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Varroc Engineering Ltd.

BSE: 541578 Sector: Auto
NSE: VARROC ISIN Code: INE665L01035
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VOLUME 12216
52-Week high 494.60
52-Week low 279.00
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Mkt Cap.(Rs cr) 4,419
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OPEN 290.00
CLOSE 290.50
VOLUME 12216
52-Week high 494.60
52-Week low 279.00
P/E
Mkt Cap.(Rs cr) 4,419
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Varroc Engineering Ltd. (VARROC) - Auditors Report

Company auditors report

To

The Members of

Varroc Engineering Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of Varroc EngineeringLimited ("the Company") which comprise the Balance sheet as at March 31 2022the Statement of Profit and Loss including the statement of Other Comprehensive Incomethe Cash Flow Statement and the Statement of Changes in Equity for the year then endedand notes to the standalone financial statements including a summary of significantaccounting 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 financial statements give the information requiredby the Companies Act 2013 as amended ("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 2022 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 financial statements in accordance with theStandards 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 Financial Statements' section of ourreport. 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 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 financial statements.

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 for the financial yearended March 31 2022. These matters were addressed in the context of our audit of thestandalone financial statements as a whole and in forming our opinion thereon and we donot provide a separate opinion on these matters. For each matter below our description ofhow 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 financial statements section ofour report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the standalone financial statements. The results of our audit proceduresincluding the procedures performed to address the matters below provide the basis for ouraudit opinion on the accompanying standalone financial statements.

Key audit matters How our audit addressed the key audit matter
Recoverability of investments in / loans given to VarrocCorp Holding BV Netherlands (askdescribedkinknotek ?kofkthek standalonekfinancialkstatements)
The Company has equity investments of Rs9665.58 Million and loans given of Rs9905.99 Million to its wholly owned subsidiary VarrocCorp Holding BV Netherlands (‘VCHBV') as at March 31 2022. The Company along with VCHBV entered into a Securities Purchase Agreement (‘SPA') dated April 28 2022 with Compagnie Plastic Omnium Se France for the sale of four-wheeler lighting business in the Americas and Europe ("VLS Business"). The audit procedures performed by us included the following:
• Obtained and read the SPA for understanding the entities/ businesses covered as part of the sale transaction;
• Reviewed the workings prepared by management for assessing the recoverability of equity investments/loans given to VCHBV including the estimates and judgements involved therein;
VLS Business comprises a substantial part of the total investments of VCHBV. Since VLS Business is being divested hence management has assessed the recoverability of the equity investments and loans given to VCHBV by the Company as at balance sheet date taking into account the purchase consideration agreed with the buyer under the SPA. Based on such assessment management has concluded that no amount needs to be provided against the said investments/ loans as at March 31 2022. • Traced the sale consideration considered in the above workings to the SPA;
• Checked the underlying calculations for the recoverable amounts in respect of the equity investments/loans given to VCHBV as at March 31 2022;
• Assessed the disclosures in the standalone financial statements for compliance with the relevant accounting standard requirements.
We identified this as a key audit matter in our audit of the standalone financial statements considering the complexity in determining the recoverable amounts attributable to the equity investments and loans given by the Company to VCHBV and the quantum of such equity investments/loans as at March 31 2022.
De-recognition of trade receivables under factoring arrangements (askdescribedkinknotek_Ykofkthekstandalonekfinancialk statements)
The Company enters into non-recourse factoring arrangements for its trade receivables with various banks/ financial institutions. The audit procedures performed by us included the following:
As at March 31 2022 the Company derecognised trade receivables amounting to Rs803.04 Million. The Company derecognises the receivables from its books if it transfers substantially all the risks and rewards of ownership of the financial asset (i.e. receivables). • We evaluated the assessment made by management in respect of transfer of substantially all risks and rewards of ownership of the financial asset under the factoring contracts;
The assessment of derecognition of trade receivables under the factoring arrangements is complex and requires judgement. • Read samples of factoring contracts to understand the terms and assessed if they qualify as non-recourse agreements and further assessed the accounting as per the requirements of Ind AS 109 "Financial Instruments";
• Assessed the disclosures in the standalone financial statements for compliance with the relevant accounting standard requirements.
Accordingly this has been identified as a key audit matter in our audit of the standalone financial statements
Testing of compliance with Debt covenants (askdescribedkinknotekY_kofkthekstandalonekfinancialkstatements)
The total borrowings of the Company as at March 31 2022 was Rs11620.53 Million. The audit procedures performed by us included the following:
The Company has availed various long-term borrowings. These borrowings have loan covenants with respect to debt- equity debt service coverage etc. non-compliance of which gives right to the lender to demand immediate repayment of the loan and/or penal interest. • We evaluated the Company's assessment and workings for compliance with the relevant loan covenants as applicable to various borrowings of the Company;
• We tested the underlying calculations used in the Company's assessment of debt covenants for a sample of loan contracts;
We identified this as a key audit matter in our audit of the standalone financial statements considering the quantum of borrowings and the implications in case of non-compliance with loan covenants. • In case of non-compliance with any of the debt covenants we read the covenant waiver letters from lenders where available. In the absence of waiver letters we assessed the consequent reclassification of the respective borrowing from non-current to current.
• We assessed the disclosures in the standalone financial statements for compliance with the relevant accounting standard requirements.

