To The Members of Kirloskar Oil Engines Limited
Report on the Audit of the Standalone Indian Accounting Standards (Ind AS) FinancialStatements Opinion
We have audited the accompanying standalone Ind AS financial statements of KirloskarOil Engines Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2021 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 (hereinafter referred to as"the Standalone Ind AS Financial Statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS standalone Financial Statements give the informationrequired by the Companies Act 2013 as amended (the Act') in the manner so requiredand give a true and fair view in conformity with the accounting principles generallyaccepted in India of the standalone state of affairs of the Company as at March 312021and its standalone profit (including Other Comprehensive Income) standalone changes inequity and its standalone cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of standalone Ind AS financial statements in accordance with theStandards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the Code of Ethics issuedby the Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the standalone Ind AS Financial Statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone Ind AS Financial Statements.
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 312021. 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. For each matter below ourdescription of how our audit addressed the matter is provided in that context.
We have determined the matter described below to be the key audit matter to becommunicated in our report.
During the financial year the company has recognised revenue from contracts withcustomers for sale of goods and services of Rs. 2663.62 Crores (Refer Note 29 ofstandalone financial statements). Revenue is recognised as per revenue recognition policydescribed in Note 40.4.18.
We have identified revenue recognition as a key audit matter since it involvessignificant management judgement and estimates including whether contracts containmultiple performance obligations which should be accounted for separately. This comprisesallocation of the transaction price to each performance obligation and assessing whetherthe identified performance obligations are satisfied at a point in time or satisfied overa period of time and determining when the control is transferred.
Our audit methodology included the following:
Obtained an understanding and assessed internal controls and its effectivenesswith regards to recognition of revenue.
Analysed major streams of revenue of company to assess whether the method ofrevenue recognition is consistent with IND AS 115 and has been applied consistently.
Focused on contract classification determination of the performance obligationsand determination of transaction price including variable consideration for selectedsamples.
Tested on sample basis whether revenue transactions near to the reporting datehave been recognised in the appropriate period based on terms of the contract.
Evaluated and critically analysed on sample basis the significant judgementsand estimates made by the management in applying the accounting policy for allocation oftransaction price and the timing of transfer of control.
Critically analysed the adequacy and appropriateness of disclosures required asper Ind AS 115- Revenue from Contracts with Customers.
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisCorporate Governance and Directors' Report but does not include the standalone Ind ASFinancial Statements and our auditor's report thereon.
Our opinion on the standalone Ind AS Financial Statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS Financial Statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone Ind AS FinancialStatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. If based on the work we have performed we conclude that there is a materialmisstatement of this other information; we are required to report that fact. We havenothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Standalone IndAS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS FinancialStatements that give a true and fair view of the standalone financial position standalonefinancial performance (including other comprehensive Income) standalone changes in equityand standalone cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) specifiedunder section 133 of the Act read with the Companies (Indian Accounting Standards) Rules2015 as amended. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone Ind AS Financial Statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.
In preparing the standalone Ind AS Financial Statements the management is responsiblefor assessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASFinancial Statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone Ind AS Financial Statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the standalone Ind ASFinancial Statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to standalone Ind AS financialstatements in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone Ind AS Financial Statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone IndAS Financial Statements including the disclosures and whether the standalone Ind ASFinancial Statements represent the underlying transactions and events in a manner thatachieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS FinancialStatements for the financial year ended March 312021 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of
doing so would reasonably be expected to outweigh the public interest benefits of suchcommunication. Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure A; a statement on the matters specified in paragraphs 3and 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 Sheet the Statement of Profit and Loss (including other comprehensiveincome) the statement of Changes in Equity and the Statement of Cash Flow dealt with bythis Report are in agreement with the books of account.
d) In our opinion the aforesaid standalone Ind AS financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended.
e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the director is disqualifiedas on March 31 2021 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 with reference tostandalone Ind AS financial statements of the Company and the operating effectiveness ofsuch controls refer to our separate Report in "Annexure B" to this report.
g) As required by section 197 (16) of the Act; in our opinion and according toinformation and explanation provided to us the remuneration paid/ provided for by thecompany to its directors is in accordance with the provisions of section 197 of the Actand remuneration paid to directors is not in excess of the limit laid down under thissection.
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 40.5.1 to thefinancial statements.
(ii) The Company did not have any long-term contracts including derivative contracts asat March 312021.
