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Pradeep Metals Ltd.

BSE: 513532 Sector: Engineering
NSE: N.A. ISIN Code: INE770A01010
BSE 00:00 | 01 Apr 41.15 0.85
(2.11%)
OPEN

43.45

HIGH

43.95

LOW

35.60

NSE 05:30 | 01 Jan Pradeep Metals Ltd
OPEN 43.45
PREVIOUS CLOSE 40.30
VOLUME 146
52-Week high 70.90
52-Week low 25.70
P/E 4.75
Mkt Cap.(Rs cr) 71
Buy Price 36.40
Buy Qty 32.00
Sell Price 40.95
Sell Qty 50.00
OPEN 43.45
CLOSE 40.30
VOLUME 146
52-Week high 70.90
52-Week low 25.70
P/E 4.75
Mkt Cap.(Rs cr) 71
Buy Price 36.40
Buy Qty 32.00
Sell Price 40.95
Sell Qty 50.00

Pradeep Metals Ltd. (PRADEEPMETALS) - Auditors Report

Company auditors report

To

The Members of Pradeep Metals Limited

Report on the Audit of Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of Pradeep MetalsLimited(‘the Company') which comprise the Balance Sheet as at 31stMarch 2019 the Statement of Profit and Loss (including other comprehensive income) theStatement of Changes in Equity and the Statement of Cash Flows for the year then endedand a summary of significant accounting policies and other explanatory information(together referred to as 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 true andfair view in conformity with the accounting principles generally accepted in Indiaincluding the Ind AS of the state of affairs of the Company as at 31st March2019 and its profit including other comprehensive income the changes in equity and itscash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the standalone financialstatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the 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.

Emphasis of Matter

Reference is invited to note 5.2 to standalone financial statements. We are informedthat in view of settlement of legal dispute in step down subsidiary (SDS) of the Companyin previous year improved operational performance of WOS during the current financialyear and management's expectation of further revival in the demand for the products inwhich WOS and SDS are dealing would enable the WOS and SDS to recoup the accumulatedlosses on consolidated basis. Considering the above and based on management opinion noprovision for loan granted and diminution in the value of investment in WOS is required.The above matter was reported by us under Emphasis of Matter paragraph in the Independentaudit report issued by us under the Companies Act 2013 for the year ended 31stMarch 2018.

Our opinion is not modified in respect of above matter and was not modified in previousyear also.

Key Audit Matters

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 standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.

Key Audit Matter & how our audit addressed the key audit matter

1. Investments in WOS and loans granted to WOS

Refer note 5.2 to standalone financial statements and Emphasis of matter paragraph asstated above.

• As on 31st March 2019 balance of the loan granted is 172.89 lakhsand value of investments in WOS with a carrying value of Rs. is Rs. 879.10 lakhs.

• There are accumulated losses in WOS and SDS on consolidated basis as on 31stMarch 2019.

As part of our audit procedures we evaluated the design and effectiveness of internalcontrol process to review indicators for impairment of loans and investments. We verifiedthe loan confirmations and compliance with repayment schedule. We verified the improvementin operational performance of WOS during the current financial year and the forecasts ofthe management based on which it is expecting further revival in the demand for theproducts in which WOS and SDS are dealing.

2. Inventory valuation (WIP)

The nature of items produced by the Company are customized and are unique (i.e. nonstandardized items) this poses a challenge of inventory valuation especially in respectof in work in progress (WIP). As at 31st march 2019 WIP value is Rs. 1655.79 lakhs. TheCompany has multiple control points which are manual in nature; these controls includedetailed recording of movement of WIP items periodical physical verification andascertainment of stage of WIP by the management. As part of our audit procedures we havetest verified the inventory of work in progress as at year end and also performedanalytical test to validate the closing stock quantities and values of WIP. Our testincluded (a) verification of the overall input-output reconciliation and inquiring thereasons for difference between standard and actual consumption & yield (b) verifyingthe accuracy of the closing stock valuation work sheets and (c) assessing the accuracy andcompleteness of the information used by management in comparing the cost of WIP inventorywith net realizable value. The deviation were not significant and satisfactory explanationwas provided to us.

