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Rico Auto Industries Ltd.

BSE: 520008 Sector: Auto
NSE: RICOAUTO ISIN Code: INE209B01025
BSE 00:00 | 20 Jan 47.10 0.85
(1.84%)
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46.40

HIGH

48.05

LOW

45.90

NSE 00:00 | 20 Jan 47.20 1.00
(2.16%)
OPEN

46.30

HIGH

48.10

LOW

45.95

OPEN 46.40
PREVIOUS CLOSE 46.25
VOLUME 106005
52-Week high 62.30
52-Week low 33.50
P/E 25.05
Mkt Cap.(Rs cr) 637
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 46.40
CLOSE 46.25
VOLUME 106005
52-Week high 62.30
52-Week low 33.50
P/E 25.05
Mkt Cap.(Rs cr) 637
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Rico Auto Industries Ltd. (RICOAUTO) - Auditors Report

Company auditors report

To the Members of

Rico Auto Industries Limited

Report on the Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements ofRico Auto Industries Limited (‘the Company') which comprise the Balance Sheetas at 31st March 2021 the Statement of Profit and Loss (including OtherComprehensive Income) the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and a summary of the significant accounting policies and otherexplanatory information.

2. In our opinion and to the best of our information and according tothe explanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 (‘Act') in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India including Indian Accounting Standards (‘Ind AS')specified under section 133 of the Act of the state of affairs of the Company as at 31stMarch 2021 and its loss (including other comprehensive income) its cash flows and thechanges in equity for the year ended on that date.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditingspecified under section 143(10) of the Act. Our responsibilities under those standards arefurther described in the Auditor's Responsibilities for the Audit of the 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(‘ICAI') together with the ethical requirements that are relevant to our auditof the financial statements under the provisions of the Act and the rules thereunder andwe have fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinion.

Key Audit Matter

4. Key audit matters are those matters that in our professionaljudgment were of most significance in our audit of the standalone financial statements ofthe current year. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters.

5. We have determined the matter described below to be the key auditmatters to be communicated in our report.

Key audit matter How our audit addressed the key audit matter
Assessment of the realizability of loans from step down subsidiary (refer note 56) Our audit included but were not limited to the following procedures:
As at 31 March 2021 the Company has given loans amounting to Rs. 37.71 crores to a step subsidiary company Rico Jinfei Wheels Limited (hereinafter referred to as "Subsidiary") as disclosed in Note 54 to the accompanying standalone financial statements. The subsidiary has earned low operating profit/ incurred losses during the current and previous years. a) Obtained an understanding from the management with respect to process and controls implemented by the Company to determine recoverability of the amounts receivable from its subsidiary companies;
Since the recoverability of the aforesaid amount is largely dependent on the operational performance of aforesaid subsidiary therefore there is a risk that the subsidiary may not achieve the anticipated business performance leading to an impairment charge that has not been recognized by the management. b) Obtained the valuation model from the management and reviewed their conclusions including reading the report provided by an independent valuation expert engaged by the management;
Management has assessed the realizability of the aforesaid amounts by carrying out a valuation of the subsidiary's business using the discounted cashflow method ("the Model"). The Model involves estimates pertaining to expected business and earnings forecasts and key assumptions including those related to discount and long-term growth rates. These estimates require high degree of management judgement resulting in inherent subjectivity which is more complex in the current year due to the required assessment of impact of COVID -19 on the aforesaid assumptions. c) Assessed the professional competence objectivity and capabilities of the third party expert engaged by the management for performing the required valuations to estimate the recoverable value of the amounts receivable from the subsidiary;
Considering the materiality of the above matter to the standalone financial statements complexities and judgement involved and the significant auditor attention required to test such management's judgement we have identified this as a key audit matter for current year audit. d) Tested the inputs used in the Model by examining the underlying data and validating the future projections by comparing past projections with actual results including discussions with management relating to these projections;
e) Assessed the reasonableness of the assumptions used and appropriateness of the valuation methodology applied by engaging auditor's valuation specialists. Tested the discount rate and terminal growth rates used in the forecast including comparison to economic and industry forecasts considering the impact of COVID -19 where appropriate;
f) Evaluated sensitivity analysis performed by the management and further performed independent sensitivity analysis on these key assumptions to assess potential impact of downside in the underlying cash flow forecasts and assessed the possible mitigating actions identified by management; and
g) Evaluated the appropriateness and adequacy of disclosures made in the standalone financial statements in accordance with the applicable accounting standards.

