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Krishna Defence & Allied Industries Ltd.

BSE: 535444 Sector: Others
NSE: KRISHNADEF ISIN Code: INE0J5601015
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Krishna Defence & Allied Industries Ltd. (KRISHNADEF) - Auditors Report

Company auditors report

To

The Board of Directors

Krishna Defence and Allied Industries Limited (formerly known as Krishna AlliedIndustries Limited)

Dear Sirs

We have examined the attached Restated Financial Information of Krishna Defence andAllied Industries Limited (hereunder referred to "the Company""Issuer") comprising the Restated Statement of Assets and Liabilities as at

September 30 2021 March 31 2021 March 31 2020 and March 31 2019 the RestatedStatement of Profit & Loss the Restated Cash Flow Statement for the Period endedSeptember 30 2021 and year ended March 31 2021 March 31 2020 and March 31 2019 theSummary statement of Significant Accounting Policies and other explanatory Information(Collectively the Restated Financial Information) as approved by the Board of Directors intheir meeting held on February 08 2022 for the purpose of inclusion in the OfferDocument prepared by the Company in connection with its Initial Public Offer of EquityShares (IPO) and prepared in terms of the requirement of:-

a) Section 26 of Part I of Chapter III of the Companies Act 2013 as amended (the"Act");

b) The Securities and Exchange Board of India (Issue of Capital and DisclosureRequirements) Regulations 2018

("ICDR Regulations") as amended (ICDR Regulations"); and

c) The Guidance Note on Reports in Company Prospectuses (Revised 2019) issued by theInstitute of Chartered

Accountants of India as amended from time to time. ("The Guidance Note")

The Company’s Board of Directors is responsible for the preparation of theRestated Financial Information for the purpose of inclusion in the offer document to befiled with Stock Exchange Securities and Exchange Board of India and Registrar ofCompanies Mumbai in connection with the proposed IPO. The Restated Financial Informationhave been prepared by the management of the Company for the Period ended on September 302021 and year ended on March 31 2021 2020 and 2019 on the basis of preparation stated inANNEXURE D to the Restated Financial Information. The Board of Directors of thecompany’s responsibility includes designing implementing and maintaining adequateinternal control relevant to the preparation and presentation of the Restated FinancialInformation.

We have examined such Restated Financial Information taking into consideration:

a) The terms of reference and terms of our engagement agreed upon with you inaccordance with our engagement in connection with the proposed IPO of equity shares of theCompany;

b) The Guidance Note also requires that we comply with the ethical requirements of theCode of Ethics issued by the ICAI;

c) Concepts of test checks and materiality to obtain reasonable assurance based onverification of evidence supporting the Restated Financial Information; and

d) The requirements of Section 26 of the Act and the ICDR Regulations. Our work wasperformed solely to assist you in meeting your responsibilities in relation to yourcompliance with the Act the ICDR Regulations and the Guidance Note in connection with theIPO.

These Restated Financial Information have been compiled by the management from auditedfinancial statements of company as at and for the Period / year ended September 30 2021March 31 2021 2020 and 2019 prepared in accordance with the Accounting Standards asprescribed under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014 as amended and other accounting principles generally accepted in India. Wehave re-audited the special purpose financial information of the Company year ended March31 2021 prepared by the Company in accordance with the Accounting Standards for thelimited purpose of complying with the requirement of getting its financial statementsre-audited by an audit firm holding a valid peer review certificate issued by the"Peer Review Board" of the ICAI as required by ICDR Regulations in relation toproposed IPO. We have issued our report on these special purpose financial information tothe Board of Directors.

For the purpose of our examination we have relied on:

a) Auditors’ Report issued by the Previous Auditor i.e. M/s Sandeep Shah &Associates (the "Previous Auditors") dated 26th November 2021 December 292020 and September 12 2019 for the Financial year ended 31st March 2021 31st March 2020& 31st March 2019 respectively.

b) The audit were conducted by the Company’s previous auditor and accordinglyreliance has been placed on the statement of assets and liabilities and statements ofprofit and loss the Significant Accounting Policies and other explanatory informationand (collectively the Audited Financial Statement") examined by them for the saidyears.

