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Shanthi Gears Ltd.

BSE: 522034 Sector: Auto
NSE: SHANTIGEAR ISIN Code: INE631A01022
BSE 14:44 | 03 Dec 149.50 -2.25
(-1.48%)
OPEN

155.80

HIGH

155.80

LOW

149.05

NSE 14:37 | 03 Dec 149.50 -2.45
(-1.61%)
OPEN

153.90

HIGH

153.90

LOW

149.00

OPEN 155.80
PREVIOUS CLOSE 151.75
VOLUME 1616
52-Week high 211.20
52-Week low 106.50
P/E 34.13
Mkt Cap.(Rs cr) 1,147
Buy Price 149.55
Buy Qty 1.00
Sell Price 150.10
Sell Qty 8.00
OPEN 155.80
CLOSE 151.75
VOLUME 1616
52-Week high 211.20
52-Week low 106.50
P/E 34.13
Mkt Cap.(Rs cr) 1,147
Buy Price 149.55
Buy Qty 1.00
Sell Price 150.10
Sell Qty 8.00

Shanthi Gears Ltd. (SHANTIGEAR) - Auditors Report

Company auditors report

TO THE MEMBERS OF SHANTHI GEARS LIMITED

Report on the Audit of the Financial Statements Opinion

We have audited the accompanying financial statements of Shanthi Gears Limited("the Company") which comprise the Balance Sheet as at 31 March 2021 and theStatement of Profit and Loss (including Other Comprehensive Income) the Statement of CashFlows and the Statement of Changes in Equity or the year then ended and a summary ofsignificant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the financial statements give the information required by the Companies Act2013 ("the Act") in the manner so required and give a true and fair view inconformity with the Indian Accounting Standards prescribed under section 133 of the Actread with the Companies (Indian Accounting Standards) Rules 2015 as amended ("IndAS") and other accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2021 and its profit total comprehensive incomeits cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under section 143(10) of the Act (SAs). Our responsibilities underthose Standards are further described in the Auditor's Responsibility for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (ICAI) together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules made there under andwe have fulfilled our other ethical responsibilities in accordance with these requirementsand the ICAI's Code of Ethics. We believe that the audit evidence obtained by us issufficient and appropriate to provide a basis for our audit opinion on the financialstatements.

Key Audit Matters

Key audit matters are those matters that in our professional judgment 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 matte Wehave determined the matters described below to be the key audit matters to be communicatedin our report.

Sl. No. Key Audit Matter Auditor's Response
1 Valuation of inventory work in progress Principal audit procedures
The Company has significant balance in inventory work in progress. Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
The valuation of inventory work in progress are complex as it includes inputs for overheads from various process each overhead is allocated to inventory work in progress based on different basis for allocation. • Obtained an understanding of the determination and allocation of the overheads values to inventory work in progress and assessed and tested the appropriateness of capturing the overhead from various process basis of allocation of overheads.
Inventory work in progress are valued at lower of cost or net realisable value and is dependent on establishing appropriate valuation processes. • Evaluated the design of internal controls relating to the overhead allocation in inventory work in progress and tested the operating effectiveness of the controls relating to overhead allocation of inventory work in progress.
Management uses Information Technology System (Oracle) for calculating and apportioning the overheads cost in inventory work in progress. Tested the controls placed in Information Technology for overheads allocation in inventory work in progress using the experts.
• Traced on a sample basis the cost of overheads considered for inventory work in progress to the actual cost of expenses accounted in the financial statements.
• Tested on a sample basis the correctness of capturing of cost of overheads from various process and tested on sample basis the correctness of basis of allocation of overheads in accordance with the Generally Accepted Accounting Principles (GAAP).
• Verified on a sample basis the cost of inventory and sales value agreed for inventory in the sales contract.
• Used Information technology expert to validate the Information system configurations that are relevant to allocation of overheads to the inventory work in progress

Information Other than the Financial Statements and Auditor's Report Thereon

The Company's Board of Directors is responsible for the preparation of otherinformation. The other information comprises the information included in the Board'sReport & Management Discussion and Analysis including Annexures to the Board's ReportCorporate Governance and Shareholder's Information but does not include the financialstatements and our auditor's report thereon.

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 in consistent with the financial statements or our knowledge obtained duringthe course of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance including othercomprehensive income cash flows and changes in equity of the Company in accordance withthe IndAS and other accounting principles generally accepted in India. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation 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 statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

The Board of Directors are responsible for overseeing the Company's financial reportingprocess.

Auditor's Responsibility 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 judgment 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 from fraud is higher thanfor one resulting from error as fraud may involve collusion forgery intentionalomissions misrepresentations or the override of internal control.

• Obtain an understanding of internal financial control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.

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

Materiality is the magnitude of misstatements in the financial statements thatindividually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

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

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

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matte We describe these matters in ourauditor's 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 Section 143(3) of the Act based on our audit 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 and the reports of theother audito

c) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome the Statement of Cash Flows and Statement of Changes in Equity dealt with by thisReport 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 on March31 2021 taken on record by the Board of Directors none of the directors are disqualifiedas on March 31 2021from being appointed as a director in terms of Section 164(2) of theAct.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.

g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended:

In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.

h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:

1. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements;

ii. The Company did not have any long-term contracts including derivative contracts.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company

2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.

