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Praj Industries Ltd.

BSE: 522205 Sector: Engineering
NSE: PRAJIND ISIN Code: INE074A01025
BSE 00:00 | 03 Apr 57.10 3.25
(6.04%)
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55.00

HIGH

58.00

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52.60

NSE 00:00 | 03 Apr 57.15 3.30
(6.13%)
OPEN

55.10

HIGH

58.00

LOW

52.50

OPEN 55.00
PREVIOUS CLOSE 53.85
VOLUME 253717
52-Week high 158.30
52-Week low 43.00
P/E 12.66
Mkt Cap.(Rs cr) 1,046
Buy Price 57.00
Buy Qty 105.00
Sell Price 57.10
Sell Qty 1.00
OPEN 55.00
CLOSE 53.85
VOLUME 253717
52-Week high 158.30
52-Week low 43.00
P/E 12.66
Mkt Cap.(Rs cr) 1,046
Buy Price 57.00
Buy Qty 105.00
Sell Price 57.10
Sell Qty 1.00

Praj Industries Ltd. (PRAJIND) - Auditors Report

Company auditors report

TO

THE MEMBERS OF

PRAJ INDUSTRIES LIMITED

Report on the Audit of the Standalone Indian Accounting Standards (Ind AS) FinancialStatements

Opinion

We have audited the standalone Ind AS financial statements of Praj Industries Limited("the Company") which comprise the Balance Sheet as at 31st March2019 and the statement of Profit and Loss (including Other Comprehensive Income)statement of changes in Equity and statement of Cash Flows for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information (hereinafter referred to as "the Standalone Ind ASFinancial Statements").

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 Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the standalone state ofaffairs of the Company as at 31 March 2019 and its standalone profit (including OtherComprehensive Income) standalone Changes in Equity and its standalone Cash Flows for theyear 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 Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditors' Responsibilities for the Audit of theStandalone Ind AS Financial Statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India together with the ethical requirements that are relevant to our auditof the standalone Ind AS financial statements under the provisions of the Companies Act2013 and the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.

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 of the currentperiod. These matters were addressed in the context of our audit of the standalone Ind ASfinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.

1) Recognition of Revenue from Contracts with Customers Description of Key AuditMatters

Revenue from Projects is recognized as per Ind-AS 115 on satisfaction of performanceobligation overtime where progress towards complete satisfaction of performanceobligation is measured under Input Method. For the year ended 31st March 2019 projectrevenue recognized amounted to र8563.433 Mn opening and closing Contracts in Progressamounted to र225.879 Mn and र833.304 Mn respectively.

Measuring of satisfaction of performance obligation under Input Method involvesestimation of budget costs in respect of projects contracted and capturing of actual costsincurred against such projects. As the revenue is recognized in proportion of projectcosts incurred to the total budgeted cost inaccurate capturing of costs incurred as wellas inaccurate budget estimates would result in incorrect recognition of revenue.

Description of Auditors' Response

We have performed the following processes in relation to the accuracy of revenuerecognized and accrued:

a) Understood evaluated and tested key controls over the 'Statement of RevenueRecognition' which is a statement prepared in which data related to Contract priceBudgeted costs Progressive billings raised and Percentage completion of contract iscaptured and on the basis of which proportionate revenue is recognized under Input Method.

b) Tested on sample basis the process of estimation of budget costs of the projectswhich are considered in 'Statement of Revenue Recognition'.

c) Checked on sample basis contract values considered in 'Statement of RevenueRecognition' from the approved contracts with the Customers.

d) Tested on sample basis the process of capturing of costs in 'Statement of RevenueRecognition' with respect to the projects in process.

e) Verified revenue to be recognized for the year under audit from 'statement ofRevenue Recognition'

Our Audit process did not identify any material incorrect Recognition of Revenue.

2) Trade Receivables Description of Key Audit Matters

Trade Receivables net of impairment allowance amount to र2277.644 Mn as on 31stMarch 2019 which constitutes about 20% of the total Assets of the Company. Impairmentprovision carried in the books as on 31st March 2019 is र769.814 Mn.

Management's judgment is involved in identifying impairment in the value of thereceivable as well as in formulating a policy for creating provisioning against impairmentwhich has an adverse effect on the profits of the Company.

