To the Members of Tube Investments of India Limited
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying Standalone Ind AS financial statements of TubeInvestments of India Limited ("the Company") which comprise the Balance sheetas at March 31 2020 the Statement of Profit and Loss including the statement of OtherComprehensive Income the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and notes to the Standalone Ind AS financial statements including asummary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the Code of Ethics'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 ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the Standalone Ind AS financial statements.
Emphasis of Matter
We draw attention to Note 2b of the Standalone Financial Statements which describes theimpact of Covid-19 pandemic and its possible consequential implications on the Company'soperations. Our opinion is not modified in respect of the matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Ind AS financial statements for the financialyear ended March 31 2020. These matters were addressed in the context of our audit of theStandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the Standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying Standalone Ind AS financialstatements.
|Key audit matters ||How our audit addressed the key audit matter |
|(a) Timing of Revenue recognition (as described in Note statements) ||3.11 and Note 19 of the Standalone Ind AS financial Our audit procedures included: |
|The Company has 3 operating segments namely Cycles and Accessories Segment Engineering Segment and Metal Formed Products Segment. The type of customers varies across these segments ranging from small dealers and Government in respect of the Cycles Segment to Original Equipment Manufacturers and Industrial Customers in respect of the Metal Formed Products and Engineering Segments. || We understood the Company's revenue process including design and implementation of controls and tested the operating effectiveness of the controls in relation to revenue recognition. |
| || We read and understood the Company's accounting policy for revenue recognition. |
|The Company recognizes revenue from sale of goods at a point in time based on the terms of the contract with customers which may vary case to case. Terms of sales arrangements with various customers within each of the operating segments including Incoterms determine the timing of transfer of control and require judgment in determining timing of revenue recognition. || On a sample basis we tested contracts with customers including Incoterms purchase orders issued by customers and sales invoices raised by the Company to determine the timing of transfer of control and the timing of revenue recognition in respect of such contracts. |
|Due to the judgement relating to determination of point of time in satisfaction of performance obligations with respect to sale of products this matter is considered as Key Audit Matter. || We performed various analytical procedures to identify any unusual trends for further testing. |
| || We analyzed revenue transactions near the reporting date duly considering the closure of operations on account of COVID-19 and tested whether the revenue was recognized in the appropriate period with reference to shipping records sales invoices etc for sample transactions and also tested the management assessment involved in this process wherever applicable. |
Existence of Inventories and allowance of Slow / Non Moving Inventory andObsolescence (as described in Note 3.10 and Note 8 of the Standalone Ind ASfinancial statements)
|Inventories represent 15% of total assets of the Company as at March 31 2020. Such inventories are held across various factories and warehouses as at the reporting date. Considering the number of locations and the level of inventory held across its factories and warehouses as well as the physical verification of these inventories at these locations are conducted on different dates the risk of existence of such inventory and the identification of non-moving obsolete / damaged inventory is a significant area of audit importance. ||Our audit procedures included: |
| || We tested the existence of inventories consisting of testing the relevant internal controls including in specific the testing of the inventory physical verification process that is performed annually by the management at various locations. Further the automated recording of revenue and purchase transactions in the IT system (three-way-match) were tested by our IT specialists. |
|Theinventoryvaluationalsorequiresmanagementestimates towards write-down of inventory items to its net realizable value (wherever applicable) and allowance for slow moving or non-moving inventory including obsolescence risk. || We observed the physical verification of Inventory conducted by management at certain locations selected by us. Our procedures in this regard included: |
|Key audit matters ||How our audit addressed the key audit matter |
|Considering the relative significance of the Inventory to the Standalone financial statements we have considered the existence of Inventory and allowance of slow / non-moving inventory and obsolescence as key audit matter. ||- Inquiring that the stock count instructions were sent by management personnel to appropriate personnel in the relevant location and steps taken by management to ascertain the existence of inventory on the date of the count (including identification of non-moving and obsolete / damaged inventory); |
| ||- Performing independent inventory counts on sample basis and reconciling the same to the management counts; |
| ||- On a sample basis we tested the reconciliation of the differences in inventory quantity between the physical count and the books of accounts including accounting of such variances basis management approval; and |
| ||- We performed roll-forward procedures on sample basis from date of count to the reporting date as the physical verification of inventory was undertaken by management on different dates across various locations during the year. |