(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For P G BHAGWAT LLP Chartered Accountants FRN : 101118W / W100682 Sd/-
Sanjay Athavale Partner
Membership No. 83374
Pune : 13.05.2021
UDIN : 21083374AAAACJ3234
Annexure A to Independent Auditor's Report
Referred to in paragraph 1 of Report on Other Legal and Regulatory Requirements sectionof the Independent Auditor's Report of even date to the members of Kirloskar Oil EnginesLimited on the standalone Ind AS financial statements as of and for the year ended March312021
(i) (a) The company has maintained proper records showing full particulars includingquantitative
details and situation of property plant and equipment.
(b) The property plant and equipment have been physically verified by the managementaccording to the phased program of three years which is reasonable with regard to size ofthe company and nature of its assets. According to the information and explanations givento us no material discrepancies were noticed during such physical verification;
(c) According to records of the company examined by us the title deeds of immovableproperties are held in the name of the company.
(ii) The physical verification of inventory have been conducted at reasonable intervalsby the Management during the year. In respect of inventory lying with third parties thesehave substantially been confirmed by them. In our opinion the frequency of verificationis reasonable. The discrepancies noticed on physical verification of inventory as comparedto book records were not material.
(iii) According to information and explanations given to us theCompany has not granted any loans secured or unsecured to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under Section189 of the Act except short term unsecured loan amounting to Rs. 40 crores to its whollyowned subsidiary company :
(a) the terms and conditions of the grant of such loan is not prejudicial to thecompany's interest ;
(b) the principal has been fully repaid and the interest has been fully paid ;
(c) there is no over due amount.
(iv) According to the information and explanations provided to us there are no loansguarantees and security given by the Company covered under the provisions of section 185of the Companies Act 2013. According to the information and explanations provided to usprovisions of section 186 of the Companies Act 2013 have been complied with respect toinvestment.
(v) In our opinion and according to information and explanation givento us the Company has not accepted public deposits hence the directive issued by theReserve Bank of India and the provisions of sections 73 to 76 or any other relevantprovisions of the Companies Act and the rules framed there under are not applicable toit. According to information and explanation given to us no order has been passed againstthe company by Company Law Board or National Company Law Tribunal or Reserve Bank of Indiaor any court or any other tribunal.
(vi) We have broadly reviewed the books of account maintained by theCompany pursuant to the rules made by the Central Government for the maintenance of costrecords under sub-section (l) of section 148 of the Companies Act 2013 and we are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. We have however not made a detailed examination of records with a view todetermine whether they are accurate and complete.
(vii) (a) According to the information and explanations given to us and the records ofthe Company examined by us in our opinion the Company is generally regular in depositingundisputed statutory dues in respect of provident fund employees' state insurance salestax income tax service tax duty of customs duty of excise value added tax Goods andService Tax cess and other material statutory dues as applicable with the appropriateauthorities.
According to the information and explanation given to us no undisputed amounts payablein respect of statutory dues were in arrears as at 31st March 2021 for a period morethan six months from the date they became payable.
(b) According to the information and explanations given to us theparticulars of dues of income tax sales tax wealth tax service tax custom duty goodsand service tax excise duty and cess as at 31st March 2021 which has not been depositedon account of disputes are as follows:
|Name of the Statue ||Nature of dispute due ||Amount under dispute not deposited (Rs in Crores) ||Period to which amount is related ||Forum where the dispute is pending |
|Sales Tax ||Sales tax disallowance for non- receipt of Forms and penalty for pump set ||2.17 ||1992-1993 2004-2005 2007-2008 ||High Court |
| ||Demand for Disallowance of Claims ||0.56 ||1995-1996 2007-2008 2011-2012 ||Tribunal |
| ||Non receipt of Forms & Disallowance of Credit ||0.78 ||1996-97 2004-06 2008-09 2011-17 ||Appellate authority - Up to Commissioner level |
|Service Tax ||Disallowance of credit ||0.03 ||2007-2010 ||High Court |
| || ||0.68 ||2006 2013-2015 2016-2018 ||Tribunal |
| || ||0.32 ||2005-2007 2012-2016 ||Appellate authority - Up to Commissioner level |
|Excise Duty ||Valuation & exemption disputes and disallowance of cenvat credit against the excise duty ||5.30 ||1999-2002 2004-2013 ||Tribunal |
| || ||11.71 ||1996 2014-17 ||Appellate authority - Up to Commissioner level |
|Customs Duty ||Dispute related to exemption and other matters ||0.86 ||1994-1997 2011-2012 ||Appellate authority - Up to Commissioner level |
(viii) According to the records of the Company examined by us and the information andexplanation given to us the Company has not defaulted in repayment of loans or borrowingsto any financial institution or bank or Government as at the balance sheet date.