Description of Auditors' Response

We have performed the following processes in relation to Management's Judgment inidentification of impairment of value of Receivables and adequacy of impairment provision:

a) We have referred to the defined policy in place stipulating the methodology ofmaking impairment provision in respect of overdue Receivable amounts. We have alsoreviewed age-wise analysis in respect of Receivables and ensured that the provisioning ismade according to such policy. The above referred provisioning policy stipulates differentprovisioning norms for Receivables with confirmations and without confirmations.

b) We have sought information and explanations from the Project Heads regarding thestatus of receivables for the purpose of ensuring adequate impairment provisions.

c) We have also tested subsequent collections made from the overdue receivables.

Our Audit process did not identify any material inadequate provisioning for impairmentin the value of Receivables.

3) Investment in Subsidiaries Description of Key Audit Matters

In terms of option of Deemed Cost as per Ind-AS 101 'First Time Adoption of IndianAccounting Standards' the Company has valued its investments in Subsidiaries amounting toर1673.234 Mn as on 31st March 2019 at cost.

As per Ind-AS 36 'Impairment of Assets' Management has to assess at the end of eachreporting period whether there is any indication that an Asset may be impaired and if suchindication exists the Management has to estimate the recoverable amount and compare thesame with the carrying amount of the investment in order to identify an impairment loss.Impairment loss if any has to be recognized immediately in the Statement of Profit andLoss.

Description of Auditors' Response

We have performed the following processes in relation to Management's Judgment inidentification of impairment of value of Investment in Subsidiaries if any:

a) We have obtained representation from the Management regarding indication of likelyimpairment loss in respect of Investments made in Subsidiaries and process of estimationof recoverable amount.

b) In case of a Subsidiary having material value under Investment in respect of whichno observable inputs were available we have referred to the valuation obtained by theManagement regarding its Value in Use and tested and discussed the assumptions used in theprocess of valuation with the management to ensure that no impairment provision againstthe same is required.

Our Audit process did not identify any requirement of provisioning for impairment inthe value of Investment in Subsidiaries.

Other Information

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 auditors' report thereon which weobtained prior to the date of this auditors' report.

Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the standalone Ind AS 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 Standalone IndAS Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thestandalone financial position standalone financial performance standalone Changes inEquity and standalone Cash Flows of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standardsspecified in the Companies (Indian Accounting Standards) Rules 2015 (as amended) undersection 133 of the Act. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding of theassets of the Company and for preventing and detecting frauds and other irregularities;selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the standalone Ind AS financial statements that give a true and fair viewand are free from material misstatement whether due 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 Board of Directors are also responsible for overseeing the Company's financialreporting process.

Auditors' 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 auditors' 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 scepticism 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 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 Companies Act 2013 we are also responsible for expressing our opinion on whetherthe Company has adequate internal financial controls system in place and the operatingeffectiveness 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 auditors' report to the related disclosures inthe standalone Ind AS financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditors' report. However future events or conditions may cause the Companyto cease to continue as a 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 with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditors' report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.

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 Companies Act 2013 we give in the Annexure A; a statement on the matters specifiedin paragraphs 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 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) 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 Ind AS financial statements comply with theAccounting 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 Auditors' 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 financial statements-Refer Note 28 to the financial statements;

(ii) The Company did not have any long-term contracts including derivative contracts asat 31st March 2019 having material foreseeable losses for which provision wasrequired.

(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

(iv) The reporting on disclosures relating to Specified Bank Notes is not applicable tothe Company for the year ended 31st March 2019

For M/s P G Bhagwat
Firm Registration Number: 101118W
Chartered Accountants
Sandeep Rao
Pune Partner
May 16 2019 Membership Number 047235

I Annexure A to Independent Auditors' Report

i. (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the Management according to a phasedprogramme designed to cover all the items over a period of three years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. Pursuant to the programme a portion of the fixed assets has been physicallyverified by the Management during the year and as informed to us no materialdiscrepancies have been noticed on such verification.

