.
Report on Other Legal & Regulatory Requirements:
1. As required by the Companies (Auditor's Report) Order 2020("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act we give in the "Annexure-A" astatement on the matters specified in paragraphs 3 and 4 of the Order to the extentapplicable.
2. As required by the section 143(3) of the Act we report that:
a. we have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purpose of our audit.
b. except for the effects of the matter described in the Basis forQualified Opinion paragraph above 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 Standalone Balance Sheet the Standalone Statement of Profit andLoss (including other comprehensive income) the Standalone Statement of Changes in Equityand the Standalone Statement of Cash Flows dealt with by this Report are in agreement withbooks of account.
d. except for the effects of the matter described in the Basis forQualified Opinion paragraph above in our opinion the aforesaid Standalone Ind ASfinancial statements comply with the Indian Accounting Standards specified under Section133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.
e. the company is a Government Company and in terms of Notificationreference No.G.S.R 463(E) dated 05th June 2015 issued by Ministry of Corporate Affairsfor Government Companies the provision of Section 164 (2) of the Companies Act 2013regarding disqualifications of directors is not applicable. Hence our comment on the samedoes not arise.
f. with respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B".
g. the company is a Government Company and in terms of Notificationreference No.G.S.R 463(E) dated 05th June 2015 issued by Ministry of Corporate Affairsfor Government Companies the provision of Section 197 of the Companies Act 2013 is notapplicable. Hence our comment on the same does not arise.
h. With respect to other matters to be included in the Auditors reportin accordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 in ouropinion and to the best of our information and according to the explanations given to us
i) The Company has disclosed its pending litigations which would impactits financial position in note 32 of the Standalone Ind AS financial statements.
ii) The Company did not have any long-term contracts as required underthe applicable law or accounting standards and also not entered into any derivativecontracts accordingly no provision is required to be made in respect of materialforeseeable losses.
iii) There were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Company.
iv) (1) The Management has represented that to the best of itsknowledge and belief as disclosed in the note 51 to the Notes to financial statements nofunds have been advanced or loaned or invested (either from borrowed funds or sharepremium or any other sources or kind of funds) by the Company to or in any other person(s)or entity(ies) including foreign entities ("Intermediaries") with theunderstanding whether recorded in writing or otherwise that the Intermediary shalldirectly or indirectly lend or invest in other persons or entities identified in anymanner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") orprovide any guarantee security or the like on behalf of the Ultimate Beneficiaries.
(2) The Management has represented that to the best of its knowledgeand belief as disclosed in the note 52 to the Notes to financial statements no fundshave been received by the Company from any person(s) or entity(ies) including foreignentities ("Funding Parties") with the understanding whether recorded inwriting or otherwise that the Company shall directly or indirectly lend or invest inother persons or entities identified in any manner whatsoever by or on behalf of theFunding Party ("Ultimate Beneficiaries") or provide any guarantee security orthe like on behalf of the Ultimate Beneficiaries.
(3) Based on the audit procedures performed that have been consideredreasonable and appropriate in the circumstances nothing has come to our notice that hascaused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e)contain any material mis-statement as stated above.
v) The company has not declared or paid dividend during the year underaudit.
3. As required by Section 143 (5) of the Act our submissions are asunder:
We give in the "Annexure-C" a statement on thecompliance to Directions issued by the Comptroller and Audit General of India.
ANNEXURE-A REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING "REPORT ONOTHER LEGAL AND REGULATORY REQUIREMENTS" OF OUR REPORT TO THE MEMBERS OF HMT LIMITED.
i) a) (A) The Company has maintained proper records showing fullparticulars including quantitative details and situation of Property Plant &Equipment.
(B) The company does not have intangible assets. Hence our comment onthe same does not ...arise.
b) Based on the information and explanation given to us by the Companyphysical verification of Property Plant & Equipment is carried out once in 3 yearsand is reasonable considering size of the company.