(ix) According to the information and explanation given to us the company has notraised money by way of initial public offer or further public offer (including debtinstrument) and not availed term loan during the year. Accordingly the Provisions ofclause 3(ix) of the Companies (Auditor's Report) Order 2016 are not applicable to thecompany.
(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) According to the information and explanation given to us the company haspaid/provided managerial remuneration within the limit prescribed under section 197 of theCompanies Act 2013. Accordingly no requisite approval is required to be sought.
(xii) In our opinion the company is not a Nidhi company. Accordingly the provisionsspecified in Paragraph 3(xii) of Companies (Auditor's Report) order 2016 are notapplicable to the company.
(xiii) According to the information and explanation given to us and in our opiniontransactions with the related parties are in compliance with section 177 and 188 of theCompanies Act 2013 and requisite details have been disclosed in the Financial statementsas required by the applicable accounting standards.
(xiv) According to the information and explanation given to us the company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures for raising funds during the year. Accordingly the provisions ofclause 3 (xiv) of the Companies (Auditor's Report) Order 2016 are not applicable to thecompany.
(xv) According to the information and explanation given to us the company has notentered into a non-cash transaction with any of the directors or persons connected withdirectors. Accordingly the provisions of clause 3 (xv) of the Companies (Auditor'sReport) Order 2016 are not applicable to the company.
(xvi) In our opinion and according to the information and explanation given to us thecompany is not required to be registered under section 45-IA of the Reserve Bank of IndiaAct 1934. Accordingly the provisions in Paragraph 3(xvi) of Companies (Auditor's Report)order 2016 are not applicable.
For P G BHAGWAT LLP Chartered Accountants FRN : 101118W / W100682
Sanjay Athavale Partner
Membership No. 83374
Pune : 13.05.2021
UDIN : 21083374AAAACJ3234
Annexure B to the Independent Auditor's Report of even date on the Standalone Ind ASFinancial Statements of Kirloskar Oil Engines Limited.
Report on the Internal Financial Controls with reference to Standalone Ind AS FinancialStatements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013("the Act")
We have audited the internal financial controls with reference to Standalone Ind ASFinancial Statements of Kirloskar Oil Engines Limited ("the Company") as ofMarch 31 2021 in conjunction with our audit of the standalone Ind AS financial statementsof the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control 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 with reference to standalone Ind AS financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls over Financial Reporting (the "Guidance Note") and the Standards onAuditing prescribed under Section 143(10) of the Act to the extent applicable to an auditof internal financial controls with reference to standalone Ind AS financial statementsboth issued by the Institute of Chartered Accountants of India. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlswith reference to standalone Ind AS financial statements were established and maintainedand if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofinternal financial controls with reference to standalone Ind AS financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tostandalone Ind AS financial statements included obtaining an understanding of suchinternal financial controls assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the standalone Ind AS financialstatements 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 internal financial controls with reference tostandalone Ind AS financial statements.
Meaning of Internal Financial Controls over financial reporting with reference tostandalone Ind AS financial statements
A company's internal financial control over financial reporting with reference tostandalone financial statements is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of standalone Ind ASfinancial statements for external purposes in accordance with generally acceptedaccounting principles. A company's internal financial control over financial reportingwith reference to standalone Ind AS financial statements includes those policies andprocedures that (1) Pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) Provide reasonable assurance that transactions are
recorded as necessary to permit preparation of standalone Ind AS financial statementsin accordance 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 standalone Ind AS financialstatements.
Inherent Limitations of Internal Financial Controls over financial reporting withreference to standalone Ind AS financial statements
Because of the inherent limitations of internal financial controls over financialreporting with reference to standalone Ind AS financial Statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto standalone Ind AS financial Statements to future periods are subject to the risk thatthe internal financial controls over financial reporting with reference to standalone IndAS financial statements may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to standalone Ind AS financial statements and such internalfinancial controls were operating effectively as at March 312021 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
For P G BHAGWAT LLP
FRN : 101118W / W100682
Sd/- Sanjay Athavale
Partner Membership No. 83374
Pune : 13.05.2021
UDIN : 21083374AAAACJ3234