To The Members of
KEI INDUSTRIES LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of KEI IndustriesLimited ("the Company") which comprise the Balance Sheet as at 31stMarch 2020 and the Statement of Profit and Loss (including Other Comprehensive Income)the Cash Flow Statement the Statement of Changes in Equity for the year then ended notesto the financial statements including a summary of significant accounting policies andother explanatory information (hereinafter referred to as the standalone financialstatements).
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at 31st March 2020 and its profittotal comprehensive income its cash flows and changes in equity for the year ended onthat date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibility for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the ethicalrequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules made there under and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence obtained by us is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|S. No. Key Audit Matter ||Auditor's Response |
|1 Physical Verification of Inventory ||Audit Procedure Applied |
|The COVID-19 outbreak created several potential challenges for management to conduct physical inventory counting as on reporting date and for the auditors to attend these counts. Due to various scenarios like lockdown travel restrictions etc. as imposed by Government of India physical inventory counting was a challenging and in some cases impracticable exercise. ||Our audit included but was not limited to the following procedures: |
|The Company has inventory of the carrying value Rs. 8637.83 Million constituting 32% of Current Assets of the Company. || Completed a walkthrough of the physical inventory counting process and assessed the design and implementation of the key controls addressing the risk. |
|The inventory is lying at various locations including at 3rd party premises. The Physical inventory counting has been conducted by management at a date other than the date of financial statements due to the reasons stated above. || Review of company's inventory records and internal controls over inventory movements. |
|We considered the physical verification of inventory as a key audit matter given the number of individual items constituting inventory and relative size of the balance in the financial statements. || Review the policy of the management for physical verification and the documents related to management's physical count procedure actually followed at different locations. |
| || We observed the physical verification process at locations of financial significance through video conference with performing roll-back procedures to the balance sheet date sample testing of management physical verification report. |
| || Identifying obsolete inventory if any. |
| || Obtain confirmation from C&F agents and 3rd parties holding inventory on behalf of company and applying substantive procedure. |
| || Assess the appropriateness and completeness of the related disclosure in the company's Ind AS Financial Statements. |
|2 Revenue - Performance Obligations ||Audit Procedure Applied |
|The Company is in the business of manufacturing of various types of Cables SS Wires and sells to customers both through institutional and dealer network globally. ||Our audit included but was not limited to the following activities: |
|Sales contracts contain various performance obligations and other terms and the determination of when significant performance obligations have been met varies albeit a specific point in time can often be established. || Mapped and evaluated selected systems and processes for revenue recognition and tested a sample of key controls. |
|As a consequence the Company has analysed its various sales contracts and concluded on the principles for deciding in which period or periods the Company's sales transactions should be recognized as revenue. || Selecting a sample from each type of the contracts with the customers and testing the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price. |
| || Tested sample of sales transactions for compliance with the company's accounting principles. |
| || Read and assessed the disclosure made in the financial statements for assessing compliance with disclosure requirements. |
|3 Revenue - Variable Consideration ||Audit Procedure Applied |
|Revenue is recognized in accordance with Ind AS 115 net of discounts incentives and rebates accrued by the Company's customers based on sales. ||Our audit included but was not limited to the following activities: |
|The company uses sales agreement terms & conditions and historical trends to estimate discounts. At the reporting date the company estimates and accrues for discounts and rebates they consider as having been incurred but not yet paid. || Understanding the policies and procedures applied to revenue recognition including an analysis of the effectiveness of controls related to revenue recognition processes employed by the Company |
| || Carrying out substantive analytical procedures analysing the actual performance of revenue and cost of sales related to discounts incentives and rebates etc. |
| || Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basic of estimation of the variable consideration. |
| || Analysing and discussing with management significant contracts including contractual terms and conditions related to discounts incentives and rebates used in the related estimates. |
| || Reviewing disclosures included in the notes to the accompanying financial statements. |
|4 Revenue - Over the Period Revenue Recognition ||Audit Procedure Applied |
|The Company is engaged in execution of Engineering Procurement and Construction projects (EPC) for survey supply of materials design erection testing & commissioning on a turnkey basis. ||Our audit included but was not limited to the following activities: |
