The Members of
REXNORD ELECTRONICS AND CONTROLS LIMITED
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Rexnord Electronicsand Controls Limited ("the Company") which comprise the Balance Sheet as at 31March 2019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Cash Flow Statement 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 standalonefinancial 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 prescribed 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 31 March 2019 its profit (including othercomprehensive income) its changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing ("SAs")specified under section 143(10) of the Act. Our responsibilities under those Standards arefurther described in the Auditor's Responsibilities for the Audit of the standalonefinancial statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Act and the Rules thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our audit opinion on the standalonefinancial statements.
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.
We have determined the matter described below to be the key audit matters to becommunicated in our report
|Key audit matter ||How our audit addressed the key audit matter |
|Appropriateness of revenue recognition on sale of goods. ||Our audit procedures relating to revenue recognition include the following: |
|Refer note 2.2 and Note 27 of the standalone financial statements. ||a. Understood and performed procedures to assess the design and test the operating effectiveness of relevant controls related to recording of revenue. |
|The Company has revenue from sale of goods. Revenue from sale of goods is recognised under IndAS 115- Revenue from Contracts with Customers' at a point in time when the control has been transferred which generally coincides with dispatch of products to customers in case of domestic sales and on the basis of bill of lading in the case of export sales. ||b. Assessed whether the policy of recognising revenue was in line with Ind AS - 115. |
| ||c. Tested the reconciliation of the amounts as per the sales register to the general ledger. |
| ||d. Performed tests on sample basis by validating the amounts recorded with the underlying documents which inter - alia includes invoices dispatch documents customer orders/ contracts receipt of consideration from customers where applicable. |
|We determined this to be a key audit matter due to significant time and effort involved in assessing the appropriateness of revenue recognition and covering the aspects of completeness accuracy occurrence and cut off. ||e. Performed cut off testing on sample basis and ensured that the revenue from sale of goods is recognised in the appropriate period. |
| ||Based on the above procedures performed we did not identify any exceptions in revenue recognition on sale of goods. |
Information other than the Standalone Financial Statements and Auditor's Report thereon
The Company's Board of Directors is responsible for preparation of the otherinformation. The other information comprises the information included in Board's Reportincluding annexures to the Board's Report Corporate Governance and Management Discussionand Analysis but does not include the standalone financial statements and our auditor'sreport 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 during the course of our 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 (includingother comprehensive income) changes in equity and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the AccountingStandards specified under Section 133 of the Act. This responsibility also includes themaintenance of adequate accounting records in accordance with the provision of the Act forsafeguarding the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.
In preparing the Standalone financial statements the Board of Directors is responsiblefor assessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless the Board of Directors either intends to liquidate the Company or tocease operations or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Standalone Financial Statements Our objectives areto obtain reasonable assurance about whether the standalone financial statements as awhole are free from material misstatement whether due to fraud or error and to issue anauditor's report that includes our opinion. Reasonable assurance is a high level ofassurance but is not a guarantee that an audit conducted in accordance with SAs willalways detect a material misstatement when it exists. Misstatements can arise from fraudor error and are considered material if individually or in the aggregate they couldreasonably be expected to influence the economic decisions of users taken on the basis ofthese 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 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
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of Section 143 ofthe Act we give in the "Annexure 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 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 theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;
e) on the basis of written representations received from the directors as on 31 March2019 taken on record by the Board of Directors none of the directors is disqualified ason 31 March 2019 from being appointed as a director in terms of Section 164 (2) of theAct;
f) with respect to the adequacy of the internal financial controls over financialreporting of the Company 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 Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to our best of our information and according to the explanations given to us:
(i) The Company does not have any pending litigation which would impact its financialposition.
(ii) The Company did not have any long-term contracts including derivatives contractsfor which there were any material foreseeable losses;
(iii) There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company; and
(iv) The disclosures 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.
3. With respect to the matter to be included in the Auditor's Report in accordance withthe requirements of section 197(16) of the Act as amended:
In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 read with schedule V of the Act.
