You are here » Home » Companies » Company Overview » L&T Technology Services Ltd

L&T Technology Services Ltd.

BSE: 540115 Sector: IT
NSE: LTTS ISIN Code: INE010V01017
BSE 00:00 | 17 Sep 4556.85 -24.80
(-0.54%)
OPEN

4580.00

HIGH

4605.00

LOW

4488.90

NSE 00:00 | 17 Sep 4558.70 -18.80
(-0.41%)
OPEN

4577.00

HIGH

4606.20

LOW

4488.85

OPEN 4580.00
PREVIOUS CLOSE 4581.65
VOLUME 19904
52-Week high 4631.85
52-Week low 1473.00
P/E 62.41
Mkt Cap.(Rs cr) 47,938
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 4580.00
CLOSE 4581.65
VOLUME 19904
52-Week high 4631.85
52-Week low 1473.00
P/E 62.41
Mkt Cap.(Rs cr) 47,938
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

L&T Technology Services Ltd. (LTTS) - Auditors Report

Company auditors report

To the Members of

L&T Technology Services Limited

Report on the audit of the standalone financial statements

Opinion

We have audited the accompanying standalone financial statements ofL&T Technology Services Limited (‘the Company') which comprise the balancesheet as at 31 March 2021 the statement of profit and loss (including othercomprehensive income) the statement of changes in equity and statement of cash flows forthe year then ended and notes to the standalone financial statements including a summaryof significant accounting policies and other explanatory information (‘the standalonefinancial statements').

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 (‘the Act') in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended (‘Ind AS') and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31 March 2021the profit and total comprehensive income changes in equity and its cash flows for theyear ended on that date.

Basis for opinion

We conducted our audit of the standalone financial statements inaccordance with the Standards on Auditing (SAs) specified under section 143(10) of theCompanies Act 2013 (‘the Act'). Our responsibilities under those Standards arefurther described in the auditor's responsibilities for the audit of thestandalone financial statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (‘ICAI') together with the independence requirements thatare relevant to our audit of the Standalone Financial Statements under the provisions ofthe Act and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion on the Standalone Financial Statements.

Key audit matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the Standalone Financial Statements of thecurrent period. These matters were addressed in the context of our audit of the StandaloneFinancial Statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.

