THE MEMBERS OF TD POWER SYSTEMS LIMITED
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the accompanying Standalone Financial Statements of TD Power SystemsLimited ("the Company") which comprise the Balance Sheet as at March 312020 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity the Statement of Cash Flows for the year then ended andnotes to the financial statements including a summary of significant accounting policiesand other explanatory information (hereinafter referred to as "the financialstatements") in which are included the financial statements of the Japan Branch forthe year ended on that date audited by the Branch Auditor of the Company located at Japan.
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 Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind-AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 312020 its profit totalComprehensive income changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion:
We conducted our audit of the Standalone Financial Statements in accordance with theStandards on Auditing (SAs) specified under section 143(10) of the Companies Act 2013.Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the ethicalrequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Companies Act 2013 and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with the requirements and the ICAI's Codeof Ethics. We believe that the audit evidence obtained by us is sufficient and appropriateto provide a basis for our audit opinion on the standalone financial statements.
Emphasis of Matter
We draw attention to Note No. 53 and Note No. 54 in the standalone financialstatements which describes the evaluation of the recoverability of the carrying value of
investments in two subsidiaries and the impact of COVID-19 carried out by themanagement of the company on the company's business operations financial positioncarrying value of various assets including investment in subsidiaries and theuncertainties associated with such an evaluation in the present circumstances and that theimpact may be different from that assessed as at the date of approval of these financialstatements.
Our opinion is not modified in respect of the above matter.
Key Audit Matters:
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 standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
Revenue Recognition for contracts with customers: Reasons why the matter was determinedto be a key audit matter: The Company generates a significant portion of the businessby manufacturing AC Generators and Electric Motors for various applications which arespecifically designed and tailor-made to suit the needs of the customers based on theirrequirements and specifications. The Company recognises revenue in accordance with IND AS115 Revenue from contracts with customers generally when or as the entity satisfies aperformance obligation by transferring a promised goods services to a customer; i. e.when the customer is able to direct the use of the transferred goods or services andobtains substantially all of the remaining benefits provided a contract with enforceablerights and obligations exists and amongst others collectability of consideration isprobable taking into account our customer's creditworthiness. These assessments includein particular the scope of deliveries and services required to fulfill contractuallydefined obligations.
Auditor's response: As part of our audit we obtained an understanding of theCompany's internally established methods processes and control mechanisms from order todelivery. We have also assessed the design and operating effectiveness of the internalcontrols by obtaining an understanding of such business transactions and testing controlsover these processes.
As part of our substantive audit procedures we evaluated the management's assumptionsbased on a risk-based selection of a sample of contracts. The customer carried outdetailed substantive testing of sales to verify the related documents that include thedocuments for final testing dispatch of goods or acknowledgement of acceptance of thegoods. We performed cut-off procedures to ensure that all year-end sales are in line withthe revenue recognition policy of the Company. The performance of obligations isconsidered complete generally when the testing of goods is completed/customer hasaccepted the goods.
We have also discussed with the management the likelihood of any changes in the termsor non-fulfilment of obligations by the customers arising from the impact of COVID-19.
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the Management Discussion and Analysis Board of Directors' reportCorporate Governance Report and other information published along with but does notinclude the financial statements and our auditor's report thereon. The ManagementDiscussion and Analysis Board of Directors' report Corporate Governance Report etc. isexpected to be made available to us after the date of this auditor's report.
Our opinion on the Standalone Financial Statements does not cover the other informationand we do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone Financial Statements our responsibilityis to read the other information identified above and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Whenwe read the Management Discussion and Analysis Board of Directors' report CorporateGovernance Report etc. if we conclude that there is a material misstatement therein weare required to communicate the matter to those charged with governance. In case ofuncorrected material misstatement we are required to communicate to other stakeholders asappropriate as well as to take action applicable under applicable laws and regulationsif any.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Companies Act 2013 ("the Act") with respect to the preparationand presentation of these standalone financial statements that give a true and fair viewof the financial position financial performance including other comprehensive incomechanges 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 read with relevant rules issued thereafter.