|Revenue is recognized in accordance with Ind AS 115 and Performance obligations in such cases are satisfied over time and accordingly revenue is recognised over the time in such cases. Methods used to recognise revenue is also a Key Audit Matter along with measuring progress towards complete satisfaction of a performance obligation. || We tested the relevant internal controls used to ensure the completeness accuracy and timing of revenue recognised including controls over the degree of completion of EPC projects. |
| || We evaluated and analysed the significant judgements and estimates made by the management and also reviewed sample contracts with customers to assess whether the method of recognition of revenue is relevant and is consistent with the accounting policies of the company. |
| || Selecting a sample of contracts for each of the key scope in components and evaluated them along with supporting evidence to determine whether various elements of revenue recognition are assessed in accordance with the principles prescribed under Ind AS 115 |
| || Tested samples of un-invoiced revenue entries with reference to the reports from the information system that records the costs incurred. |
| || Read and assessed the disclosure made in the financial statements for assessing compliance with disclosure requirements. |
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors are responsible for the other information. The otherinformation comprises the letter from the management Director's Report ManagementDiscussion and Analysis Business Responsibility Report and Corporate Governance Reportbut does not include the standalone financial statements and our auditor's report thereon.The letter from the management Director's Report Management Discussion and AnalysisBusiness Responsibility Report and Corporate Governance Report are expected to be madeavailable to us after the date of this auditor's report. Our opinion on the standalonefinancial statements does not cover the other information and we will not express any formof assurance conclusion thereon. In connection with our audit of the standalone financialstatements our responsibility is to read the other information identified above when itbecomes available and in doing so consider whether the other information is materiallyinconsistent with the standalone financial statements or our knowledge obtained during thecourse of our audit or otherwise appears to be materially misstated.
When we read the letter from the management Director's Report Management Discussionand Analysis Business Responsibility Report and Corporate Governance Report if weconclude that there is a material misstatement therein we are required to communicatethe matter to those charged with governance as required under SA 720 The Auditor'sresponsibilities Relating to Other Information'.
Management's Responsibility for the Standalone 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 financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding 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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error. In preparing the standalone 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. The Board of Directors are alsoresponsible for overseeing the Company's financial reporting process.
Auditor's Responsibility for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial 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 these standalone financial statements. As part of an audit inaccordance with SAs we exercise professional judgment and maintain professionalscepticism throughout the audit. We also: ? Identify and assess the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror design and perform audit procedures responsive to those risks and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for oneresulting from error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control. ? Obtain an understandingof internal financial control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances. Under section 143(3)(i) of the Act we are alsoresponsible for expressing our opinion on whether the Company has adequate internalfinancial controls system in place and the operating effectiveness of such controls. ?Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management. ? Conclude onthe appropriateness of management's use of the going concern basis of accounting andbased on the audit evidence obtained whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Company's ability to continueas a going concern. If we conclude that a material uncertainty exists we are required todraw attention in our auditor's report to the related disclosures in the standalonefinancial statements or if such disclosures are inadequate to modify our opinion. Ourconclusions 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 thestandalone financial statements including the disclosures and whether the standalonefinancial 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 alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships 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 financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when 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 Section 143(3) of the Act based on our audit we report that:
a. We have sought and obtained all the information and explanations which to thebest of 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 bythe Company so far as it appears from our examination of those books.
c. The Balance Sheet the Statement of Profit and Loss (including OtherComprehensive Income) the Cash Flow Statement and Statement of Changes in Equity dealtwith by this Report are in agreement with the relevant books of account.
d. In our opinion the aforesaid standalone Ind AS financial statements comply withthe Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read withCompanies (Indian Accounting Standards) Rules 2015 as amended. e. On the basis ofthe written representations received from the directors as on 31st March 2020taken on record by the Board of Directors none of the directors is disqualified as on 31stMarch 2020 from being appointed as a director in terms of Section 164(2) of theAct.
