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Schaeffler India Ltd.

BSE: 505790 Sector: Engineering
NSE: SCHAEFFLER ISIN Code: INE513A01022
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OPEN 2169.95
PREVIOUS CLOSE 2112.40
VOLUME 1889
52-Week high 2437.05
52-Week low 1024.30
P/E 48.12
Mkt Cap.(Rs cr) 33,525
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 2169.95
CLOSE 2112.40
VOLUME 1889
52-Week high 2437.05
52-Week low 1024.30
P/E 48.12
Mkt Cap.(Rs cr) 33,525
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Schaeffler India Ltd. (SCHAEFFLER) - Auditors Report

Company auditors report

To the Members of Schaeffler India Limited Report on the Audit of theFinancial Statements

Opinion

1. We have audited the accompanying financial statements of SchaefflerIndia Limited (‘the Company') which comprise the Balance Sheet as at 31December 2021 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 endedand a summary of the significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according tothe explanations given to us the aforesaid financial statements give the informationrequired by the Companies Act 2013 (‘Act') in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia including Indian Accounting Standards (‘Ind AS') specified under section133 of the Act of the state of affairs of the Company as at 31 December 2021 and itsprofit (including other comprehensive income) its cash flows and the changes in equityfor 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 theethical requirements that are relevant to our audit of the financial statements in termsof the Code of Ethics issued by the Institute of Chartered Accountants of India(‘ICAI') and the relevant provisions of the Act and the rules thereunder and wehave 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 Matters

4. Key audit matters are those matters that in our professionaljudgment were of most significance in our audit of the financial statements of thecurrent period. These matters were addressed in the context of our audit of the financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.

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

Key audit matter How our audit addressed the key audit matter
Revenue Recognition (refer note 24 and 47 of the accompanying financial statements) Our key audit procedures around revenue recognition included and not limited to the following:
The Company's revenue principally comprises sale of goods. Revenue from the sale of goods is recognised at point in time when the control of the goods is transferred to the customers which is on dispatch/ delivery in accordance with the terms of sales contracts. • Obtained an understanding of and assessed the design implementation and operating effectiveness of management's key internal financial controls in relation to revenue recognition;
We have identified the recognition of revenue as a key audit matter since the Company has various customers with different terms of trade which increase the risk of error in the timing of revenue recognition. Revenue is determined to be an area involving significant risk in line with the requirements on Standards of Auditing and hence requiring significant auditor attention. • Assessed the appropriateness of the revenue recognition accounting policies of the Company including those relating to variable consideration by evaluating compliance with the applicable accounting standards.
The Company and its external stakeholders focus on revenue as a key performance indicator and therefore there could be a risk of material misstatement in so far as revenue recognition is concerned. • Selected samples of revenue transactions during the year and inspected underlying customer contracts and shipping documents to identify the terms and conditions relating to the transfer of control of the products sold and assessed the Company's timing of revenue recognition;
Considering the aforesaid significance to our audit and the external stakeholders revenue recognition has been considered as a key audit matter for the current year's audit. • Performed analytical review procedures on revenue recognised during the year to identify any unusual and/or material variances.
• Tested selected samples of revenue transactions recorded before and after the financial year end date to determine whether the revenue has been recognised in the appropriate financial period.
Evaluated the appropriateness and adequacy of disclosures in the financial statements in respect of revenue recognition with the applicable standards.
Related Party Transactions (refer note 37 of the accompanying financial statements) Our key audit procedures around Related party transactions included and not limited to the following:
The Company has entered into several transactions with related parties during the year ended 31 December 2021 and has outstanding balances as the year-end. • Obtained an understanding and assessed the design implementation and operating effectiveness of management's key internal financial controls in relation to identification and disclosure of related party transactions and arm's length assessment.
The Company's related party transactions comprises purchase and sale of goods purchase of tangible assets payments for royalty information technology services and other services guarantee commission and reimbursements. • Assessed the compliance with the SEBI listing regulations and the regulations under the Companies Act 2013 including authorization and approvals as specified in Sections 177 and 188 of the Companies Act 2013 with respect to the related party transactions as applicable.
Each related party operates under different jurisdiction and applies its own pricing model to be compliant with the respective legal and tax (transfer pricing) framework of the respective jurisdiction. • Evaluated the compliance with Indian Transfer Pricing Regulations with respect to arm's length based on the transfer pricing documentation prepared by the Company. This also involved obtaining views from the auditor's internal tax experts regarding the arm's length pricing.
We have identified transactions with related parties as a key audit matter due to quantum of transactions completeness of the disclosures made in the financial statements compliance with various tax requirements and judgements involved to ensure arm's length pricing compliance with statutory regulations governing related party transactions such as Companies Act 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 (‘the SEBI listing regulations'). • On a sample basis inspected relevant ledgers agreements and other information that may indicate the existence of related party relationships or transactions. We also assessed the completeness of related parties with reference to the various statutory registers and declarations maintained by the Company's management.
Evaluated the adequacy and appropriateness of the disclosures on related party transactions in the financial statements with the requirements of the applicable accounting standard.

