You are here » Home » Companies » Company Overview » Schaeffler India Ltd

Schaeffler India Ltd.

BSE: 505790 Sector: Engineering
NSE: SCHAEFFLER ISIN Code: INE513A01014
BSE 12:07 | 15 Jul 3575.80 -8.75
(-0.24%)
OPEN

3588.40

HIGH

3588.40

LOW

3560.00

NSE 11:59 | 15 Jul 3560.00 -18.10
(-0.51%)
OPEN

3595.95

HIGH

3599.95

LOW

3552.00

OPEN 3588.40
PREVIOUS CLOSE 3584.55
VOLUME 61
52-Week high 4950.00
52-Week low 3044.10
P/E 32.90
Mkt Cap.(Rs cr) 11,178
Buy Price 3557.15
Buy Qty 5.00
Sell Price 3568.70
Sell Qty 2.00
OPEN 3588.40
CLOSE 3584.55
VOLUME 61
52-Week high 4950.00
52-Week low 3044.10
P/E 32.90
Mkt Cap.(Rs cr) 11,178
Buy Price 3557.15
Buy Qty 5.00
Sell Price 3568.70
Sell Qty 2.00

Schaeffler India Ltd. (SCHAEFFLER) - Auditors Report

Company auditors report

To the Members of Schaeffler India Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Schaeffler India Limited ("theCompany") which comprise the balance sheet as at December 31 2019 and thestatement of profit and loss (including other comprehensive income) statement of changesin equity and statement of cash flows for the year then ended and notes to the financialstatements including a summary of the significant accounting policies and otherexplanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("Act") in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at December 31 2019 and profit and othercomprehensive income 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) specifiedunder Section 143(10) of the Act.

Our responsibilities under those SAs are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the financial statements under the provisions of the Act and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.

The key audit matter How the matter was addressed in our audit
Revenue Recognition In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
The Company's revenue principally comprises sale of goods. • Obtain an understanding of and assessing the design implementation and operating effectiveness of management's key internal financial controls in relation to revenue recognition.
Revenue from the sale of goods is recognised when the control of the goods is transferred to the customers which is on dispatch/delivery in accordance with the terms of sales contracts.
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. As the revenue is a key performance indicator of the Company there is an inherent risk of misstatement in revenue recognition. Refer note 24 to the Financial Statements • Selecting a sample of revenue transactions during the year (including year end cut off testing) and inspecting underlying customer contracts and shipping documents to identify the terms and condition relating to the transfer of control of the products sold and assessing the Company's timing of revenue recognition.
• Considered the adequacy of the Company's disclosures in respect of revenue.
Related Party Transactions In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence:
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 interest and repayment of loan taken guarantee commission and reimbursements.
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. • Obtain an understanding of and assessing the design implementation and operating effectiveness of management's key internal financial controls in relation to related party transactions and arm's length assessment.
• Evaluating the compliance with Companies Act 2013 and Indian Transfer Pricing Regulations with respect to arm's length based on the transfer pricing documentation prepared by the Company.
Transactions with related parties is a key audit matter due to quantum of transactions and also from an arm's length pricing perspective. • Evaluation of management's assessment including views from the management's tax experts on transfer pricing compliance along with the involvement of auditors' tax experts.
Refer note 37 to the Financial Statements. • Assessing the appropriateness and sufficiency of the disclosures on related party transactions in the financial statements.

Other Information

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditors' reportthereon.

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

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.

Management's Responsibility for the Financial Statements

The Company's management and Board of Directors are responsible for the matters statedin Section 134(5) of the Act with respect to the preparation of these financial statementsthat give a true and fair view of the state of affairs profit and other comprehensiveincome changes in equity and cash flows of the Company in accordance with the accountingprinciples generally accepted in India including the Indian Accounting Standards (Ind AS)specified under Section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgements 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 financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.

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

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

As part of an audit in accordance with SAs we exercise professional judgement andmaintain professional skepticism throughout the audit. We also:

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

• 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 with reference to financial statements in place andthe operating effectiveness of such controls.

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

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe 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'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

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

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

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

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditors' report unless law or regulation precludes public disclosure about the matter orwhen 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 (Auditors' Report) Order 2016 ("the Order")issued by the Central Government 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 theOrder to the extent applicable.

