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Varroc Engineering Ltd.

BSE: 541578 Sector: Auto
NSE: VARROC ISIN Code: INE665L01035
BSE 00:00 | 20 Feb 402.75 -1.55
(-0.38%)
OPEN

408.50

HIGH

411.00

LOW

400.10

NSE 00:00 | 20 Feb 402.55 -1.75
(-0.43%)
OPEN

407.90

HIGH

413.00

LOW

400.05

OPEN 408.50
PREVIOUS CLOSE 404.30
VOLUME 876
52-Week high 666.35
52-Week low 380.05
P/E 72.44
Mkt Cap.(Rs cr) 5,429
Buy Price 402.75
Buy Qty 1.00
Sell Price 402.75
Sell Qty 5.00
OPEN 408.50
CLOSE 404.30
VOLUME 876
52-Week high 666.35
52-Week low 380.05
P/E 72.44
Mkt Cap.(Rs cr) 5,429
Buy Price 402.75
Buy Qty 1.00
Sell Price 402.75
Sell Qty 5.00

Varroc Engineering Ltd. (VARROC) - Auditors Report

Company auditors report

To the Members of Varroc Engineering Limited

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statements of VarrocEngineering Limited ("the Company") which comprise the Balance sheet as atMarch 31 2019 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 financial statements including a summary ofsignificant 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 ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2019 its profitincluding other comprehensive income its cash flows and the changes in equity for theyear 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 Rs. 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 Rs. 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 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 audit opinion on the standalone Ind AS financial statements.

Key Audit Matters

We have determined that there are no key audit matters to communicate in our report.

Other Information

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the Board's Report (including the Annexures) Corporate GovernanceReport and Management Discussions and Analysis (but does not include thestandalone/consolidated Ind AS financial statements and our auditor's report thereon)which we obtained prior to the date of this auditor's report and Corporate overview andother details to be included in the annual report which is expected to be made availableto us after that date.

Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not and will 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 identified above and in doing soconsider whether the other information is materially inconsistent with the standalone IndAS financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.

If based on the work we have performed on the other information that we obtained priorto the date of this auditor's report we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.

When we read the Corporate overview and other details included in the annual report ifwe conclude that there is a material misstatement therein we are required to communicatethe matter to those charged with governance.

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.

Independent Auditor's Report

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 system in place and the operating effectiveness ofsuch 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 2019 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.

Other Matter

The Ind AS financial statements of the Company for the year ended March 312018included in these standalone Ind AS financial statements have been audited by thepredecessor auditor who expressed an unmodified opinion on those statements on June 62018.

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 March312019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 312019 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 2019 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 50 to the standaloneInd AS financial statements;

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts - Refer Note 27 to the standalone Ind AS financial statements;

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003

per Paul Alvares

Partner

Membership Number: 105754

Place of Signature: Mumbai

Date: May 24 2019

Annexure 1 referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirement " of our report of even date

Re: Varroc Engineering Limited (the "Company")

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) All fixed assets have not been physically verified by management during the yearbut there is a regular programme of verification to cover all the items over a period ofthree years 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 management the title deedsof immovable properties included in property plant and equipment are held in the name ofthe Company.

(ii) The inventory has been physically verified by management during the year. In ouropinion the frequency of verification is reasonable. No material discrepancies werenoticed on such physical verification. Inventories lying with third parties have beensubstantially confirmed by them and no material discrepancies were noticed in respect ofsuch confirmations.

(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 usprovisions of section 185 and 186 of the Companies Act 2013 in respect of loans todirectors including entities in which they are interested and in respect of loans andadvances given investments made and guarantees and securities given have been compliedwith by the Company.

(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 related to the manufacture of its products andare of the opinion that prima facie the specified accounts and records have been made andmaintained. We have not however made a detailed examination of the same.

(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax duty of custom goods and service tax cess and other statutorydues have generally been regularly deposited with the appropriate authorities though therehas been a slight delay in a few cases in respect of payment of income taxes (TDS) andprovident fund. According to the information and explanations given to us no undisputedamounts payable in respect of provident fund employees' state insurance income-taxgoods and services tax customs duty cess and other statutory dues were outstanding atthe year end for a period of more than six months from the date they became payable.

(b) According to the records of the Company the dues of income-tax sales-tax servicetax duty of custom duty of excise value added tax and cess which have not beendeposited on account of any dispute are as follows:

Name of the statute Nature of the dues Amount* (Rs. in Million) Period to which the amount relates Forum where the dispute is pending
Income Tax Act 1961 Income Tax 12.70 AY 2008-09 Bombay High Court Aurangabad bench
Income Tax Act 1961 Income Tax 11.06 AY 2015-16 CIT (A) Pune
Sales Tax Act Sales Tax 0.65 FY 2000-01 Bombay High Court
The Central Excise Act 1944 Excise Duty 200.53 FY 2011-16 Commissioner of Central Excise Aurangabad
The Central Excise Act 1944 & The Finance Act 1994 Excise Duty & Service Tax 21.23 Jan 2005 to June 2017 Various Tax Authorities

* Against the litigation amount as mention above Rs. 0.53 million have been depositedwith respective authorities.

(viii) In our opinion and according to the information and explanations given bymanagement the Company has not defaulted in repayment of loans or borrowing to afinancial institution bank or government or dues to debenture holders.

(ix) In our opinion and according to information and explanations given by managementmonies raised by the company by way of term loans were applied for the purpose for whichthey were raised. According to the information and explanations given by management theCompany has not raised any money by way of initial public offer or further public offer(including debt instruments).

(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 management we report that no fraud by the Company or no fraud on the Company bythe officers and employees of the Company has been noticed or reported during the year.

(xi) According to the information and explanations given by management the managerialremuneration has been paid/provided in accordance with the requisite approvals mandated bythe provisions of section 197 read with Schedule V to the Companies Act 2013.

Annexure 1 referred to in paragraph 1 under the heading "Report on Other Legal andRegulatory Requirement " of our report of even date

(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 section 177 and 188 of theCompanies 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 by management the Companyhas not made any preferential allotment or private placement of shares or fully or partlyconvertible debentures during the year under review and accordingly reporting requirementsunder clause 3(xiv) are not applicable to the Company and hence not commented upon.

(xv) According to the information and explanations given by management the Company hasnot entered into any non-cash transactions with directors or persons connected with him asreferred to in section 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.

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003

per Paul Alvares

Partner

Membership Number: 105754

Place of Signature: Mumbai

Date: May 24 2019

Annexure 2 to The Independent Auditors Report of Even Date on The Standalone Ind asFinancial Statement

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 VarrocEngineering Limited ("the Company") as of March 31 2019 in conjunction with ouraudit of the standalone Ind AS financial statements of the Company for the year ended onthat 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 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 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.

Auditor's Responsibility

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 as specified under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls both applicable to an audit of Internal Financial Controls and bothissued by the Institute of Chartered Accountants of India. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively 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 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 internal financial controls system overfinancial reporting with reference to these standalone Ind AS financial statements.

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 ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting withreference to these standalone financial statements

Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone 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 financial statements to future periods are subject to the risk thatthe internal financial control over financial reporting with reference to these standalonefinancial statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these standalone financial statementsand such internal financial controls over financial reporting with reference to thesestandalone financial statements were operating effectively as at March 312019 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003

per Paul Alvares

Partner

Membership Number: 105754

Place of Signature: Mumbai

Date: May 24 2019