However in Auxiliary Business Division -the fixed assets of AuxiliaryBusiness Division have been physically verified as per the policy by the management duringthe Financial year 2019-20. However physical verification of the Property Plant &Equipment of the erstwhile Tractor division merged with Auxiliary Business Division wascarried out during financial year 2016- 17. In our opinion the division has to makearrangements for physical verification of assets belonging to Tractor division merged withAuxiliary Business Division. Further no material discrepancies were noticed in the caseof Property Plant & Equipment of Auxiliary Business Division but since we do not havelatest physical verification report of Tractor Division we are unable to comment on thediscrepancy if any on Property Plant & Equipment of Tractor division.
c) According to the information and explanation given to us by theCompany read with foot note to note 3B and foot notes to note 3C of the Standalone Ind ASfinancial statements title deed of all immovable properties are held in the name of theCompany except:
(i) The Branch Auditor has reported that the following property held byFood Processing Machinery Unit of the company is under dispute as the land has beenencroached upon. The matter is pending with the Honourable High Court as stated in NoteNo. 3A of the Standalone Ind AS Financial Statements.
|Description of the Property ||Gross Carrying Value ||Held in the name of ||Whether promoter director or their relative or employee ||Period held- indicate range where appropriate ||Reason for not being held in name of company |
|Leasehold land from CIDCO ||Rs.500000 ||HMT Limited ||No || ||Title deeds are in the name of the Company whereas the said land has been encroached and the matter is pending with the Honourable High Court. |
d) Company has not revalued its Property Plant and Equipment(including Right of Use assets) during the year however company does not have anyintangible assets. Hence our comment on the same does not arise.
e) As per the information and explanation given to us by the companythere are no proceedings initiated or pending against the company for holding any benamiproperty under Benami Transactions (Prohibition) Act 1988 (45 of 1988) and rules madethereunder. Hence our comment on the same does not arise.
ii) (a) The management during the year has physically verified theinventory at reasonable intervals at respective units. The discrepancies that were noticedduring the physical verification of Inventory were not material and the same has beenproperly adjusted in the respective unit books of account. However the physicalverification of inventories belonging to erstwhile Tractor Division merged with AuxiliaryBusiness Division was not conducted and hence we are unable to comment on thediscrepancies if any and its impact on Standalone Ind AS Financial statements.
(b) According to the information and explanation given to us duringthe year the company has not taken any working capital loan. Hence our comment on thesame does not arise.
(a) During the year the Company has granted unsecured loans to one ofits subsidiaries
(Rs. in Lakhs)
|Particulars ||Loans ||Advances in the nature of Loans |
|Aggregate amount granted/ provided during the year ||1700.00 ||2013.03 |
|- Subsidiaries || || |
|HMT Machine Tools Ltd ||1700.00 ||1936.81 |
|SUDMO HMT Process Engineers (India) Ltd ||- ||2.41 |
|HMT (International) Ltd ||- ||73.81 |
|Balance outstanding as at balance sheet date in respect of above cases' || || |
|- Subsidiaries || || |
|HMT Machine Tools Ltd ||24573.58 ||7871.16 |
|SUDMO HMT Process Engineers (India) Ltd ||- ||4.83 |
|HMT (International) Ltd ||- ||190.22 |
(b) According to the information and explanations given to us and basedon the audit procedures conducted by us we are of the opinion that the terms andconditions of the loans given are prima facie not prejudicial to the interest of theCompany.
(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company in the case of loans giventhe repayment of principal is not due as on 31st March 2022 whereas payment of interestis not regular. The details of which are as follows
(Rs. In Lakhs)
|Name of the Entity ||Amount ||Due date ||Extent of Delay ||Remarks if any |
|HMT Machine Tools Limited ||Rs. 556.99 ||31-03-2019 ||1097 Days ||- |
|HMT Machine Tools Limited ||Rs. 1345.47 ||31-03-2020 ||731 Days ||- |
|HMT Machine Tools Limited ||Rs. 1640.73 ||31-03-2021 ||366 Days ||- |
(d) According to the information and explanations given to us and onthe basis of our examination of the records of the Company there is an overdue amount formore than ninety days in respect of loans given.