(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 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 statement of cash flows dealt with bythis Report are in agreement with the books of account;

d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder Section 133 of the Act;

e) On the basis of the written representations received from the directors as onDecember 31 2019 taken on record by the Board of Directors none of the directors isdisqualified as on December 31 2019 from being appointed as a director in terms ofSection 164(2) of the Act; and

f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".

(B) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations as at December 31 2019on its financial position in its financial statements - Refer Note 35 to the financialstatements;

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on longterm contracts includingderivative contracts- Refer Note 36 to the financial statements;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund (‘IEPF') by the Company except for anamount of ' 247805 pertaining to dividends related to prior years and the Company is inthe process of transferring the same to IEPF; and

iv. The disclosures in the financial statements regarding holdings as well as dealingsin specified bank notes during the period from November 8 2016 to December 30 2016 havenot been made in these financial statements since they do not pertain to the financialyear ended December 31 2019.

(C) With respect to the matter to be included in the Auditors' Report under Section197(16):

In our opinion and according to the information and explanations given to us theremuneration paid by the Company to its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.

For B S R & Co. LLP
Chartered Accountants
Firm Registration No: 101248W/W-100022
Nirav Patel
Partner
Place: Pune Membership No. 113327
Date: February 12 2020 UDIN: 20113327AAAAAJ7108

Annexure ‘A' to the Independent Auditors' Report

December 31 2019

(Referred to in our report of even date)

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

(b) The Company has a programme of physical verification of its property plant andequipments by which all property plant and equipments are verified in a phased mannerover a period of two years. In our opinion this periodicity of physical verification isreasonable having regard to the size of the Company and the nature of its assets.Accordingly a part of the property plant and equipments were physically verified by themanagement in current year and no material discrepancies were noticed on suchverification.

(c) In our opinion and according to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties included in property plant and equipment are held in the name of the Companyexcept in case of immovable properties of two transferor entities which have been mergedwith the Company during the previous year pursuant to the Scheme of Amalgamation and theirtitle transfer proceedings are under progress.

(ii) The inventory except goods-in-transit and stocks lying with certain thirdparties has been physically verified by the management during the year. For stocks lyingwith third parties at the year-end written confirmations have been obtained. In ouropinion the frequency of such verification is reasonable. No material discrepancies werenoticed on such physical verification.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms or other parties covered inthe register maintained under Section 189 of the Companies Act 2013. AccordinglyParagraph 3(iii) of the Order is not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to usthere are no loans guarantees or securities in respect of which provision of Section 185of the Companies Act 2013 are applicable. Further in our opinion and according to theinformation and explanations given to us provisions of Section 186 of the Companies Act2013 in respect of loans and advances given investments made and guarantees securitiesgiven have been complied by the Company.

(v) The Company has not accepted any deposits to which the directives issued by theReserve Bank of India and the provisions of Sections 73 to 76 or any other relevantprovisions of the Companies Act 2013 apply. Accordingly paragraph 3(v) of the Order isnot applicable to the Company.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules prescribed by the Central Government for maintenance of cost records underSection 148(1) of the Companies Act 2013 in respect of bearings for the year endedDecember 31 2019 and are of the opinion that prima facie the prescribed accounts andrecords have been made and maintained. However we have not made a detailed examination ofthe records.

(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund Employees' StateInsurance Income Tax Duty of Customs Goods and Services Tax and other materialstatutory dues have been regularly deposited during the year by the Company with theappropriate authorities.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income Tax CustomsDuty Goods and Services Tax and other material statutory dues were in arrears as atDecember 31 2019 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us there are no dues ofProvident Fund Employees' State Insurance Income Tax Sales Tax Service Tax WealthTax Excise Duty Customs Duty Value Added Tax and Goods and Services Tax which have notbeen deposited with the appropriate authorities on account of any dispute other than thosementioned below:

Name of statute Nature of dues Amount (Rs. in million) Period Forum where dispute is pending
State and Central Sales Tax Act Duty Interest and Penalty 0.1 2006-07 Dy. Commissioner Sales Tax
0.2 2008-09 Sales Tax Tribunal Chennai
0.3 2009-10
0.4 2010-11
0.7 2011-12
0.6 2012-13
0.3 2013-14
0.4 2012-13 Joint Commissioner Sales Tax (A) Vadodara
158.6 2015-16 Joint Commissioner Sales Tax (A) Haryana
The Finance Act 1994 Duty Interest and Penalty 18.0 2008-09 to 2012-13 Petition with Bombay HC
13.6 April 2013 to Dec 2014
9.6 2008-09 to 2013-14 Customs Excise and Service Tax Appellate
3.3 Sep 2015 to June 2017 Tribunal Ahmedabad (CESTAT)
2.8 Feb 2016 to June 2017 Commissioner (A) Pune
The Central Excise Act 1944 Duty Interest and Penalty 11.6 2009-10 to June 2011 Customs Excise and Service Tax Appellate
2.4 2013-14 Tribunal Pune (CESTAT)
2.9 2014-15
94.1 Oct 2011 to Sep 2016 Customs Excise and Service Tax Appellate
5.6 Oct 2016 to June 2017 Tribunal Ahmedabad (CESTAT)
115.4 Sep 2010 to March 2012 Customs Excise and Service Tax Appellate Tribunal Chennai (CESTAT) and applied at Sabka Vishwas Scheme 2020
37.4 April 2012 and May 2012 Customs Excise and Service Tax Appellate
0.7 April 2011 and March 2015 Tribunal Chennai (CESTAT)
Income Tax Act 1961 Tax and interest 0.3 2004-05 Commissioner of Income Tax (Appeals)
14.4 2012-13
17.6 2013-14
21.3 2015-16
14.3 2016-17

Above amounts are net of amounts paid under protest for Sales Tax aggregating to Rs.12.3 million Excise Duty aggregating to ' 13.8 million Service Tax aggregating to ' 4.1million and for Income Tax aggregating to ' 539.9 million.

(viii) In our opinion and according to the information and explanations given to usthe Company does not have any loans or borrowing from financial institutions or banks orGovernment or dues to debenture holders during the year. Accordingly paragraph 3(viii) ofthe Order is not applicable to the Company.

(ix) According to the information and explanations given to us the Company has notraised any money by way of initial public offer/ further public offer/ debt instrumentsand term loans. Accordingly paragraph 3(ix) of the Order is not applicable to theCompany.

(x) In our opinion and according to the information and explanations given to us wereport that no fraud by the Company or on the Company by its officers and employees hasbeen noticed or reported during the year.

(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the managerial remuneration has been paid/provided in accordance with the requisite approvals mandated by the provisions of Section197 read with Schedule V to the Companies Act 2013.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable to the Company.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with related parties are incompliance with Section 177 and Section 188 of the Companies Act 2013 where applicableand details of such transactions have been disclosed in the notes to the Ind AS financialstatements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year under review. Accordingly paragraph 3(xiv) of the Order is not applicable to theCompany.

(xv) According to the information and explanations given to us the Company has notentered into any non-cash transactions with directors or persons connected with them asreferred to in Section 192 of the Companies Act 2013. Accordingly paragraph 3(xv) of theOrder is not applicable to the Company.

(xvi) According to the information and explanations given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.Accordingly paragraph 3(xvi) of the Order is not applicable to the Company.

For B S R & Co. LLP
Chartered Accountants
Firm Registration No: 101248W/W-100022
Nirav Patel
Partner
Place: Pune Membership No. 113327
Date: February 12 2020 UDIN: 20113327AAAAAJ7108

Annexure ‘B' to the Independent Auditors' Report December 312019

Report on the internal financial controls with reference to the aforesaid financialstatements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013

(Referred to in paragraph 1(f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

Opinion

We have audited the internal financial controls with reference to financial statementsof Schaeffler India Limited ("the Company") as of December 31 2019 inconjunction with our audit of the financial statements of the Company for the year endedon that date.

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at December 31 2019 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 on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the "Guidance Note").

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. 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 the Companies Act 2013 (hereinafter referred to as"the Act").

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed underSection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing 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 judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.

Meaning of Internal Financial controls with Reference to Financial Statements

A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the Company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the Company are being made only in accordance withauthorisations of management and directors of the Company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the Company's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial controls with Reference to FinancialStatements

Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

For B S R & Co. LLP
Chartered Accountants
Firm Registration No: 101248W/W-100022
Nirav Patel
Partner
Place: Pune Membership No. 113327
Date: February 12 2020 UDIN: 20113327AAAAAJ7108