TO THE MEMBERS OF
M/s UCAL FUEL SYSTEMS LIMITED
Report on the audit of Standalone Ind AS Financial Statements
We have audited the accompanying Standalone Ind AS Financial Statements of UCAL FUELSYSTEMS LIMITED ("The Company") which comprise the Balance Sheet as at 31stMarch 2020 the Statement of Profit and Loss (including Other Comprehensive Income)Statement of Changes in Equity the Statement of Cash Flows for the year ended on thatdate and Notes to the Financial Statements including a summary of the SignificantAccounting Policies and other explanatory information (hereinafter referred to asthe Standalone Financial Statements').
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Financial Statements give the information requiredby the Companies Act 2013 ("Act") in the manner so required and give a true andfair view in conformity with the Indian Accounting Standards prescribed under Section 133of the Act read with the companies (Indian Accounting Standards) Rules 2015 as amended("Ind AS") and other accounting principles generally accepted in India of thestate of affairs of the Company as at 31st March 2020 the loss (IncludingOther Comprehensive Income) the changes in Equity and its cash flows for the year endedon that date.
Basis for Opinion
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
We draw attention to:-i. Note 38 (c) forming part of the financial statements for theyear in connection with the non-availability of RBI approval for writing off made duringthe year 2017-18 in respect of Trade receivable and Loan receivable aggregating toRs.15191.85 Lakhs due from foreign subsidiary (UCAL Holdings Inc. formerly AmtecPrecision Products Inc.) Our opinion on the financial statements is not modified inrespect of the above matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgement were of mostsignificance in our audit of the Financial Statements of the current period. These matterswere addressed in the context of our audit of Financial Statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
|Key Audit Matters ||Response to Key Audit Matters |
|1. Evaluation of uncertain tax positions ||Principal Audit Procedures |
|The Company has material uncertain tax positions including matters under dispute which involved significant judgement to determine the possible impact arising from the outcome of these disputes. ||We have carried out the validation of the information provided by the management by performing the following procedures: |
| ||- Evaluating reasonableness of the underlying assumptions |
| ||- Examining the relevant documents on record |
|Refer Note 43 to the standalone financial statements || |
| ||- Relying on relevant external evidence available including legal opinion relevant judicial precedents and industry practices |
| ||- Getting management confirmation wherever necessary |
|2. Physical verification of inventory ||Principal Audit Procedures |
|Due to the disruption caused by the COVID-19 global pandemic the Company could not carry out the physical verification on or before the reporting date. The physical inventory taking was however carried out by the Company on an alternate date. ||Even though we could not physically attend the inventory count we have performed alternate audit procedures to obtain sufficient appropriate audit evidence for our purpose which includes: |
| ||(i) Examination of production and consumption records |
| ||(ii) Understanding the plan and coverage of the management for carrying out the inventory count |
| ||(iii) Examination of the working papers relating to physical verification |
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information in the AnnualReport comprising of the Director's Report and its annexures but does not include theStandalone Financial Statements and our Auditor's Report thereon.
Our opinion on the Standalone Financial Statements does not cover the other informationand we do 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 when it is made available and in doing so considerwhether the other information is materially inconsistent with the Standalone FinancialStatements or our knowledge obtained during the course of our audit or otherwise appearsto be materially misstated. If based on the work we have performed we conclude that ifthere is a material misstatement of this other information we are required to report thatfact.
Management Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section 134(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 (includingOther Comprehensive Income) Changes in Equity and Cash Flows of the Company in accordancewith Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 Financial Statements management is responsiblefor assessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic 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 Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these Financial Statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit.
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 controls 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 Companyhas adequate Internal Financial Controls system in place and the operating effectivenessof 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the StandaloneFinancial Statements including the disclosures and whether the Standalone FinancialStatements represent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the Standalone Financial Statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and quantitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the Financial Statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in Internal Control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication
Report on Other Legal and Regulatory Requirements
1. As required by Section 143 (3) of the Act 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 the Cash Flow Statement dealt with by thisReport are in agreement with the books of account.
d) In our opinion the aforesaid Standalone Ind As Financial Statements comply with theIndian Accounting Standards prescribed under Section 133 of the Act read with Rule 7 ofthe companies (Accounts) Rules 2014.
e) 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.
f) With respect to the adequacy of the Internal Financial Controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A".
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of Section 197 (16) of the Act as amended:
In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of Section 197 of the Act.
h) With respect to the other matters to be included in the Auditors' 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 Standalone Financial Statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.
2. As required by the companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143 (11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THESTANDALONE IND AS FINANCIAL STATEMENTS OF UCAL FUEL SYSTEMS LIMITED.
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 UCAL FUELSYSTEMS LIMITED ("The Company") as of 31st March 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
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 Controlstated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India (ICAI). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the 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") and the Standards on Auditing issued by ICAI and deemedto be prescribed under Section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of Internal Financial Controls both applicable to an audit ofInternal Financial Controls and both issued by ICAI. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate Internal Financial Controls over FinancialReporting was established and maintained and if such controls operated effectively in allmaterial 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 Auditors' judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's Internal Financial Controls Systemover Financial Reporting.
Meaning of Internal Financial Controls over Financial Reporting
A Company's Internal Financial Control over Financial Reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A Company's Internal Financial Control over FinancialReporting includes those policies and procedures that: (i) Pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (ii) Provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the Company are being made only in accordance with authorisations ofManagement and Directors of the Company; and (iii) Provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of theCompany's assets that could have a material effect on the financial statements.
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 31st March 2020based 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 ICAI.
ANNEXURE "B" TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THESTANDALONE IND AS FINANCIAL STATEMENTS OF UCAL FUEL SYSTEMS LIMITED.