(Rs. In Lakhs)
|No. of Cases ||Principal Amount Overdue ||Interest Overdue ||Total Overdue ||Remarks if any |
|Single Case ||- ||Rs. 3543.19 ||Rs. 3543.19 ||- |
(e) According to the information and explanations given to us and onthe basis of our examination of the records of the Company there is no loan given fallingdue during the year which has been renewed or extended or fresh loans given to settle theoverdues of existing loans given to the same party.
(f) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the Company has given advancesin the nature of loans without specifying any terms or period of repayment.
|Particulars ||All Parties ||Promoters ||Related Parties |
|Aggregate amount of advances in the nature of loans || || || |
|- Repayable on demand (A) ||Rs. 2694.36 ||- ||Rs. 2694.36 |
|- Agreement does not specify any terms or period of repayment (B) ||- ||- ||- |
|Total (A+B) ||Rs. 2694.36 ||- ||Rs. 2694.36 |
|Percentage of loans/ advances in the nature of loans to the total loans ||8.25% ||- ||8.25% |
iv) In our opinion and according to information and explanationfurnished to us the Company has complied with the provisions of Section 185 and 186 ofthe Act with respect to loans and investment made.
v) The Company has not accepted any deposits from the public. Hence ourcomment on the compliance of provisions of sections 73 to 76 or any other relevantprovisions of the Companies Act 2013 and the rules framed thereunder does not arise.
The Company Law Board or National Company Law Tribunal or Reserve Bankof India or any court or any other tribunal has not passed any order and hence our commenton the same does not arise
vi) In our opinion and according to information and explanationsfurnished to us in our opinion the Central Government has not prescribed maintenance ofcost records under subsection(1) of section 148 of Companies Act 2013 in respect ofcompany's products.
vii) a) According to the information and explanations provided to usCustom Duty and Excise duty does not apply to this company for the year under review.
According to the information and explanations given to us and on thebasis of our examination of the records of the Company amounts deducted/accrued in thebooks of account in respect of undisputed statutory dues including income tax GST havegenerally been regularly deposited by the Company with the appropriate authorities thoughthere has been a slight delay in few cases.
As per our verification and according to the information andexplanation given to us there are no undisputed statutory dues except the followingstatutory dues which remained outstanding as at 31st March 2022 for a period more thansix months from the date they became payable:
|Sl. No. Nature of the Statute ||Nature of Dues ||Amount |
|In respect of Corporate Head Office: || || |
|1. Greater Hyderabad Municipal Corporation ||Property tax ||463.83 |
|In respect of Auxiliary Business Division:+ || || |
|2 Goods & Service Tax ||Tax Deducted at Source on GST ||1.83 |
|3 Employee State Insurance ||Employee State Insurance ||2.34 |
|4 VAT/CST ||Interest on VAT/CST ||1.24 |
|In respect of Food Processing Machinery Unit: || || |
|5 Employee Provident Fund ||Provident Fund ||62.81 |
b) According to the information and explanation given to us by theCompany there are no dues outstanding on account of any disputes in respect of statutorydues as at 31st March 2022 except the following:
(Rs. in Lakh)
|Name of the Statute ||Nature of Dues ||Amount (Rs.in lakhs) ||Amount paid under protest (Rs.in lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|Haryana Local Area Development Tax Ordinance 2000 ||Haryana Local Area Development Tax ||486.18 ||Nil ||From 2005 to 2015 ||Honorable High Court of Punjab and Haryana |
viii) The company does not have any transactions not recorded in thebooks of account which have been surrenderee or disclosed as income during the year in thetax assessments under the Income Tax Act 1961.
