TO THE MEMBERS OF KIRLOSKAR ELECTRIC COMPANY LIMITED BANGALORE
Report on the Standalone Ind AS financial statements
We have audited the accompanying Standalone Ind AS financial statementsof Kirloskar Electric Company Limited ("the Company") which comprise theBalance Sheet as at March 31 2018 the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Cash Flows and the Statement of Changes in Equityfor the year then ended and a summary of significant accounting policies and otherexplanatory information for the year then ended in which are incorporated the Returnsaudited by the branch auditors M/s Sundar & Associates Chartered Accountants of theKuala Lumpur office of the Company in Malaysia (hereinafter referred to asStandalone Ind AS financial statements').
Management's Responsibility for the Standalone Ind AS financialstatements
The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Companies Act 2013 ("the Act") with respect tothe preparation of these Standalone Ind AS financial statements that give a true and fairview of the financial position financial performance including other comprehensiveincome cash flows and changes in equity of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)specified under section 133 of the Act read with relevant rules thereunder. 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 judgements 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.
Our responsibility is to express an opinion on these Standalone Ind ASfinancial statements based on our audit.We have taken into account the provisions of theAct the accounting and auditing standards and matters which are required to be includedin the audit report under the provisions of the Act and the rules made thereunder.Weconducted our audit in accordance with the Standards on Auditing specified under section143(10) of the Act. Those Standards require that we comply with the ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether theStandaloneInd AS financial statements are free from material misstatement.An audit involvesperforming procedures to obtain audit evidence about the amounts and thedisclosures in theStandalone Ind AS financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement ofthe Standalone
Ind AS financial statements whether due to fraud or error. In makingthose risk assessments the auditor considers internal financial control relevant to theCompany's preparation of the Standalone Ind AS financial statements that give a trueand fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by theCompany's Directors as well as evaluating the overall presentation of the StandaloneInd AS financial statements.We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our qualified audit opinion on theStandalone Ind AS financial statements.
Basis for Qualified Opinion
Attention of the Members is invited to note 37(20) to the StandaloneInd AS financial statements regarding the amounts due to the Company from certainsubsidiaries towards part consideration receivable on sale/assignment of certain immovableproperties receivables interest charged and expenses reimbursed. We have relied on themanagement's representations that it is confident of realization of amounts due tothe said subsidiaries aggregating to 14516.72 lakhs ( 13504.63 lakhs as at March 312017) 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.
In our opinion and to the best of our information and according to theexplanations given to usexcept for the effects of the matter described in the Basis forQualified Opinion paragraph above the aforesaid Standalone Ind AS financial statementsgive the information required by the Act in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2018 and its loss including othercomprehensive income its cash flows and the changes in equity for the year ended on thatdate.
We did not audit the financial statements/information of one branchthe Kuala Lumpur office of the Company included in the Standalone Ind AS financialstatements of the Company whose financial statements reflect total assets of 188 lakhs asat March 31 2018 and total revenues of 1lakh for the year ended on that date asconsidered in the Standalone Ind AS financial statements. The financial statements of thesaid office have been audited by the branch auditors (M/s Sundar & AssociatesChartered Accountants) whose report has been furnished to us and our opinion in so far asit relates to the amounts and disclosures included in respect of these branches is basedsolely on the report of such branch auditors. Our report is not qualified in respect ofthis matter.
Emphasis of Matter:
(a) Attention of the members is invited to note 37(21) of the financialstatements where in the directors have detailed the reasons for preparing theseStandalone Ind AS financial statements on a going concern basis though the Company/ Group(consisting of the Company its subsidiaries and associate) have incurred losses and theirnetworth (after excluding revaluation reserve) has been eroded. There are certain overduepayments to creditors and banks. The appropriateness of the said basis is subject to theCompany adhering to the restructuring plan and infusion of requisite funds with itsattendant uncertainties. We have relied on the representations made to us by the Company.
(b) Attention of the members is invited to note 37(1a)(vii)of theStandalone Ind AS financial statements which sets out that the Company has filed SpecialLeave Petition in respect of demands of resale tax and sales tax penalty of 527 lakhs and362 lakhs respectively before the Honourable Supreme Court of India. Management hasrepresented to us that it is not probable that there will be an outflow of economicbenefits and hence no provision is required to be recognized in this regard. We haverelied on this representation.
Report on Other Legal and Regulatory Requirements:
1. As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government of India in terms of sub-section(11) of section 143 of the Act we give in the "Annexure A" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.
2. As required by the section 143(3) of the Act we report that: a. Wehave sought and obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit. b. In our opinionproper books of account as required by law have been kept by the Company so far as itappears from our examination of those books and proper returns adequate for the purposesof 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 ofthe Company audited under Section 143 (8) of the Act by branch auditors have beenforwarded to us and have been duly dealt with by us while preparing this report.
d. The Balance Sheet the Statement of Profit and Loss the Statementof Cash Flows and the Statement of Changes in Equity dealt with by this report are inagreement with the books of account and with the returns received from the branches notvisited by us.
e. In our opinion the aforesaid Standalone Ind AS financial statementscomply with the Indian Accounting Standards specified under section 133 of the Act readwith relevant rules thereunder.
f. On the basis of the written representations received from thedirectors as on March 31 2018 taken on the record by the Board of Directors none of thedirectors is disqualified as on that date from being appointed as a director in terms ofsection 164(2) of the Act.
g. With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate report in "Annexure B".
h. With respect to other matters to be included in the Auditors reportin accordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 as amendedin our opinion and to the best of our information and according to the explanations givento us
i The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements Refer Note 37(1a) to the financialstatements.
ii The Company did not have any long-term contracts and has not enteredinto any derivative contracts.
Accordingly no provision is required to be recognised in respect ofmaterial foreseeable losses under applicable laws or accounting standards. iii There wereno amounts which were required to be transferred to the Investor Education and ProtectionFund by the Company.
| ||for Ashok Kumar Prabhashankar & Co. |
| ||Chartered Accountants |
| ||Firm Regn. No. 004982S |
| ||A. Umesh Patwardhan |
| ||Partner |
|Date:May 28 2018 ||M. No. 222945 |
|Place: Bengaluru || |