To the members of
MAZAGON DOCK SHIPBUILDERS LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements ofMazagon Dock Shipbuilders Limited ("the Company") which comprise the BalanceSheet as at March 31 2020 the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Changes in Equity and the Statement of Cash Flowsfor the year ended on that date and a summary of the significant accounting policies andother explanatory information (hereinafter referred to as "the standalone financialstatements").
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 March 31 2020the 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 specified under section 143(10) of the Act(SAs). Our responsibilities under those Standards are further described in theAuditor's Responsibilities for the Audit of the Standalone Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI) together with theindependence requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules made thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theICAI's Code of Ethics. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion on the standalonefinancial statements.
Emphasis of Matter
We draw attention to the following matters in the notes to theStandalone Ind AS financial statements:
1. Registration formalities and Renewals of Leasehold are pending inrespect of certain properties. (Refer Note 2 Point no. (ii vii viii))
2. In respect to the balances due from / to Indian Navy (Refer Note 36Point no. 2)
3. Balance of Advance to Vendors and balance outstanding in TradePayables are subject to confirmation. (Refer Note 36 Point no. 1)
4. The company has opted for reduced rate of income tax by electing thenon-reversible option U/s 115BAA of Income tax Act 1961.This has resulted in one timeeffect on PAT by Rs. 160.73 crores due to reduction in deferred tax assets. (Refer Note53)
Our opinion is not modified in respect of these matters.
Information Other than the Standalone Financial Statements andAuditor's Report Thereon
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in theDirectors' Report Overall Business Operations Management and Corporate Governancebut does not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the otherinformation and we do not express any form of assurance / conclusion thereon. Inconnection with our audit of the financial statements our responsibility is to read theother information identified above and in doing so consider whether the otherInformation is materially inconsistent with the financial statements or our knowledgeobtained in the audit or otherwise appears to be materially misstated.
If based on the work we have performed on the other information thatwe obtained prior to the date of this auditors' 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.
When we read the Annual report if we conclude that there is a materialmisstatement therein then we will communicate the matter to those charged withgovernance.
The opinion expressed in the present report includes the informationfacts and inputs made available to us through electronic means by the Company'sManagement and relied upon by us because the COVID-19 induced restrictions on physicalmovements.
The Company has adequate resources to continue in operational existencefor the foreseeable future. But going forward the uncertainties resulting from COVID-19will results into delay in completion of projects and may increase the exceptional losses.
Our opinion is not modified in respect of this matter.
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 India.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding 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 standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the standalone financial statements the Board ofDirectors is responsible for assessing the Company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless the Board of Directors either intends to liquidate theCompany or to cease operations or has no realistic alternative 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 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 relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating 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 the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies 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.
Report on Other Legal and Regulatory Requirements
I. As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government in terms of Section 143(11) ofthe Act we give in "Annexure I" a statement on the matters specified inparagraphs 3 and 4 of the Order.
As required by the directions issued by the office of the Comptroller& Auditor General of India under Section 143(5) of the Act we give in "AnnexureII" a statement on the matters referred to in those directions.
3. 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 explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including OtherComprehensive Income Statement of Changes in Equity and the Statement of Cash Flow dealtwith by this Report are in agreement with the relevant books of account.
d) In our opinion the aforesaid standalone financial statements complywith the Ind AS specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules2014.
e) The provisions of Section 164(2) of the Companies Act 2013 are notapplicable to the Government Company.
f) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure III". Our report expresses an unmodifiedopinion on the adequacy and operating effectiveness of the Company's internalfinancial controls over 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 Actas amended:
In our opinion and to the best of our information and according to theexplanations given to us the remuneration paid by the Company to its directors during theyear is in accordance with the provisions of section 197 of the Act.
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 according tothe explanations given to us:
i. The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone financial statements.
ii. The Company has made provision as required under the applicablelaw or accounting standards for material foreseeable losses if any on long-termcontracts including derivative contracts.
iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
ANNEXURE T TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 3 under Report on Other Legal andRegulatory Requirements' section of our report to the Members of Mazagon DockShipbuilders Limited of even date)
i. In respect of the Company's Fixed Assets:
(a) The Company has maintained proper records showing full particularsincluding 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 the nature of its assets. Pursuant to the program certain fixedassets were physically verified by the management during the year. According to theinformation and explanations given to us no material discrepancies were noticed on suchverification.