ix) (a) According to the records of the company examined by us and asper the information and explanation given to us the company has not issued debentures andalso not availed loans from financial institutions / banks during the year other than loanfrom Government of India which was taken and defaulted as reported below:
|Nature of Borrowing [Interest Free] ||Name of the lender ||Amount of installment and period of default ||No of Days Delay or Unpaid |
|i) Government of India Loan [Interest Free] dated 21.01.2017 ||Government of India ||a) Rs.6073.60 Lakhs due since 21.01.2018. ||1530 |
| || ||b) Rs.6073.60 Lakhs due since 21.01.2019. ||1165 |
| || ||c) Rs.6073.60 Lakhs due since 21.01.2020. ||800 |
| || ||d) Rs.6073.60 Lakhs due since 21.01.2021. ||434 |
| || ||e) Rs.6073.60 Lakhs due since 21.01.2022. ||69 |
|ii) Government of India Loan [Interest Free] dated 16.02.2017 ||Government of India ||a) Rs.4800.00 Lakhs due since 16.02.2018. ||1504 |
| || ||b) Rs.4800.00 Lakhs due since 16.02.2019. ||1139 |
| || ||c) Rs.4800.00 Lakhs due since 16.02.2020. ||774 |
| || ||d) Rs.4800.00 Lakhs due since 16.02.2021. ||408 |
| || ||e) Rs.4800.00 Lakhs due since 16.02.2022. ||43 |
|iii) Government of India Loan [Interest Free] dated 29.04.2017 ||Government of India ||a) Rs.1958.00 Lakhs due since 29.04.2018. ||1432 |
| || ||b) Rs.1958.00 Lakhs due since 29.04.2019. ||1067 |
| || ||c) Rs.1958.00 Lakhs due since 29.04.2020. ||701 |
| || ||d) Rs.1958.00 Lakhs due since 29.04.2021. ||336 |
(b) The Company is not declared wilful defaulter by any bank orfinancial institution or other lender.
(c) According to the information and explanations given to us and basedon our examination of the records of the company the Company has not obtained any termloan during the year and hence our comment on application of term loans funds does notarise.
(d) The Company has not raised any funds on short term or long termbasis hence our comment on utilization of the same does not arise.
(e) The Company has not taken any funds from any entity or person tomeet the obligations of its subsidiaries associates or joint ventures Hence our commenton the same does not arise.
(f) The Company has not raised any loans during the year on the pledgeof securities held in subsidiaries Hence our comment on the same does not arise.
x) (a) In our opinion based on the information and explanation given tous the Company has not raised any moneys by way of initial public offer or further publicoffer (including debt instruments) during the year. Hence comment on the same does notarise.
(b) According to the information and explanations given to us and basedon our examination of the records of the Company the Company has not made anypreferential allotment or private placement of shares or fully or partially or optionallyconvertible debentures during the year. Hence our comment on the same does not arise.
xi) (a) Based upon the audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and as per the informationand explanations given by the management we report that no fraud on or by the Company byits officers or employees has been noticed or reported during the course of our audit.
(b) No report has been filed by the Company Auditors in Form ADT-4 asper Section 143(12) of the Act since there were no instances of fraud by the company orany fraud on the company has been noticed or reported during the year.
(c) No Whistle-blower complaints were received during the year by theauditor and hence our... comment on the same does not arise.
xii) The Company is not a Nidhi Company and hence our comment onmatters mentioned in sub clause (a) to (c) of clause (xii) of the order does not arise.
xiii) In our opinion and according to the information and explanationgiven to us and as represented to us by the management all transactions with the relatedparties are in compliance with section 177 and 188 of the Act and the details have beendisclosed in the Standalone Ind AS financial statements as required by the applicableIndian accounting standards.
xiv) (a) The Company has a formal internal audit system which iscommensurate with the size of the company and nature of its Business which needs to bestrengthened.
(b) We have considered the Internal Auditor's reports which has beensubmitted for the period under audit.
