THE MEMBERS OF
MUNJAL AUTO INDUSTRIES LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Munjal AutoIndustries Limited ("the Company") which comprise the Balance Sheet as at31st March 2019 the Statement of Profit and Loss including Other Comprehensive Incomethe Statement of Changes in Equity and the Statement of Cash Flows for the year thenended and notes to the standalone financial statements including a summary ofsignificant accounting policies and other explanatory information(hereinafter referred toas "the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards specified under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended (Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at 31st March 2019 and total comprehensiveincome (comprising of profit and other comprehensive income)changes in equity and itscash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) 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 Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made 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 sufficient and appropriate to provide a basisfor our audit opinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of these standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate 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 ||RESPONSE TO KEY AUDIT MATTER |
|1. Recognition and Measurement of Deferred Taxes including Minimum Alternate Tax (MAT) credit: (Refer to note 4 (xiii) 11 39 (a) and (b) to the standalone financial statements) ||Principal Audit Procedures |
|The recognition and measurement of deferred tax items requires at the level of the tax entity the complete determination of all differences between the recognition and the measurement of tax base of assets and liabilities. This requires significant calculations on account of the tax regulations most of which are complex. The effects and the measurement of deferred tax assets and liabilities require detailed knowledge of the applicable tax law. We have considered the recognition and measurement of deferred tax assets including MAT credit as Key Audit Matter as recognition of these assets involves judgement by management as to the likelihood of the realization of these deferred tax assets which is based on a number of factors including whether there will be sufficient taxable profits in future periods to support recognition. ||Our audit procedures included the following: - Evaluating management's assessment on the sufficiency of future taxable profits in support of the recognition of deferred tax asset by comparing management's forecasts of future profits to historical results and evaluating the assumptions used in those forecasts. - Inquiry and critical analysis of the management judgement on recognition of deferred tax asset. - Assessing the adequacy of the deferred tax disclosures to the financial statements. Conclusion: Based on the procedures described above we did not identify any material exceptions to the management's assertions and treatment presentation and disclosure of the subject matter in financial statements |
|2 Litigations and Claims ||Principal Audit Procedures |
|(Refer to note 4 (xiv) and 40 to the standalone financial statements) ||Our audit procedures included the following: |
|Litigation and claims are pending with multiple tax and regulatory authorities and there are claims from employees which have not been acknowledged as debt by the company. In the normal course of business financial exposures may arise from pending legal/regulatory proceedings and from above referred claims not acknowledged as debt by the company. Whether a claim needs to be recognized as liability or disclosed as contingent liability in the standalone Ind AS financial statements is dependent on a number of significant assumptions and judgments. The amounts involved are potentially significant and determining be recognised or disclosed in the financial statements is inherently subjective. We have considered Litigations and claims as Key Audit Matter as it requires significant management judgement including accounting estimates that involves high estimation uncertainty. ||- Understanding the current status of disputed tax matters and other litigations and claims and discussing selected matters with the entity's management. - Critically assessing the entity assumptions and estimates in respect of claims included in the contingent liabilities disclosed in the financial statements. Assessment of the probability of negative result of litigation and the reliability of the amount if any to estimates of related obligation. Conclusion: Based on the procedures described above we did not identify any material exceptions to the management's assertions and treatment presentation and disclosure of the subject matter in financial statements. |
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the Board'sReport including Annexures to Board's Report Management Discussion and AnalysisCorporate Governance and Shareholder's Information but does not include the standalonefinancial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial 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 financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. 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 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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone 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.
The Board of Directorsis also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial 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 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 standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematters or when 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 subsection (11) of section 143 ofthe Act we give in Annexure "A" a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
2. As required by Section 143(3) of the Act we report that: a. we have sought andobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit; b. in our opinion proper books ofaccount as required by law have been kept by the Company so far as it appears from ourexamination of those books; c. the Balance Sheet the Statement of Profit and Lossincluding other comprehensive income the Statement of Changes in Equity and the Statementof Cash Flows dealt with by this Report are in agreement with the books of account; d. inour opinion the aforesaid standalone financial statements comply with the Ind ASspecified under Section 133 of the Act; e. on the basis of the written representationsreceived from the directors as on 31st March 2019 taken on record by the Board ofDirectors none of the directors is disqualified as on 31st March 2019 from beingappointed as a director in terms of Section 164(2) of the Act; f. with respect to theadequacy of the internal financial controls with reference to standalone financialstatements of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"; and
g. with respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended:
in our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of 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 in our opinionand to the best of our information and according to the explanations given to us:
i. the Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements Refer Note 40 to thestandalonefinancial statements;
ii. the Company did not have any long-term contracts including derivative contracts asat 31st March 2019;
iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
For K. C. Mehta & Co.
Chartered Accountants Firm's Registration No. 106237W
Vishal P. Doshi Place : Vadodara Partner Date : 22nd May 2019 Membership No.101533
ANNEXURE A TO INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1 under Report on Other Legal and RegulatoryRequirements' section of our report of even date to the Members of Munjal AutoIndustries Limited)
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets bywhich fixed assets are verified in a phased manner over a period of two years. Inaccordance with this programme certain fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification. In our opinion this periodicityof physical verification is reasonable having regard to the size of the Company and thenature of its assets.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties otherthan self-constructed properties are held in the name of the Company.
ii. The inventories of finished goods stores spare part and raw materials have beenphysically verified by the management. In our opinion the frequency of verification isreasonable. On the basis of our examination of the records of inventory we are of theopinion that the discrepancies noticed on verification between the physical stocks andbook records were not material and have been properly dealt with in the books of account.
iii. The Company has granted unsecured loan to a subsidiary Company covered in theregister maintained under section 189 of the Companies Act 2013.