The Annexure referred to in Paragraph 2 under the heading Report on Other Legaland Regulatory Requirements' of our Report of even date:
(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets;
(b) These fixed assets have been physically verified by the Management at reasonableintervals and the evaluation of the outcome of verification is in progress. Consequentadjustments if any would be carried out in future.
(c) The title deeds of immovable properties are held in the name of the Company.
(ii) The inventories could not be physically verified by the management during the yeardue to the disruption caused by the COVID-19 pandemic. However physical verification wasconducted at key locations post the balance sheet date. Material differences noticed havebeen appropriately adjusted in the books of accounts in the Financial Year 2019-20 afterroll back procedures.
(iii) According to the information and explanations given to us and on the basis of ourexamination of the books of account the Company during the year has not provided anyloans secured or unsecured to companies firms or other parties covered in the registermaintained under Section 189 of the Companies Act 2013. Consequently the provisions ofclauses iii (a) and iii (b) are not applicable.
(iv) According to the information and explanations given to us and on the basis of ourexamination of the books of account the Company during the year has not provided any loanor Investment or Guarantees or securities which falls under the purview of Section 185 and186 of the Companies Act 2013 in respect of grant of loans making Investments andproviding guarantees and securities as applicable.
(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public and consequently the directives issued by theReserve Bank of India and provisions of Section 73 to 76 or any other relevant provisionsof the Companies Act 2013 and companies (Acceptance of Deposits) amended Rules 2015 arenot applicable.
(vi) On the basis of the records produced to us we are of the opinion that primafacie the cost records prescribed by the Central Government under Sub-Section (1) ofSection 148 of the Act have been made and maintained. However we are not required to andhave not carried out any detailed examination of such records.
(vii) According to the information and explanations given to us in respect of Statutorydues:
(a) The Company is regular in depositing undisputed statutory dues including ProvidentFund Employees' State Insurance Sales Tax Service Tax Duty of Customs Duty of ExciseValue Added Tax Cess Goods and Service Tax and other material Statutory Dues to theappropriate authorities. There were no undisputed amounts payable which were in arrears asat 31st March 2020 for a period of more than six months from the date theybecame payable except as below:
|Nature of Dues ||Amount |
| ||Rs. in Lakhs |
|Advance income tax due on 15th June 2019 ||79.21 |
|Advance income tax due on 15th September 2019 ||158.42 |
|(excluding the portion already due on 15th June 2019) || |
|Customs Duty ||172.98 |
(b) As per the information and explanations given us by the Company the following arethe statutory dues which have not been deposited on account of disputes:
|Nature of Dues/Statute ||Period ||Amount Rs. in Lakhs ||Forum where dispute is pending |
|Income Tax Act1961 ||Income Tax AY 2000-01 ||3.59 ||High Court of Madras |
|Income Tax Act1961 ||Income Tax AY 2003-04 ||146.58 ||CIT (Appeals) Chennai |
|Income Tax Act1961 ||Income Tax AY 2017-18 ||388.56 ||CIT (Appeals) Chennai |
| ||Central Sales Tax || || |
|Sales Tax and Value Added Tax || ||4.77 ||Additional Deputy Commissioner |
| ||FY 2006-07- Plant 8 || ||(Appellate) Chennai |
| || || ||ETO cum Assessing Officer |
|Sales Tax and Value Added Tax ||Haryana VAT-AY 2014-15 ||37.50 || |
| || || ||Gurgaon |
| ||TN VAT and CST AY 2011-12 || || |
|Sales Tax and Value Added Tax || ||1870.70 ||High Court of Madras |
| ||to AY 2015-16 || || |
|Sales Tax and Value Added Tax ||FY 2013-14 VAT ||158.75 ||Assessing Officer Pondicherry |
|Sales Tax and Value Added Tax ||FY 2011-12 CST ||78.16 ||Assessing Officer Pondicherry |
|Sales Tax and Value Added Tax ||FY 2012-13 CST ||210.51 ||Assessing Officer Pondicherry |
(viii) On the basis of verification of records and according to the information andexplanations given to us the Company has not defaulted in repayment of loans or borrowingto a financial institution Bank or Government. The Company has not issued any debentures.The Company has applied to its lenders for moratorium with respect to the instalments duein March 2020.
(ix) In our opinion and according to the information and explanations given to us theterm loans availed by the Company have been applied for the purpose for which they wereobtained. According to the information and explanations given to us the Company has notraised any moneys by way of initial public offer or further public offer (including debtinstruments) during the year.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and as per the information and explanations given tous by the management the Company has not noticed or reported any fraud by the Company orany fraud on the Company by its Officers or employees during the year.
(xi) In respect of the Financial Year 2019-20 the managerial remuneration paid orprovided by the Company is in accordance with the provisions of Section 197 of theCompanies Act 2013.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company and reporting under clause 3(xii) of the order is notapplicable.
(xiii) According to the information and explanations given to us and based on ourexamination of records of the Company transactions with related parties are in compliancewith Sections 177 and Section 188 of the Companies Act 2013 where applicable and thedetails have been disclosed in the Financial Statements etc. as required by theapplicable Indian Accounting Standards. (xiv) According to the information andexplanations given to us and based on our examination of records of the Company theCompany has not made any preferential allotment or private placement of shares or fully orpartly convertible debentures during the year under review and hence reporting underclause 3 (xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us and based on ourexamination of records of the Company the Company has not entered into any non-cashtransactions with Directors or persons connected with its Directors.
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.
| ||For M/s R. SUBRAMANIAN AND COMPANY LLP |
| ||Chartered Accountants |
| ||FRN: 004137S/S200041 |
| ||K JAYASANKAR |
| ||Partner |
|Place: Chennai ||Membership No.014156 |
|Date: 31st July 2020 ||UDIN: 20014156AAAABH1561 |