Key audit matter How the matter was addressed in our audit
Revenue recognition
The Company is primarily in the business of providing technology and engineering services to third parties. Our revenue testing included both testing of the Company's controls as well as substantive audit procedures.
The Company is having two models for the purpose of recognition of revenue from contracts for services rendered which are time and material contracts and fixed price contracts. Our procedures included: We ensured that revenue recognition method applied was appropriate based on the terms of the agreement with the customer;
For the year ended 31 March 2021 revenue from services amounts to Rs. 49640 million (refer note 26 to the standalone financial statements). We obtained an understanding of the processes and tested relevant controls which impact the revenue recognition;
For time and material based contracts: i. We obtained appropriate evidence based on the circumstances to conclude whether the hours charged on projects were appropriate;
ii. We obtained appropriate evidence based on the circumstances to conclude whether the rate charged per man hours on projects were appropriate; and
iii. We verified the revenue based on the hours charged on the projects and approved per hour rate.
We considered the appropriateness of disclosures in relation to revenue recognition as detailed in notes 26 and 47 to the standalone financial statements.
For fixed price contracts:
i. We agreed the total project revenue estimate with customer contracts agreements including amendments as appropriate;
ii. We assessed the reliability of management's estimates by comparing actual results of delivered projects to previous estimates;
iii. We evaluated management's estimates and assumptions in recognition of the revenue;
iv. We verified the revenue based on the stage of completion of the projects; and
v. We obtained appropriate evidence based on the circumstances to conclude whether the proportion of completion of projects was appropriate.
Based on the procedures performed we consider the amount of revenue recognised to be fairly stated in the standalone financial statements.
Valuation of goodwill
The Company accounted for goodwill at the time of acquisition of certain businesses in earlier years. Our procedures included:
As required by the applicable Indian Accounting Standard goodwill is not amortised but is tested for impairment by management on an annual basis. The impairment is tested using discounted cash flow models. As disclosed in note 2(k) and 5 to the standalone financial statements there are some sensitive key judgements made in determining the inputs into these models which include: We tested the methodology applied for impairment of goodwill;
Revenue forecasts; Operating margins; We evaluated process by which the future cash flows were drawn up including comparing them to the latest board approved targets and long-term plans;
Cash flow forecasts; and We tested the key underlying assumptions for revenue growth operating margins cash flow forecasts and the discount rate applied to the projected future cash flows;
The discount rate applied to the projected future cash flows. In addition the impact of Covid-19 is also considered in the current year. We compared the current year actual results included in the impairment model to consider whether forecasts included assumptions that with hindsight had been appropriate;
Accordingly the impairment test of goodwill is considered to be a key audit matter.
As at 31 March 2021 goodwill amounts to Rs. 3891 million (refer note 5 to the standalone financial statements). We evaluated management's assumptions on the impact of Covid-19 on the above matters; and
We considered the appropriateness of disclosures in relation to impairment assessment as detailed in note 2(k) and 5 to the standalone financial statements.
Based on the procedures performed we consider the goodwill to be fairly stated in the standalone financial statements.
Derivative financial instruments and hedge accounting
Derivative financial instruments are used to manage and hedge foreign currency exchange risks and interest rate risks. Our procedures included:
These instruments are typically designated as fair value or cash flow hedge relationship. Financial instruments that are not designated in a hedging relationship and where no hedge accounting is applied are measured at fair value through profit and loss. financial We obtained an understanding of the risk management policies and testing key controls for the use the recognition and the measurement of derivative financial instruments;
The fair value of the derivative financial instruments is based on valuation models using observable input data. We reconciled derivative instruments data with third party confirmations;
We focused on this area on account of the number of contracts the forecast by management of net foreign currency exposure in the future their measurement the complexity related to hedge accounting and the potential impact on the statement of profit and loss. We compared input data used in the Company's valuation models with independent sources and externally available market data;
In addition the impact of Covid-19 is also considered for the current year. We compared valuation of derivative financial instruments with market data or results from alternative independent valuation models;
As at 31 March 2021 the Company has derivative financial assets at fair value of Rs. 1941 million and derivative financial liabilities at fair value of Rs. 340 million (refer note nos. 8 16 20 23 41(i) and 41(iii) to the standalone financial statements). We tested on a sample basis the applicability and accuracy of hedge accounting;
We evaluated management's assumptions on the impact of Covid-19 on the above matters; and
We considered the appropriateness of disclosures in relation to financial risk management derivative financial instruments and hedge accounting to the standalone financial statements.
Based on the procedures performed the derivative financial instruments and hedge accounting are fairly stated in the standalone financial statements.
Investment in subsidiaries
The Company has investments in subsidiaries and the carrying amount of the investments may be affected on account of the impact of the Covid-19 pandemic on their businesses. Our procedures included:
As at 31 March 2021 the investments in subsidiaries amounted to Rs. 2076 million (refer note 6 to the standalone financial statements). We evaluated process by which the future cash flows were drawn up including comparing them to the latest board approved targets and long-term plans;
We tested the key underlying assumptions for revenue growth operating margins cash flow forecasts and the discount rate applied to the projected future cash flows;
We evaluated management's assumptions on the future cash flows in the changed circumstances; and
We considered the appropriateness of disclosures in relation to impairment assessment as detailed in note 6 to the standalone financial statements.
Based on the procedures performed we consider the investments to be fairly stated in the standalone financial statements.

 

Information other than the standalone financial statements andauditor's report thereon

The Company's Board of Directors is responsible for thepreparation of other information. The other information comprises the information includedin the director's report including annexures thereto management discussion andanalysis and annual business responsibility report but does not include the standalonefinancial statements and our auditor's report thereon.

Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated.

If based on the work we have performed on the other information thatwe obtained prior to the date of this auditor's report we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.

Management's responsibility for the standalone financialstatements

The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these standalonefinancial statements that give a true and fair view of the financial position financialperformance total comprehensive income changes in equity and cash flows of the Companyin accordance with the Ind AS and other accounting principles generally accepted in Indiaincluding the Accounting Standards specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments 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 financial statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.

In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

The Board of Directors are responsible for overseeing theCompany's financial reporting process.