Other Information

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 financial statements and our auditor's report thereon. The Annual report 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 will not express any form of assurance conclusion thereon. In connection with ouraudit of the standalone financial statements our responsibility is to read the otherinformation and in doing so consider whether such other information is materiallyinconsistent with the standalone financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated.

When we read the Annual report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.

Responsibilities of Management for the Standalone 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 financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting 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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone 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 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 skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial 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 exists we are required to draw attention inour auditor's report to the related disclosures in the financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However future events orconditions may cause the Company to cease to continue 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.

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 statementsfor the financial year ended March 31 2022 and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2020 ("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 andobtained all the information and explanations which to the best of our knowledge andbelief 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 Sheetthe Statement of Profit and Loss including the Statement of Other Comprehensive Incomethe Cash Flow Statement and Statement of Changes in Equity dealt with by this Report arein agreement with the books of account; (d) In our opinion the aforesaid standalonefinancial statements comply with the Accounting Standards specified under Section 133 ofthe Act read with Companies (Indian Accounting Standards) Rules 2015 as amended; (e) Onthe basis of the written representations received from the directors as on March 31 2022taken on record by the Board of Directors none of the directors is disqualified as onMarch 31 2022 from being appointed as a director in terms of Section 164 (2) of the Act;(f) With respect to the adequacy of the internal financial controls with reference tothese standalone financial statements and the operating effectiveness of such controlsrefer to our separate Report in "Annexure 2" to this report; (g) In our opinionthe managerial remuneration for the year ended March 31 2022 has been paid / provided bythe Company to its directors in accordance with the provisions of section 197 read withSchedule V to the Act; (h) With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules2014 as amended in our opinion and to the best of our information and according to theexplanations given to us: i. The Company has disclosed the impact of pending litigationson its financial position in its standalone financial statements – Refer Note 51 tothe standalone financial statements; ii. The Company did not have any long-term contractsincluding derivative contracts for which there were any material foreseeable losses; iii.There were no amounts which were required to be transferred to the Investor

Education and Protection Fund by the Company. iv. a) The management has representedthat to the best of its knowledge and belief other than as disclosed in the note 54 tothe standalone financial statements no funds have been advanced or loaned or invested(either from borrowed funds or share premium or any other sources or kind of funds) by thecompany to or in any other person(s) or entity(ies) including foreign entities("Intermediaries") with the understanding whether recorded in writing orotherwise that the Intermediary shall whether directly or indirectly lend or invest inother persons or entities identified in any manner whatsoever by or on behalf of thecompany ("Ultimate Beneficiaries") or provide any guarantee security or thelike on behalf of the Ultimate Beneficiaries; b) The management has represented that tothe best of its knowledge and belief other than as disclosed in the note 54 to thestandalone financial statements no funds have been received by the company from anyperson(s) or entity(ies) including foreign entities ("Funding Parties") withthe understanding whether recorded in writing or otherwise that the company shallwhether directly or indirectly lend or invest in other persons or entities identified inany manner whatsoever by or on behalf of the Funding Party ("UltimateBeneficiaries") or provide any guarantee security or the like on behalf of theUltimate Beneficiaries; and c) Based on such audit procedures that were consideredreasonable and appropriate in the circumstances nothing has come to our notice that hascaused us to believe that the representations under sub-clause (a) and (b) contain anymaterial misstatement. v. No dividend has been declared or paid during the year by theCompany.

For S R B C & CO LLP
Chartered Accountants
ICAI Firm Registration Number: 324982E/E300003
per Paul Alvares
Partner
Membership Number: 105754
UDIN: 22105754AJWJUN7357
Place of Signature: Pune
Date: May 30 2022

Annexure 1

Referred to in paragraph 1 under the heading "Report on Other Legal and RegulatoryRequirements" of our report of even date Re: Varroc Engineering Limited (the"Company")

(i) (a) (A) The Company has maintained proper records showing full particularsincluding quantitative details and situation of Property Plant and Equipment.

(B) The Company has maintained proper records showing full particulars of intangiblesassets.

