To the Members of Jain Irrigation Systems Limited
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of JainIrrigation Systems Limited ("the Company") which comprise the Balance Sheet asat March 31 2019 the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows for the yearthen ended and notes to the standalone Ind AS financial statements including a summary ofsignificant accounting policies and other explanatory information (hereinafter referred toas " standalone Ind AS financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India including the Indian Accounting Standards ("Ind AS") of the state ofaffairs of the Company as at March 31 2019 its profit (including other comprehensiveincome) changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with Standards on Auditing (SAs) specified undersection 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone Ind ASFinancial 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 ("ICAI") together with the ethical requirements that are relevant to ouraudit of the standalone Ind AS financial statements under the provisions of the Act andRules thereunder and we have fulfilled our other ethical responsibilities in accordancewith these requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements of the currentyear. These matters were addressed in the context of our audit of the standalone Ind ASfinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Sr. No. Key Audit Matter ||How the matter was addressed in the audit |
|1) Revenue recognition on long term contracts (percentage of completion accounting) (Refer to notes 2.1(v) 18 and 34 to the standalone Ind AS financial statements as on March 31 2019) ||Our audit procedures included : (a)We understood and tested the design and operating effectiveness of controls as established by the Management in adoption of the new accounting standard. |
|The Company has during the year adopted Indian Accounting Standard 115 (Ind AS 115) Revenue from Contract with Customers which was applicable for reporting period beginning on or after April 12018. In accordance with the first time adoption option available the Company has chosen the modified retrospective approach. The application of the new accounting standard to revenue recognition was complex and involved significant management estimates and judgment. The Company generates a significant portion of its revenue from long term engineering contracts (construction contracts) which include both contracts related to Micro Irrigation Systems and PE PVC Pipes. These contracts are accounted under the percentage of completion method (POC). The new accounting standard involved judgment relating to identification of separate performance obligations determination of transaction price allocation of transaction to separate performance obligations and the appropriateness of the basis used to measure revenue recognition over the period. ||(b)Validation of Accounting Policy: We have assessed the appropriateness of the Company's accounting policy on revenue recognition including those relating to contract revenue by comparing with applicable accounting standards. |
| ||(c) Control testing: |
| ||We have obtained an understanding of the methodology applied the internal processes and the controls used to determine the Percentage of completion identification of expected project revenue cost incurred for the specific project (including allocation of overheads and other costs) and estimated costs required to complete the project. We evaluated the processes and technical systems used to record actual costs incurred and tested the effectiveness of the controls. |
| ||(d) Tests of details: |
| ||We have focused on Management's judgment in applying the methodology and the estimates made to determine the amount of revenue to be recorded in their project calculations. Further our checking of details involved the following procedures - |
| || We obtained and reviewed project source documents such as contracts budgets and projects calculations. |
| || We have checked read and evaluated the existing and new contracts to check the separate performance obligation and transaction price. We have evaluated whether the transaction price involves any variable consideration. |
|We identified this matter as a key audit matter due to the size of revenue generated from construction contracts. Furthermore accounting for the contracts involves both judgment in assessing whether the criteria set out in the Ind AS have been met and estimates related to future costs the final outcome of the contract and the stage of completion. || We have critically verified the actual project costs incurred revenue booked and by carrying out sensitivity analysis analysed the estimation of the Management over balance costs required to complete the projects. Also we have verified the process of allocation of project costs on each and every project and basis for determining project revenue and project costs that are required to be booked. |
| || We have also verified the acceptance of invoices and work completed by the contractor. |
| || We have made enquiry with Management in respect of the reasonableness of judgments made regarding the cost to complete estimate and the timing of recognition of change orders. |
| || We also assessed whether Management's policies and processes for making these estimates continue to be appropriate and are applied consistently over the period time and to contracts of a similar nature. |
|2. Valuation of Trade Receivables || |
|(Refer to Note 2.1 (iv) 7(b) and 37 to the standalone Ind AS financial statements) At March 312019 the total receivables balance excluding provisions included in note 7(b) was ' 25467.89 million. ||Our audit procedures included : |
| ||(a)We understood and tested the design and operating effectiveness of controls as established by the Management over trade receivables. |
| ||(b) Validation of Accounting policies: |
|Trade receivables are mainly comprised of receivables from central and state government owned enterprises aggregating ' 17408.38 million as on March 31 2019 out of which ' 372.10 million pertains to more than 2 year which are subject to independent confirmations. We have identified valuation of trade receivables as a key audit matter on account of the significant management judgment involved with respect to the recoverability and existence of trade receivables and the provisions for impairment of receivables and the importance of cash collection with reference to the working capital management of the business. ||We have assessed the appropriateness of the Company's credit risk policy and obtaining an understanding on Management of credit risk. |
| ||(c) Discussing with the management and obtaining a list of accounts receivables with relevant amount of settlement during the year or subsequent to the end of the reporting period identified by the management and their assessment on the recoverability of accounts receivables. |
| ||(d) Control testing: Obtaining an understanding on credit approvals establishing credit limits and continuous monitoring of creditworthiness of customers to which the Company grants the credit in normal course of business. |
| || Obtaining understanding on how the Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables. |
| ||(e) Tests of details: |
| || We have checked the ageing analysis on a sample basis and subsequent receipt of the trade receivables to the source documents including bank statements; |
| || We have verified the underlying supporting documents like RA bills approvals from Government Authorities at the time of supply of materials/ rendering of services along with various correspondence carried out by the Management of the Company with government Trade Receivable Authorities; |
| || We have verified open invoices duly approved by Government Authorities in order to ensure existence of trade receivables; |
| || We have verified the appropriateness of judgments regarding provisions for trade receivables and assessment as to whether these provisions were calculated in accordance with the Company's provisioning policies. |
| || Evaluated the historical accuracy of the management's assessment of impairment for accounts receivables on a sample basis by examining the actual write-offs the reversal of previous recorded allowance and new allowances recorded in the current year in respect of accounts receivables at the end of the previous financial year. |
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the annual report but does not includethe Ind AS financial statements and our auditor's report thereon.
Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone Ind AS financialstatements or our knowledge obtained in audit or otherwise appears to be materiallymisstated. If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Standalone IndAS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including Ind ASspecified under section 133 of the Act read with relevant rules issued thereunder. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting 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 financialstatements 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 is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of this standalone Ind AS financial statements. As part of an audit inaccordance with SAs we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material 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 standalone Ind AS financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone IndAS financial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves 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 deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS 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.
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 section 143(11) of the Act we givein "Annexure 1" a statement on the matters specified in paragraphs 3 and 4 ofthe Order to the extent applicable.
(2) As required by section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) The Balance Sheet the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis report are in agreement with the books of account;
d) In our opinion the aforesaid standalone Ind AS financial statements comply with theIndian Accounting Standards specified under section 133 of the Act read with relevantrules issued thereunder;
e) On the basis of the written representations received from the directors as on March312019 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2019 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 with reference tofinancial statements of the Company and the operating effectiveness of such controls wegive our separate report in "Annexure 2";
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act;
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid/ provided by the Company to its directors during theyear is in accordance with the provisions of section 197 of the Act;
h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements - Refer Note 29 on ContingentLiabilities to the standalone Ind AS financial statements;
(ii) The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts - Refer Note 34 and 37 to the standalone Ind AS financial statements;
(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
|For Haribhakti & Co. LLP |
|Chartered Accountants |
|ICAI Firm Registration No.103523W / W100048 |
|Snehal Shah |
|Membership No.048539 |
|Place : Mumbai |
|Date : May 30 2019 |
TO THE INDEPENDENT AUDITOR'S REPORT
[Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' in the Independent Auditor's Report of even date to the members of JainIrrigation Systems Limited ("the Company") on the Standalone Ind AS FinancialStatements for the year ended March 31 2019]
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation
of fixed assets.
(b) During the year the fixed assets of the Company have been physically verified bythe Management as per the regular programme of verification which in our opinion isreasonable having regard to the size of the Company and the nature of its assets. Asinformed no material discrepancies were noticed on such verification.
(c) The title deeds of immovable properties recorded as fixed assets in the books ofaccount of the Company are held in the name of the Company.
(ii) The inventory (excluding stocks lying with third parties) has been physicallyverified by the Management during the year. In respect of inventory lying with thirdparties these have substantially been confirmed by them. As informed no materialdiscrepancies were noticed on physical verification carried out during the year.
(iii) As informed the Company has not granted any loans secured or unsecured tocompanies firms Limited Liability Partnerships or other parties covered in the registermaintained under Section 189 of the Act. Accordingly paragraph 3 (iii)(a) 3 (iii)(b) and3 (iii)(c) of the Order are not applicable to the Company.
(iv) Based on information and explanation given to us in respect of loans investmentsguarantees and securities the Company has complied with the provisions of Section 185 and186 of the Act.
(v) In our opinion and according to the information and explanations given to us theCompany has not accepted any deposits from the public within the provisions of Sections 73to 76 of the Act and the rules framed there under.
(vi) We have broadly reviewed the books of account maintained by the Company in respectof products where the maintenance of cost records has been specified by the CentralGovernment under sub-section (1) of Section 148 of the Act and the rules framed thereunder and we are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained.
