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Kirloskar Electric Company Ltd.

BSE: 533193 Sector: Engineering
NSE: KECL ISIN Code: INE134B01017
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OPEN 10.72
CLOSE 10.35
VOLUME 10644
52-Week high 19.62
52-Week low 6.95
P/E
Mkt Cap.(Rs cr) 67
Buy Price 10.04
Buy Qty 100.00
Sell Price 10.73
Sell Qty 430.00

Kirloskar Electric Company Ltd. (KECL) - Auditors Report

Company auditors report

TO THE MEMBERS OF

KIRLOSKAR ELECTRIC COMPANY LIMITED BENGALURU

Report on the Abridged Standalone Ind AS financial statements

The accompanying abridged Standalone Ind AS financial statements of Kirloskar ElectricCompany Limited ("the Company") which comprise the abridged Balance Sheet as atMarch 31 2019 the abridged Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Cash Flows and the Statement of Changes in Equity for the yearthen ended and a summary of significant accounting policies and related notes are derivedfrom the audited Standalone Ind AS financial statements of Kirloskar Electric CompanyLimited("the Company") as at and for the year ended March 31 2019. We expresseda qualified audit opinion on those financial statements in our report dated May 29 2019.

The abridged Standalone Ind AS financial statements do not contain all the disclosuresrequired by the Indian Accounting Standards referred to in section 133 of the CompaniesAct 2013 ("the Act") read with relevant rules thereunder and accountingprinciples generally accepted in India. Reading the abridged Standalone Ind AS financialstatements therefore is not a substitute for reading the audited Standalone Ind ASfinancial statements of the Company.

Management's Responsibility for the abridged Standalone Financial Statements

Management is responsible for the preparation of a summary of the audited StandaloneInd AS financial statements in accordance with 136(1) read with Rule 10 of Companies(Accounts) Rules 2014 and are based on the audited Standalone Ind AS financial statementsfor the year ended March 31 2019 which is prepared in accordance with Indian AccountingStandards referred to in Section 133 of the Act read with relevant rules thereunder andaccounting principles generally accepted in India.

Auditor's Responsibility

Our responsibility is to express an opinion on the abridged Standalone Ind AS financialstatements based on our procedures which were conducted in accordance with Standard onAuditing (SA) 810 "Engagements to Report on Summary Financial Statements"issued by the Institute of Chartered Accountants of India.

Basis for Qualified Opinion

Attention of the Members is invited to note 16 to the abridged Standalone Ind ASfinancial statements regarding the amounts due to the Company from certain subsidiariestowards part consideration receivable on sale/assignment of certain immovable propertiesreceivables interest charged and expenses reimbursed. We have relied on the management'srepresentations that it is confident of realization of amounts due to the saidsubsidiaries aggregating to 14898.79 lakhs ( 14562.40 lakhs as at March 31 2018)against which provision is recognized for an amount of 2970.77 lakhs. Pendingdisposals/realization of assets by the subsidiaries shortfall in realization of theamount outstanding (net of provision) if any could not be ascertained.

Qualified Opinion

In our opinion except for the effects of the matter described in the Basis forQualified Opinion paragraph abovethe abridged Standalone Ind AS financial statementsderived from the audited Standalone Ind AS financial statements of the Company as at andfor the year ended March 31 2019 are a fair summary of those Standalone Ind AS financialstatements in accordance with the Indian Accounting Standards specified under section 133of the Act read with relevant rules thereunder and accounting principles generallyaccepted in India.

Key Audit Matters

Note 17 of the abridged Standalone Ind AS financial statements: The directors havedetailed the reasons for preparing these financial statements on a going concern basisthough the Company/Group (consisting of the Company its subsidiaries and associate) haveincurred losses and their networth (after excluding revaluation reserve) has been eroded.There are certain overdue payments to creditors and banks. The appropriateness of the saidbasis is subject to the Company adhering to the restructuring plan and infusion ofrequisite funds. We have been appraised of the restructuring plan including monetizationof few non-core assets projection of increase in turnover and infusion of funds in thenear future. We have relied on the representations made by the Company and hence we are ofthe opinion that there is no existence of material uncertainty that may cast a significantdoubt on the Company's ability to continue as a going concern. Our opinion is not modifiedin respect of this matter.

