To the Members of Subros Limited
Report on the audit of the Standalone financial statements
1. We have audited the accompanying standalone financial statements of Subros Limited("the Company") which comprise the Balance Sheet as at March 31 2020 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 significant accounting policies and other explanatoryinformation.
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 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at March 31 2020 and total comprehensive income(comprising of profit and other comprehensive income) changes in equity and its cashflows for the year then ended.
Basis for opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 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 together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Emphasis of matter
4. We draw your attention to Note 41 to the financial statements which describes themanagement's assessment of the impact of the outbreak of Coronavirus (Covid-19) on thebusiness operations of the Company. The management believes that no adjustments arerequired in the financial statements as it does not impact the current financial yearhowever in view of the various preventive measures taken (such as complete lock-downrestrictions by the Government of India travel restrictions etc.) and highly uncertaineconomic environment a definitive assessment of the impact on the subsequent periods ishighly dependent upon circumstances as they evolve. Our opinion is not modified in respectof this matter.
Key audit matters
5. 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 matters.
|Key audit matter ||How our audit addressed the key audit matter |
|Appropriateness of capitalisation of internal development costs || |
|[Refer note 2 (significant accounting policies) and note 4 (intangible assets under development) to the standalone financial statements] ||We performed the following procedures amongst others |
|During the year ended March 31 2020 the Company has capitalized significant costs incurred on internal development of Intangible assets amounting to Rs. 3297.94 lakhs under the head 'Intangible assets under development'. These intangible assets were predominantly in relation to the projects awarded by original equipment manufacturers. The costs mainly comprised employees' payroll and other costs. ||- Understood and evaluated the financial controls for the capitalisation of internal development costs and tested such controls. |
|The capitalization of internal development costs was a key audit matter due to the amount of the internal development costs capitalized and judgement involved in assessing whether the criteria set out in the Indian Accounting Standard (Ind AS) 38 "Intangible Assets" had been met. ||- Assessed the appropriateness of capitalization of product development costs with the criteria to capitalize product development costs and challenged the management through discussions and assessing the products' commercial feasibility |
|Significant judgement was made by the management in the determination of - ||- Tested the accuracy and allocation of capitalized payroll and other costs and assessed whether these are directly attributable to the development as against research. |
|i) costs incurred towards development or for research nature ||- Assessed underlying cash flow forecasts including the future revenue expected margins to be achieved with reference to historical data and management approved margins in the AOP (Annual Operating Plan) inputs used by the Management to calculate the discount rate applied by comparing this to the cost of capital for the Company We also involved the internal expert to evaluate the reasonability of Cost of Capital of the Company used to discount the future cash flows arising from the project. |
|ii) the costs including payroll costs were directly attributable to relevant projects and ||- Performed a sensitivity analysis over the key assumptions which included assessing the impact of change in those assumptions that would be required for future economic benefits falling short of the carrying value of capitalized internal development costs. |
|iii) key assumptions such as future revenue margins and the discount rate used to assess the future cash flows. ||As a result of the above procedures the capitalisation of internal development costs by the Company was considered to be appropriate. |
6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Board report but does not includethe financial statements 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 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.
Responsibilities of management and those charged with governance for the financialstatements
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 financial position financial performance changesin equity and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Accounting Standards specified under section133 of the Act. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
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. Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Auditor's responsibilities for the audit of the financial statements
9. 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.
10. As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism 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.
11. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including
e. On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.
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 A".
g. 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 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 on its financialposition in its financial statements - Refer Note 26 to the financial statements;
ii) The Company has long-term contracts including derivative contracts as at March 312020 for which there were no material foreseeable losses;
iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company;
iv) The reporting on disclosures relating to Specified Bank Notes is not applicable tothe Company for the year ended March 31 2020.
12. 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.
13. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when 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
14. As required by the Companies (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure B a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
15. 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 Cash Flow Statement dealt with by thisReport are in agreement with the books of account.
d. In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act.
16. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct. any significant deficiencies in internal control that we identify during our audit.
Annexure A to Independent Auditors' Report
Referred to in paragraph 15(f) of the Independent Auditors' Report of even date to themembers of Subros Limited on the standalone financial statements as of and for the yearended March 31 2020
Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the Act
1. We have audited the internal financial controls with reference to financialstatements of Subros Limited ("the Company") as of March 31 2020 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
2. 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 (ICAI). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
3. 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 on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls with reference to financial statementswas established 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 internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including 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 sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemwith reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
6. 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 includes 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
7. 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 control 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.
8. In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as atMarch 31 2020 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. Also refer paragraph 4 of themain audit report.
Annexure B to Independent Auditors' Report
Referred to in paragraph 14 of the Independent Auditors' Report of even date to themembers of Subros Limited on the standalone financial statements as of and for the yearended March 31 2020
i. (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets (Property plant and equipment).
(b) The fixed assets (Property plant and equipment) are physically verified by theManagement according to a phased programme designed to cover all the items over a periodof two years which in our opinion is reasonable having regard to the size of the Companyand the nature of its assets. In view of the lockdown consequent to the outbreak ofCoronavirus (Covid-19) the physical verification of fixed assets (Property plant andequipment) could not be carried out by the Company as at the year end. However thecompany has carried out the physical verification of fixed assets (Property plant andequipment) subsequent to the year end and no material discrepancies have been noticed onsuch verification.