For DELOITTE HASKINS & SELLS Chartered Accountants (Firm's Registration No. 008072S)
Bengaluru 24 May 2021 Balaji M.N. Partner (Membership No. 202094) (UDIN :21202094AAAADH4576)

Report on Internal Financial Controls Over Financial Reporting ANNEXURE "A"TO THE INDEPENDENT AUDITOR'S REPORT

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

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of ShanthiGears Limited ("the Company") as of March 31 2021 in conjunction with our auditof the Ind AS financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting of the Company based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.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 over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's 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 systemover financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that

(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

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

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2021 based on the criteria forinternal financial control over financial reporting established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India.

For DELOITTE HASKINS & SELLS Chartered Accountants (Firm's Registration No. 008072S)
Bengaluru 24 May 2021 Balaji M.N. Partner (Membership No. 202094) (UDIN : 21202094AAAADH4576)

(Referred to in paragraph 2 under "Report on Other Legal and RegulatoryRequirements" section of our report of even date)

i. a) The Company has maintained proper records showing full particulars includingquantitative details and situation of the fixed assets.

b) Some of the fixed assets were physically verified during the year by the Managementin accordance with a programme of verification which in our opinion provides forphysical verification of all the fixed assets at reasonable intervals. According to theinformation and explanation given to us no material discrepancies were noticed on suchverification.

c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed provided to us we reportthat the title deeds comprising all the immovable properties of land and buildings whichare freehold are held in the name of the Company as at the balance sheet date.

ii. As explained to us the inventories were physically verified during the year by theManagement at reasonable intervals and no material discrepancies were noticed on physicalverification.

iii. The company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained undersection 189 of the Companies Act 2013.

iv. The Company has not granted any loans made investments or provided guarantees andhence reporting under clause (iv) of the CARO 2016 is not applicable.

v. According to the information and explanations given to us the Company has notaccepted any deposit during the year to which the provisions of Sections 73 to 76 or anyother relevant provisions of Companies Act 2013 were applicable.

vi. The maintenance of cost records has been specified by the Central Government undersection 148(1) of the Companies Act 2013 for Gears and Accessories. We have broadlyreviewed the cost records maintained by the Company pursuant to the Companies (CostRecords and Audit) Rules 2014 as amended prescribed by the Central Government undersub-section (1) of Section 148 of the Companies Act 2013 and are of the opinion thatprima facie the prescribed cost records have been made and maintained. We have howevernot made a detailed examination of the cost records with a view to determine whether theyare accurate or complete.

vii. According to the information and explanations given to us in respect of statutorydues:

a. The Company has been generally regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income-tax Service Tax Goods andServices Tax Cess and other material statutory dues applicable to it to the appropriateauthorities.

b. There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income-tax Goods and Services Tax Cess and other material statutorydues in arrears as at March 31 2021 for a period of more than six months from the datethey became payable.

c. Details of dues of Income-tax Excise Duty Service Tax and which have not beendeposited as on March 31 2021 on account of disputes are given below:

Name of Statute Nature of Dues Forum where dispute is pending Period to which the amount relates Amount involved ( In crores) Amount unpaid ( In crores)
Central Excise Act 1944 Excise Duty on Inter unit transfer of Machinery Jurisdictional Officer 2005-06 1.52* 1.52
Income Tax Act 1961 Demand on Dividend distribution tax Joint Commissioner of Income tax Range III 2010-11 0.03 0.03
Income Tax Act 1961 Income tax demand payable Jurisdictional Assessing Officer 2017-18 4.57 4.57

* Includes penalty of 0.76 Crores

viii. The Company has not taken any loans or borrowings from financial institutionsbanks and government or has not issued any debentures. Hence reporting under clause (viii)of CARO 2016 is not applicable to the Company.

ix. The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause (ix) ofthe CARO 2016 Order is not applicable

x. To the best of our knowledge and according to the information and explanations givento us no fraud by the Company and no material fraud on the Company by its officers oremployees has been noticed or reported during the year.

xi. In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the CompaniesAct 2013.

xii. The Company is not a Nidhi Company and hence reporting under clause (xii) of theCARO 2016 Order is not applicable.

xiii. In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the financial statements as required by the applicableaccounting standards.

xiv. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause (xiv) of CARO 2016 Order is not applicable to the Company.

xv In our opinion and according to the information and explanations given to us duringthe year the Company has not entered into any non-cash transactions with its directors orpersons connected with them and hence provisions of section 192 of the Companies Act 2013are not applicable.

xvi. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.

For DELOITTE HASKINS & SELLS

Chartered Accountants

(Firm's Registration No. 008072S)

Balaji M.N. Partner

(Membership No. 202094)

(UDIN : 21202094AAAADH4576)

Bengaluru 24 May 2021

.