To the Members of Motherson Sumi Systems Limited
Report on the Audit of the Standalone Ind AS Financial Statements Opinion
We have audited the accompanying Standalone Ind AS financial statements of MothersonSumi Systems Limited ("the Company") which comprise the Balance sheet as atMarch 31 2020 the Statement of Profit and Loss including the statement of OtherComprehensive Income the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and notes to the Standalone Ind AS financial statements including asummary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Ind AS financial statements in accordance withthe Standards 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'issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the 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 believethat the audit evidence we have obtained is suJicient and appropriate to provide a basisfor our audit opinion on the Standalone Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Ind AS financial statements for the financialyear ended March 31 2020. 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 matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the Standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying Standalone Ind AS financialstatements.
|Key audit matters ||How our audit addressed the key audit matter |
|De-recognition of trade receivables under factoring facilities (as described in note 8 of the standalone Ind AS financial statements) || |
|The Company enters into non-recourse factoring arrangements for its trade receivables with various banks/financial institutions. ||The procedures performed includes following: |
|As at 31 March 2020 the Company had factoring facilities in place for trade receivables and amount of Rs. 1010 million were de-recognized by using these facilities. || Obtained an understanding of the process related to de-recognition of trade receivables; |
|The Company derecognizes the receivables from its books if it transfers substantially all the risks and rewards of ownership of the financial asset (i.e. receivables). || Evaluated the assessment made by management covering significant factoring contracts; |
|The assessment of de-recognition of trade receivables under the factoring facilities is complex and requires judgement. || For certain new contracts entered during the year tested the nature of the contracts and evaluated key terms and conditions of the contract in line with the guidance prescribed under Ind AS 109 "Financial Instruments"; |
|Accordingly the matter has been identified as KAM. || Read and assessed the disclosure made in the financial statements for assessing compliance with disclosure requirements. |
|Impairment assessment on Investments in subsidiaries (as described in note 6 (a) of the standalone Ind AS financial statements) || |
|The Company has made investments in various subsidiaries and the carrying amount of total investments as at March 31 2020 is Rs. 46135 million. ||The procedures performed includes following: |
|Considering the long term nature of these investments their impairment assessment requires judgement and significant estimates to determine the Value-In-Use (VIU) in certain cases. In particular the determination of the VIU is sensitive to significant assumptions such as discount rate revenues growth operating margin and terminal value. || Assessed the process followed and controls implemented for the impairment review and analysis performed by the management; |
|Accordingly the matter has been identified as KAM. || Tested management's impairment calculation and ensured the compliance with the applicable accounting standards; |
| || Read the financial position and operating/financial results of the respective investments from their financial information made available to us by the management; |
| || Where considered necessary evaluated the key assumptions used in determining VIU and performed sensitivity analysis of key assumptions; |
| || Read and assessed the disclosure made in the financial statements for assessing compliance with disclosure requirements |
Emphasis of Matter Corona developments
The developments surrounding the Corona (Covid-19) virus have a profound impact onpeople's health and on our society as a whole as well as on the operational and financialperformance of organizations. The situation changes on a daily basis giving rise toinherent uncertainty. The Company is confronted with this uncertainty as well which hasbeen disclosed in the note 47 to the Ind AS financial statements together with itsevaluation thereof.
We draw attention to these disclosures. Our opinion is not modified in respect of thismatter.
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe standalone Ind AS financial statements and our auditor's report thereon. The Annualreport is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we will not express any form of assurance conclusion thereon. Inconnection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information identified above when it becomes availableand in doing so consider whether such other information is materially inconsistent withthe standalone Ind AS financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
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 financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation 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 Standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the Standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those charged with governance are also responsible for overseeing the Company'sfinancial reporting 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. We also:
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 suJicient 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 financial statements in place andthe 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 financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the 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 withthose charged with governance we determine those matters that were of most significancein the audit of the Standalone Ind AS financial statements for the financial year endedMarch 31 2020 and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure 1"a statement on the matters specified inparagraphs 3 and 4 of the Order.
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 the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid Standalone Ind AS financial statements comply withthe 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 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 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 over financialreporting of the Company with reference to these Standalone Ind AS financial statementsand the operating effectiveness of such controls refer to our separate Report in"Annexure 2" to this report;
(g) In our opinion the managerial remuneration for the year ended March 31 2020 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;
(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 43 to theStandalone Ind AS financial statements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts Refer Note 37 to the Standalone Ind AS financial statements;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company
For S.R. Batliboi & Co. LLP
ICAI Firm Registration Number: 301003E/E300005
per Pankaj Chadha
Membership Number: 091813
Place of Signature: Gurugram
Date: June 02 2020
Annexure 1 referred to in paragraph 1 of "Report on Other Legal and RegulatoryRequirements" of our report of even date
Re: Motherson Sumi Systems Limited (the "Company")
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
(i) (b) All property plant and equipment have not been physically verified by themanagement during the year but there is a regular programme of verification which in ouropinion is reasonable havingregardtothesizeoftheCompanyandthe nature of its assets. Nomaterial discrepancies were noticed on such verification.
(i) (c) According to the information and explanations given by the management thetitle deeds of immovable properties included in property plant and equipment are held inthe name of the Company.