(c) The Title deeds of the immovable properties are held in the name ofthe Company except for the following-
|Sr. No. ||Plot No. ||Location ||Type of Property ||Area (Sq. Mtrs.) ||Remarks </tr> |
|1 ||Plot No. 355 PH-I ||Dockyard Road Mumbai ||Leasehold ||6240.14 ||Lease renewal of the plots is under consideration of MBPT. Awaiting formulation of Land Policy. |
|2 ||Plot No. 355 PH-II ||Dockyard Road Mumbai ||Leasehold ||1960.93 || |
|3 ||Extension ||Dockyard Road Mumbai ||Leasehold ||3746.00 || |
|4 ||Additional Water Area for further extension of slipway to 20 Mtr. ||Dockyard Road Mumbai ||Leasehold ||1850.00 || |
|5 ||JN- 4 Type Sector 10 ||Vashi Navi Mumbai ||Quarters ||61.20 ||Deed of Apartments & its registration is under process. |
ii. In respect of the Company's Inventory:
(a) As per the information and explanations given to us the Inventory(except those held with third parties) has been physically verified by the management andthe external auditor during the year at reasonable intervals except in March due to Covidpandemic.
(b) The discrepancies between the physical inventory and the bookrecords noticed on physical verification were not material and have been properly dealtwith in the books of accounts.
iii. The Company has not granted any loan or given any guarantee orprovided any security to companies firms or other parties covered in the registermaintained under Section 189 of the Act.
iv. The Company has not granted any loan given any guarantee orprovided any security covered under Section 185 of the Act. Section 186 of the Actrelating to investments loans granted guarantees given and security provided is notapplicable to the Company being a Government Company engaged in Defense production.
v. The Company has not accepted deposits during the year and does nothave any unclaimed deposits as at March 31 2020 and therefore the provisions of theclause 3 (v) of the Order are not applicable to the Company.
We have broadly reviewed the cost records maintained by the Company asprescribed by the Central Government under Section 148(1) of the Act and are of theopinion that prima facie the prescribed cost records have been made and maintained. Wehave however not made a detailed examination of these records with a view to determinewhether they are accurate and complete
vii. According to the information and explanations given to us inrespect of statutory dues:
(a) The Company has generally been regular in depositing undisputedstatutory dues including Provident Fund Employees' State Insurance Income TaxGoods and Service Tax Customs Duty Cess and other material statutory dues applicable toit with the appropriate authorities. There were no undisputed arrears of statutory duesoutstanding as at 31st March 2020 for a period of more than six months fromthe date they became payable.
(b) There were no undisputed amounts payable in respect of ProvidentFund Employees State Insurance Income Tax Goods and Service Tax Customs Duty Cess andother material statutory dues in arrears as at March 31 2020for a period of more than sixmonths from the date they became payable.
(c) Details of dues of Income Tax Sales Tax Service Tax Excise Dutyand Value Added Tax which have not been deposited as at March 31 2020on account ofdispute are given below:
|Name of the Statute ||Period ||Amount (Rs. In Lakhs) ||Forum where dispute is pending |
|Central Excise Act 1944 ||FY 2001-02 to FY 2003-04 and FY 2007-08 ||226.8 ||CESTAT Mumbai |
| ||FY 2000-01 ||15 ||Additional Commissioner Mumbai |
|BST Act 1959 ||FY 1980-81 to FY 2004-05 ||115099.24 ||Maharashtra Sales Tax Tribunal Mumbai |
|MVAT Act 2002 ||FY 2005-06 to FY 2013-14 || ||Jt. Commissioner of Sales Tax |
|Karnataka Sales Tax Act ||FY 1989-90 FY 1990-91 FY 1992-93 FY 1995- 96 to FY 1996- 97 ||316.40 ||Karnataka Sales Tax Appellate Tribunal |
|Service Tax ||FY 2001-02 to FY 2003-04 ||4235.53 ||Bombay High Court |
|Custom Duty ||FY 2007-08 ||8 ||Assistant Commissioner of Customs |
viii. The Company has taken Short Term Loans or borrowings from banksagainst the Fixed Deposits.