(c) The title deeds of immovable properties as disclosed in Note 3 on fixed assets tothe financial statements are held in the name of the Company.

ii. Physical verification of inventory has been conducted at reasonable intervals bythe management during the current year. In our opinion the interval of such verificationis reasonable. Discrepancies noticed on physical verification of inventory were notmaterial and the same have been properly dealt with in the books of account.

iii. The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained underSection 189 of the Act. Therefore the provisions of Clause 3(iii) (iii) (a) (iii) (b)and (iii) (c) of the said Order are not applicable to the Company.

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 Companies Act 2013in respect of the loans and investments made and guarantees and security provided by itwherever applicable.

v. The Company has not accepted any deposits from public within the meaning of Sections73 74 75 and 76 or any other relevant provisions of the Act and the Rules framed thereunder to the extent notified. According to the information and explanations given to usno order has been passed by the Company Law Board or National Company Law Tribunal orReserve Bank of India or any Court or any other Tribunal.

vi. Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products.We have broadly reviewed the same and are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We have nothowever made a detailed examination of the records with a view to determine whether theyare accurate or complete.

vii. (a) According to the information and explanations given to us and the records ofthe Company examined by us in our opinion the Company is regular in depositing theundisputed statutory dues including provident fund employees' state insurance incometax sales tax service tax duty of customs duty of excise value added tax Goods andService Tax cess and other material statutory dues as applicable with the appropriateauthorities. According to the information and explanation provided to us no undisputedamounts payable in respect of statutory dues were in arrears as at March 312019 for aperiod more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of income-tax service-tax duty of customsduty of excise value added tax Goods and Service Tax which have not been deposited onaccount of any dispute. The particulars of dues of sales tax as at balance sheet datewhich have not been deposited on account of a dispute are as follows:

Name of the statute Nature of dues Amount (र) Mn Period to which the amount relates Forum where the dispute is pending
Sales tax laws Demand as per Sales Tax Assessment 20.17 F.Y. 2010-11 Joint Commissioner (Appeals)
Sales tax laws Demand as per Sales Tax Assessment 166.62 F.Y. 2006-07 2007-08 2008-09 2009-10 and 2011-12 Maharashtra Sales Tax Tribunal Mumbai

viii. According to the records of the Company examined by us and the information andexplanation given to us the Company has not defaulted in repayment of loans or borrowingsto any financial institution or bank or Government. The company does not have anydebentures holders.

ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans. Accordingly the provisions ofClause 3(ix) of the Order are 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 acrossany instance of fraud by the Company or on the Company by its officers or employees norhave we been informed of such case by the Management except for one case in which therewas unauthorized transfer of secret information relating to the business of the company byone of the employees of the company to the outsiders for which necessary FIR has beenlodged by the company.

xi. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct.

xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company.

xiii. The Company has entered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required under Ind AS 24Related Party Disclosures specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

xiv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of Clause 3(xiv) of the Order are not applicable to the Company.

xv. The Company has not entered into any non-cash transactions with its Directors orpersons connected with him. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.

xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.

For M/s P G Bhagwat
Firm Registration Number:101118W
Chartered Accountants
Sandeep Rao
Pune Partner
May 16 2019 Membership Number 047235

I Annexure B to the Independent Auditors' Report of even date on the standalone Ind ASfinancial statements of Praj Industries Limited

Report on the Internal Financial Controls

Under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")

We have audited the internal financial controls over financial statements of PrajIndustries Limited ("the Company") as of 31st March 2019 in conjunction withour audit of the standalone Ind AS financial statements of the Company for the year endedon 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. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial statements based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") and the Standards on Auditing to the extentapplicable to an audit of internal financial controls both issued by the Institute ofChartered Accountants of India. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls over financial reporting wereestablished 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 statements and their operatingeffectiveness. Our audit of internal financial controls over financial statements 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 auditors' judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due 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 systemover financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes 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 preparation of 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

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.

Opinion

In our opinion the Company has maintained in all material respects adequate internalfinancial controls system over financial statements and such internal financial controlsover financial statements were operating effectively as of 31st March 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For M/s P G Bhagwat
Firm Registration Number:101118W
Chartered Accountants
Sandeep Rao
Pune Partner
May 16 2019 Membership Number 047235