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Sterling Tools Ltd.

BSE: 530759 Sector: Engineering
NSE: STERTOOLS ISIN Code: INE334A01023
BSE 00:00 | 12 Aug 179.80 0
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NSE 00:00 | 12 Aug 179.40 2.30
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OPEN 178.50
PREVIOUS CLOSE 179.80
VOLUME 2041
52-Week high 256.05
52-Week low 105.30
P/E 46.58
Mkt Cap.(Rs cr) 647
Buy Price 177.00
Buy Qty 42.00
Sell Price 187.95
Sell Qty 100.00
OPEN 178.50
CLOSE 179.80
VOLUME 2041
52-Week high 256.05
52-Week low 105.30
P/E 46.58
Mkt Cap.(Rs cr) 647
Buy Price 177.00
Buy Qty 42.00
Sell Price 187.95
Sell Qty 100.00

Sterling Tools Ltd. (STERTOOLS) - Auditors Report

Company auditors report

Tothe Members of Sterling Tools Limited

Report on the Audit of the Standalone Financial Statements Opinion

1. We have audited the accompanying standalone financial statements of Sterling ToolsLimited (the ‘Company') which comprise the Balance Sheet as at 31 March 2019 theStatement of Profit and Loss (including Other Comprehensive Income) the Cash FlowStatement the Statement of Changes in Equity for the year then ended and a summary of thesignificant accounting policies and other explanatory information.

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

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (‘ICAI') togetherwith the ethical requirements that are relevant to our audit of the financial statementsunder the provisions of the Act and the rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.

Key Audit Matters

4. Key audit matters are those matters that in our professional judgment were of mostsignificance 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 awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.

5. We have determined the matters described below to be the key audit matters to becommunicated in our report.

Key audit matter How our audit addressed the key audit matter
Impairment assessment of investment in joint venture Our audit procedures included but were not limited to the following:
Refer note 1(C)(18) for the accounting policy and note 5 for the related disclosure Obtained an understanding of the management's processes and controls for determining the recoverable value of the investment including the identification of the impairment indicators and assessed the same in accordance with the accounting standards.
The Company has made investment in a joint venture Sterling Fabory India Private Limited amounting to Rs. 688.25 lakh as at 31 March 2019. The management makes an assessment of the recoverable value of the investment when impairment indicators exist by comparing the recoverable value and carrying value of such investment.
Obtained an understanding evaluated and tested the controls around management's assessment of the impairment indicators and the testing performed.
As at 31 March 2019 impairment indicators existed for the investment made in the aforesaid joint venture considering the negative profits in the earlier years and accumulated losses as at 31 March 2019 in the joint venture. Obtained from the management of the Company the approved future business plans of the joint venture and held detailed discussions with the management to understand the assumptions used and estimates made by them for determining the cash flow projections.
Key audit matter How our audit addressed the key audit matter
The management during the year ended 31 March 2019 has carried out an impairment test for such investment whereby the carrying amount of the investment was compared with the recoverable amount. The recoverable value of the investment is determined based on discounted cash flows method which requires management estimates and judgements around assumptions used in the method primarily around estimated growth in the operations of the joint venture ability to generate cash profits in the future estimated future financial performance capital expenditure and the discount rates applied. Changes to assumptions could lead to material changes in estimated recoverable amounts resulting in impairment in the value of the investments. Involved auditor's expert to assess the appropriateness of the valuation methodology used for calculation of the recoverable value.
Performed sensitivity analysis on management's calculated recoverable value by changing the significant assumptions used in the calculation. Assessed the appropriateness and adequacy of the related disclosures in the financial statements in accordance with the applicable accounting standards.
Accordingly assessment of impairment losses to be recognised if any on the carrying value of investment made in the joint venture has been considered as be a key audit matter for current year audit.

We have determined that there are no other key audit matters to communicate in ourreport.

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 otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereon. The Annual Report is expectedto 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 wewill not express any form of assurance conclusion thereon.

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

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

Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements

7. 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 standalone financial statementsthat give a true and fair view of the state of affairs (financial position) profit orloss (financial performance including other comprehensive income) changes in equity andcash flows of the Company in accordance with the accounting principles generally acceptedin India including the Ind AS specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of 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 statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

8. 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.