The modification in restated financials were carried out based on the modified reportsif any issued by Previous Auditor which is giving rise to modifications on the financialstatements as at and for the years ended March 31 2021 March 31 2020 and March 312019. There is no qualification of previous auditor for the Financial Statement of 31stMarch 2021 2020 and 2019.

The audit reports on the financial statements were modified and included followingmatter(s) giving rise to modifications on the financial statements as at and for thePeriod ended September 30 2021 and years ended March 31 2021 2020 & 2019:-

a) The Restated Financial Information or Restated Summary Financial Statement have beenmade after incorporating adjustments for the changes in accounting policiesretrospectively in respective financial period/years to reflect the same accountingtreatment as per the changed accounting policy for all reporting periods if any;

b) The Restated Financial Information or Restated Summary Financial Statement have beenmade after incorporating adjustments for prior period and other material amounts in therespective financial years/period to which they relate and there are no qualificationswhich require adjustments;

c) Extra-ordinary items that needs to be disclosed separately in the accounts has beendisclosed wherever required;

d) There were no qualifications in the Audit Reports issued by us for the Period endedSeptember 30 2021 and in the Audit Reports issued by previous auditor for the FinancialYear Ended March 31 2021 2020 and 2019 which would require adjustments in this RestatedFinancial Statements of the Company;

e) Profits and losses have been arrived at after charging all expenses includingdepreciation and after making such adjustments/restatements and regroupings as in ouropinion are appropriate and are to be read in accordance with the Significant AccountingPolices and Notes to Accounts as set out in ANNEXURE D to this report;

f) Adjustments in Restated Financial Information or Restated Summary FinancialStatement have been made in accordance with the correct accounting policies;

g) There was no change in accounting policies which needs to be adjusted in theRestated Financial Information;

h) There are no revaluation reserves which need to be disclosed separately in theRestated Financial Information or Restated Summary Financial Statement; i) The Company hasnot paid any dividend since its incorporation. In accordance with the requirements of PartI of Chapter III of Act including rules made there under ICDR Regulations Guidance Noteand Engagement Letter we report that: a) The "Restated Statement of Assets andLiabilities" as set out in ANNEXURE A to this report of the Company as at September30 2021 March 31 2021 2020 and 2019 is prepared by the Company and approved by theBoard of Directors. These Restated Statement of Assets and Liabilities have been arrivedat after making such adjustments and regroupings to the individual financial statements ofthe Company as in our opinion were appropriate and more fully described in SignificantAccounting Policies and Notes to Accounts as set out in ANNEXURE D to this Report. b) The"Restated Statement of Profit and Loss" as set out in ANNEXURE B to this reportof the Company for the Period ended September 30 2021 and for the years ended March 312021 2020 and 2019 is prepared by the Company and approved by the Board of Directors.These Restated Statement of Profit and Loss have been arrived at after making suchadjustments and regroupings to the individual financial statements of the Company as inour opinion were appropriate and more fully described in Significant Accounting Policiesand Notes to Accounts as set out in ANNEXURE D to this Report.

c) The "Restated Statement of Cash Flow" as set out in ANNEXURE C to thisreport of the Company for the Period ended September 30 2021 and for the years endedMarch 31 2021 2020 and 2019 is prepared by the Company and approved by the Board ofDirectors. These Restated Statement of Cash Flow as restated have been arrived at aftermaking such adjustments and regroupings to the individual financial statements of theCompany as in our opinion were appropriate and more fully described in SignificantAccounting Policies and Notes to Accounts as set out in ANNEXURE D to this Report.