Emphasis of Matter

Attention of the members is invited to note 18 of the abridged Standalone Ind ASfinancial statements which sets out that the Company has filed Special Leave Petition inrespect of demand of resale tax penalty of 527 lakhs before the Honourable Supreme Courtof India. Management has represented to us that it is not probable that there will be anoutflow of economic benefits and hence no provision is required to be recognized in thisregard. We have relied on this representation. Our opinion is not modified in respect ofthis matter.

Other Matters:

We did not audit the financial statements/information of one branch the Kuala Lumpuroffice of the Company included in the abridged Standalone Ind AS financial statements ofthe Company whose financial statements reflect total assets of 209.90 lakhs as at March31 2019 and total revenues of 1 lakh for the year ended on that date as considered inthe Standalone Ind AS financial statements. The financial statements of the said officehave been audited by the branch auditors (M/s Sundar & Associates CharteredAccountants) whose report has been furnished to us and our opinion in so far as itrelates to the amounts and disclosures included in respect of these branches is basedsolely on the report of such branch auditors.Our opinion is not modified in respect ofthis matter.

for Ashok Kumar Prabhashankar & Co.
Chartered Accountants
Firm Regn. No. 004982S
A.Umesh Patwardhan
Date:May 29 2019 Partner
Place: Bengaluru M. No. 222945

INDEPENDENT AUDITORS' REPORT

To the Members of KIRLOSKAR ELECTRIC COMPANY LIMITED BENGALURU

Report on the Audit of the Standalone Financial Statements Qualified Opinion

We have audited the accompanying Standalone Ind AS financial statements of KIRLOSKARELECTRIC COMPANY LIMITED ("the Company") which comprise the Balance Sheetas at March 31 2019 and the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and Statement of Cash Flows for the year thenended and Notes to the financial statements including a summary of significantaccounting policies and other explanatory information. In our opinion and to the best ofour information and according to the explanations given to us except for the effects ofthe matter described in the Basis for Qualified Opinion paragraph below the aforesaidStandalone Ind AS financial statements give the information required by the Companies Act2013 as amended ("the Act") in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2019 and its loss including othercomprehensive income its cash flows and the changes in equity for the year ended on thatdate.

Basis for Qualified Opinion

Attention of the Members is invited to note 37(19) to the Standalone Ind AS financialstatements regarding the amounts due to the Company from certain subsidiaries towards partconsideration receivable on sale/assignment of certain immovable properties receivablesinterest charged and expenses reimbursed. We have relied on the management'srepresentations that it is confident of realization of amounts due from the saidsubsidiaries aggregating to 14898.79 lakhs ( 14562.40 lakhs as at March 31 2018)against which provision is recognized for an amount of 2970.77 lakhs as at March 312019. Pending disposals/realization of assets by the subsidiaries shortfall inrealization of the amount outstanding (net of provision) if any could not beascertained.

We conducted our audit in accordance with Standards on Auditing (SAs) specified undersection 143(10) of the Companies Act 2013. Our responsibilities under those Standards arefurther described in the ‘Auditor's Responsibilities for the Audit of the FinancialStatements' section of our report. We are independent of the Company in accordance withthe ‘Code of Ethics' issued by the Institute of Chartered Accountants of Indiatogether with the ethical requirements that are relevant to our audit of the financialstatements under the provisions of the Companies Act 2013 and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our qualified opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the Standalone Ind AS financial statements for the financialyear ended March 31 2019. These matters were addressed in the context of our audit of theStandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters.We have determined the mattersdescribed below to be the key audit matters to be communicated in our report. For eachmatter below our description of how our audit addressed the matter is provided in thatcontext.

a. Going Concern Assessment – Effect of erosion in net worth of the company

Note 37(20) of the Standalone Ind AS financial statements – The directors havedetailed the reasons for preparing these Standalone Ind AS financial statements on a goingconcern basis though the Company/Group (consisting of the Company its subsidiaries andassociate) have incurred losses and their networth (after excluding revaluation reserve)has been eroded. There are certain overdue payments to creditors and banks. Theappropriateness of the said basis is subject to the Company adhering to the restructuringplan and infusion of requisite funds.