Information other than the Financial Statements and

Auditor's Report thereon

6. The Company's Board of Directors are responsible for the otherinformation. The other information comprises the information included in the AnnualReport but does not include the financial statements and our auditor's reportthereon.

Our opinion on the 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 ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.

Responsibilities of Management and Those Charged with Governance forthe Financial Statements

7. The accompanying financial statements have been approved by theCompany's Board of Directors. The Company's Board of Directors are responsiblefor the matters stated in section 134(5) of the Act with respect to the preparation andpresentation of these financial statements that give a true and fair view of the financialposition financial performance including other comprehensive income changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Ind AS specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

8. In preparing the financial statements Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless Board of Directors either intend to liquidate the Company or tocease operations or has no realistic alternative but to do so.

9. Those Board of Directors are 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 a material uncertainty exists we are required todraw attention in our auditor's report to the related disclosures in the financialstatements or if such disclosures are inadequate to modify our opinion. Our conclusionsare 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 goingconcern;

• 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 financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Other Matter

15. The financial statements of the Company for the year ended 31December 2020 were audited by the predecessor auditor B S R & Co. LLP who haveexpressed an unmodified opinion on those financial statements vide their audit reportdated 16 February 2021. In respect of this matter our opinion is not modified.

Report on Other Legal and Regulatory Requirements

16. 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.

17. 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.

18. 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 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 financial statements dealt with by this report are in agreementwith the books of account;

d) in our opinion the aforesaid financial statements comply with IndAS 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 December 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 financial statements of the Company as on 31 December 2021 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date and ourreport dated 16 February 2022 as per Annexure B expressed unmodified opinion; 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 has disclosed the impact of pending litigations on itsfinancial position as at 31 December 2021;

ii. the Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses as at 31December 2021;

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 31 December 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 financial statements. Hence reportingunder this clause is not applicable.

Annexure A

to the Independent Auditor's Report of even date to the members ofSchaeffler India Limited on the financial statements for the year ended 31 December 2021

Based on the audit procedures performed for the purpose of reporting atrue and fair view on the 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 property plant andequipment.

(b) The Company has a regular program of physical verification of itsproperty plant and equipment under which property plant and equipment are verified in aphased manner over a period of two years which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. In accordance with thisprogram certain property plant and equipment were verified during the year and nomaterial discrepancies were noticed on such 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 except for the following properties which were transferred as a result of mergerof companies as stated in note 46 to the financial statements wherein the title deeds arein the name of the erstwhile company:

Nature of property Total Number of Cases Whether leasehold / freehold Gross block as on 31 December 2021 (Rs in million) Net block on 31 December 2021 (Rs in million) Remarks
Land 1 Freehold 21.3 21.3
Land 1 Leasehold 65.9 65.1

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

(iii) The Company has not granted any loan secured or unsecured tocompanies firms Limited Liability Partnerships (LLPs) or other parties covered in theregister maintained under Section 189 of the Act. Accordingly the provisions of clauses3(iii)(a) 3(iii)(b) and 3(iii)(c) of the Order are not applicable.

(iv) In our opinion the Company has not entered into any transactioncovered under Sections 185 and 186 of the Act. Accordingly the provisions of clause 3(iv)of the Order are not applicable.

(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 goods andservice tax sales-tax service tax duty of customs duty of excise value added taxcess and other material statutory dues as applicable to the appropriate authorities.Further no undisputed amounts payable in respect thereof were outstanding at the year-endfor a period of more than six months from the date they become payable.