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 A. Our report expresses an unmodified opinion on theadequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.
g. In our opinion the managerial remuneration for the year ended March 31 2020has been paid / provided by the Company to its directors in accordance with the provisionsof section 197 read with Schedule V to 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 as amended inour opinion and to the best of our information and according to the explanations given tous:
I. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements Refer Note No- 44 ofstandalone financial statements.
II. The Company did not have any long-term contracts including derivative contractsfor which there were any material foreseeable losses during the year ended 31stMarch 2020.
III. There has been no delay in transferring amounts required to be transferredto the Investor Education and Protection Fund by the Company during the year ended 31stMarch 2020.
2. As required by the Companies (Auditor's Report) Order 2016 issued by theCentral Government in terms of sub-section (11) of Section 143 of the Act("theOrder") and on the basis of such checks of the books and records of the Company aswe considered appropriate and according to the information and explanations given to uswe give in Annexure B a statement on the matters specified in paragraphs 3 and 4 ofthe Order to the extent applicable.
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT
Referred to in paragraph 1(f) of the Independent Auditors' Report of even date to themembers of KEI Industries Limited on the standalone financial statements for the yearended 31st March 2020 Report on the Internal Financial Controls under Clause(i) of Sub-section 3 of Section 143 of the Act
We have audited the internal financial controls over financial reporting of KEIIndustries Limited ("the Company") as of 31st March 2020 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
Management's Responsibility for Internal Financial Controls
TheBoardofDirectorsoftheCompanyisresponsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its 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 Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing deemed to be prescribedunder section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls. 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 over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control 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 statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
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 31st March 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
Annexure "B" to Independent Auditor's Report
Referred to in paragraph 2 of the Independent Auditors' Report of even date to themembers of KEI Industries Limited on the Standalone financial statements as of andfor the year ended 31st March 2020
I. a) The Company is maintaining properThe Company is maintaining proper recordsshowing full particulars including quantitative details and situation of fixed assets.
b) The fixed assets were physically verified during the year by the Management inaccordance with a regular programme of verification which in our opinion provides forphysical verification of all the assets at reasonable intervals. According to theinformation and explanation given to us no material discrepancies were noticed on suchverification. In our opinion the frequency of verification is reasonable.
c) The title deeds of immovable properties as disclosed in Note -3 on fixed assetsto the financial statements are held in the name of the Company.
II. The physical verification of inventory (excluding stocks with third parties)has been conducted at reasonable intervals by the Management during the year. In respectof inventory lying with third parties these have substantially been confirmed by them.The discrepancies noticed on physical verification of inventory as compared to bookrecords were not material.
III. The Company has granted unsecured loans to one subsidiary company and oneassociate company covered in the register maintained under Section 189 of the Act. Thereare two parties covered in the register maintained under Section 189 of the Act to whichCompany has given security deposits as per contractual obligations (Refer Note - 48 ofstandalone financial statements).
a) In respect of the aforesaid loans and deposits the terms and conditions underwhich such deposits were granted are not prejudicial to the Company's interest.
b) Loans to subsidiary company and associate company are repayable on demand and noschedule for payment of interest has been stipulated by the Company. The company has madeprovision for interest along with principal due from such parties. (Refer Note No. 48 ofstandalone financial statement). For security deposit no schedule for repayment ofdeposit is applicable and no interest was charged.
c) In respect of the aforesaid loans and deposits there is no amount which isoverdue for more than ninety days.
IV. In our opinion and according to the information and explanations given to usthe Company has complied with the provisions of Section 185 and 186 of the Companies Act2013 in respect of the loans and investments made and guarantees and security provided byit.