Auditor's responsibilities for the audit of the standalonefinancial statements

Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

Obtain an understanding of internal financial controls relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls system in place and theoperating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditionsmay cause the Company to cease to continue as a going concern.

Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation. Materiality is the magnitude of misstatements in thestandalone financial statements that individually or in the aggregate make it probablethat the economic decisions of a reasonably knowledgeable user of the standalone financialstatements may be influenced. We consider quantitative materiality and qualitative factorsin (i) planning the scope of our audit work and in evaluating the results of our work; and(ii) to evaluate the effect of any identified misstatement in the standalone financialstatements.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant de_ciencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing 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 of the Companies Act 2013 we give in Annexure A a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.

2 As required by section 143(3) of the Act based on our audit wereport that: (a) We have sought and obtained all the information and explanations which tothe best of our knowledge and belief were necessary for the purposes of our audit;

(b) In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;

(c) The balance sheet the statement of profit and loss (includingother comprehensive income) statement of changes in equity and the statement of cash flowdealt with by this report are in agreement with the relevant books of account;

(d) In our opinion the aforesaid standalone financial statementscomply with the Ind AS specified under section 133 of the Act read with rule 7 of theCompanies (Accounts) Rules 2014;

(e) On the basis of the written representations received from thedirectors as on 31 March 2021 taken on record by the Board of Directors none of thedirectors is disqualified as on 31 March 2021 from being appointed as a director in termsof section 164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controlsover financial reporting of the Company and the operating effectiveness of such controlsrefer to our separate report in Annexure B. Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controlsover financial reporting;

(g) With respect to the other matters to be included in theauditor's report in accordance with the requirements of section 197(16) of the Act(as amended) we report that in our opinion and to the best of our information andaccording to the explanations given to us the remuneration paid by the Company to itsdirectors during the year is in accordance with the provisions of section 197 of the Act;and

(h) With respect to the other matters to be included in theauditor's report in accordance with rule 11 of the Companies (Audit and Auditors)Rules 2014 (as amended) in our opinion and to the best of our information and accordingto the explanations given to us:

i The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements – refer note 34 to the standalonefinancial statements;

ii the Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses; and

iii There were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Company – refer note 50 to thestandalone financial statements.

Annexure A to

The Independent Auditor's Report

(Referred to in paragraph 1 of ‘report on other legal andregulatory requirements' section of our report of even date)

(i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets;

(b) The Company has a program of verification to cover all the items offixed assets in a phased manner which in our opinion is reasonable having regard to thesize of the Company and nature of its assets. Pursuant to the program certain fixedassets were physically verified during the year. According to the information andexplanations given to us no material discrepancies were noticed on such verification; and

(c) The Company does not hold any immovable properties. Accordinglyparagraph 3 (i) (c) of the Order is not applicable to the Company.

(ii) The Company does not hold any physical inventories. Thusparagraph 3(ii) of the Order is not applicable to the Company.

(iii) According to the 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. Accordingly paragraphs 3(iii) (a) (b) and (c) of the Order are notapplicable to the Company.

(iv) In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of sections 185 and 186 of theCompanies Act 2013 in respect of grant of loans making investments and providingguarantees and securities as applicable.

(v) In our opinion and according to information and explanations givento us the Company has not accepted deposits as per the directives issued by the ReserveBank of India under the provisions of sections 73 to 76 or any other relevant provisionsof the Act and the rules framed there under. Accordingly paragraph 3(v) of the Order isnot applicable to the Company.

(vi) According to the information and explanations given to us thecentral government has not prescribed the maintenance of cost records under section 148(1)of the Act for any of the services rendered by the Company. Accordingly paragraph 3(vi)of the Order is not applicable to the Company.

(vii) (a) According to the information and explanations given to us andon the basis of our examination of records of the Company amounts deducted/ accrued inthe books of account in respect of undisputed statutory dues including provident fundemployee's state insurance income tax service tax goods and service tax cess andother material statutory dues have been regularly deposited during the year by the Companywith the appropriate authorities. As explained to us the Company did not have any dues onaccount of sales tax duty of customs duty of excise and value added tax.

According to the information and explanations given to us noundisputed amounts payable in respect of provident fund income tax service tax goodsand service tax cess and other material statutory and other material statutory dues werein arrears as at 31 March 2021 for a period of more than six months from the date theybecame payable.

