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Rico Auto Industries Ltd.

BSE: 520008 Sector: Auto
NSE: RICOAUTO ISIN Code: INE209B01025
BSE 00:00 | 18 Sep 31.75 0.25
(0.79%)
OPEN

31.80

HIGH

33.05

LOW

31.60

NSE 00:00 | 18 Sep 31.75 0.15
(0.47%)
OPEN

31.90

HIGH

33.25

LOW

31.55

OPEN 31.80
PREVIOUS CLOSE 31.50
VOLUME 55930
52-Week high 54.00
52-Week low 15.95
P/E 529.17
Mkt Cap.(Rs cr) 430
Buy Price 31.70
Buy Qty 978.00
Sell Price 33.00
Sell Qty 1200.00
OPEN 31.80
CLOSE 31.50
VOLUME 55930
52-Week high 54.00
52-Week low 15.95
P/E 529.17
Mkt Cap.(Rs cr) 430
Buy Price 31.70
Buy Qty 978.00
Sell Price 33.00
Sell Qty 1200.00

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 of Rico Auto Industries Limited ('the Company') which comprise the Balance Sheet as at 31st March 2019 the Statement of Profit and Loss (including Other Comprehensive Income) the Cash Flow Statement and the Statement of Changes in Equity for the year then ended and a summary of the significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according to the explanations given to us the aforesaid standalone financial statements give the information required by the Companies Act 2013 ('Act') in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Indian Accounting Standards ('Ind AS') specified under section 133 of the Act of the state of affairs (financial position) of the Company as at 31st March 2019 and its profit (financial performance including other comprehensive income) its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ('ICAI') together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matter

4. Key audit matters are those matters that in our professional judgment were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters.

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

Key audit matterHow our audit addressed the key audit matter
Assessment of the realisability of loans and other receivables from step down subsidiary:Our audit included but were not limited to the following procedures:
As at 31st March 2019 the Company has given loans amounting to Rs. 49.06 crores to a step subsidiary company Rico Jinfei Wheels Limited (hereinafter referred to as Subsidiary) as disclosed in Note 7 and Note 43 to the accompanying standalone financial statements.a) Obtained an understanding from the management with respect to process and controls followed by the Company to determine recoverability of the amounts receivable from its subsidiary companies;
The subsidiary has incurred losses/ earned low operating profit during the current and previous years.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;
Since the recoverability of the aforesaid amounts 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.c) Assessed the professional competence objectivity and capabilities of the third party expert considered by the management for performing the required valuations to estimate the recoverable value of the amounts receivable from the subsidiary;
Management has assessed the realisability 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.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 where appropriate;
Considering the materiality of the above matter to the 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.f) Evaluated sensitivity analysis performed by the management and 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 of disclosures made in the financial statements in accordance with the applicable accounting standards.

Information other than the Financial Statements and Auditor's Report thereon

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

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

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

When we read the Annual Report if we conclude that there is a material misstatement therein we are required to communicate the matter to those charged with governance.

Responsibilities of Management and those charged with Governance for the Standalone Financial Statements

7. The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs (financial position) profit or loss (financial performance including other comprehensive income) changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Ind AS specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement whether due to fraud or error.

8. In preparing the financial statements management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

9. Those Board of Directors are also responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

10. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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

 Identify and assess the risks of material misstatement of the financial statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.

 Obtain an understanding of internal control relevant to the audit in order to design 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 has adequate internal financial controls system in place and the operating effectiveness of such controls.

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

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

 Evaluate the overall presentation structure and content of the financial statements including the disclosures and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

12. We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.

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

14. From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

15. As required by section 197(16) of the Act we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.

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

17. Further to our comments in Annexure A as required by section 143(3) of the Act we report that:

a) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

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

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

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

e) on the basis of the written representations received from the directors and taken on record by the Board of Directors none of the directors is disqualified as on 31st March 2019 from being appointed as a director in terms of section 164(2) of the Act;

f) we have also audited the internal financial controls over financial reporting (IFCoFR) of the Company as on 31st March 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated 29th May 2019 as per Annexure B expressed unmodified opinion; and

g) with respect to the other matters to be included in the Auditor'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 according to the explanations given to us:

i. the Company as detailed in Note 36 to the standalone financial statements has disclosed the impact of pending litigations on its financial position as at 31st March 2019;

ii. the Company has made provision as at 31st March 2019 as required under the applicable law or Ind AS for material foreseeable losses if any on long-term contracts including derivative contracts;

iii. there has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31st March 2019; and

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

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Ashish Gupta
Place : GurugramPartner
Date : May 29 2019Membership No.: 504662

Annexure A

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit and to the best of our knowledge and belief we report that:

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of property plant and equipment.

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

(c) The title deeds of all the immovable properties (which are included under the head 'Property plant and equipment') are held in the name of the Company.

(ii) In our opinion the management has conducted physical verification of inventory at reasonable intervals during the year except for goods-in-transit and stocks lying with third parties. For stocks lying with third parties at the year-end written confirmations have been obtained by the management. No material discrepancies were noticed on the aforesaid verification.

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

(a) in our opinion the terms and conditions of grant of such loans are not prima facie prejudicial to the company's interest.

(b) the schedule of repayment of principal and payment of interest has been stipulated and the principal amount is not due for repayment currently;

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

(iv) In our opinion the Company has complied with the provisions of Sections 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 within the 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 not applicable.