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

Auditor's Responsibilities for the Audit of the Financial Statements

10. 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 withStandards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.

11. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:3 Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control. 3 Obtainan understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances. Under section 143(3)(i) of the Actwe are also responsible for explaining our opinion on whether the company has adequateinternal financial controls system in place and the operating effectiveness of suchcontrols.

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

3 Conclude on the appropriateness of management's use of the going concern basis ofaccounting 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. 3 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 among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

13. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards. 14. From the matterscommunicated with those charged with governance we determine those matters that weresignificance of most in the audit of the financial statements of the current period andare therefore the key audit matters. We describe these matters in our auditor's reportunless law or regulation precludes public disclosure about the matter or when inextremely rare circumstances we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected tooutweigh 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 haspaid remuneration to its directors during the year in accordance with the provisions ofand 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 givein the Annexure I a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

a) we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit; b) in ouropinion proper books of account as required by law have been kept by the Company so faras it appears from our examination of those books; c) the standalone financial statementsdealt with by this report are in agreement with the books of account; d) on the basis ofthe written representations received from the directors and taken on record by the Boardof Directors none of the directors disqualified as on 31 March 2019 from beingappointed as a director in terms of section 164(2) of the Act; e) we have also audited theinternal financial controls over financial reporting (IFCoFR) of the Company as on 31March 2019 in conjunction with our audit of the standalone financial statements of theCompany for the year ended on that date and our report dated 23 May 2019 as per AnnexureII expressed unmodified opinion; and f) with respect to the other matters to be includedin 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 accordingto the explanations given to us:

i. the Company as detailed in note 38 to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position as at 31 March 2019;

ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2019;

iii. there were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company during the year ended 31 March 2019; and

iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Anamitra Das
Place: Faridabad Partner
Date: 23 May 2019 Membership No.: 062191

Annexure I to the Independent Auditor's Report of even date to the members of SterlingTools Limited on the standalone financial statements for the year ended 31 March 2019

Annexure I

Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe 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 its property plantand equipment under which property plant and equipment are verified in a phased mannerover a period of three years which in our opinion is reasonable having regard to thesize of the Company and the nature of its assets. In accordance with this program certainproperty plant and equipment were verified during the year and no material discrepancieswere noticed on such verification.

(c) The title deeds of all the immovable properties (which are included underthe 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 atreasonable intervals during the year except for goods-in-transit and stocks lying withthird parties. For stocks lying with third parties at the year-end written confirmationshave been obtained by the management. No material discrepancies were noticed on theaforesaid verification.

(iii) The Company has not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships (LLPs) or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly the provisions of clauses 3(iii)(a) 3(iii)(b)and 3(iii)(c) of the Order are not applicable. (iv) In our opinion the Company hascomplied with the provisions of Section 186 in respect of investments. Further in ouropinion the Company has not entered into any transaction covered under Section 185 andSection 186 of the Act in respect of loans guarantees and security.

(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). 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 pursuantto the Rules made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.

(vii) (a) The Company is regular in depositing undisputed statutory dues includingprovident fund employees' state insurance income-tax sales tax service tax duty ofcustoms duty of excise value added tax cess and other material statutory dues asapplicable to the appropriate authorities. Further no undisputed amounts payable inrespect thereof were outstanding at the year-end for a period of more than six months fromthe date they become payable.

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

Annexure I to the Independent Auditor's Report of even date to the members of SterlingTools Limited on the standalone financial statements for the year ended 31 March 2019(Cont'd)

Statement of Disputed Dues

Name of the statute Nature of dues Amount ` ( in lacs) Amount paid under protest (` in lacs) Period to which the amount relates Forum where dispute is pending
Central Excise Act 1944 Excise duty and penalty 181.39 Nil Financial year 2013- 14 to 2017-18 Directorate General of Goods and Services Tax Intelligence Gurugram
Central Excise Act 1944 Excise duty and penalty 46.29 Nil April 2016 to June 2017 Assistant Commissioner of Central Goods and Services Tax
Income-tax Act 1961 Demand under the Income-tax Act 1961 0.62 Nil Assessment year 2013-14 Income-tax Appellate Tribunal (ITAT)

(viii) The Company has not defaulted in repayment of loans or borrowings to any bankduring the year. The Company did not have any outstanding loans payable to any financialinstitution or government during the year. Further the Company does not have anyoutstanding debentures during the year.

