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Kirloskar Pneumatic Company Ltd.

BSE: 505283 Sector: Engineering
NSE: KGKHOSLA ISIN Code: INE811A01020
BSE 00:00 | 03 Dec 157.35 8.25
(5.53%)
OPEN

151.40

HIGH

159.00

LOW

150.00

NSE 05:30 | 01 Jan Kirloskar Pneumatic Company Ltd
OPEN 151.40
PREVIOUS CLOSE 149.10
VOLUME 89091
52-Week high 177.40
52-Week low 80.00
P/E 23.80
Mkt Cap.(Rs cr) 1,010
Buy Price 157.35
Buy Qty 173.00
Sell Price 157.35
Sell Qty 9.00
OPEN 151.40
CLOSE 149.10
VOLUME 89091
52-Week high 177.40
52-Week low 80.00
P/E 23.80
Mkt Cap.(Rs cr) 1,010
Buy Price 157.35
Buy Qty 173.00
Sell Price 157.35
Sell Qty 9.00

Kirloskar Pneumatic Company Ltd. (KGKHOSLA) - Auditors Report

Company auditors report

To the Members of Kirloskar Pneumatic Company Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Kirloskar Pneumatic Company Limited("the Company") which comprise the balance sheet as at 31st March2020 and the statement of Profit and Loss ( including Other Comprehensive Income)statement of changes in equity and statement of cash flows for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information hereinafter referred to as ‘the financialstatements'.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at 31stMarch 2020 and its profit (including Other Comprehensive Income) changes in equity andits cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.

Key Audit Matter : Expected credit Loss on Trade receivables:

The company has trade receivables as at 31st March 2020 amounting to Rs1891 million (Refer note 4 in financial statements). The mix of trade receivable is suchthat it majorly includes receivables from government sector as compared to other sectorsof industry. Ind AS 109 requires the company to recognize the impairment loss allowance onfinancial assets based on expected credit loss approach. Note 53(4.7)(a) (v) second paradescribes the company's Accounting Policy on impairment of trade receivables.

We have considered Expected Credit loss on trade receivables as key audit matter sincethe assessment of expected credit loss is highly judgemental considering the mix of tradereceivables and of low visibility of reasonable and supportable information to establishany trend.

Audit methodology:

- We have analyzed and tested the appropriateness of relevant internal financialcontrols for extraction of data and its completeness.

- We have analysed nature and recoverability of significant trade receivables based onpast trend available and obtained explanations.

- We have sent request letters to material debtors seeking balance confirmation onreporting date.

Where balance confirmations are not received alternate audit procedures as perrelevant Auditing Standard were performed.

- We have reviewed company's policy on impairment of trade receivables and evaluatedthe reasonableness of Management estimate by understanding the process of expected creditloss estimation.

- We have checked the accounting treatment and necessary disclosures as per Ind AS 109given in financial statements.

Other Information

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Directors Report to the members& Annexures thereto Report on Corporate Governance Management Discussion &Analysis but does not include the financial statements and our auditor's report thereon.Our opinion on the financial statements does not cover the other information and we do notexpress any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the FinancialStatements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese financial statements that give a true and fair view of the financial positionfinancial performance (including other comprehensive income) changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the Indian Accounting Standards (Ind AS) specified under section 133 ofthe Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing and detecting frauds and other irregularities selection and application ofappropriate accounting policies making judgments and estimates that are reasonable andprudent and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. The Board of Directors is also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

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

Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company has adequate internal financial controls system with reference to financialstatements 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 management.

Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings includingsignificant deficiencies if any in internal control that we identify during our audit.We also provide those charged with governance with a statement that we have complied withrelevant ethical 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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the Annexure A a statement on the 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 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 Sheetthe Statement of Profit and Loss (including other comprehensive income) the Statement ofChanges in Equity and the Cash Flow Statement dealt with by this Report are in agreementwith the books of account.

(d) In our opinion the aforesaid financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with Companies (IndianAccounting Standards) Rules 2015 as amended.

(e) On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in termsof Section 164 (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 controlsrefer to our separate Report in "Annexure B".

(g) As required by section 197 (16) of the Act; in our opinion and according toinformation and explanation provided to us the remuneration paid by the company to itsdirectors is in accordance with the provisions of section 197 of the Act and remunerationpaid to directors is not in excess of the limit laid down under this section.

(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. TheCompany has disclosed the impact of pending litigations on its financial position in itsfinancial statements – Refer Note 42 to the financial statements; ii. The Company didnot have any long-term contracts including derivative contracts for which there were anymaterial foreseeable losses; iii. There has been no delay in transferring amountsrequired to be transferred to the Investor Education and Protection Fund by the Company.

For M/S P.G. BHAGWAT
Chartered Accountants
Firm's registration No. 101118W
sd/-
Sanjay Athavale
Partner
Membership No. 83374
Pune : 25th June 2020
UDIN : 20083374AAAABT1113

ANNEXURE A TO INDEPENDENT AUDITORS' REPORT

Referred to in our above Independent Auditor's Report of even date to the members ofKirloskar Pneumatic Company Limited on the financial statements for the year ended March31 2020

(i) (a) The company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets; (b) The fixed assets are physicallyverified by the Management according to a phased programme designed to cover all the itemsover a period of three years which in our opinion is reasonable having regard to thesize of the Company and the nature of its assets. However no physical verification wascarried out by the Management during the year. Accordingly the discrepancies if anycould not be ascertained and therefore we are unable to comment on whether thediscrepancies if any have been properly dealt with in the books of account; (c) Thetitle deeds of immovable properties as disclosed in Note 1 to the financial statementsare held in the name of the company.