Audit for the financial year ended on March 31 2021 March 31 2020 and March 31 2019was conducted by M/s Sandeep Shah & Associates and accordingly reliance has beenplaced on the financial statement examined by M/s Sandeep Shah & Associates for thesaid years. Financial Reports included for said years are solely based on report submittedby them. Further financial statement for the year ended on March 31 2021 are re-auditedby us as per SEBI (ICDR) 2018.

We have also examined the following other financial information relating to the Companyprepared by the Management and as approved by the Board of Directors of the Company andannexed to this report relating to the Company for the Period ended September 30 2021 andFinancial Year Ended March 31 2021 2020 and 2019 proposed to be included in the OfferDocument for the proposed IPO.

Restated Statement of Share Capital Reserves And Surplus Note 3 & 4
Restated Long Term Borrowings Note 5
Restated Long Term Provisions Note 6
Restated Statement of Short Term Borrowings Note 7
Restated Statement of Trade Payables Note 8
Restated Statement of Other Current Liabilities And Short Term Provisions Note 9 & 10
Restated Statement of Property Plant & Equipments and Intangible Assets and Capital Work in Progress Note 11
Restated Statement of Non Current Investments Note 12
Restated Statement of Long-Term Loans And Advances Note 13
Restated Statement of Other Non - Current Assets Note 14
Restated Statement of Inventories Note 15
Restated Statement of Trade Receivables Note 16
Restated Statement of Cash & Bank Balance Note 17
Restated Statement of Short-Term Loans And Advances Note 18
Restated Statement of Other Current Assets Note 19
Restated Statement of Revenue from Operations Note 20
Restated Statement of Other Income Note 21
Restated Cost of Materials Consumed Note 22
Restated Purchase of Traded Goods Note 23
Restated Changes In Inventories Of Finished Goods Work-In-Progress And Stock-In-Trade Note 24
Restated Statement of Employee Benefit Expenses Note 25
Restated Statement of Finance Cost Note 26
Restated Statement of Depreciation & Amortisation Note 11
Restated Statement of Other Expenses Note 27
Restated Statement of Contingent Liabilities Note 28.A
Restated statement of Related party transaction Note 29(B)
Restated Statement of Deferred Tax (Assets) / Liabilities Note 29(E)
Restated Statement of Accounting Ratios Note 30(F)
Mandatory Accounting Ratios Annexure E
Material Adjustment to the Restated Financial Information Annexure F
Restated Statement of Tax shelter Annexure G
Restated Statement of Capitalization Annexure H

In our opinion and to the best of information and explanation provided to us theRestated Financial Information of the Company read with significant accounting policiesand notes to accounts as appearing in ANNEXURE D are prepared after providing appropriateadjustments and regroupings as considered appropriate.

We M/s CNK & Associates LLP Chartered Accountants have been subjected to the peerreview process of the

Institute of Chartered Accountants of India ("ICAI") and hold a valid peerreview certificate issued by the "Peer Review Board" of the ICAI.

The report should not in any way be construed as a re-issuance or re-dating of any ofthe previous audit reports issued by any other Firm of Chartered Accountants nor shouldthis report be construed as a new opinion on any of the financial statements referred totherein.

We have no responsibility to update our report for events and circumstances occurringafter the date of the report.

In our opinion the above financial information contained in ANNEXURE A to H of thisreport read with the respective Significant Accounting Polices and Notes to Accounts asset out in ANNEXURE D are prepared after making adjustments and regrouping as consideredappropriate and have been prepared in accordance with the Companies Act ICDR RegulationsEngagement Letter and Guidance Note.

Our report is intended solely for use of the management and for inclusion in the OfferDocument in connection with the SME-IPO for Proposed Issue of Equity Shares of the Companyand our report should not be used referred to or distributed for any other purposewithout our prior consent in writing.