(ii) The inventory has been physically verified by the management during the year. Inour opinion the frequency of verification is reasonable. No material discrepancies werenoticed on such physical verification. Inventories lying with third parties have beenconfirmed by them as at March 31 2020 and no material discrepancies were noticed inrespect of such confirmations.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usprovisions of section 185 and 186 of the Companies Act 2013 in respect of loans todirectors including entities in which they are interested and in respect of loans andadvances given investments made and guarantees and securities given have been compliedwith by the Company.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records undersection 148(1) of the Companies Act 2013 related to the manufacture of its products andrelated services and are of the opinion that prima facie the specified accounts andrecords have been made and maintained. We have not however made a detailed examinationof the same.
(vii) (a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees' state insurance income-taxsales-tax service tax duty of custom duty of excise value added tax goods and servicetax cess and other statutory dues applicable to it.
(vii) (b) According to the information and explanations given to us no undisputedamounts payable in respect of provident fund employees' state insurance income-taxservice tax sales-tax duty of custom duty of excise value added tax goods and servicetax cess and other statutory dues were outstanding at the year end for a period of morethan six months from the date they became payable.
(vii) (c) According to the records of the Company the dues outstanding of income-taxsales-tax service tax excise duty or value added tax on account of any dispute are asfollows:
|Name of the statute ||Nature of dues ||Amount (Rs. million)* ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax ||13 ||A.Y. 2002f03 ||Supreme Court |
|Income Tax Act 1961 ||Income Tax ||20 ||A.Y. 2003f04 to 2005f06 ||High Court Delhi |
|Income Tax Act 1961 ||Income Tax ||2 ||A.Y. 2010f11 ||Income Tax Appellate Tribunal |
|Income Tax Act 1961 ||Income Tax ||19 ||A.Y. 2011f12 ||Transfer Pricing OJicer |
|Income Tax Act 1961 ||Income Tax ||6 ||A.Y. 2008f09 ||Commissioner of Income Tax (Appeals) |
|Income Tax Act 1961** ||Income Tax ||0 ||A.Y. 2015f2016 ||Income Tax Appellate Tribunal |
|Income Tax Act 1961 ||Income Tax ||1 ||A.Y. 2016f2017 ||Dispute Resolution Panel |
|U.P. VAT Act 2008 ||Value Added Tax & Sales Tax ||1 ||A.Y. 2017f18 ||Additional Commissioner (Appeals) |
|Central Excise Act 1944 ||Excise ||1 ||A.Y. 2014f15 to 2017f2018 ||Additional Commissioner |
|Central Excise Act 1944** ||Excise ||0 ||A.Y. 2014f15 & 2015f2016 ||Commissioner (Appeals) |
|Central Excise Act 1944** ||Excise ||0 ||A.Y. 2011f2012 ||CESTAT |
|Finance Act 1994 ||Service tax ||7 ||A.Y. 2010f11 ||Additional Commissioner |
|Finance Act 1994** ||Service tax ||0 ||A.Y. 2009f10 to 2014f15 ||Commissioner (Appeals) |
|Finance Act 1994 ||Service tax ||2 ||A.Y. 2002f03 to 2003f04 & 2010f11 ||Commissioner |
|Finance Act 1994 ||Service tax ||13 ||A.Y. 2002f2004 2007f08 2009f10 to 2014f15 & 2015f16 ||CESTAT |
* The amounts are net of advances
** Amount is below the rounding off norm adopted by the Company
(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of loans or borrowing to a bank.The Company does not have any dues outstanding to debenture holder or financialinstitution or government in the nature of loan or borrowing.
(ix) According to the information and explanations given by the management the Companyhas not raised any money way of initial public offer / further public offer / debtinstruments and term loans hence reporting under clause (ix) is not applicable to theCompany and hence not commented upon.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financialstatementsandaccordingtotheinformation and explanations given bythe management we report that no fraud by the Company or no fraud on the Company by theoJicers and employees of the Company has been noticed or reported during the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.
(xii) In our opinion the Company is not a nidhi Company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) of the Order are notapplicable to the Company and not commented upon.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in section 192 of Companies Act 2013.
(xvi) According to the information and explanations given to us the provisions ofsection 45fIA of the Reserve Bank of India Act 1934 are not applicable to the Company.
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIALSTATEMENTS OF MOTHERSON SUMI SYSTEM LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of MothersonSumi Systems Limited ("the Company") as of March 31 2020 in conjunction withour audit of the standalone financial statements of the Company for the year ended on thatdate.
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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and eJicient conduct of its businessincluding adherence to the 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 Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone financial statementsbased on our audit. We conducted our audit in accordance with the Guidance Note on Auditof Internal Financial Controls Over Financial Reporting (the "Guidance Note")and the Standards on Auditing as specified under section 143(10) of the Companies Act2013 to the extent applicable to an audit of internal financial controls and both issuedby the Institute of Chartered Accountants of India. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting with reference to these standalone financial statements was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to thesestandalone financial statements and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding ofinternal financial controls over financial reporting with reference to these standalonefinancial statements assessing the risk that a material weakness exists and testing andevaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.
We believe that the audit evidence we have obtained is suJicient and appropriate toprovide a basis for our audit opinion on the internal financial controls over financialreporting with reference to these standalone financial statements.
Meaning of Internal Financial Controls Over Financial Reporting with Reference to theseFinancial Statements
A company's internal financial control over financial reporting with reference to thesestandalone financial statements is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accountingprinciples. A company's internal financial control over financial reporting with referenceto these standalone financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyrefilect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting withReference to these Standalone Financial Statements
Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone 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 these standalone financial statements to future periods are subject to the risk thatthe internal financial control over financial reporting with reference to these standalonefinancial statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these standalone financial statementsand such internal financial controls over financial reporting with reference to thesestandalone financial statements were operating effectively as at March 31 2020 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 Institute ofChartered Accountants of India.