| || On a sample basis we performed testing of purchase and revenue transactions near the reporting date to assess whether transactions were recorded in the correct period by testing shipping records sales / purchase invoices (as applicable). |
| || We tested whether the adjustments to bring down the cost of inventory items to their net realisable value and allowance for slow moving or non-moving inventory and obsolescence at the reporting date is appropriate by assessing the methodology and assumptions adopted by management in this regard including the related adjustments by testing a sample of inventory items as at the reporting date. |
|Key audit matters ||How our audit addressed the key audit matter |
|Significant judgement relating to assessment of impairment of Subsidiaries (as described in Note 3.9 and Note 6a of the standalone financial statements) || |
|The Company has Investments aggregating to INR 522.46 Crores as at March 31 2020 in Subsidiaries as at March 31 2020. The Management assesses the existence of any indicator of impairment every year in respect of its investments in subsidiaries. ||Our audit procedures included: |
| || We obtained an understanding of the Company's policy on assessment of impairment of Investments and assumptions used by the management including design and implementation of Controls and testing the operating effectiveness of these controls. |
|During the current year there was a decrease in the fair value of one of its subsidiaries which required impairment assessment under Ind AS 36. Considering the complexity of the assumptions used in the impairment assessment judgement required for estimating the future cash flows and the related uncertainties involved due to COVID-19 situation this has been considered as a Key Audit Matter. || We assessed the methodology used by the management to estimate the recoverable value of investment and consistency with accounting standards. |
| || We analyzed and examined the business plans approved along with assumptions and estimates used by management including the effect of COVID-19 on the projections. |
| || We compared projections with historical performance of the respective Subsidiaries to assess the appropriateness of Business Plans. |
| || We assessed the recoverable value headroom by performing sensitivity testing of key assumptions used. |
| || We tested the arithmetical accuracy of the models prepared by the management. |
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 information included in the Annual report but does not includethe Standalone Ind AS financial statements and our auditor's report thereon.
Our opinion on the Standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management for the Standalone Ind AS 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 Standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe 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 the 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 Standalone Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the Standalone Ind AS financial statements management 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 unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the Standalone Ind ASfinancial 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 Ind AS 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 Standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
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 Standalone IndAS financial statements including the disclosures and whether the Standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the Standalone Ind AS financialstatements for the financial year ended March 31 2020 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.
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;
(c) The Balance Sheet the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid Standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;
(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 over financialreporting of the Company with reference to these Standalone Ind AS financial statementsand the operating effectiveness of such controls refer to our separate Report in"Annexure 2" to this report;
(g) In our opinion the managerial remuneration for the year ended March 31 2020 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofSection 197 read with Schedule V to 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:
i. The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Ind AS financial statements Refer Note 36a to theStandalone Ind AS financial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
Annexure 1 referred to in our report of even date
Re: Tube Investments of India Limited (the Company')
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment and investmentproperty.
(b) All property plant and equipment and investment property have not been physicallyverified by the management during the year but there is a regular programme ofverification which in our opinion is reasonable having regard to the size of the Companyand the nature of its assets. No material discrepancies were noticed on such verification.
(c) According to the information and explanations given by the management the titledeeds of immovable properties included in property plant and equipment and investmentproperty are held in the name of the Company.
(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under Section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3 (iii) (a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usthere are no loans guarantees and securities granted in respect of which provisions ofSection 185 and 186 of the Companies Act 2013 are applicable and hence not commentedupon. In our opinion and according to the information and explanations given to usprovisions of Section 186 in respect of investments made have been complied with by theCompany.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).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 underSection 148(1) of the Companies Act 2013 relating to certain products of the Company towhich such rules apply and are of the opinion that prima facie the specified accountsand records have been made and maintained. We have not however made a detailedexamination of the same.