- Our Address on the Key Audit Matter

We have been appraised of the restructuring plan including monetization of few non-coreassets projection of increase in turnover and infusion of funds in the near future. Wehave relied on the representations made by the Company and hence we are of the opinionthat there is no existence of material uncertainty that may cast a significant doubt onthe Company's ability to continue as a going concern. Our opinion is not modified inrespect of this matter.

Emphasis of Matter a. Attention of the members is invited to note 37(21) of theStandalone Ind AS financial statements which sets out that the Company has filed SpecialLeave Petition in respect of demand of resale tax penalty of 527 lakhs before theHonourable Supreme Court of India. Management has represented to us that it is notprobable that there will be an outflow of economic benefits and hence no provision isrequired to be recognized in this regard.

We have relied on this representation. Our opinion is not modified in respect of thismatter.

Other Information

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 Standalone Ind AS financial statements and our auditor's report thereon. Our opinionon the Standalone Ind AS financial statements does not cover the other information and wedo not express any form of assurance conclusion thereon. In connection with our audit ofthe Standalone Ind AS financial statements our responsibility is to read the otherinformation and in doing so consider whether the other information is materiallyinconsistent with the financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated. If based on the work we have performed weconclude that there is a material misstatement of this other information we are requiredto report that fact. As described in the Basis for Qualified Opinion section above wewere unable to obtain sufficient appropriate audit evidence regarding the quantificationof shortfall in realization of consideration receivable from certain subsidiaries pendingdisposals/realization of assets by the subsidiaries. Accordingly we are unable toconclude whether or not the other information in relation to this is materially misstatedwith respect to this matter.

Responsibility of Management and Those Charged with Governance for Financial 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 Standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance changes in equity and cash flows of the Companyin accordance with the accounting principles generally accepted in India including theaccounting Standards specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgements and estimates that are reasonable and prudent; and designimplementation 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 foroverseeing the company's financial reporting process.

Auditor's Responsibilities for the Audit of the 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 these Standalone Ind AS financial statements.

As part of an audit in accordance with SAs we exercise professional judgement andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial 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 financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness 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 financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

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 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.

Other Matters

We did not audit the financial statements/ information of one branch the Kaula LampurOffice of the company included in the Standalone Ind AS financial statements of thecompany whose financial statements/financial information reflect total assets of 209.90lakhs as at March 31 2019 and the total revenue of 1 lakhs for the year ended on thatdate as considered in the Standalone Ind AS financial statements. The financialstatements/information of this branch has been audited by the branch auditors (M/s Sundar& Associates Chartered Accountants) whose reports have been furnished to us and ouropinion in so far as it relates to the amounts and disclosures included in respect ofbranches is based solely on the report of such branch auditors. Our report is notqualified in respect of this matter.

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 in terms of sub-section (11) of section 143 of the Actwe give in the "Annexure A" a statement on the matters specified inparagraphs 3 and 4 of the 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 purpose of our audit;

b. In our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books and proper returns adequatefor the purposes of our audit have been received from the branches not visited by us;

c. The report on the accounts of the Kuala Lumpur office in Malaysia of the Companyaudited under Section 143(8) of the Act by the branch auditors have been forwarded to usand have been duly dealt with by us while preparing this report;

d. The Balance Sheet the Statement of Profit and Lossincluding Other ComprehensiveIncome the Statement of Cash Flows and the Statement of Changes in Equity dealt with bythis Report are in agreement with the books of account;

e. In our opinion the aforesaid Standalone Ind AS financial statements comply with theAccounting Standards specified under Section 133 of the Act read with relevant rules asamended;

f. On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct;

g. 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"; and

h. With respect to the other matters to be included in the Auditors' 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 have disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note 37(1a) to the Standalone Ind ASfinancial statements;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses under applicable laws or accountingstandards;

iii. There has been no delay in transferring amounts required to be transfeered tothe Investor Education and Protection Fund by the Company.