The Branch Auditor of Food Processing Machinery Unit Aurangabad hasreported that he has not considered the Internal Audit report while issuing his AuditReport dated 22nd May 2022.
xv) According to the information and explanations given to us and basedon our examination of the records of the Company it has not entered into any non-cashtransactions with its directors or persons connected with them during the year and hencethe compliance of provisions of section 192 of Companies Act 2013 on this matter does notarise.
xvi) As the Company is not carrying on the business of Non-BankingFinance the company is not required to be registered under section 45-IA of Reserve Bankof India Act 1934. Hence our comment on clauses (b) to (d) of the order does not arise.
xvii) The company has not incurred any cash losses in the financialyear and in the immediately preceding financial year.
xviii) There has been no resignation of Company's Statutory Auditorsduring the financial year. Hence our comment on the same does not arise.
xix) According to the information and explanations given to us and onthe basis of the financial ratios ageing and expected dates of realization of financialassets and payment of financial liabilities other information accompanying the financialstatements our knowledge of the Board of Directors and management plans and based on ourexamination of the evidence supporting the assumptions nothing has come to our attentionwhich causes us to believe that any material uncertainty exists as on the date of theaudit report that company is not capable of meeting its liabilities existing at the dateof balance sheet as and when they fall due within a period of one year from the balancesheet date. We however state that this is not an assurance as to the future viability ofthe company. We further state that our reporting is based on the facts up to the date ofthe audit report and we neither give any guarantee nor any assurance that all liabilitiesfalling due within a period of one year from the balance sheet date will get dischargedby the company as and when they fall due.
xx) (a) The Company does not have unspent amount in respect of otherthan ongoing projects in compliance with second proviso sub-section (6) of section 135 ofthe said Act. Hence our comment on the same does not arise.
(b) According to the information and explanation given to us theCompany has transferred the remaining amount unspent relating to an ongoing project incompliance with the provision of sub- section (6) of section 135 of the said Act. (xxi)The reporting under clause (xxi) is not applicable to Standalone Financial statements.
ANNEXURE-B REFERRED TO IN PARAGRAPH 2 (f) UNDER THE HEADING"REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS" OF OUR REPORT TO THE MEMBERSOF HMT LIMITED.
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act"):
We have audited the internal financial controls over financialreporting of HMT Limited ("the Company") as of March 31 2022 in conjunctionwith our audit of the Standalone Ind AS financial statements of the Company for the yearended on that date.
Management's Responsibility for Internal Financial Controls:
The Company's management is responsible for establishing andmaintaining internal financial controls based on "the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India". Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013 ("the Act").
Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") and the Standards on Auditing issued by ICAIand deemed to be prescribed under section 143(10) of the Act to the extent applicable toan audit of internal financial controls both applicable to an audit of Internal FinancialControls and both issued by the Institute of Chartered Accountants of India. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the Standalone Ind AS financial statements whether dueto fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting:
A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of
Standalone Ind AS financial statements for external purposes inaccordance with generally accepted accounting principles. A company's internal financialcontrol over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of Standalone Ind AS financial statements in accordancewith generally accepted accounting principles and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directorsof the company; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the company's assets thatcould have a material effect on the Standalone Ind AS financial statements.
Inherent Limitations of Internal Financial Controls Over FinancialReporting:
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 31 2022 basedon internal financial 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 except:
Company as a Whole:
1. The company did not have adequate appropriate internal controls forreconciling inventories and obtaining balance confirmation from sundry debtors sundrycreditors and other parties. This could potentially result a material weakness infinancial reporting process of debtors creditors and other parties.
In case of Food Processing Machinery Unit Aurangabad the branchauditor has reported in the following manner:
2. There is no appropriate internal control system for inventory asthere is no integration between financial accounting module and inventory module. Thevaluation of inventory is done in inventory module.
It has been explained that Company is in the process of integrating thefinance accounting module and inventory module and currently it is in the final stage.
As explained to us stock is valued by adopting weighted average costmethod. However on scrutiny the rates could not be verified due to absence of relevantrecords such as Purchase Invoices Purchase orders etc.
Further the internal control system for identification and allocationoverheads to inventory was also not adequate. These could potentially result in materialmisstatements in the company's consumption inventory and expense account balances.