ix. The Company has not raised moneys by way of initial public offer orfurther public offer (including debt instruments) or term loans and hence reporting underclause 3 (ix) of the Order is not applicable to the Company.
x. To the best of our knowledge and according to the information andexplanations given to us no fraud by the Company or no material fraud on the Company byits officers or employees has been noticed or reported during the year.
xi. In our opinion and according to the information and explanationsgiven to us the Company has paid/provided managerial remuneration in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theAct.
xii. The Company is not a Nidhi Company and hence reporting underclause 3 (xii) of the Order is not applicable to the Company.
xiii. In our opinion and according to the information and explanationsgiven to us the Company is in compliance with Section 177 and 188 of the Companies Act2013 where applicable for all transactions with the related parties and the details ofrelated party transactions have been disclosed in the standalone financial statements asrequired by the applicable accounting standards.
xiv. During the year the Company has not made any preferentialallotment or private placement of shares or fully or partly paid convertible debenturesand hence reporting under clause 3 (xiv) of the Order is not applicable to the Company.
xv. In our opinion and according to the information and explanationsgiven to us during the year the Company has not entered into any non-cash transactionswith its Directors or persons connected to its directors and hence provisions of section192 of the Companies Act 2013 are not applicable to the Company.
xvi. According to the information given to us and as per the recordsexamined by us the Company is not required to be registered under section 45-IA of theReserve Bank of India Act 1934.
ANNEXURE II' TO THE INDEPENDENT AUDITOR'S REPORT
To the Members of Mazagon Dock Shipbuilders Limited
As referred to in Paragraph 2 under Report on Other Legal andRegulatory Requirements' in our Auditor's Report of even date and as required by thedirections issued by the Office of the Comptroller & Auditor General of India underSection 143(5) of the Companies Act 2013 we give below our comments on the mattersreferred therein:
1. Whether the Company has System in place to process all theaccounting transactions through IT System? If yes the implications of processing ofaccounting transactions outside IT System on the integrity of the accounts along with thefinancial implications if any may be stated.
> According to the information and explanations given to us andbased on the records of the Company examined by us the Company has ERP system in place toprocess all the transactions through IT System. All the processes and transactions aremapped through ERP.
2. Whether there is restructuring of an existing loan or cases ofwaiver/ write off of debt/loans/interest etc. made by a lender to the Company due to theCompany's inability to repay the loan? If yes the financial impact may be stated.
> According to the information and explanations given to us andbased on the records of the Company examined by us there were no cases of waiver/ writeoff of debt/loans/interest etc. made by a lender to the Company due to the Company'sinability to repay the loan in FY 2019-20.
3. Whether funds received/ receivable for specific schemes fromCentral/State agencies were properly accounted for/utilized as per its terms andconditions? List the cases of deviation.
> According to the information and explanations given to us andbased on the records of the Company examined by us there were no cases of any fundsreceived by the Company during FY 2019-20 from Central/State governments under anyschemes.
ANNEXURE "III" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 3 (f) under Report on Other Legal andRegulatory Requirements' section of our report to the Members of Mazagon DockShipbuilders Limited of even date)
Report on the Internal Financial Controls Over Financial Reportingunder Clause (i) Of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls over financialreporting of MAZAGON DOCK SHIPBUILDERS LIMITED ("the Company") as of March 312020 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 Board of Directors of the Company is responsible for establishingand maintaining 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 issued by the Institute of Chartered Accountants of India. 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 respective company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the internal financialcontrols over financial reporting of the Company based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act2013to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethic al requirementsand plan and perform the audit to obtain reasonable assurance about whether adequateinternal financial controls over financial reporting was established and maintained and ifsuch controls operated effectively in all material respects.
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 judgment including the assessment of therisks of material misstatement of the financial statements whether due to 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 internal financial controlssystem over financial reporting of the Company.
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 financial statements for external purposes in accordancewith generallyacceptedaccDuntingprinciples.Acompany'sinternalfinancialcontroloverfinancialreportingincludes those policies and procedures that (1) pertain to the maintenance of recordsthat in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance 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 financial statements.
Limitations of Internal Financial Controls Over Financial Reporting
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.
In our opinion to the best of our information and according to theexplanations given to us the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.