for Ashok Kumar Prabhashankar & Co.
Chartered Accountants
Firm Regn. No. 004982S
A.Umesh Patwardhan
Date: May 29 2019 Partner
Place: Bengaluru M. No. 222945

ANNEXURE ‘A' TO THE AUDITORS' REPORT

The Annexure referred to in our report to the members of Kirloskar Electric CompanyLimited for the year ended March 31 2019. We report that:

i) a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Property plant and equipment (PPE). Howevercomprehensive description of assets and their current location need to be updated in theasset records

b) Management has physically verified these PPE in various units as per a phasedprogram of physical verification which is at reasonable intervals. The discrepanciesnoticed on such verification were not material however the same has been properly dealtwith in the books of account.

c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company.

ii) With regard to inventory physical verification has been conducted by themanagement at reasonable intervals and certain mistakes noticed in the inventory recordshave been corrected to the extent identified based on physical verification taken fromtime to time. The Company is in the process of identifying and analysing the differencesadjusted/to be adjusted in the books of account on a comprehensive basis as reported innote 37(7) of the Standalone Ind AS financial statements and consequently we are not in aposition to comment on the extent of discrepancies and any further adjustments required inthe books of account.

iii) The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnership or other parties covered in the register maintained undersection 189 of the Companies Act 2013. For this purpose we have relied on therepresentations of the management that monies due from parties referred to in note 37(8)tothe financial statements are advances and not in the nature of loans.

iv) In our opinion and according to the information and explanations given to us thecompany has not granted any loans or provided any guarantees or security to the partiescovered under section 185 of the Companies Act 2013. In our opinion and according to theinformation and explanations given to us the company has complied with the provisions ofsection 186 of the Companies Act 2013 in respect of investments made or guarantees givento the wholly owned subsidiaries covered under section 186 of the Companies Act 2013.There were no loans given nor securities provided to wholly owned subsidiaries coveredunder section 186 of the Companies Act 2013.

v) In our opinion and according to the information and explanations given to us theCompany has complied with the directives issued by the Reserve Bank of India and theprovisions of sections 73 to 76 of the Companies Act 2013 or any other relevantprovisions of the said Act and the rules framed there under with regard to depositsaccepted from the public. There were no delays in repayment of deposits during thefinancial year ended March 31 2019 and the management has represented to us that thereare no deposits unpaid as laid down in section 74 and other relevant provisions of theCompanies Act 2013. Further and according to the Company no order has been passed by theCompany Law Board or National Company Law Tribunal or Reserve Bank of India or any Courtor any other Tribunal.

vi) We have broadly reviewed the books of account maintained by the Company pursuant tothe Rules made by the Central Government for the maintenance of cost records undersub-section (1) of section 148 of the Act and read with paragraph 2 above regardinginventory records we are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained. However we have not carried out a detailedexamination of such records.

vii) a) The Company has been regular in depositing undisputed statutory dues includingProvident fund Employees' State Insurance Income-tax Sales-tax Goods and Services TaxService tax Duty of Customs Duty of Excise Value Added Tax Cess and any OtherStatutory Dues barring delays in few cases in certain months in respect of provident fundexcise duty and professional tax. According to the information and explanations given tous there are no undisputed amounts payable in respect of above mentioned statutory dueswhich were in arrears as at March 31 2019 for a period of more than six months from thedate they became payable except in respect of dues of Duty of Excise amounting to 176.03lakhs payable for December 2016 March 2017 to May 2017 and dues of Provident fundamounting to 2.08 lakhs payable for August 2018.

b) According to the information and explanations given to us the following dues ofSales Tax Income Tax Excise Duty Value Added Tax Service Tax and Cess had not beendeposited as at March 31 2019 with the relevant authorities on account of disputes.