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 we report that:
(i) (a) the Company has maintained records showing full particulars includingquantitative details and situation of its fixed assets;
(b) as explained to us all the fixed assets have been physically verified by themanagement at the close of the year. We were informed that no material discrepancy havebeen noticed by the management on such verification as compared to the aforesaid recordsof fixed assets; and
(c) According to the information and explanations given to us in our opinion thetitle deeds of immoveable properties are held in the name of the Company except in thecase of a plot of land purchased during the financial year 2016-17 by the Company asdetailed below:
|Particulars ||Area (In Hectare) ||Gross Block (' in lakhs) ||Net Block (' in lakhs) ||Remarks |
|A plot of land situated at S. No. 61 H. No. 1 Part at Village- Kaman Taluka -Vasai District - Palghar (MS) ||0.242 ||14.50 ||14.50 ||Plot purchased by executing Memorandum of Understanding and possession taken. Sale deed is yet to be executed and registered. |
(ii) as certified by the management physical verification of inventories was conductedby the management at the close of the year. There were no material discrepancies noticedon physical verification of inventories as compared to book records and the same have beenproperly dealt with in the books of account.
(iii) according to the information and explanation given to us the Company has duringthe year not granted loans secured or unsecured to firms limited liability partnershipsor other parties covered in the register maintained under section 189 of the Act exceptthe unsecured loan to its wholly owned subsidiary company and with respect to the same:
a) in our opinion the terms and conditions of granting loan to wholly owned subsidiarycompany are not prima facie prejudicial to the interest of the Company;
b) the schedule of repayment of principal and payment of interest has been stipulatedand the repayment/receipts of the principal amount and the interest are regular; and
c) there is no overdue amount of more than 90 days in respect of loan granted to whollyowned subsidiary company.
(iv) in our opinion and according to the information and explanation given to us theCompany has complied with the provisions of section 186 the Act with respect to the loangranted and investments made by it during the year. The Company has during the year notgiven any guarantee or provided any security in connection with a loan covered under thesections 186 of the Act. Further the Company has during the year not granted any loansgiven any guarantee or provided any security in connection with a loan covered under thesections 185 of the Act.
(v) the Company has not accepted any deposit from public during the year in accordancewith the provisions of sections 73 to 76 of the Act and rules framed there under.
(vi) We have broadly reviewed the books of account maintained by the Company in respectof the products where pursuant to the rules made by the Central Government of India themaintenance of cost records has been specified under sub section (1) of Section 148 of theAct and are of the opinion that prima facie the prescribed accounts and records havebeen made and maintained. We have not however made a detailed examination of the recordswith a view of determine whether they are accurate or complete.
(vii) (a) on the basis of books and records examined by us amount deducted/ accrued inthe books of account in respect of undisputed statutory dues including provident fundemployees state insurance income-tax sales-tax service tax goods and services taxduty of customs duty of excise value added tax cess and other statutory dues havegenerally been regularly deposited with the appropriate authorities. There are no arrearsof undisputed statutory dues as at the last day of financial year concerned outstandingfor a period of more than six months from the date they became payable except CentralSales Tax Rs 26255.00.
(b) on the basis of books and records examined by us there are no dues of income taxsales tax service tax goods and services tax duty of customs duty of excise and valueadded tax which have not been deposited with appropriate authorities on account of anydispute.
(viii) on the basis of selective checks carried out during the course of audit we areof the opinion that the Company has not defaulted in the repayment of dues to financialinstitutions and banks. There are no dues payable to the debenture holders and Government.
(ix) As per the records of the Company the Company did not raise any money by way ofinitial public offer or further public offer (including debt instruments) during the year.In respect of term loans obtained during the year we are of the opinion that the termloans were applied for the purpose for which they were obtained.
(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during thecourse of our audit.
(xi) According to the information and explanations given to us the Company has paid/provided managerial remuneration in accordance with the requisite approvals mandated bythe provisions of Section 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a nidhi company. Accordingly provisions of paragraph 3(xii) of the Orderare not applicable to the Company.
(xiii) According to the information and explanations given to us transactions with therelated parties are in compliance with Section 177 and Section 188 of the Act whereapplicable and details of such transactions have been disclosed in the standalonefinancial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us the Company has notmade any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year. Accordingly provisions of paragraph 3(xiv) of theOrder are not applicable to the Company.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly provisions ofparagraph 3(xv) of the Order are not applicable to the Company.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of RexnordElectronics and Controls Limited ("the Company") as of 31 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 ("the 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 theAct.
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 on Audit of Internal Financial Controls Over Financial Reporting("the Guidance Note") and the Standards on Auditing issued by the ICAI andprescribed 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 statements 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 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.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 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 issued by theICAI.
| ||For Rakesh Soni & Co. |
| ||Chartered Accountants |
| ||(Firm Registration No. 114625W) |
| ||R.K. Soni |
| ||Partner |
|Place: Mumbai ||Membership No. 047151 |
|Dated: May 30 2019 || |