(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). In our opinion the term loans were applied for thepurposes for which the loans were obtained. (x) No fraud by the Company or on the Companyby its officers or employees has been noticed or reported during the period covered by ouraudit. (xi) Managerial remuneration has been paid and provided by the Company inaccordance with the requisite approvals mandated by the provisions of Section 197 of theAct read with Schedule V to the Act. (xii) In our opinion the Company is not a NidhiCompany. 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 withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed 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 placementof shares or fully or partly convertible debentures.

(xv) In our opinion the Company has not entered into any non-cash transactions withthe 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 ofIndia Act 1934.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Anamitra Das
Place: Faridabad Partner
Date: 23 May 2019 Membership No.: 062191

Annexure II to the Independent Auditor's Report of even date to the members of SterlingTools Limited on the standalone financial statements for the year ended 31 March 2019

Annexure II

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

1. In conjunction with our audit of the standalone financial statements of SterlingTools Limited (‘the Company') as at and for the year ended 31 March 2019 we haveaudited the internal financial controls over financial reporting (‘IFCoFR') of theCompany as at that date.

Management's Responsibility for Internal Financial Controls

2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (‘the Guidance Note') issued by the Institute of Chartered Accountants ofIndia (‘ICAI'). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of the Company's business including adherenceto the Company's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditor's Responsibility

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

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide 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 regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR include those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Annexure II to the Independent Auditor's Report of even date to the members of SterlingTools Limited on the standalone financial statements for the year ended 31 March 2019(Cont'd)

Inherent Limitations of Internal Financial Controls over Financial Reporting

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

Opinion

8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such controls were operating effectivelyas at 31 March 2019 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note issued by the ICAI.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Anamitra Das
Place: Faridabad Partner
Date: 23 May 2019 Membership No.: 062191

Independent Auditor's Report on Standalone Financial Results of Sterling Tools Limitedpursuant to the Regulation 33 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015

To the Board of Directors of Sterling Tools Limited

1. We have audited the standalone financial results of Sterling Tools Limited (the‘Company') for the year ended 31 March 2019 being submitted by the Company pursuantto the requirement of Regulation 33 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. Attention is drawn to Note 3 to the standalone financialresults which states that the figures for the quarter ended 31 March 2019 as reported inthese standalone financial results are the balancing figures between audited standalonefigures in respect of the full financial year and the published standalone year to datefigures up to the end of the third quarter of the financial year. Also the figures up tothe end of the third quarter had only been reviewed and not subjected to audit. Thesestandalone financial results are based on the standalone financial statements for the yearended 31 March 2019 prepared in accordance with the accounting principles generallyaccepted in India including Indian Accounting Standards (‘Ind AS') specified underSection 133 of the Companies Act 2013 (the ‘Act') and published standalone year todate figures up to the end of the third quarter of the financial year prepared inaccordance with the recognition and measurement principles laid down in Ind AS 34 InterimFinancial Reporting specified under Section 133 of the Act and SEBI CircularCIR/CFD/FAC/62/2016 dated 5 July 2016 which are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on these standalone financialresults based on our audit of the standalone financial statements for the year ended 31March 2019 and our review of standalone financial results for the nine months period ended31 December 2018. 2. We conducted our audit in accordance with the auditing standardsgenerally accepted in India. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial results are free of materialmisstatement. An audit includes examining on a test basis evidence supporting theamounts disclosed as financial results. An audit also includes assessing the accountingprinciples used and significant estimates made by management. We believe that our auditprovides a reasonable basis for our opinion.

3. In our opinion and to the best of our information and according to the explanationsgiven to us the standalone financial results:

(i) are presented in accordance with the requirements of Regulation 33 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 read with SEBICircular CIR/CFD/FAC/62/2016 dated 5 July 2016 in this regard; and

(ii) give a true and fair view of the standalone net profit (including othercomprehensive income) and other financial information in conformity with the accountingprinciples generally accepted in India including Ind AS specified under Section 133 of theAct for the year ended 31 March 2019.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Anamitra Das
Place: Faridabad Partner
Date: 23 May 2019 Membership No.: 062191