For CNK & Associates LLP
Chartered Accountants
Firm Registration Number: 101961W/W-100036
Peer Review Number: 013232
Sd/-
Alok Shah
Partner
Membership No. 042005
Date: February 08 2022
Place: Vadodara
UDIN: 22042005AAUKQX1817

ANNEXURE-A

RESTATED STATEMENT OF ASSET & LIABILITIES

(Amt. in Lakhs)

Particulars As at 30 September 2021 As at 31 March 2021 As at 31 March 2020 As at 31 March 2019
I. EQUITY AND LIABILITIES
1 Shareholders’ funds
(a) Share capital 840.00 420.00 420.00 420.00
(b) Reserves and surplus 1084.89 1382.78 1189.13 1114.52
1924.89 1802.78 1609.13 1534.52
2 Non-current liabilities
(a) Long-term borrowings 1227.85 1476.86 1438.66 1423.64
(b) Deferred tax liabilities (Net) 29.25 21.09 19.54 23.37
(c) Long-term provisions 5.01 5.01 3.23 2.26
1262.11 1502.97 1461.43 1449.26
3 Current liabilities
(a) Short-term borrowings 1129.49 1080.51 1129.02 1311.02
(b) Trade payables
(C) Total outstanding dues of Micro and small enterprises 115.90 152.67 165.38 210.41
(D) Total outstanding dues of creditors other than micro and small enterprises 870.40 520.24 906.61 1489.08
(c) Other current liabilities 395.22 480.60 817.71 553.75
(d) Short-term provisions 106.13 80.29 52.08 51.62
2617.15 2314.32 3070.79 3615.87
TOTAL 5804.14 5620.06 6141.36 6599.65
I ASSETS
I 1 Non-current assets
(a) Property Plant and Equipment
(iv) Tangible assets 1396.53 996.13 1037.68 999.54
(v) Capital work in progress 13.91 339.23 161.10 46.42
(vi) Intangible assets - - - 4.00
(b) Non-current investments 1.00 1.00 1.00 1.00
(c) Long-term loans and advances 16.77 17.25 72.35 53.77
(e) Other non-current assets 69.40 82.94 97.84 113.56
1497.61 1436.55 1369.96 1218.29
2 Current assets
(a) Inventories 1597.87 1528.02 2058.82 1113.08
(b) Trade receivables 1219.62 1320.79 1217.66 3161.11
(c) Cash and Bank Balance 994.11 908.96 1102.56 901.63
(d) Short Term loans and advances 122.49 113.46 83.88 62.79
(e) Other current assets 372.45 312.29 308.47 142.76
4306.53 4183.51 4771.39 5381.37
TOTAL 5804.14 5620.06 6141.36 6599.65

ANNEXURE-B

RESTATED STATEMENT OF PROFIT AND LOSS

(Amt. in Lakhs)
Particulars Half year ended 30 September 2021 Year ended 31 March 2021 Year ended 31 March 2020 Year ended 31 March 2019
I. Revenue from operations 2071.56 3502.66 2499.23 5837.91
II. Other income 26.64 116.18 73.14 52.94
III. Total Revenue 2098.20 3618.84 2572.37 5890.85
IV. Expenses:
Cost of materials consumed 422.01 739.11 1106.12 1079.86
Purchases of Stock-in-Trade 492.58 285.91 481.36 2985.00
Changes in inventories of finished goods work-in-progress and Stock-in-Trade (92.03) 601.96 (958.27) (231.22)
Employee benefit expenses 408.11 634.88 740.57 678.66
Finance costs 88.42 172.43 169.96 177.20
Depreciation and amortization expenses 69.83 139.65 139.19 129.05
Other expenses 543.02 782.70 780.01 784.00
Total expenses 1931.94 3356.64 2458.94 5602.55
V Profit before tax 166.26 262.20 113.44 288.30
VI Tax expense:
Current tax 34.43 67.00 36.69 84.58
Tax of earlier years (Net) 1.57 - 5.97 -
Deferred tax Liability/(Asset) 8.15 1.55 (3.82) (2.72)
VII Profit for the period (V-VI) 122.11 193.65 74.61 206.44
VIII Earnings per equity share:
Basic 1.45 2.31 0.89 2.46
Diluted 1.45 2.31 0.89 2.46

