To the Members of NRB Bearings Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of NRB BearingsLimited ('the Company') which comprise the Balance Sheet as at 31 March 2019 theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement and the Statement of Changes in Equity for the year then ended and a summary ofthe significant accounting policies and other explanatory information.
2. 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 ('Act') in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India including IndianAccounting Standards ('Ind AS') specified under section 133 of the Act of the state ofaffairs (financial position) of the Company as at 31 March 2019 and its profit (financialperformance including other comprehensive income) its cash flows and the changes inequity for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the 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 withthe ethical requirements that are relevant to our audit of the financial statements underthe provisions of the Act and the rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.
Key Audit Matters
4. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.
5. We have determined matters described below to be Key Audit matters to becommunicated in our report.
|Key audit matter ||How our audit addressed the key audit matter |
|Valuation of investment in subsidiary Company ||Our audit procedures in relation to assessing the carrying value of investments included but were not limited to the following: |
|Refer to Note 5(a)(2) in the standalone financial statements. || |
|The Company has investments in NRB Bearings (Thailand) Limited ('wholly owned subsidiary') amounting to ' 2413.12 lakhs has given loan (including interest receivable) amounting to ' 1764.22 lakhs has trade receivables amounting to ' 1214.19 lakhs and has given guarantee amounting to ' 2375.60 lakhswhich is engaged in business of manufacturing and Sale of bearings. Such investment in the aforesaid subsidiary is accounted for at cost in accordance with Ind AS 27 Separate Financial Statements. The Company assesses the recoverable amount of the investment when impairment indicators exist by comparing the fair value (less costs of disposal) and carrying the amount of the investment as on the reporting date. || Obtained an understanding of management's processes and controls for determining the fair value of investments; |
| || Evaluated the design of and tested the operating effectiveness of the key controls around determining the value in use; |
| || Evaluated the appropriateness of the valuation methodology used to arrive at the fair value of the investments using our valuation specialist; |
| || Tested the accuracy of the input data used by the management; |
| || Reconciled the cash flow projections to the business plans approved by the Company's board of directors; |
|During the year ended 31 March 2019 NRB Bearings (Thailand) Limited has reported a profit of? 472.00 lakhs but as at that date its accumulated losses aggregating ' 2855.76 lakhs have significantly eroded its capital. || Evaluated the reasonableness of the key assumptions used in the cash flow projections such as growth rates comparable market multiples etc. considering our understanding of the business industry and relevant market factors. |
|As at 31 March 2019 management has assessed that the recoverable amount computed is higher than the carrying value of the investment in NRB Bearings (Thailand) Limited. However there is a risk that the investment in NRB Bearings (Thailand) Limited may be impaired if the projections used in computation of value in use method are not met. || |
| || Obtained and evaluated sensitivity analysis performed by the management on aforesaid key assumptions and performed further independent sensitivity analysis to determine impact of estimation uncertainty on the valuation; |
| || Evaluated the historical accuracy of business projections made by the management in prior period; |
|Management's assessment of value in use requires estimation and judgement around assumptions used. The key assumptions used in management's assessment include but are not limited to projections of future cash flows growth rates comparable market multiples. || |
| || Tested the mathematical accuracy of the cash flow projections and fair valuation computation; and |
| || Evaluated the appropriateness and adequacy of the related disclosures made in the standalone financial statements in accordance with the applicable accounting standards. |
|Accordingly valuation of investment in subsidiary has been considered as key audit matter owing to the materiality of the amounts involved and inherent subjectivity involved in the determination of the amount considered recoverable. || |
Information other than the Financial Statements and Auditor's Report thereon
6. 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 financial statements and our auditor's report thereon. The Annual Report is expectedto be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other informationand we will 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 on the other informationobtained prior to the date of this auditor's report 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
7. 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 state of affairs (financial position) profit orloss (financial performance including other comprehensive income) changes in equity andcash flows of the Company in accordance with the accounting principles generally acceptedin India including the Ind AS specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the 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 financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
8. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
9. Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
10. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.
11. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
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 explaining our opinion on whether the company hasadequate internal financial controls system in place and the operating effectiveness ofsuch 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 financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
12. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
13. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
14. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror 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
15. As required by section 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor's Report) Order 2016 ('the Order') issued bythe Central Government of India in terms of section 143(11) of the Act we give in theAnnexure A a statement on the matters specified in paragraphs 3 and 4 of the Order.
17. Further to our comments in Annexure A as required by section 143(3) of the Act wereport that:
a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose 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 standalone financial statements dealt with by this report are in agreement withthe books of account;
d) in our opinion the aforesaid standalone financial statements comply with Ind ASspecified under section 133 of the Act;
e) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2019 from being appointed as a director in terms of section 164(2) of the Act;
f) we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport as per Annexure B expressed an unmodified opinion;
g) 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 as at 31 March 2019;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2019;
iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended 31 March2019;
iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Adi P. Sethna
Membership No.: 108840
Date: 29 May 2019
Annexure A to the Independent Auditor's Report of even date to the members of NRBBearings Limited on the standalone financial statements for the year ended 31 March 2019
Based on the audit procedures performed for the purpose of reporting a true and fairview on the standalone financial statements of the Company and taking into considerationthe information and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment.
(b) The Company has a programme of verification of fixed assets to cover all the itemsonce in every three yearswhich in our opinion is reasonable having regard to the size ofthe Company and the nature of its assets.Pursuant to the programme all fixed assets werephysically verified by the Management during the year ended 31 March 2018. According tothe information and explanations given to us no material discrepancies werenoticed on suchverification.
(c) The title deeds of all the immovable properties (which are included under the head'Property plant and equipment') are held in the name of the Company except for thefollowing property which was transferred as a result of amalgamation of companies asstated in Note 2 to the standalone financial statements wherein the tittle deed is in thename of the erstwhile company.
|Nature of property ||Total Number of Cases ||Whether leasehold / freehold ||Gross block as on 31 March 2019 ||Net block on 31 March 2019 ||Remarks |
|Land at Waluj ||1 ||Leasehold land ||' 6.23 lakhs ||' 4.36 lakhs ||The lease deed is in the name of NRB Torrington Private Limited erstwhile Company that was merged with the Company under Section 391 to 394 of the Companies Act 1956 in terms of the approval of the Honorable High Court. |
(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year except for goods-in-transit and stocks lying withthird parties. For stocks lying with third parties at the year- end written confirmationshave been obtained by the management. No material discrepancies were noticed on theaforesaid verification.
(iii) The Company has granted two unsecured loans (including a loan granted during theyear) to only one party covered in the register maintained under Section 189 of the Actwhich is its wholly owned foreign subsidiary; and with respect to the same:
(a) in our opinion the terms and conditions of the loans granted are not prima facieprejudicial to the Company's interest;
(b) the schedule of repayment of principal and interest has been stipulated andrepayments of the principal amount and the receipts of interest are regular.
(c) there is no overdue amount in respect of loans granted to the party.
(iv) In our opinion the Company has complied with the provisions of Section 186 inrespect of investments loans and guarantees. Further in our opinion the Company has notentered into any transaction covered under Section 185 and Section 186 of the Act inrespect of provision of security.
(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). 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 undersub-section (1) of Section 148 of the Act in respect of Company's products and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.
(vii) (a) The Company is regular in depositing undisputed statutory dues includingprovident fund employees' state insurance income-tax sales-tax service tax goods andservice tax duty of customs duty of excise value added tax cess and other materialstatutory dues as applicable with the appropriate authorities. Further no undisputedamounts payable in respect thereof were outstanding at the year-end for a period of morethan six months from the date they become payable.
(b) There were no dues in respect of service tax goods and service tax duty ofcustoms and duty of excise that have not been deposited with the appropriate authoritieson account of any dispute.
