To the Members of
HPL Electric & Power Ltd.
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the financial statements of HPL ELECTRIC & POWER LIMITED ("theCompany") which comprise the balance sheet as at 31st March 2020 and the statementof Profit and Loss(including other comprehensive income) Statement of Changes in Equityand Statement of Cash Flows for the year then ended and notes to the standalone financialstatements including a summary of significant accounting policies and other explanatoryinformation (hereinafter referred to as "the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at 31stMarch 2020 its profit/loss and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
|The key audit matters ||How the matter was addressed in our audit |
|Evaluation of uncertain tax positions ||Principal Audit Procedures |
|The Company operates in multiple jurisdictions and is subject to periodic challenges by local tax authorities on a range of tax matters during the normal course of business including indirect tax matters. These involve significant management judgment to determine the possible outcome of the uncertain tax positions consequently having an impact on related accounting and disclosures in the consolidated financial statements. ||Our audit procedures include the following substantive procedures: |
| || Obtained understanding of key uncertain tax positions; and |
| || We along with our internal tax experts |
| ||Read and analyzed select key correspondences external legal opinions / consultations by management for key uncertain tax positions; |
| ||Discussed with appropriate senior management and evaluated management's underlying key assumptions in estimating the tax provisions; and |
| ||Assessed management's estimate of the possible outcome of the disputed cases. |
|Expected credit loss (ECL) on trade receivables ||Principal Audit Procedures |
|Trade receivables balances represent significant portion of the Company's assets. Loss allowances on trade receivables for delays and defaults in recovery involves significant judgements and estimates. ||Our audit procedures over ECL on trade receivables included the following: |
| || |
|Timing of collection of dues from the customers may differ from the actual credit period. ||Testing the design implementation and operating e_ectiveness of key internal financial controls on a sample basis over accounting of measurement of ECL on trade receivables credit control process over aged receivables; |
|The balance of loss allowances on trade receivables represent the Company's best estimates at the reporting date of ECL under Ind AS 109. The Company assesses the ECL allowance resulting from all possible defaults over the expected life of the receivables and credit impaired receivables. These are expected to be recognized before a trade receivables becomes past due. The measurement of ECL involves significant Company's judgement and assumption primarily relating to: ||Evaluating governance structure over provisioning matrix; |
| ||Assessing Company's policy for ECL on trade receivables and credit impaired receivables with applicable accounting standards: |
| ||Challenging the ECL estimates by examining the information used to form such estimates such as application of future economic conditions credit risk of customers etc: |
|- Historical credit loss experience adjusted for future economic conditions ||Checking completeness and accuracy of the data used by the Company for computation of assumptions used for computing ECL on trade receivables; |
|- Credit risk of customers ||Conducting audit procedure on existence of trade receivables. We performed independent checks for outstanding balances tested subsequent receipts and sales transactions for audit samples. |
The Company's management and 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 financial statements and our auditors'report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated. If based on thework we have performed we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the accounting Standards specified undersection 133 of the Act. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding of theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud 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.
Boards of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
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 a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act 2013 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 the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant de_ciencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the Annexure A' a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
(A) As required by Section 143 (3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including the Statement of OtherComprehensive Income the Cash Flow Statement and Statement of Changes in Equity dealtwith by this Report are in agreement with the books of account.
d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Companies (Indian AccountingStandards) Rules 2015 as amended;
e) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in terms of Section164 (2) of the Act.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in Annexure B'.
(B) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed pending litigations and the impact on its financialposition - refer note 44 to the Standalone Financial Statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
(C) With respect to the matter to be included in the Auditors' Report under section197(16):
In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.
| ||For Kharabanda Associates |
| ||Chartered Accountants |
| ||FRN: 003456N |
| ||Sunil Kharabanda |
|Place : New Delhi ||Proprietor |
|Date : 9th July 2020 ||M. No. 082402 |
ANNEXURE A' TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph under Report on Other Legal and RegulatoryRequirements' section of our Report of even date)
(1) In respect of the Company's fixed assets: a) The company has maintained properrecords showing full particulars including quantitative details and situation of fixedassets. b) The fixed assets were physically verified during the year by the Management inaccordance with a regular program of verification which on our opinion provides physicalverification of all the fixed assets at reasonable intervals. According to the informationand explanations given to us no material discrepancies were noticed on such verification.
C) According to the information and explanations given to us and the records examinedby us and based on the examination of the conveyance deed provided to us we report thatthe title deeds comprising all the immovable properties of land and buildings which arefreehold are held in the name of the Company as at the balance sheet date.
(2) As explained to us the inventories were physical verified during the year by themanagement at reasonable intervals and no material discrepancies were noticed on suchverification. (3) The Company has not granted any loans secured or unsecured tocompanies firm limited liability partnerships or other parties covered in the registermaintained under Section 189 of the Companies Act 2013. (4) In our opinion and accordingto the information and explanations given to us the Company has complied with theprovisions of Section 185 and 186 of the Act in respect of grant of loans makinginvestments and providing guarantees and securities as applicable.