ANNEXURE-C

RESTATED CASH FLOW STATEMENT

(Amt in lakhs)
Particulars For the half year ended 30th September 2021 For the year ended 31st March 2021 For the year ended 31st March 2020 For the year ended 31st March 2019
A CASH FLOW FROM OPERATING ACTIVITIES
Profit before exceptional items prior period items and tax: 166.26 262.20 113.44 288.30
Adjustments for :
Depreciation /amortization 69.83 139.65 139.19 129.05
Loss on Sale/scrap of assets - - - 0.11
Amount no longer payable written back - (51.29) -
Rent Income (1.20) (2.40) (2.40) (2.40)
Award Income - - -
Adjustment in opening balance for restatement (31.28)
Interest received (25.20) (60.82) (70.73) (49.66)
Bad Debts - 34.55
Interest Expense 83.75 167.12 146.43 164.14
127.18 226.80 212.49 209.96
Operating Profit before working capital changes 293.44 489.00 325.92 498.26
Adjustments for:
(Increase)/Decrease in Loans and Advances (8.54) 17.98 (42.28) (48.12)
(Increase)/Decrease in Trade receivables 101.16 (137.67) 1943.45 (642.43)
(Increase)/Decrease in Inventories (69.86) 530.80 (945.74) (176.75)
(Increase)/Decrease in Other Non Current Assets 13.54 14.90 15.73 58.46
(Increase)/Decrease in Other Current Assets (56.09) 0.97 (160.56) 29.65
Increase/(Decrease) in Trade Payable 313.39 (347.78) (627.50) 690.46
Increase/(Decrease) in (111.68) (345.69) 265.39 (22.52)
Liabilities and Provisions 181.93 (266.50) 448.49 (111.26)
Cash generated from Operations 475.37 222.50 774.41 387.00
Less : Direct taxes paid ( Net of refund if any ) 16.14 (20.89) (40.04) (91.19)
Cash flow before extraordinary items 491.51 201.61 734.38 295.82
Net cash from Operating Activities (A) 491.51 201.61 734.38 295.82
B CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Property plant & Equipments (144.91) (276.23) (292.02) (416.75)
Proceeds from Sale of Property plant & Equipments - 4.00 1.00
Purchase of Investment(net) - (1.00)
(Increase)/Decrease in Other bank balances (86.07) 195.90 (188.61) (421.49)
Rent Received 1.20 2.40 2.40 2.40
Interest received 21.13 56.04 65.58 34.41
Net Cash used in Investing
Activities (B) (208.65) (21.89) (408.64) (801.43)
C CASH FLOW FROM FINANCIAL ACTIVITIES
Receipt of Long term borrowings(net) 29.25 703.66 278.17 1652.88
Repayment of Long Term
Borrowings (270.36) (642.31) (305.07) (1085.47)
Increase/(Decrease) in Short term Borrowings 41.07 (71.65) (140.08) 79.43
Interest paid (83.75) (167.12) (146.43) (164.14)
Net cash used Financing
Activities (C) (283.78) (177.42) (313.40) 482.69
Net increase in cash and cash
equivalents (A+B+C) (0.93) 2.29 12.33 (22.92)
Cash and cash equivalents at the beginning of the year 22.96 20.66 8.34 31.26
Cash and cash equivalents at the end of the year 22.03 22.96 20.66 8.34
Components of Cash & Cash Equivalents
Cash on hand 11.11 10.79 3.83 5.39
Balance with schedule banks In Current Account 10.92 12.17 16.84 2.94
Cash and Cash Equivalents (As per Note No.17) 22.03 22.96 20.66 8.34

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