(c) The title deeds of immovable properties as disclosed in Note 3 on fixed assets(Property plant and equipment) to the financial statements are held in the name of theCompany.
ii. The physical verification of inventory (excluding stocks with third parties) havebeen conducted at reasonable intervals by the Management during the year. Also physicalverification of inventory has been carried out by the management subsequent to theyear-end due to the lockdown restrictions imposed by the Government of India for whichroll-back procedures have been performed to determine the existence and condition ofinventory as at the year-end. In respect of inventory lying with third parties these havesubstantially been confirmed by them. The discrepancies noticed on physical verificationof inventory as compared to book records were not material.
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 Act. Therefore the provisions of Clause 3(iii) (iii)(a) (iii)(b) and(iii)(c) of the said Order are not applicable to the Company.
iv. The Company has not granted any loans or made any investments or provided anyguarantees or security to the parties covered under Section 185 and 186. Therefore theprovisions of Clause 3(iv) of the said Order are not applicable to the Company.
v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified.
vi. Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products.
We have broadly reviewed the same and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have not however madea detailed examination of the records with a view to determine whether they are accurateor complete.
vii. (a) According to the information and explanations givento us and the records ofthe Company examined by us in our opinion the Company is generally regular in depositingundisputed statutory dues in respect of provident fund though there has been a delay in afew cases and is regular in depositing undisputed statutory dues including employees'state insurance sales tax income tax service tax duty of customs duty of excisevalue added tax cess goods and service tax and other material statutory dues asapplicable with the appropriate authorities. Also refer note 37 to the financialstatements regarding management's assessment on certain matters relating to providentfund.
Further for the month of March 2020 the company has paid Goods and Service Tax andfiled GSTR 3B (after the due date but) within the timelines allowed by Central Board ofIndirect Taxes and Customs under the Circular no: 136/06/2020-GST dated April 03 2020 onfulfilment of conditions specified therein.
(b) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of service tax and goods and services tax whichhave not been deposited on account of any dispute. The particulars of dues of income taxsales tax duty of customs duty of excise value added tax as at March 31 2020 whichhave not been deposited on account of a dispute are as follows:
|Name of the statute ||Nature of dues ||Amount (Rs. In Lakhs) ||Amount paid under protest (Rs. In Lakhs) ||Period to which the amount relates ||Forum where the dispute is pending |
|The Income Tax Act 1961 ||Income Tax ||135.23 ||- ||Assessment year 2003-04 ||Hon'ble High Court of Delhi |
|The Income Tax Act 1961 ||Income Tax ||80.90 ||70.99 ||Assessment year 2014-15 ||Income Tax Appellate Tribunal New Delhi |
|The Income Tax Act 1961 ||Income Tax ||19.41 ||- ||Assessment year 2015-16 ||Commissioner of Income Tax (Appeals) |
|The Income Tax Act 1961 ||Income Tax ||23.40 ||4.68 ||Assessment year 2016-17 ||Commissioner of Income Tax (Appeals) |
|The Income Tax Act 1961 ||Income Tax ||166.35 ||6.11 ||Assessment year 2017-18 ||Commissioner of Income Tax (Appeals) |
|The Customs Act 1962 ||Custom Duty ||1183.82 || |
|June 2012 to July 2017 ||Hon'ble Customs Excise and Service Tax Appellate Tribunal Allahabad |
|The Customs Act 1962 ||Custom Duty ||15.19 ||- ||July 2017 to March 2019 ||Commissioner of Customs Maharashtra |
|The Andhra Pradesh General Sales Tax Act 1957 ||Sales Tax ||79.74 ||79.74 ||2002-03 to 2004-05 ||Hon'ble High Court of Andhra Pradesh |
|The Central Sales Tax Act 1956 ||Sales Tax ||111.00 ||- ||2015-16 ||State Tax Officer Chennai |
|The Uttar Pradesh Tax on Entry of Goods into Local Areas Act 2007 ||Entry Tax ||112.33 ||109.85 ||October 2008 to November 2011 ||Hon'ble High Court of Allahabad |
|The Central Excise Act 1944 ||Central Excise Duty ||75.81 ||- ||December 2013 to May 2016 ||Joint Commissioner Pune |
|The Central Excise Act 1944 ||Central Excise Duty ||3992.18 || |
|2013-14 to 2017-18 ||Directorate General Goods & Service Tax Intelligence (Gurugram) |
viii. According to the records of the Company examined by us and the information andexplanation given to us the Company has not defaulted in repayment of loans or borrowingsto any bank or dues to debenture holders as at the balance sheet date. The Company has nottaken any loans or borrowings from Government or financial institutions.
ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans. Accordingly the provisions ofClause 3(ix) of the Order are not applicable to the Company.
x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.
xi. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals mandated by the provisions of Section 197 read with Schedule V to theAct. Also refer paragraph 16 of our main audit report. xii. As the Company is not a NidhiCompany and the Nidhi Rules 2014 are not applicable to it the provisions of Clause3(xii) of the Order are not applicable to the Company.
xiii. The Company has entered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required under IndianAccounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 ofthe Act.
xiv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of Clause 3(xiv) of the Order are not applicable to the Company.
xv. The Company has not entered into any non cash transactions with its directors orpersons connected with him. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.
xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.
|For Price Waterhouse Chartered Accountants LLP || |
|Firm Registration Number: 012754N/N500016 || |
| ||Chartered Accountants |
| ||Rajib Chatterjee |
| ||Partner |
|Place of the Signature: Gurugram ||Membership Number 057134 |
|Date: June 29 2020 ||UDIN: 20057134AAAAAH3278 |