(a) In our opinion and according to the information and explanations given to us theterms and conditions on which loans have been granted to a Company covered in the registermaintained under section 189 of the Act are not prima facie prejudicial to the interestof the Company;
(b) The schedule of repayment of principal and payment of interest has been stipulatedfor the loans granted and in accordance with such stipulation repayment of loans isregular.
(c) The principal and interest are not overdue in respect of loan granted to a Companylisted in the register maintained under section 189 of the Companies Act 2013.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Act in respect ofthe loans granted investments made and guarantees and security provided by it.
v. According to the information and explanations given to us the Company has notaccepted any deposits during the year from the public within the meaning of provisions ofsection 73 to 76 of the Act and the rules framed thereunder or under the directivesissued by the Reserve Bank of India and therefore reporting under clause (v) of the Orderis not applicable to the Company.
vi. In our opinion and according to the information and explanations given to us theCentral Government has not prescribed maintenance of cost records under sub-section (1) ofsection 148 of the Companies Act 2013 and rules 3 of the Companies (Cost Records andAudit) Amendment Rules 2014 for any of the products of the Company and thereforereporting under clause (vi) of the Order is not applicable to the Company.
vii. (a) According to the information and explanations given to us and on the basis ofour examination of the records the Company has been regular in depositing withappropriate authorities undisputed statutory dues including provident fund employee'sstate insurance income-tax sales-tax service tax duty of customs duty of excisevalue added tax goods and service tax cess and and any other statutory dues applicableto it. Further no undisputed amounts payable in respect of income tax sales tax servicetax duty of customs duty of excise value added tax goods and service tax cess andother statutory dues were in arrears as at 31st March 2019 for a period of more than sixmonths from the date they become payable.
(b) According to the information and explanations given to us there are no disputeddues in respect of Income Tax Goods and Service Tax Service tax and Duty of Customs.According to the information and explanations given to us the followings are theparticulars of Sales Tax and Duty of Excise as at 31stMarch2019 which have not beendeposited on account of dispute:
|Name of the statute ||Nature of disputed dues ||Amount in ||Period to which the amount relates ||Forum where pending |
|The Gujarat Sales Act 1969 ||Sales Tax ||2549704 ||Financial Year 2002-2003 ||Commissioner of Commercial Tax Tax (Appeals) |
|The Central Excise Act 1944 ||Duty of Excise ||5876332 ||June 2008- March 2009 ||Commissioner of Customs Excise and Service Tax (Appeals) |
viii. In our opinion and according to the information and explanations given to us theCompany has not defaulted in repayment of loans or borrowings to any bank. The Company hasnot taken any loans from financial institution or Government. It has not issued anydebentures.
ix. The Company has not raised any money by way of initial public offer or furtherpublic offer (including debt instruments) or term loans during the year and thereforereporting under clause (ix) of the Order is not applicable to the Company.
x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement of the Company.
xi. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act.
xii. In our opinion the Company is not a Nidhi company and therefore reporting underclause (xii) of the Order is not applicable to the Company.
xiii. In our opinion and according to the information and explanations given to ustransactions with the related parties are in compliance with sections 177 and 188 of theAct where applicable and the details of such transactions have been disclosed in thefinancial statements as required by the applicable Indian accounting standards.
xiv. According to the information and explanations given to us and based on ourexamination of the records the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year andtherefore reporting under clause (xiv) of the Order is not applicable to the Company.
xv. In our opinion and according to the information and explanations given to us theCompany has not entered into non-cash transactions with directors or persons connectedwith him and therefore reporting under clause(xv) of the Order is not applicable to theCompany.
xvi. In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of IndiaAct 1934.
For K. C. Mehta & Co.
Chartered Accountants Firm's Registration No. 106237W
Vishal P. Doshi Place : Vadodara Partner Date : 22nd May 2019 Membership No.101533
ANNEXURE B TO INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2(f) under Reporton Other Legal and RegulatoryRequirements' section of our report to the Members of Munjal Auto Industries Limited onthestandalone financial statementsof even date)
Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the Act.
We have audited the internal financial controls with reference to financial statementsof Munjal Auto Industries Limited ("the Company") as of 31st March 2019 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India ("ICAI"). 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 company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Companies Act to theextent applicable to an audit of internal financial controls both applicable to an auditof Internal Financial Controls and both issued by the ICAI. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlswith reference to financial statements were established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of internal financial controls withreference to financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the financial statements whetherdue to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
A Company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial controlswith reference to financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect 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 with reference to financialstatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements 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 withreference to financial statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls with reference to financial statements and such internal financialcontrols with reference to standalone financial statements were operating effectively asat 31stMarch 2019 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.
For K. C. Mehta & Co.
Chartered Accountants Firm's Registration No. 106237W
Vishal P. Doshi
Place : Vadodara
Partner Date : 22nd May 2019