(b) There are no dues in respect of goods and service tax and duty ofcustoms that have not been deposited with the appropriate authorities on account of anydispute.

The dues outstanding in respect of income-tax sales-tax service taxduty of excise and value added tax on account of any dispute are as follows:

Statement of Disputed Dues

Name of the statute Nature of dues Amount (Rs in million) Period to which the amount relates Forum where dispute is pending
State and Central Sales Tax Act Duty Interest and Penalty 0.1 2006-07 Dy. Commissioner Sales Tax (A) Pune
12.7 2008-09 Sales Tax Tribunal Ahmedabad
0.4 2012-13 Joint Commissioner Sales Tax (A) Vadodara
188.9 2015-16 Joint Commissioner Sales Tax (A)
71.5 2016-17
38.0 2017-18
The Finance Act 1994 Duty and Interest and penalty 18.1 2008-09 to 2012-13 Petition with Bombay HC
13.7 April 2013 to Dec 2014
9.6 2008-09 to 2013-14 Customs Excise and Service Tax Appellate Tribunal Ahmedabad (CESTAT)
3.3 Sep 2015 to June 2017
2.7 Feb 2016 to June 2017 Customs Excise and Service Tax Appellate Tribunal Mumbai (CESTAT)
The Central Excise Act 1944 Duty Interest and Penalty 11.6 2009-10 to June 2011 Customs Excise and Service Tax Appellate Tribunal Mumbai (CESTAT)
2.4 2013-14
2.8 2014-15
94.2 Oct 2011 to Sep 2016 Customs Excise and Service Tax Appellate Tribunal Ahmedabad (CESTAT)
5.6 Oct 2016 to June 2017
115.5 September 2010 to March 2012 Customs Excise and Service Tax Appellate Tribunal Chennai (CESTAT)
37.5 April 2012 and May 2012 Customs Excise and Service Tax Appellate Tribunal Chennai (CESTAT)
Income Tax Act 1961 Tax and interest 25.4 AY 2009-10 Commissioner of Income Tax (Appeals)
3.4 AY 2011-12
14.4 AY 2012-13
17.6 AY 2013-14
4.0 AY 2015-16
13.7 AY 2016-17
29.3 AY 2017-18
46.4 AY 2018-19

Above amounts are net of amounts paid under protest for sales-taxaggregating to Rs 13.9 million Excise Duty aggregating to Rs 13.8 million Service taxaggregating to Rs 4.2 million and for Income-tax aggregating to Rs 48.7 million.

(viii) The Company has no loans or borrowings payable to a financialinstitution or a bank or government and no dues payable to debenture-holders during theyear. Accordingly the provisions of clause 3(viii) of the Order are not applicable.

(ix) The Company did not raise moneys by way of initial public offer orfurther public offer (including debt instruments) and did not have any term loansoutstanding during the year. Accordingly the provisions of clause 3(ix) of the Order arenot applicable.

(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 financial statements etc. as required by the applicable IndAS.

(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

to the Independent Auditor's Report of even date to the members ofSchaeffler India Limited on the financial statements for the year ended 31 December 2021

Independent Auditor's Report on the internal financial controlswith reference to the financial statements under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 (‘the Act')

1. In conjunction with our audit of the financial statements ofSchaeffler India Limited (‘the Company') as at and for the year ended 31December 2021 we have audited the internal financial controls with reference to financialstatements 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). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of the Company's business including adherence to the Company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors 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 ICAIprescribed under Section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to financial statements and the Guidance Noteissued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wereestablished and maintained and if such controls operated effectively in all materialrespects.

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 financial statements.

Meaning of Internal Financial Controls with Reference to FinancialStatements

6. A company's internal financial controls with reference to financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to financial statements include those policies andprocedures 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 as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton the financial statements.

Inherent Limitations of Internal Financial Controls with Reference toFinancial 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 financial statements and such controls wereoperating effectively as at 31 December 2021 based on the internal financial controlswith reference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note issued by the ICAI.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Khushroo B. Panthaky
Partner
Place: Mumbai Membership No.: 042423
Date: 16 February 2022 UDIN: 22042423ACVVTW2767

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