(5) The company has not accepted any deposits during the year and does not have anyunclaimed deposits as at March 31 2020 and therefore the provision of the clause 3(v) ofthe Order are not applicable to the Company. (6) We have broadly reviewed the books ofaccounts maintained by the company in respect of the products where pursuant to the rulesmade by the Central Government of India the maintenance of cost records have beenprescribed under sub-section (1) of Section 148 of the Companies Act 2013 and are of theopinion that prima-facie the prescribed accounts and records have been made andmaintained. (7) According to the information and explanations given to us in respect ofstatutory dues: (a) The Company has generally been regular in depositing undisputedstatutory dues including Provident Fund Employees' State Insurance Income Tax SalesTax Service Tax Value Added Tax Goods and service Tax duty of Custom duty of ExciseCess and other material statutory dues applicable to it with the appropriate authorities.
(b) There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income Tax Sales tax Service Tax Value Added Tax Goods and Servicetax duty of Customs duty of Excise Cess and other material statutory dues in arrear asat 31st March 2020 for a period of more than six months from the date they becamepayable. (c) According to the information and explanations given to us by the managementand records of the Company examined by us the particulars of dues of Income Tax SalesTax Service Tax and Excise Duty as at 31st March 2020 which have not been deposited onaccount of dispute are given below:
|Nature of the statue ||Nature of dues ||Financial year to which the matter pertains ||Forum where the Dispute is pending ||Amount (Rs. in lakhs) |
|Central Excise Act 1944 ||Excise Duty ||2008-2009 ||Addl. Comm LTU New Delhi. ||16.40 |
|Finance Act 1994 ||Service Tax ||2012--2017 ||Comm. (A) LTU Delhi ||1.01 |
|Haryana VAT Act 2003 ||Sales Tax ||2008-2009 ||Haryana Tax Tribunal Chandigarh. ||25.51 |
|Haryana VAT Act 2003 ||Sales Tax ||2011-2012 ||Jt.Comm.(A) Ambala ||4.38 |
|Haryana VAT Act 2003 ||Sales Tax ||2010-2011 ||Jt.Comm.(A)Rohtak. ||17.83 |
|Haryana VAT Act 2003 ||Sales Tax ||2009-2010 ||Haryana Tax Tribunal Chandigarh. ||4.78 |
|Finance Act 1994 ||Service Tax ||2011-2012 ||CESTAT New Delhi. ||1.13 |
|Haryana VAT Act 2003 ||Sales Tax ||2011-2012 ||Haryana Tax Tribunal Rohtak. ||18.45 |
|Haryana VAT Act 2003 ||Sales Tax ||2011-2012 ||Haryana Tax Tribunal Sonepat. ||23.19 |
|Central Excise Act 1944 ||Excise Duty ||2009-10 to 2015-16 ||Comm..(A)New Delhi ||82.49 |
|Haryana VAT Act 2003 ||Sales Tax ||2012-13 ||Haryana Tax Tribunal Rohtak ||10.06 |
|Haryana VAT Act 2003 ||Sales Tax ||2010-11 ||Haryana Tax Tribunal Rohtak ||49.22 |
|Finance Act 1994 ||Service Tax ||2010-11 to 2014-15 ||CESTAT New Delhi. ||163.04 |
|Employee s Provident Fund Act 1952 ||EPF ||Demand For EPF ||EPF Appelllate Truibunal New Delhi ||8.87 |
|Haryana VAT Act 2003 ||Sales Tax ||2011-12 ||Haryana Tax Tribunal Rohtak ||23.39 |
|Haryana VAT Act 2003 ||Sales Tax ||2012-13 ||Haryana Tax Tribunal Rohtak ||23.67 |
|Haryana VAT Act 2003 ||Sales Tax ||2013-14 ||Haryana Tax Tribunal Rohtak ||80.59 |
|Haryana VAT Act 2003 ||Sales Tax ||2013-14 ||Jt. Commissioner (A) Rohtak ||72.95 |
|Haryana VAT Act 2003 ||Sales Tax ||2014-15 ||Jt. Commissioner (A) Rohtak ||25.35 |
|Haryana VAT Act 2003 ||Sales Tax ||2013-14 ||Jt. Commissioner (A) Rohtak ||18.38 |
|Haryana VAT Act 2003 ||Sales Tax ||2013-14 ||Jt. Commissioner (A) Rohtak ||97.68 |
|Haryana VAT Act 2003 ||Sales Tax ||2011-12 ||Haryana Tax Tribunal Chandigarh ||3.61 |
|Haryana VAT Act 2003 ||Sales Tax ||2012-13 ||Haryana Tax Tribunal Chandigarh ||1.97 |
|Haryana VAT Act 2003 ||Sales Tax ||2013-14 ||Haryana Tax Tribunal Chandigarh ||3.73 |
|Haryana VAT Act 2003 ||Sales Tax ||2014-15 ||Haryana Tax Tribunal Chandigarh ||0.52 |
|Haryana VAT Act 2003 ||Sales Tax ||2010-11 ||Haryana Tax Tribunal Jt. ETC (A) Rohtak ||33.95 |
|Haryana VAT Act 2003 ||Sales Tax ||2014-15 ||Dy. Excise & Taxation Commissioner (ST) ||10.14 |
| || || ||Sonipat || |
|Haryana VAT Act 2003 ||Sales Tax ||2014-15 ||Jt Excise & Taxation Commissioner Ambala ||55.74 |
|Income Tax Act 1961 ||Income Tax ||AY 2017-18 ||Income Tax Demand before Asstt. Commissioner of IT Delhi for AY 2017-18 ||28.72 |
|Haryana VAT Act 2003 ||Sales Tax ||2015-16 ||Demand for Sales Tax before Haryana Tax Tribunal Rohtak for 2015-16s ||41.89 |
|Haryana VAT Act 2003 ||Sales Tax ||2014-15 ||Demand for Sales Tax before Haryana Tax Tribunal Rohtak for 2014-15 ||97.13 |
|Haryana VAT Act 2003 ||Sales Tax ||2015-16 ||Demand for Sales Tax before Haryana Tax Tribunal Rohtak for 2015-16 ||75.76 |