Information Other than the Standalone Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the other information. The otherinformation comprises of the Board's Report including Annexures to Board's ReportManagement Discussion and Analysis Business Responsibility Report Corporate Governanceand Shareholder's Information but does not include the standalone financial statements andour 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 and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained in the audit or otherwise appears to be materially 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 changesin equity and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Ind AS specified under section 133 of the Actread with the Companies (Indian Accounting Standard) Rules 2015 as amended from time totime.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error. In preparing the standalonefinancial statements management is responsible for assessing the Company's ability tocontinue as a going concern disclosing as applicable matters related to going concernand using the going concern basis of accounting unless management either intends toliquidate the Company or to cease operations or has no realistic alternative but to doso.

Those Board of Directors are 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 a part of an audit in accordance with SAs we exercise professional judgement 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 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 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.

Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone financial statements.

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 thematter 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

As required by the Companies (Auditor's Report) Order 2016 (‘the Order') issuedby the Central Government of India in terms of Section 143(11) of the Act we give in"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

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 Other ComprehensiveIncome the Statement of Changes in Equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of account.

d) In our opinion the aforesaid standalone financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

e) On the basis of the written representations received from the directors as on 31stMarch 2019 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2019 from being appointed as a director in termsof Section 164 (2) of the Act.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B.

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 opinionand to the best of our information and according to the explanations given to us theremuneration paid / provided by the Company to its directors for the year ended 31st March2019 is in accordance with the provisions of section 197 read with Schedule V of the Act;and

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 fromtime to time in our opinion and to the best of our information and according to theexplanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements – Refer note 36(A)(b) 36(A)(c) and36(B)to the standalone financial statements

ii. The Company did not have any long term contract including derivative contract forwhich there are any material foreseeable losses.

iii. According to the information and explanations given to us and on the basis of ourexamination of records of the Company there was a delay of 39 days in transferring unpaiddividend amount to the Investor Education and Protection Fund by the Company.

For N. A. Shah Associates LLP
Chartered Accountants
Firm Registration No.: 116560W/W100149
Milan Mody
Place: Mumbai Partner
Date: 15th May 2019 Membership No.: 103286

Annexure A to Independent Auditors' Report for the year ended 31st March2019

[Referred to in ‘Other legal and regulatory requirements ‘of our report ofeven date]

i. a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

b) The Company has physically verified the fixed assets during the year as per theprogramme of physical verification in a phased manner over a period of three years. In ouropinion frequency of physical verification is reasonable having regard to the size of theCompany and the nature of its assets. No material discrepancies were noticed on suchverification.

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 areheld in the name of the Company which have been verified from photocopies of theagreements since the original documents are deposited with banks against credit facilitiesgranted by them.

ii. The inventory (other than lying with third parties) has been physically verified bythe management during the year. In respect of inventory lying with third partiesconfirmations have been obtained by the Company.

In our opinion the frequency of verification is reasonable. As per the information andexplanation given to us discrepancies noticed on physical verification were not material.iii. The Company had granted loan to one company [wholly owned subsidiary (WOS)] coveredin the register maintained under Section 189 of the Companies Act 2013 in earlier years.The Company has not granted loan to any other companies firms limited liabilitypartnerships or other parties as listed in the said register during the current year.

(a)In our opinion the rate of interest and other terms and conditions on which theloan had been granted to the party listed in the register maintained under Section 189 ofthe Act are not prima facie prejudicial to the interest of the Company.

(b)In respect of loan granted repayment of principal is regular during the year andpayment of interest is regular as stipulated.

(c)There are no overdue amounts in respect of the loan granted to party listed in theregister maintained under section 189 of the Act.

iv. According to the information and explanation given to us in respect of corporateguarantee loan given and investment made in wholly owned subsidiary the Company hascomplied with the provisions of Section 185 and Section 186 of the Act. There are no othertransactions for which section 185 or section 186 needs to be complied with.

v. In our opinion and according to the information and explanation given to us theCompany has not accepted any deposits. Therefore question of reporting compliance withdirective issued by the Reserve Bank of India and the provisions of sections 73 to 76 orany other relevant provisions of the Act and rules framed thereunder does not arise. Wehave been informed that no order relating to Company has been passed by the Company LawBoard or National Company Law Tribunal or Reserve Bank of India or any Court or any otherTribunal.

vi. As per information and explanation given to us maintenance of cost records inrespect of closed dies forging and processing is prescribed for the Company pursuant tothe Rules made by the Central Government under section 148(1) of the Act. We have broadlyreviewed the books of account maintained by the Company pursuant to the Rules made by theCentral Government for the maintenance of cost records under section 148 of the Act andare of the opinion that primafacie the prescribed accounts and records have been made andmaintained.

vii. (a)According to the information and explanations given to us and on the basis ofour examination of records of the Company in respect of amounts deducted / accrued in thebooks of account the Company has been generally regular in depositing undisputedstatutory dues including provident fund employees' state insurance income tax salestax duty of customs duty of excise goods and service tax cess and any other materialstatutory dues as applicable to the Company during the period with the appropriateauthorities. There are no arrears of outstanding statutory dues as at 31st March 2019 fora period of more than six months from the date they became payable.