(vii) (a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees' state insurance income-tax duty ofcustom goods and service tax cess and other statutory dues applicable to it.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxsales-tax duty of custom duty of excise value added tax goods and service tax cessand other statutory dues were outstanding at the year end for a period of more than sixmonths from the date they became payable.
(c) According to the records of the Company the dues outstanding of income-taxsales-tax wealth-tax service tax customs duty excise duty value added tax and cess onaccount of any dispute are as follows:
|Name of the Statute ||Nature of the Dues ||Forum where dispute is pending ||Period to which the amount relates ||Amount (Rs.) * |
|Finance Act 1994 Central Excise Act ||Service Tax Excise Duty / Interest / ||Adjudicating Officer CCE (Appeals) / ||2016-17 Apr to Jun 17 ||0.46 |
|1944 ||Penalty ||CESTAT / HC ||1995-96 ||0.01 |
|Central Sales Tax Act || || ||2013-14 2014-15 and || |
|1956 ||CST ||CESTAT ||2016-17 ||0.16 |
| || || ||2005-06 2006-07 || |
|Income Tax Act 1961 ||Income Tax ||CIT (Appeals) ||2009-10 & 2011-12 ||6.05 |
(viii) In our opinion and according to the information and explanations given by themanagement the Company has not defaulted in repayment of dues to banks or debentureholders. The Company did not have any dues to in respect of loans and borrowings payableto financial institutions or government.
(ix) According to the information and explanations given by the management the Companyhas not raised any money way of initial public offer / further public offer / debtinstruments and term loans hence reporting under clause (ix) is not applicable to theCompany and hence not commented upon.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the company or no material fraud onthe company by the officers and employees of the Company has been noticed or reportedduring the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the CompaniesAct 2013.
(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with Sections 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review. Therefore the reporting requirements under clause 3(xiv) are not applicableto the Company and hence not commented upon.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions involving directors as referred to inSection 192 of Companies Act 2013.
(xvi) According to the information and explanations given to us the provisions ofSection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
To the Members of Tube Investments of India Limited
We have audited the internal financial controls over financial reporting of TubeInvestments of India Limited ("the Company") as of March 31 2020 in conjunctionwith our audit of the Standalone Ind AS Financial Statements of the Company for the yearended on that date.
Management's Responsibility for Internal Financial Controls
TheCompany'sManagementisresponsibleforestablishing and maintaining internal financialcontrols based on the internal control over financial reporting criteria established bythe Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India. These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the 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 Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these Standalone Ind AS financialstatements based on our audit. We conducted our audit in accordance with the Guidance Noteon Audit of Internal Financial Controls Over Financial Reporting (the "GuidanceNote") and the Standards on Auditing as specified under section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controlsand both issued by the Institute of Chartered Accountants of India. 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 with reference to these Standalone financial statementswas established and maintained and if such controls operated effectively in all materialrespects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to theseStandalone Ind AS financial statements and their operating effectiveness. Our audit ofinternal financial controls over financial reporting included obtaining an understandingof internal financial controls over financial reporting with reference to these StandaloneInd AS financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the Standalone Ind AS financialstatements 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 internal financial controls over financialreporting with reference to these Standalone financial statements.
Meaning of Internal Financial Controls Over Financial Reporting With Reference to theseStandalone Ind AS Financial Statements
A company's internal financial control over financial reporting with reference to theseStandalone Ind AS financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation ofStandalone Ind AS financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting with reference to these Standalone Ind AS financial statements includes thosepolicies and procedures that (1) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe company; (2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of Standalone Ind AS financial statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of thecompany are being made only in accordance with authorisations of management and directorsof the company; and (3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the company's assets thatcould have a material effect on the Standalone Ind AS financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting WithReference to these Standalone Ind AS Financial Statements
Because of the inherent limitations of internal financial controls over financialreporting with reference to these Standalone Ind AS financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these Standalone Ind AS financial statements to future periods are subject to the riskthat the internal financial control over financial reporting with reference to theseStandalone Ind AS financial statements may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these Standalone Ind AS financialstatements and such internal financial controls over financial reporting with reference tothese Standalone Ind AS financial statements were operating effectively as at March 312020 based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.