3. As per Information and explanations given to us verification offixed assets was done in March 2022. An effective internal financial control may beevolved to ensure that there should not be any mismatch between fixed assets register andphysical sets with respect to the make of the asset serial number and location whichcould potentially result in a material weakness in the process of verification of fixedassets.
ANNEXURE - C REFERRED TO IN PARAGRAPH 3 UNDER THE HEADING "REPORTON OTHER LEGAL AND REGULATORY REQUIREMENTS" OF OUR REPORT DIRECTIONS INDICATING THEAREARS TO BE EXAMINED BY STATUTORY AUDITORS DURING THE COURSE OF AUDIT OF ANNUAL ACCOUNTSOF HMT LIMITED FOR THE FINANCIAL YEAR 2021-22 ISSUED BY THE COMPTROLLER & AUDITORGENERAL OF INDIA ("C&AG") UNDER SECTION 143 (5) OF THE COMPANIES ACT 2013
|Sl Directions No. ||Audit Observations |
|1. Whether the Company has system in place to process all the accounting transactions through IT system? If yes the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with financial implications if any may be stated. ||Based on the information and explanation provided to us by the Company it has system in place where all the accounting vouchers are manually prepared and entered into IT systems after proper authorization. We are of the opinion that there is no material financial implications on the Company. |
|2 Whether there is any restructuring of an existing loan or cases of waiver/ write off of debts/ loans/interest etc. made by a lender to the Company due to the Company's inability to repay the loan? If yes the financial impact may be stated. Whether such cases are properly accounted for? (In case lender is a Government company then this direction is also applicable to statutory auditor of lenders company). ||Based on the information and explanation furnished to us by the Company there is no restructuring of loan/ waiver off of debts/ loans/ interest etc from its lenders. |
|3 Whether funds (grants/subsidy etc.) received/receivable for specific schemes from central/state Government or its agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation. ||Based on the information and explanation furnished to us by the Company it has received an amount of Rs.13.74 Lakhs from Department of Heavy Industries towards reimbursement expenses incurred by the Company for Financial & Strategic Review of Consolidation & Restructuring Plan of the Company paid to IIM Bangalore. Since the communication from Department of Heavy Industries states as one- time interest free loan the same has been treated as current liabilities. Manqwagement has informed that it is in process of getting ratification for same. Accordingly we are unable to comment whether it is loan or grant given by the Central Government. Further the Company has an unspent balance of Rs.29.98 crores as on 31.03.2022 out of the Loan received from GOI of Rs. 641.58 crores. |
COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION143(6)(b) OF THE COMPANIES ACT 2013 ON THE STANDALONE FINANCIAL STATEMENTS OF HMT LIMITEDFOR THE YEAR ENDED 31 MARCH 2022
The preparation of financial statements of HMT Limited for the yearended 31 March 2022 in accordance with the financial reporting framework prescribed underthe Companies Act 2013 (Act) is the responsibility of the management of the Company. TheStatutory Auditors appointed by the Comptroller and Auditor General of India under Section139 (5) of the Act are responsible for expressing opinion on the financial statementsunder Section 143 of the Act based on independent audit in accordance with the Standardson Auditing prescribed under Section 143(10) of the Act. This is stated to have been doneby them vide their Revised Audit Report dated 01 September 2022 which supersedes theirearlier Audit Report dated 22 June 2022.
I on behalf of the Comptroller and Auditor General of India haveconducted a supplementary audit of the Standalone Financial Statements of HMT Limited forthe year ended 31 March 2022 under Section 143(6) (a) of the Act. This supplementary audithas been carried out independently without access to the working papers of the StatutoryAuditors and is limited primarily to inquiries of the Statutory Auditors and Companypersonnel and a selective examination of some of the accounting records.
In view of the revision made in the Statutory Auditors' Report to giveeffect to some of my audit observations raised during supplementary audit I have nofurther comments to offer upon or supplement to the Statutory Auditors' Report underSection 143(6)(b) of the Act.