(b)According to the records of the Company and information and explanations given tous there are no dues of income tax sales tax service tax duty of customs duty ofexcise goods and service tax which have not been deposited with appropriate authoritieson account of any dispute except demands raised for income tax aggregating to Rs.11850860 for financial years 2008-09 2011-12 2012-13 and 2013-14 under Income Tax Act1961. In respect of these demands the Company has filed rectification application seekingto give credit of taxes paid and after rectification no demand will be payable.

viii. Based on our audit procedures and as per the information and explanations givenby the management we are of the opinion that the Company has not defaulted in repaymentof dues to the bank. The Company has not borrowed any money from financial institutiongovernment and has not issued any debentures.

ix. The Company has not raised money by way of initial public offer or further publicoffer [including debt instruments]. As per information and explanations given and based onour verification term loans raised by the Company are applied for the purpose for whichthose are raised.

x. During the course of our examination of the books of account and records of theCompany carried out in accordance with generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither noticed norhave been informed by the management any incidence of fraud by the Company or on theCompany by its officers or employees.

xi. In our opinion and according to the information and explanation given to usmanagerial remuneration has been paid or provided in accordance with the requisiteapprovals mandated by the provision of section 197 read with Schedule V of the Act.

xii. In our opinion and according to the information and explanation given to us theCompany is not a Nidhi company. Therefore clause (xii) of paragraph 3 the Order is notapplicable.

xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the standalone financial statements as required by theapplicable Indian accounting standards.

xiv. The Company has not made any preferential allotment or private placement or fullyor partly convertible debentures during the year. Therefore question of our comment oncompliance with provisions of Section 42 of Act does not arise.

xv. In our opinion and according to the information and explanations given to us theCompany has not entered into any non-cash transaction with directors or person connectedwith him. Therefore clause (xv) of paragraph 3 the Order is not applicable.

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 N. A. Shah Associates LLP
Chartered Accountants
Firm Registration No.: 116560W/W100149
Milan Mody
Place: Mumbai Partner
Date:15th May 2019 Membership No.: 103286

Annexure B to Independent Auditors' Report of even date on the standalone financialstatements of Pradeep Metals Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013

Opinion

We have audited the internal financial controls over financial reporting of PradeepMetals Limited ("the Company") as of 31st March 2019 inconjunction with our audit of the standalone financial statement of the Company for theyear ended on that date.

In respect of inventory (recording of WIP and allocation of overheads) internalfinancial controls needs to be further strengthened to commensurate with the size of theCompany and nature of its business. This matter was reported in earlier year also.

In our opinion read with our comment with respect to inventory above the Company hasin all material respects an adequate internal financial controls system over financialreporting and such internal financial controls over financial reporting were operatingeffectively as at 31st March 2019 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 (‘the Guidance Note') issued by the Institute of CharteredAccountants of India (‘ICAI').

Responsibilities of Management and Those Charged with Governance for Internal FinancialControls over Financial Reporting

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 issued by the ‘ICAI'. These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to Company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under the Act.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note and the Standards on Auditing issued by ICAI and deemed to beprescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls over financial reporting wasestablished and maintained and if such controls operated effectively in all materialrespects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statement whether due to fraud orerror.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Meaning of Internal Financial Controls over Financial Reporting

The Company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of standalone financial statement for external purposes in accordance withgenerally accepted accounting principles. The Company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the Company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of standalonefinancial statement in accordance with generally accepted accounting principles and thatreceipts and expenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the Company's assets that could have a material effect on the standalonefinancial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

For N. A. Shah Associates LLP
Chartered Accountants
Firm Registration No.: 116560W/W100149
Milan Mody
Place: Mumbai Partner
Date: 15th May 2019 Membership No.: 103286