(Rs in Lakhs)
Name of the statue Nature of the dues Amount (Rs in Lakhs.) Period to which the amount relates Forum where dispute is pending
Karnataka Sales Tax Act 1957 Resale tax demanded 527.07 2003 – 05 Supreme Court
Karnataka Value Added Tax Act 2003 VAT demanded 88.59 2007 – 08 to 2014-15 Joint Commissione of Commercial Tax (Appeals)
The Central Excise 1944 Cenvat availment 6.85 January 2018 to April 2010 October 2008 to April 2010 September 2010 to March 2011 Commissioner of Central Excise (Appeals)
The Central Sales Tax Act 1956 & The Bombay Sales Tax Act 1959 Sales tax demand 1723.92 1999 – 2000 2005-2006 2007-2008 and 2008-2009 2011-12 20112-13 Joint Commissioner of Commercial Taxes
The West Bengal Sales Tax Act Sales Tax demand 73.47 2011-12 2012-13 2013-14 & 2014-15 Commercial Taxes Appellate board and Senior joint commissioner Central Audit Unit-1 Kolkata

viii) In our opinion and according to the information and explanations given to usthere were no loans taken by the Company from the Government or from the debentureholders. The Company has not defaulted in repayment of loans or borrowings to banks andfinancial institutions except for the following instances of delay/default in repayment ofprincipal amount and interest in the below table.

(Rs in Lakhs)

As at March 31 2019
Lender's Name Principal Interest Total Period of delay
State Bank of India 206.60 85.54 292.14 Less than 180 days
State Bank of India 77.48 32.08 109.56 Less than 90 days
Corporation Bank 2234.00 25.09 2259.09 More than 365 Days
Bank of India 14.02 4.73 18.75 Less than 90 days
Bank of India 30.06 19.84 49.90 Less than 90 days
Axis Bank* 7135.00 - 7135.00 More than 365 Days
Total 9697.16 167.28 9864.44

*The entire loan was repayable by 30-06-2017 as per the sanction terms. The company hasdefaulted in repayment of the said loan. The asset was classified as Non-Performing Assetby the bank w.e.f 27-09-2017. Thereafter during the period covered under audit thebankers have assigned the loan along with the securities charged to Asset ReconstructionCompany India Limited (ARCIL).

ix) The company has not raised moneys by way of initial public offer or further publicoffer (including debtinstruments) or fresh term loans from banks during the year.

x) According to the information and explanation given to us there are no fraudsreported by the Company or any fraud on the company by its officers or employees has beennoticed or reported during the year.

xi) According to the information and explanations given by the management themanagerial remuneration has been paid or provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.

xii) The Company is not a Nidhi Company. Accordingly the provisions of clause 11 ofthe said Order are not applicable.

xiii) In our opinion and according to the information and explanation given to us andas represented to us by the management all transactions with the related parties are incompliance with section 177 and 188 of Companies Act 2013 and the details have beendisclosed in the Standalone Ind AS financial statements as required by the applicableaccounting standards.

xiv) According to the information and explanations given to us and based on ourexamination of the records the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year.

xv) As represented to us by the management and according to the information andexplanation given to us by the management the Company has not entered into any non-cashtransactions with directors or persons connected with him. Accordingly the provisions ofclause 15 of the said Order are not applicable.

xvi) According to the information and explanation given the Company is not required tobe registered under section 45-IA of the Reserve Bank of India Act 1934. Accordingly theprovisions of clause 16 of the Order is not applicable.

for Ashok Kumar Prabhashankar & Co.
Chartered Accountants
Firm Regn. No. 004982S
A.Umesh Patwardhan
Date:May 29 2019 Partner
Place: Bengaluru M. No. 222945

Annexure ‘B' to the Auditors' Report

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of KirloskarElectric Company Limited("the Company") as of March 31 2019 in conjunctionwith our audit of the Standalone Ind AS financial statements of the Company for the yearended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing 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'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors' Responsibility

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 issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate 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 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 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.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2019 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.

for Ashok Kumar Prabhashankar & Co.
Chartered Accountants
Firm Regn. No. 004982S
A.Umesh Patwardhan
Date:May 29 2019 Partner
Place: Bengaluru M. No. 222945