(8) In our opinion and according to the information and explanations given to us thecompany has not defaulted in repayment of loan or borrowing to banks. The Company does nothave any loans or borrowing from government and has not issued any debentures. The Companyhas taken a term loan amounting to Rs. 25 crore from TATA Capital Financial ServicesLimited. Outstanding as on March 312020 is Rs. 22.92 crore.
(9) In our opinion and according to the information and explanations given to us themonies taken by way of term loan have been applied for the purposes for which they wereobtained.
(10) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no fraud on the Company by its officers oremployees has been noticed or reported during the year. (11) In our opinion and accordingto the information and explanations given to us the Company has paid / provided managerialremuneration in accordance with the requisite approvals mandated by the provision ofSection 197 read with Schedule V to the Act.
(12) The Company is not a Nidhi Company and hence reporting under clause 3(xii) of theOrder is not applicable.
(13) In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Act where applicable for alltransactions with the related parties and the details of related party transactions havebeen disclosed in the financial statements as required by the applicable accountingstandards.
(14) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debenture and hence reporting underclause 3(XIV) of the Order is not applicable to the Company.
(15) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsDirectors or persons connected to its Directors as referred to in Section 192 of the Act.(16) The Company is not required to be registered under Section 45-lA of the Reserve Bankof India Act 1934.
| ||For Kharabanda Associates |
| ||Chartered Accountants |
| ||FRN: 003456N |
| ||Sunil Kharabanda |
|Place : New Delhi ||Proprietor |
|Date : 9th July 2020 ||M. No. 082402 |
ANNEXURE B' TO THE INDEPENDENT AUDITORS' REPORT
(Referred to in paragraph 1(f) under Report on Other Legal and RegulatoryRequirements' section of our report to the members of HPL Electric & Power Limited ofeven date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 (the Act')
We have audited the internal financial controls over financial reporting of HPLELECTRIC & POWER LTD. (the Company') as of March 31 2020 in conjunctionwith our audit of the standalone Ind AS financial statement of the company for the yearthen ended and as on that date.
Management's Responsibility for the Internal Financial Controls
The Board of Directors of the company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over financialReporting issued by the Institute of Chartered Accountants of India (the GuidanceNote'). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business the safeguarding of its assets theprevention 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.
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) issued by the Institute of Chartered Accountants of India and theStandards on Auditing prescribed under Section 143(10) of the Companies Act 2013 to theextant applicable to an audit of internal financial controls. Those Standards and theGuidance Note required that we comply with the ethical requirements and plan and performthe audit to obtain reasonable assurance about internal financial controls over financialreporting was established and maintained and if such controls operated effectively in allmaterial 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 of the auditors' judgment including the assessment of therisks of material misstatement of the financial statement 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 controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial controls over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purpose in accordance with generallyaccepted accounting principles. A company's internal financial controls over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statement inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisation of themanagement and directors of the company and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitation 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 controlsover financial reporting may become inadequate because of change in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2020 based on the internal financialcontrols over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Control Over Financial Reporting issued by the Institute of Chartered Accountantof India.
| ||For Kharabanda Associates |
| ||Chartered Accountants |
| ||FRN: 003456N |
|Place : New Delhi ||Sunil Kharabanda |
|Date : 9th July 2020 ||Proprietor |
| ||M. No. 082402 |