(b) According to the information and explanations given to us and onthe basis of our examination of records of the Company the particulars of income taxvalue added tax sales tax service tax duty of excise and duty of custom which have notbeen deposited with the appropriate authorities on account of any dispute as at31_March_2021 are as under:

Name of the Statute Nature of the disputed dues

Amount (Rs. million) *

Period to which the amount relates

Forum where dispute is pending

The Income-tax Act 1961 Disallowance of amortisation of goodwill on acquisition of Product Engineering Services (PES) business and nominal disallowance under section 14A. @

72.33

2016-17

Commissioner of Income-tax (Appeals)

 

* Net of pre-deposit paid in getting the stay/ appeal admitted.

@ Amount unpaid is the outstanding demand as per the Department'srecord without considering the effect of rectification application.

(viii) In our opinion and according to the information and explanationsgiven to us the Company has not defaulted in the repayment of loans or borrowings tobank. The Company has not borrowed any funds from the public financial institutionsgovernment and debenture holders.

(ix) The Company did not raise any money by way of initial public offeror further public offer (including debt instruments) and term loans during the year.Accordingly paragraph 3(ix) of the Order is not applicable to the Company.

(x) According to the information and explanations given to us nomaterial fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the year.

(xi) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has paid/ provided formanagerial remuneration in accordance with the requisite approvals mandated by theprovisions of section 197 read with schedule V of the Act.

(xii) In our opinion and according to the information and explanationsgiven to us the Company is not a nidhi company. Accordingly paragraph 3(xii) of theOrder is not applicable to the Company.

(xiii) According to the information and explanations given to us andbased on our examination of the records of the Company transactions with the relatedparties are in compliance with sections 177 and 188 of the Act where applicable anddetails of such transactions have been disclosed in the financial statements as requiredby the applicable accounting standards.

(xiv) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not made anypreferential allotment or private placement of shares or partly convertible debenturesduring the year. Accordingly paragraph 3(xiv) of the Order is not applicable to theCompany.

(xv) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has not entered intonon- cash transactions with directors or persons connected with him and hence provisionsof section 192 of the Act are not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934.

Annexure B to

The Independent Auditor's Report

(Referred to in paragraph 2(f) of our report of even date)

Report on the internal financial controls under clause (i) ofsub-section 3 of section 143 of the Companies Act 2013 (‘the Act')

We have audited the internal financial controls over financialreporting of L&T Technology Services Limited (‘the Company') as of 31 March2021 in conjunction with our audit of the Standalone Financial Statements of the Companyfor the year ended on that date.

Management's responsibility for internal financial controls

The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the guidance note on audit of internal financial controls overfinancial reporting (‘Guidance Note') issued by the Institute of CharteredAccountants of India (‘ICAI'). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under theCompanies Act 2013.

Auditors' responsibility

Our responsibility is to express an opinion on the Company'sinternal financial controls over financial reporting based on our audit. We conducted ouraudit in accordance with the Guidance Note and the standards on Auditing issued by ICAIand deemed to be prescribed under section 143(10) of the Act to the extent applicable toan audit of internal financial controls both applicable to an audit of internal financialcontrols and both issued by the ICAI. Those standards and the guidance note require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment ofthe risks of material misstatement of the Standalone Financial Statements whether due tofraud 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 internalfinancial controls system over financial reporting.

Meaning of internal financial controls over financial reporting

A company's internal financial control over financial reporting isa process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Standalone Financial Statements for external purposes inaccordance with generally accepted accounting principles. A company's internalfinancial control over financial reporting includes those policies and procedures 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 asnecessary to permit preparation of Standalone Financial Statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of thecompany are being made only in accordance with authorisations of management and directorsof the company; and

(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assetsthat could have a material effect on the Standalone Financial Statements.

Inherent limitations of internal financial controls over financialreporting

Because of the inherent limitations of internal financial controls overfinancial reporting 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 overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at 31 March 2021 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the guidance note onaudit of internal financial controls over financial reporting issued by the ICAI.

For Sharp & Tannan
Chartered Accountants
Firm's registration no.109982W
Firdosh D. Buchia
Partner
Membership no. 38332
Mumbai 3 May 2021 UDIN: 21038332AAAALW4981

 

.