This responsibility also includes the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand 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 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 the Board of Directors is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessthe Board of Directors either intends to liquidate the Company or to cease operations orhas no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. We also:
i 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.
i 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 Companies Act 2013 we are also responsible for expressing our opinion on whetherthe Company has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
i Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by the management.
i Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Company's abilityto continue as a going concern. If we conclude that a material uncertainty exists we arerequired to draw attention in
our auditor's report to the related disclosures in the standalone financial statementsor if such disclosures are inadequate to modify our opinion. Our conclusions are basedon the audit evidence obtained upto the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a going concern.
i Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
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 standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or 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.
We did not audit the financial statements of Japan Branch included in the standalonefinancial statements of the Company whose financial statements reflect total assets of Rs.3436.09 lakhs as at 31st March 2020 and total revenues of Rs. 2462.42 lakhs for the yeaended on that date as considered in the standalone financial statements. The financialstatements of the Branch have been audited by the branch auditors whose report has beenfurnished to us and our opinion in so far as it relates to the amounts and disclosuresincluded in respect of the Branch is based solely on the report of such Branch Auditors.
Our opinion is not modified in respect of the above matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ('the Order') issued bythe Central Government of India in terms of section 143(11) of the Act we give in the 'AnnexureA' a statement on the matters specified in the paragraph 3 and 4 of the said Order tothe extent applicable.
2. 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 and proper returnsadequate for the purpose of our audit have been received from the Branch not visited byus but audited by the Branch Auditors.
c. The report on the accounts of one branch office audited under section 143 by aperson other than the company's auditor has been forwarded to us as required bysub-section (8) of section 143 and have been properly dealt with in preparing our reportin the manner considered necessary by us;
d. The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the books of account and with the returns received from thebranch not visited by us but audited by the Branch Auditors.
e. In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;
f. On the basis of the written representations received from the directors as on 31stMarch 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2020 from being appointed as a director in termsof Section 164 (2) of the Act.
g. 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 B';
h. 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 iswithin the limit laid down under the provisions of section 197(16) of the Act.
i. 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 pending litigations in its standalone financialstatements the impact if any on the final settlement of these litigations on
its financial position is not ascertainable at this stage - Refer Note No 36 ofstandalone financial statements;
ii. the Company did not have any long-term contracts for which there were any materialforeseeable losses. The company has made provisions for losses on derivative contracts asstated in Note No. 41(b) of the standalone financial statements; and
iii. there has been no delay in transferring amounts to be transferred to the InvestorEducation and
Protection Fund by the Company during the year - Refer Note 41 of standalonefinancial statements.
Annexure referred to in paragraph 1 under the heading 'report on Other Legal andRegulatory Requirements' of our Independent Auditor's Report of even date on theStandalone Financial Statements of TD Power Systems Limited for the year ended 31stMarch 2020.
I. In respect of its Property plant and equipment:
(a) The Company has maintained proper records which are showing full particularsincluding quantitative details and situation of fixed assets.
(b) The Company has a programme of physical verification of Property plant andequipment of the Company which in our opinion is reasonable having regard to the size ofthe Company and nature of its assets. According to the information and explanations givento us there were no material discrepancies identified on such verification when comparedwith available records of the Company.
(c) According to the information and explanations given to us and as per verificationof the records of the Company the title deeds of the immovable properties are held inthe name of the Company as at the balance sheet date.
II. The inventory has been physically verified by the management during the year andafter the year end. In our opinion the frequency of verification is reasonableconsidering the circumstances at the year end. No material discrepancies were noticed onsuch physical verification.
III. According to the information and explanations given to us the Company has grantedunsecured loans to 3 wholly owned foreign subsidiaries which are covered in the registermaintained under section 189 of the Act.
a. The terms and conditions of the grant of such loans are in our opinion primafacie not prejudicial to the Company's interest.
b. The schedule of repayment of principal and payment of interest has been stipulatedthe loans are renewed on maturity and the interest has been received as stipulated.
c. There is no overdue amount remaining outstanding as at the balance sheet date.
IV. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of the section 185 and 186 of the Act in respectof the loans granted and guarantees provided to the subsidiaries. There was no loangranted or guarantee provided to other parties.
V. According to the information and explanations given to us the Company has notaccepted any deposit from the public during the year. Accordingly the provisions ofparagraph 3(v) of the Order is not applicable.