Information other than the Financial Statements and Auditor's Reportthereon

6. The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in the AnnualReport but does not include the standalone financial statements and our auditor'sreport thereon. The Annual Report is expected to be made available to us after the date ofthis auditor's report.

Our opinion on the standalone financial statements does not cover theother information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statementsour responsibility is to read the other information identified above when it becomesavailable and in doing so consider whether the other information is materiallyinconsistent with the standalone financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated.

When we read the Annual Report if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance.

Responsibilities of Management and Those Charged wit Governance for theStandalone Financial Statements

7. The accompanying standalone financial statements have been approvedby the Company's Board of Directors. The Company's Board of Directors isresponsible for the matters stated in section 134(5) of the Act with respect to thepreparation of these standalone financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income changes inequity 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 Act.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

8. In preparing the financial statements management is responsible forassessing 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 management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

9. Those Board of Directors is also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

10. Our objectives are to obtain reasonable assurance about whether thefinancial 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. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with Standards on Auditing will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements.

11. As part of an audit in accordance with Standards on Auditing weexercise professional judgment and maintain professional skepticism throughout the audit.We also:

• Identify and assess the risks of material misstatement of thefinancial 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 theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3) (i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls with reference to financialstatements in place and the operating effectiveness of such controls;

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management;

• Conclude on the appropriateness of management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditionsmay cause the Company to cease to continue as a going concern;

• Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation;

12. We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

13. We also provide those charged with governance with a statement thatwe have complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

14. From the matters communicated with those charged with governancewe determine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

15. As required by section 197(16) of the Act based on our audit wereport that the Company has paid remuneration to its directors during the year inaccordance with the provisions of and limits laid down under section 197 read withSchedule V to the Act.

16. As required by the Companies (Auditor's Report) Order 2016(‘the Order') issued by the Central Government of India in terms of section143(11) of the Act we give in the Annexure A a statement on the matters specified inparagraphs 3 and 4 of the Order.

17. Further to our comments in Annexure A as required by section143(3) of the Act based on our audit we report to the extent applicable that:

a) we have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purpose of our auditof the accompanying standalone financial statements;

b) in our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books

c) the standalone financial statements dealt with by this report are inagreement with the books of account;

d) in our opinion the aforesaid standalone financial statements complywith Ind AS specified under section 133 of the Act;

e) on the basis of the written representations received from thedirectors and taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2021 from being appointed as a director in terms of section164(2) of the Act;

f) we have also audited the internal financial controls with referenceto standalone financial statements of the Company as on 31st March 2021 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date and our report dated 21 June 2021 as per Annexure B expressed unmodifiedopinion; and

g) with respect to the other matters to be included in theAuditor's Report in accordance with rule 11 of the Companies (Audit and Auditors)Rules 2014 (as amended) in our opinion and to the best of our information and accordingto the explanations given to us :

i. the Company as detailed in note 35 to the standalone financialstatements has disclosed the impact of pending litigations on its financial position asat 31st March 2021;

ii. the Company as detailed in note 32 to the standalone financialstatements has made provision as at 31 March 2021 as required under the applicable lawor Ind AS for material foreseeable losses if any on long-term contracts includingderivative contracts;

iii. there has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company during the yearended 31st March 2021; and

iv. the disclosure requirements relating to holdings as well asdealings in specified bank notes were applicable for the period from 8 November 2016 to 30December 2016 which are not relevant to these standalone financial statements. Hencereporting under this clause is not applicable.

Annexure A

Based on the audit procedures performed for the purpose of reporting atrue and fair view on the standalone financial statements of the Company and taking intoconsideration the information and explanations given to us and the books of account andother records examined by us in the normal course of audit and to the best of ourknowledge and belief we report that:

(i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.

(b) All property plant and equipment have not been physically verifiedby the management during the year however there is a regular program of verificationonce in every three years which in our opinion is reasonable having regard to the sizeof the Company and the nature of its assets. No material discrepancies were noticed onsuch verification.