(vii) (a) The Company is generally regular in depositing with appropriate authoritiesundisputed statutory dues including provident fund employees' state insurance incometax sales tax service tax value added tax goods and service tax customs duty exciseduty cess and any other material statutory dues applicable to it however there havebeen slight delay in few cases.
According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income tax sales taxservice tax value added tax goods and service tax customs duty excise duty cess andany other material statutory dues applicable to it were outstanding at the year end fora period of more than six months from the date they became payable.
(b) According to the information and explanation given to us the dues outstanding withrespect to income tax sales tax service tax value added tax goods and service taxcustoms duty excise duty on account of any dispute are as follows:
|Name of the statute ||Nature of dues ||Amount ' (in million) ||Period to which the amount relates ||Forum where dispute is pending |
|Central Sales tax and Local Sales Tax ||Sales Tax ||44.24 ||FY 2008-2009 2009 -2010 2011-2012 2012-2013 ||High Court of Madhya Pradesh |
| || ||2.28 ||FY 2006-2007 ||High Court of Tamil nadu |
| || ||23.43 ||FY 2014-2015 ||Commissioner of Sales Tax |
|The Finance Act 1994 ||Service Tax ||21.98 ||FY 2005-2010 ||Customs Excise and Service Tax Appellate Tribunal |
| || ||0.22 ||FY 2012-2013 ||Assistant Commissioner |
|The Central Excise Act 1994 ||Excise duty ||13.07 ||FY 1994-1995 1996-1997 2008 - 2009 2009 - 2010 2014-2015 ||Additional Commissioner / Assistant Commissioner / Commissioner |
| || ||59.26 ||FY 1992 -1997 2012 - 2014 ||Customs Excise and Service Tax Appellate Tribunal |
| || ||188.32 ||FY 1995-1998 ||High Court of Bombay |
|The Income Tax Act 1961 ||Income Tax ||9.26 ||AY 2011-2012 ||Commissioner of Income Tax (Appeals) |
(viii) According to the information and explanations given to us the Company hasgenerally been regular in repayment of loans or borrowings to financial institutionsbanks or dues to debenture holders.
(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) during the year. In our opinion and according tothe information and explanations given to us the Company has utilised the money raised byway of term loans during the year for the purposes for which they were raised.
(x) During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of fraud by the Company or any fraud on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such instance by theManagement.
(xi) According to the information and explanations given to us managerial remunerationhave been paid / provided in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Therefore paragraph 3(xii) of the Order is not applicableto the Company.
(xiii) According to the information and explanation given to us all transactionsentered into by the Company with the related parties are in compliance with Sections 177and 188 of Act where applicable and the details have been disclosed in the FinancialStatements etc. as required by the applicable accounting standards.
(xiv) The Company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review. Thereforeparagraph 3(xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with him duringthe year.
(xvi) According to the information and explanation given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.
|For Haribhakti & Co. LLP |
|Chartered Accountants |
|ICAI Firm Registration No. 103523W / W100048 |
|Snehal Shah |
|Membership No. 048539 |
|Place : Mumbai |
|Date : May 30 2019 |
TO THE INDEPENDENT AUDITORS REPORT
[Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements' in the Independent Auditor's Report of even date to the members of JainIrrigation Systems Limited on the Standalone Ind AS financial statements for the yearended March 31 2019]
Report on the Internal Financial Controls with reference to Financial Statements underclause (i) of sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls with reference to financial statementsof Jain Irrigation Systems Limited ("the Company") as of March 312019 inconjunction with our audit of the Standalone Ind AS Financial Statements of the Companyfor the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India ("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing specified under Section143(10) of the Act to the extent applicable to an audit of internal financial controlsboth issued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness.
Our audit of internal financial controls with reference to financial statementsincluded obtaining an understanding of internal financial controls with reference tofinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal controls based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto 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 withreference to financial statements.
Meaning of Internal Financial Controls with reference to Financial Statements
A Company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial control withreference to financial statements includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions 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 authorisations ofManagement and directors of the Company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of theCompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference to FinancialStatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper Managementoverride of controls material misstatements due to error or fraud may
occur and not be detected. Also projections of any evaluation of the internalfinancial controls with reference to financial statements to future periods are subject tothe risk that the internal financial controls with reference to financial statements maybecome inadequate because of changes in conditions or that the degree of compliance withthe policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls with reference to financial statements and such internal financialcontrols with reference to financial statements were operating effectively as at March312019 based on the internal control with reference to financial statements criteriaestablished by the Company considering the essential components of internal controlsstated in the Guidance Note issued by the ICAI.
|For Haribhakti & Co. LLP |
|Chartered Accountants |
|ICAI Firm Registration No.103523W / W100048 |
|Snehal Shah |
|Membership No.048539 |
|Place : Mumbai |
|Date : May 30 2019 |