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

(vii) (a) Undisputed statutory dues including provident fund employees' state insurance income-tax sales-tax service tax duty of customs duty of excise value added tax cess and other material statutory dues as applicable have generally been regularly deposited to the appropriate authorities. Further no undisputed amounts payable in respect thereof were outstanding at the year-end for a period of more than six months from the date they became payable.

(b) The dues outstanding in respect of income-tax sales-tax service-tax duty of customs duty of excise and value added tax on account of any dispute are as follows:

Statement of Disputed Dues

Name of the statuteNature of duesAmount (Rs. in Crores)Amount paid under Protest (Rs. in Crores)Period to which the amount relatesForum where dispute is pending
Income Tax Act 1961Errors and Mismatch of challans in returns filed to Income Tax Department0.005NilAssessment year 2009-10 2010-11 2011-12Assessing Officer Income Tax Department.
Haryana VAT Act 2003Disallowance of certain expenses0.04NilFinancial year 2007-08Joint Commissioner
Gujarat VAT 2003Disallowance of input on rejected goods0.040.009Financial year 2017-18Gujarat Sales tax Tribunal
Finance Act 1994Claim of cenvat on construction & other repair & maintenance service0.64NilFinancial year 2005-06 to 2010-11Custom Excise & Service Tax Appellate Tribunal
Finance Act 1994Denial of credit taken on services of insurance catering tent house and taxi0.40NilFinancial year 2004-05 to 2007-08Custom Excise & Tribunal Service Tax Appellate
Finance Act 1994Denial of credit taken on services of insurance catering tent house and taxi0.17NilFinancial year 2005-06 to 2006-07Custom Excise & Service Tax Appellate Tribunal
Finance Act 1994Denial of credit taken on services of insurance catering tent house and cab.0.43NilFinancial year 2011-12 to 2012-13Custom Excise & Service Tax Appellate Tribunal
Finance Act 1994Denial of credit taken on services of insurance catering tent house and cab.0.09NilFinancial year 2013-14 to 2014-15Custom Excise & Service Tax Appellate Tribunal
Finance Act 1994Deposit of inadmissible cenvat credit availed on the capital goods destroyed in fire0.39NilFinancial year 2012-13Commissioner Central Excise (Appeal)
Finance Act 1994Denial of credit taken on outward freight0.07NilFinancial year 2012-13Commissioner Central Excise (Appeal)
Finance Act 1994Denial of credit taken on Service of insurance and tour and travelling services0.11NilFinancial year 2015-16 to 2017-18Commissioner Central Excise (Appeal)
Haryana Local Area Development Tax Act 2000Applicability of local area development tax on items purchased0.02NilFinancial year 2001-02 to 2003-04Joint Commissioner (Appeal)
Finance Act 1944Denial of exemption for dies sent to job worker on the premise of captive consumption3.250.10Financial year 2006-07High Court (Punjab & Haryana)
Central Excise Act 1944Supply of components without adding cost of designs/drawings/ specifications3.15NilFinancial year 2013-14 to 2017-18Commissioner of CGST
Central Excise Act 1944Non-payment of excise duty on amount of sales tax retained by the assessee0.56NilFinancial year 2011-12 to 2013-14GST Appellate Tribunal
Central Excise Act 1944Short reversal of cenvat credit on clearance of capital Goods during slump sale.1.07NilFinancial year 2017-18Additional Commissioner Central Goods & Service tax

(viii) The Company has not defaulted in repayment of loans or borrowings to any bank or financial institution during the year.

The Company has no borrowings to the government and did not have any outstanding debentures during the year.

(ix) The Company did not raise moneys by way of initial public offer or further public offer (including debt instruments). In our opinion the term loans were applied for the purposes for which the loans were obtained.

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

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

(xii) In our opinion the Company is not a Nidhi Company.

Accordingly provisions of clause 3(xii) of the Order are not applicable.

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

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

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

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

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Ashish Gupta
Place : GurugramPartner
Date : May 29 2019Membership No.: 504662

Annexure B

Independent Auditor's Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ('the Act')

1. In conjunction with our audit of the standalone financial statements of Rico Auto Industries Limited ('the Company') as at and for the year ended 31st March 2019 we have audited the internal financial controls over financial reporting ('IFCoFR') of the Company as at that date.

Management's Responsibility for Internal Financial Controls

2. The Company's Board of Directors is responsible for establishing and maintaining internal financial controls based on internal control over financial reporting criteria established by the company considering the essential components of internal control stated in guidance note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance note) issued by the Institute of Chartered Accountants of India ('ICAI'). These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of the Company's business including adherence to the Company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Act.

Auditor's Responsibility

3. Our responsibility is to express an opinion on the Company's IFCoFR based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by ICAI and deemed to be prescribed under Section 143(10) of the Act to the extent applicable to an audit of IFCoFR and the Guidance Note issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate IFCoFR were established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining an understanding of IFCoFR assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A company's IFCoFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's IFCoFR include those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition use or disposition of the company's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

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

Opinion

8. In our opinion the Company has in all material respects adequate internal financial controls over financial reporting and such controls were operating effectively as at 31st March 2019 based on internal control over financial reporting criteria established by the company considering the essential components of internal control stated in the Guidance Note issued by ICAI.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Ashish Gupta
Place : GurugramPartner
Date : May 29 2019Membership No.: 504662