(c) The title deeds of all the immovable properties (which are includedunder the head ‘Property plant and equipment') are held in the name of theCompany. In respect of immovable properties in the nature of land and building that havebeen taken on lease and disclosed under the head property plant and equipment in thestandalone financial statements the lease agreements are in the name of the Companywhere the Company is the lessee as per the agreement.

(ii) In our opinion the management has conducted physical verificationof inventory at reasonable intervals during the year except for goods-in-transit. Nomaterial discrepancies were noticed on the aforesaid verification.

(iii) The Company has granted long term unsecured loans to companiescovered in the register maintained under Section 189 of the Act; and with respect to thesame:

(a) in our opinion the terms and conditions of grant of such loans arenot prima facie prejudicial to the company's interest;

(b) the schedule of repayment of principal and payment of interest hasbeen stipulated and the principal amount is not due for repayment currently however thereceipts of the interest are regular;

(c) there is no overdue amount in respect of loans granted to suchcompanies.

(iv) In our opinion the Company has complied with the provisions ofSections 185 and 186 of the Act in respect of loans investments guarantees and security.

(v) In our opinion the Company has not accepted any deposits withinthe meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits)Rules 2014 (as amended). Accordingly the provisions of clause 3(v) of the Order are notapplicable.

(vi) We have broadly reviewed the books of account maintained by theCompany pursuant to the Rules made by the Central Government for the maintenance of costrecords under sub-section (1) of Section 148 of the Act in respect of Company'sproducts and are of the opinion that prima facie the prescribed accounts and recordshave been made and maintained. However we have not made a detailed examination of thecost records with a view to determine whether they are accurate or complete.

(vii) (a) The Company is regular in depositing undisputed statutorydues including provident fund employees' state insurance income-tax sales-taxservice tax duty of customs duty of excise value added tax cess and other materialstatutory dues as applicable to 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) The dues outstanding in respect of income-tax sales-taxservice-tax duty of customs duty of excise and value added tax on account of anydispute are as follows:

Statement of Disputed Dues

Name of the statute Nature of dues Amount (Rs.) Amount paid under Protest (Rs.) Period to which the amount relates Forum where dispute is pending
Income Tax Act 1961 Errors and Mismatch of challans in returns filed to Income Tax Department 0.003 Nil Assessment year 2009-10 to 2019-20 Assessing Officer Income Tax Department.
Gujarat VAT 2003 Finance Act 1994 Disallowance of input on rejected goods Claim of cenvat on construction & other repair & maintenance service 0.04 0.64 0.009 Nil Financial year 2017-18 Financial year 2005-06 to 2010-11 Gujarat Sales tax tribunal Custom Excise & Service Tax Appellate Tribunal
Finance Act 1994 Denial of credit taken on services of insurance catering tent house and taxi 0.52 Nil Financial year 200405 to 2008-09 Custom Excise & Service Tax Appellate Tribunal
Finance Act 1994 Denial of cenvat credit on tax paid on marine insurance catering tent house and taxi 0.01 Nil Financial year 201415 and 2015-16 Custom Excise & Service Tax Appellate Tribunal
Finance Act 1994 Denial of cenvat credit on insurance of plant & machinery and stock. 0.51 Nil Financial year 201112 to 2013-14 Custom Excise & Service Tax Appellate Tribunal
Finance Act 1994 Deposit of inadmissible cenvat credit availed on the capital goods destroyed in fire 0.39 Nil Financial year 2012-13 Commissioner Central Excise (Appeal)
Finance Act 1994 Denial of credit taken on outward freight 0.07 Nil Financial year 2012-13 Commissioner Central Excise (Appeal)
Finance Act 1994 Denial of credit taken on credit taken on Service of insurance and tour and travelling services 0.10 Nil Financial year 2015-16 to 2017-18 Commissioner Central Excise (Appeal)
Haryana Local Area Development Tax Act 2000 Applicability of local area development tax on items purchased 0.01 Nil Financial year 2001-02 to 2003-04 Joint Commissioner (Appeal)
Central Excise Act 1944 Supply of components without adding cost of designs/drawings/ specifications 3.15 Nil Financial year 2013-14 to 2017-18 Commissioner of CGST
Central Excise Act 1944 Non-payment of excise duty on amount of sales tax retained by the assessee 0.56 Nil Financial year 2011-12 to 2013-14 Custom Excise & Service Tax Appellate Tribunal
Central Excise Act 1944 Short reversal of cenvat credit on clearance of capital Goods during slump sale. 1.07 Nil Financial year 2017-18 Additional Commissioner Central Goods & Service tax
Goods and Services Tax Act 2017 Tax credit incorrectly availed 0.01 0.01 Financial Year 2019-20 State Tax officer