The dues outstanding in respect of income-tax sales-tax and value added tax on accountof disputes are as follows:
Statement of Disputed Dues
|Name of the statute ||Nature of dues ||Amount* (' in Lakhs) ||Amount paid there- against (' in Lakhs) ||Period to which the amount relates ||Forum where dispute is pending |
|The Income-tax ||Income tax ||411.51 ||- ||A.Y. 2012-13 ||Commissioner of Income |
|Act 1961 || ||171.02 ||- ||A.Y. 2013-14 ||Tax (Appeals) |
| || ||259.87 ||- ||A.Y. 2014-15 || |
| || ||232.36 ||- ||A.Y. 2015-16 || |
|The Bombay Sales Tax Act 1959 ||Value added tax ||1.20 ||- ||FY 1996-97 ||Deputy Commissioner (Appeals) |
|The Bombay Sales Tax Act 1959 ||Value added tax ||14.49 ||- ||FY 2014-15 ||Joint Commissioner Sales Tax (Appeals) |
|The Central Sales ||Sales tax ||2.42 ||- ||F.Y. 1996-97 ||Deputy Commissioner |
|Tax Act 1956 || ||214.04 ||- ||F.Y. 2012-13 ||(Appeals) |
| || ||2.31 ||- ||FY 2013-14 || |
| || ||46.32 ||- ||F.Y. 2014-15 || |
|The Central Sales Tax Act 1956 ||Sales tax ||7.84 ||- ||F.Y. 2012-13 ||Additional Deputy Commissioner (Appeals) |
|The Central Sales ||Sales tax ||40.07 ||- ||FY 2012-13 ||Joint Commissioner Sales |
|Tax Act 1956 || ||21.21 ||- ||FY 2013-14 ||Tax (Appeals) |
| || ||79.08 ||- ||FY 2014-15 || |
| || ||26.91 ||- ||FY 2014-15 || |
| || ||5.61 ||- ||FY 2015-16 || |
* including interest
(viii) The Company has not defaulted in repayment of loans or borrowings to anyfinancial institution or a bank or government or any dues to debenture-holders during theyear.
(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). In our opinion the term loans availed during theyear were applied for the purposes for which the loans were obtained.
(x) No fraud by the Company or on the Company by its offcers or employees has beennoticed or reported during the period covered by our audit.
(xi) Managerial remuneration has been paid and providedby the Company in accordancewith the requisite approvals mandated by the provisions of Section 197 of the Act readwith Schedule V to the Act.
(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the standalone financial statements etc. as required by the applicableIndAS.
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures. Accordingly the provisionsof clause 3(xiv) of the Order are not applicable.
(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.Accordingly the provisions of clause 3(xv) of the Order are not applicable.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
For Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Adi P. Sethna
Membership No.: 108840
Annexure B to the Independent Auditor's Report of even date to the Members of NRBBearings Limited on the standalone financial statements for the year ended 31 March 2019
Independent Auditor's Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ('the Act')
1. In conjunction with our audit of the standalone financial statements of NRBBearings Limited ('the Company') as at and for the year ended 31 March 2019 we haveaudited the internal financial controls over financial reporting ('IFCoFR') of the Companyas at that date.
Management's Responsibility for Internal Financial Controls
2. The Company's Board of Directors is responsible for establishing and maintaininginternal financialcontrols 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 designimplementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of the Company'sbusiness including adherence to the Company's policies the safeguarding of its assetsthe prevention and detection of frauds anderrors the accuracy and completeness of theaccounting records and the timely preparation ofreliable financial information asrequired under the Act.
3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance withthe Standards on Auditing issued by theInstitute of Chartered Accountants of India ('ICAI') and deemed to be prescribed underSection 143(10) of the Act to the extent applicable to an audit of IFCoFR and theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting ('theGuidance Note') issued by the ICAI. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate IFCoFR were established and maintained and if suchcontrols operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness ofinternal 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.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A company's IFCoFR is a process designed to providereasonable assurance regardingthe reliability of financial reporting and the preparation offinancial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR include those policies and procedures that (1) pertain to the maintenance ofrecords that 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 preparationof financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements
Inherent Limitations of Internal Financial Controls over Financial Reporting
7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that the IFCoFR may become inadequate because ofchanges inconditions or that the degree of compliance with the policies or procedures maydeteriorate.
8. In our opinion the Company has in all material respects adequate internalfinancialcontrols over financial reporting and such controls were operating effectively asat 31 March 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 Walker Chandiok & Co LLP
Firm's Registration No.: 001076N/N500013
Adi P. Sethna
Membership No.: 108840
Date: 29 May 2019