VI. We have broadly reviewed the books of account and records maintained by the Companypursuant to the Rules made by the Central Government for the maintenance of cost recordsunder Section 148(1) of the Companies Act 2013 and are of the opinion that prima faciethe prescribed accounts and records have been made and maintained. We have however notmade a detailed examination of the accounts and records with a view to determining whetherthey are accurate or complete.
VII. (a) According to the information and explanations given
to us and as per our verification of the records of the Company the Company has beengenerally regular in depositing undisputed statutory dues including Provident fundEmployee's State Insurance Income Tax Sales Tax Value Added Tax Custom Duty ExciseDuty Goods and Service Tax Cess and other statutory dues with the appropriateauthorities during the year to the extent applicable. There are no arrears of undisputedstatutory dues of a material nature outstanding as at the last day of the financial yearfor a period of more than six months from the date on which they became payable.
(b) According to the information and explanations given to us and as per ourverification of the records of the Company no disputed amounts of Income tax or sales taxor Goods and service tax or duty of custom or duty of excise or value added tax have notbeen deposited with appropriate authorities as at 31st March 2020 except forthe following:
|Name of the Statute ||Nature of the dues ||Amount (Rs. In Lakhs) ||Period (financial year) to which the amount relates to ||Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax ||15.80 ||2012-13 ||Commissioner of Income Tax (Appeals) |
|Income Tax Act 1961 ||Income Tax ||27.56 ||2015-16 ||Commissioner of Income Tax (Appeals) |
VIII. According to the information and explanations given to us and as per ourverification of the records of the Company the Company has not defaulted in repayment ofits dues to the banks and financial institution. The company does not issued anydebentures and there are no loans or borrowings from Government.
IX. According to the information and explanations given to us and as per ourverification of records of the Company the Company has not raised money by way of initialpublic offer or further public offer (including debt instruments) during the year. Thecompany has not availed any term loans during the year. Accordingly the provisions ofparagraph 3(ix) of the Order are not applicable.
X. According to the information and explanations given to us and as per ourverification of records of the Company no fraud either by the Company or on the Companyby its officers or employees has been noticed or reported during the year.
XI. According to the information and explanations given to us and as per ourverification of records of the Company the Company has paid / provided for managerial
remuneration in accordance with the requisite approvals mandated by the provisions ofthe Section 197 read with Schedule V of the Act.
XII. In our opinion and according to the information given to us the Company is not aNidhi company. Accordingly paragraph 3(xii) of the Order is not applicable.
XIII. According to the information and explanations given to us and as per ourverification of records of the Company transactions with the related parties are incompliance with the sections 177 and 188 of the Act and details of such transactions havebeen disclosed in the standalone financial statements as required by the applicable IndianAccounting Standards.
XIV. According to the information and explanations given to us and as per ourverification of records of the Company the Company has not made preferential allotment orprivate placement of shares or fully or partly convertible debentures during the year.Accordingly paragraph 3(xiv) of the Order is not applicable.
XV. According to the information and explanations given to us and as per ourverification of records of the Company the Company has not entered into non-cashtransactions with the directors or persons connected with the directors. Accordinglyparagraph 3 (xv) of the Order is not applicable.
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.
ANNEXURE REFERRED TO IN PARA 2 (g) "REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS" OF THE INDEPENDENT AUDITOR'S REPORT
REPORT ON THE INTERNAL FINANCIAL CONTROLS UNDER CLAUSE (I) OF SUB-SECTION 3 OF SECTION143 OF THE COMPANIES ACT 2013 ("THE ACT")
We have audited the internal financial controls over financial reporting of TD PowerSystems Limited ("the Company") as of 31 March 2020 in conjunction with ouraudit of the Standalone Financial Statements of the Company for the year ended on thatdate.
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.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") issued by the Institute of Chartered Accountants of Indiaand the Standards on Auditing prescribed under section 143(10) of the Companies Act 2013to the extent applicable to an audit of internal financial controls. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated 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 judgment including the assessment of the risks ofmaterial misstatement of 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.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2020 based on theinternal control over financial reporting criteria 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.