(viii) The Company has not defaulted in repayment of loans orborrowings to any financial institution or a bank during the year. The Company did nothave outstanding debentures and loan from government during the year.

(ix) In our opinion the Company has applied the term loans for thepurposes for which these were raised. The Company did not raise moneys by way of initialpublic offer / further public offer (including debt instruments).

(x) No fraud by the Company or on the Company by its officers oremployees has been noticed or reported during the period covered by our audit.

(xi) Managerial remuneration has been paid and provided by the companyin accordance with the requisite approvals mandated by the provisions of Section 197 ofthe Act read with Schedule V to the Act.

(xii) In our opinion the Company is not a Nidhi Company. Accordinglyprovisions of clause 3(xii) of the Order are not applicable.

(xiii) In our opinion all transactions with the related parties are incompliance with Sections 177 and 188 of Act where applicable and the requisite detailshave been disclosed in the standalone financial statements etc. as required by theapplicable Ind AS.

(xiv) During the year the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures.

(xv) In our opinion the Company has not entered into any non-cashtransactions with the directors or persons connected with them covered under Section 192of the Act.

(xvi) The Company is not required to be registered under Section 45-IAof the Reserve Bank of India Act 1934.

Annexure B

Independent Auditor's Report on the internal financial controlswith reference to the standalone financial statements under Clause (i) of Sub-section 3 ofSection 143 of the Companies Act 2013 (‘the Act')

1. In conjunction with our audit of the standalone financial statementsRico Auto Industries Limited (‘the Company') as at and for the year ended 31stMarch 2021 we have audited the internal financial controls with reference to standalonefinancial statements of the Company as at that date.

Responsibilities of Management and Those Charged with Governance forInternal Financial Controls

2. The Company's Board of Directors is responsible forestablishing and maintaining internal financial controls based on the internal financialcontrols with reference to financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls over Financial Reporting (‘the GuidanceNote') issued by the Institute of Chartered Accountants of India (‘ICAI').These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of the Company's business including adherence to theCompany's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditor's Responsibility for the Audit of the Internal FinancialControls with Reference to Financial Statements

3. Our responsibility is to express an opinion on the Company'sinternal financial controls with reference to financial statements based on our audit. Weconducted our audit in accordance with the Standards on Auditing issued by the Instituteof Chartered Accountants of India (‘ICAI') prescribed under Section 143(10) ofthe Act to the extent applicable to an audit of internal financial controls withreference to financial statements and the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (‘the Guidance Note') issued by the ICAI.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to financial statements were established and maintainedand if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidenceabout the adequacy of the internal financial controls with reference to financialstatements and their operating effectiveness. Our audit of internal financial controlswith reference to financial statements includes obtaining an understanding of suchinternal financial controls assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgementincluding the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion on the Company's internalfinancial controls with reference to standalone financial statements.

Meaning of Internal Financial Controls with Reference to FinancialStatements

6. A company's internal financial controls with reference tofinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. Acompany's internal financial controls with reference to financial statements includethose policies and procedures that

(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;

(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and

(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assetsthat could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls with Referenceto Financial Statements

7. Because of the inherent limitations of internal financial controlswith reference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

Opinion

8. In our opinion the Company has in all material respects adequateinternal financial controls with reference to standalone financial statements and suchcontrols were operating effectively as at 31st March 2021 based on the internal financialcontrols with reference to financial statements criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Noteissued by the ICAI.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Arun Tandon
Partner
Place: New Delhi Membership No.: 517273
Date : June 21 2021 UDIN No.: 20517273AAAACO1264

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