(ii) The physical verification of inventory excluding stocks with third parties havebeen conducted at reasonable intervals by the Management during the year. In respect ofinventory lying with third parties these have substantially been confirmed by them. Thediscrepancies noticed on physical verification of inventory as compared to book recordswere not material.

(iii) The company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013. Therefore the provisions of Clause 3(iii)(iii)(a) (iii)(b) and (iii)(c) of the said Order are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of the loans and investments made and guarantees and security provided by it.(v) In our opinion and according to the information & explanations given to us thecompany has not accepted any deposits from the public within the meaning of Sections 7374 75 and 76 of the Act and the Rules framed there under to the extent notified. (vi) TheCompany has made & is maintaining cost records as prescribed under Section 148 (1) ofthe Companies Act 2013. We have not however made a detailed examination of the recordswith a view to determine whether they are accurate or complete.

(vii) (a) According to the information & explanations given to us & accordingto the records of the company the company is regular in depositing undisputed statutorydues including provident fund employees' state insurance income-tax sales-tax servicetax duty of customs duty of excise value added tax GST cess and any other statutorydues to the appropriate authorities and there were no arrears of outstanding statutorydues as on the last day of the financial year concerned for a period of more than sixmonths from the date they became payable ; (b) According to the information &explanations given to us & according to the records of the company there are no duesof income tax sales tax service tax duty of customs excise duty value added tax orGST which have not been deposited on account of any dispute except :

Name of the Nature of dues Amount Period to which Forum
Statute (Rs. millions) amount relates
Excise Duty Demand of penalty on reversal of Cenvat Credit not made 0.2 FY 1997-98 to 2001-02 CESTAT Delhi
upto Feb-2002
Excise Duty Wrong availment of CENVAT credit 0.01 FY 2013-14 to 2015-16 Asst. Commissioner
up to Aug-2016 CGST Division
-VI (Koregaon
Park) Pune-I
Commissionerate
Excise Duty Wrong availment of exemption 25.10 FY 2016-17 to 2017-18 DGGI Zonal Unit
for lower Central excise duty up to Jun-2017 Pune
Customs Non compliance of conditions 1.45 FY 1997-98 Asst. Commissioner
Duty for availing concessional rate (Customs) Mumbai
of customs duty
Customs Non compliance of conditions 15.79 FY 2011-12 Supreme Court
Duty for availing concessional rate 15.52 FY 2012-13 DGFT Pune & Delhi
of customs duty
Customs Wrong payment of lower 0.52 FY 2017-18 Commissioner of
Duty Import duty (IGST) Customs Audit
Commissionerate
JNCH Raigad
Sales Tax Non-production of C Forms 0.10 FY 1992-93 Asst. Commissioner
0.92 FY 2012-13 Appeals Jt.
0.24 FY 2013-14 Commissioner
7.12 FY 2015-16 Appeals
Sales Tax Demand under Work Contract 0.48 FY 1985-86 to 1987-88 Asst. Commissioner
Tax Appeals
Income Tax Provision for Pension Scheme 6.97 FY 1996-97 High Court
Assessment effects 6.13 FY 2015-16 CIT Appeals 7 Pune
Assessment effects 2.60 FY 2016-17 CIT Appeals 7 Pune

(viii) Based on our audit procedures and on the information and explanations given bythe management we are of the opinion that the company has not defaulted in repayment ofloans or borrowing to any financial institutions banks Government or dues to debentureholders as at the balance sheet date.

(ix) The company has not raised any moneys by way of initial public offer or furtherpublic offer (including debt instruments) or any term loan during the year.

(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 on the Company by its officers or employees noticedor reported during the year nor have we been informed of any such case by the Management.

(xi) Managerial remuneration for the year has been paid or provided in accordance withthe requisite approvals mandated by the provisions of section 197 read with Schedule V tothe Companies Act.

(xii) The company is not a Nidhi Company.

(xiii) Based upon the audit procedures performed and information and explanations givenby the management all transactions with the related parties are in compliance withsections 177 and 188 of Companies Act 2013 where applicable and the details have beendisclosed in the financial Statements etc. as required by the applicable accountingstandards.

(xiv) The company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review.

(xv) Based upon the audit procedures performed and information and explanations givenby the management the company has not entered into any non-cash transactions withdirectors or persons connected with him within the meaning of the provisions of section192 of Companies Act 2013.

(xvi) The company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.

For M/S P.G. BHAGWAT
Chartered Accountants
Firm's registration No. 101118W
sd/-
Sanjay Athavale
Partner
Membership No. 83374
Pune : 25th June 2020
UDIN : 20083374AAAABT1113

Annexure B to the Independent Auditors' Report

Referred to in paragraph 2 (f) under the heading "Report on Other legal andRegulatory Requirements" of our report on even date:

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 with reference to financial statementsof Kirloskar Pneumatic Company Limited ("the Company") as of 31 March 2020 inconjunction with our audit of the financial statements of the Company for the year endedon 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 controls 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 issued 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 with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. 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 theadequacy of the internal financial controls system with reference to financial statementsand their operating effectiveness. Our audit of internal financial controls with referenceto financial statements included obtaining an understanding of internal financial controlsover financial reporting assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgment 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 andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system with reference 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 bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as at31 March 2020 based on the internal controls 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 issued by the Institute of Chartered Accountants of India.

For M/S P.G. BHAGWAT
Chartered Accountants
Firm's registration No. 101118W
sd/-
Sanjay Athavale
Partner
Membership No. 83374
Pune : 25th June 2020
UDIN : 20083374AAAABT1113

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