V. In our opinion and according to the information and explanations given to usthe Company has complied with the provisions of Sections 73 74 75 and 76 or any otherrelevant provisions of the Act and the Rules framed thereunder to the extent notifiedwith regard to the deposits accepted from the public. According to the information andexplanations given to us no order has been passed by the Company Law Board or NationalCompany Law Tribunal or Reserve Bank of India or any Court or any other Tribunal on theCompany in respect of the aforesaid deposits.
VI. Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products. We have broadly reviewed the same and are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We havenot however made a detailed examination of the records with a view to determine whetherthey are accurate or complete.
VII.a) According to the records of the Company and information and explanationsgiven to us and the records of the Company examined by us the Company has been regular indepositing the undisputed statutory dues including provident fund employees stateinsurance income tax Investor education and protection fund goods and service taxcustoms duty and other material statutory dues applicable to it with the appropriateauthorities.
According to the information and explanations given to us no undisputed amountspayable in respect of the aforesaid dues were in arrears as at 31st March 2020for a period of more than six months from the date they became payable.
b) According to the information and explanations given to us and the records of theCompany examined by us the particulars of dues of Income Tax goods and service taxservice tax value added tax/ sales tax entry tax customs duty and excise duty as at 31stMarch 2020 which have not been deposited on account of a dispute are as follows:
|Name of the Statute ||Nature of the Due ||Amount (Rs. In millions) ||Period to which the amount relates ||Forum where dispute is pending |
| ||Central Sales Tax ||0.67 ||1999-2000 ||Tax Board |
|Sales/ Entry Tax Act ||West Bengal Tax on Entry of Goods into Local Areas Act2012 Excise Duty ||7.14 ||2013-14 to 2017-18 ||Hon'ble High Court |
| || ||0.62 ||2010-11 ||Commissioner (Appeals) |
|Central Excise Duty ||Excise Duty ||26.87 ||2010-11 ||CESTAT Commissioner |
| ||Excise Duty ||6.80 ||2011-12 ||(Appeals) |
|Finance Act ||Service Tax ||34.30 ||2011-12 to 2015-16 ||Commissioner (Appeals) |
|Income Tax Act ||Income Tax ||15.18 ||2011-122015- 20162016-17 ||Commissioner (Appeals) |
VIII. According to the records of the Company examined by us and the informationand explanation given to us the Company has not defaulted in repayment of loans orborrowings to any financial institution or bank or Government or dues to debenture holdersas at the balance sheet date.
IX. The Company has not raised any moneys by way of initial public offerfurther public offer (including debt instruments). Term loans have been applied for thepurposes for which they were obtained.
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 material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.
XI. The Company has paid/ provided for managerial remuneration in accordance withthe requisite approvals mandated by the provisions of Section 197 read with Schedule V tothe Act.
XII. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are notapplicable to it the provisions of Clause 3(xii) of the Order are not applicable to theCompany.
XIII. The Company has entered into transactions with related parties in compliancewith the provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required under IndianAccounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 ofthe Act read with Rule 7 of the Companies (Accounts) Rules 2014.
XIV. The Company has made a placement with qualified institutional investors ofequity shares during the year under review in compliance with the requirements of Section42 of the Act. The amounts raised have been used for the purpose for which funds wereraised (Refer Note No. 56.1 of standalone financial statements).
XV. The Company has not entered into any non-cash transactions with its directorsor persons connected with him. Accordingly the provisions of Clause 3(xv) of the Orderare not applicable to the Company.
XVI. The Company is not required to be registered under Section 45-IA of theReserve Bank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Orderare not applicable to the Company.
| ||For PAWAN SHUBHAM & CO. |
| ||Chartered Accountants |
| ||Firm Registration Number: 011573C |
| ||CA Pawan Kumar Agarwal |
|Place of Signature: New Delhi ||Partner |
|Date: 30th May 2020 ||Membership Number: 092345 |