(b) Property Plant and Equipment were physically verified by the management during theyear in accordance with a planned program of verifying them once in three years which inour opinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were identified on such verification.

(c) The title deeds of all the immovable properties (other than properties where theCompany is the lessee and the lease agreements are duly executed in favour of the lessee)are held in the name of the Company.

(d) The Company has not revalued its Property Plant and Equipment (including Right ofuse assets) or intangible assets during the year ended March 31 2022 since the Companyfollows cost model for measurement after recognition of Property Plant and Equipment andintangible assets.

(e) There are no proceedings initiated or are pending against the Company for holdingany benami property under the Prohibition of Benami Property Transactions Act 1988 andrules made thereunder.

(ii) (a) The inventory has been physically verified by the management during the yearexcept for inventories lying with third parties. In our opinion the frequency ofverification by the management is reasonable and the coverage and procedure for suchverification is appropriate. Discrepancies of 10% or more in aggregate for each class ofinventory were not noticed in respect of such physical verification. Inventories lyingwith third parties have been confirmed by them as at or near year end and discrepancies of10% or more in aggregate for each class of inventory were not noticed in respect of suchconfirmations.

(b) As disclosed in note 22 to the financial statements the Company has beensanctioned working capital limits in excess of five crore rupees in aggregate from banksand/or financial institutions during the year on the basis of security of current assetsof the Company. The quarterly returns/statements filed by the Company with such banks andfinancial institutions are in agreement with the books of account of the Company exceptfor the cases for which the details are disclosed in Appendix A.

(iii) (a) During the year the Company has provided loans and guarantees to companiesas disclosed below. According to the information and explanations given to us and auditprocedures performed by us the Company has not provided advances in the nature of loansor security to companies firms Limited Liability Partnerships or any other parties. (seetable below)

(Rs in Million)
Subsidiaries/ Joint Ventures/ Associates/ Others Guarantees Loans
Aggregate amount granted/ provided during the year Subsidiaries 2555.50 10400.26
Balance outstanding as at balance sheet date in respect of above cases Subsidiaries 2595.85* 10122.11*

* Balance outstanding includes restatement impact on foreign currency loans. There wasno repayment during the year.

(b) During the year the terms and conditions of the grant of all loans and guaranteesto companies are not prejudicial to the Company's interest. The Company has not made anyinvestments provided security and advances in the nature of loans to companies firmsLimited Liability Partnerships or any other parties during the year.

(c) The Company has granted loans to subsidiaries which are repayable on demand.Payment of interest has been stipulated and the delays in receipt of interest as ofbalance sheet date are mentioned below:

Name of the Entity Amount (Rs In Million) Due date Extent of delay in days upto balance sheet date
Varroc Corp Holding B.V. The Netherlands 3.76 30-Jul-21 244
Varroc Corp Holding B.V. The Netherlands 20.49 30-Oct-21 152
Varroc Corp Holding B.V. The Netherlands 53.63 30-Jan-22 60
Varroc Corp Holding B.V. The Netherlands 2.45 30-Oct-20 518
Varroc Corp Holding B.V. The Netherlands 3.69 30-Jan-21 426
Varroc Corp Holding B.V. The Netherlands 4.05 30-Apr-21 336
Varroc Corp Holding B.V. The Netherlands 1.91 30-Apr-21 336
CarIQ Technologies Private Limited 0.77 31-Mar-20 730
CarIQ Technologies Private Limited 2.00 31-Mar-21 365

(d) The following amounts are overdue for more than ninety days as at the balance sheetdate from subsidiaries to whom loans have been granted and reasonable steps have beentaken by the Company for recovery of the overdue amount of principal and interest.

rNumber of Cases Principal Amount Overdue Interest Overdue (Rs in Million) Total Overdue (Rs in Million)
8 Nil 39.12 39.12

(e) There were no loans granted to companies which had fallen due during the year.

(f) As disclosed in note 15 to the financial statements the Company has granted loanswhich are repayable on demand. Of these following are the details of the aggregate amountof loans granted to related parties (subsidiaries) as defined in clause (76) of section 2of the Companies Act 2013:

(Rs in Million)
Subsidiaries
Aggregate amount of loans 10142.11
- Repayable on demand Percentage of loans repayable on demand to the total loans 99.98%

(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities given in respect of whichprovisions of section 185 of the Companies Act 2013 are applicable and hence not commentedupon. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 186 of the Act in respect of loans andadvances given investments made and guarantees and securities given.

(v) The Company has neither accepted any deposits from the public nor accepted anyamounts which are deemed to be deposits within the meaning of sections 73 to 76 of theCompanies Act and the rules made thereunder to the extent applicable. Accordingly therequirement to report on clause 3(v) of the Order is not applicable to the Company. (vi)We have broadly reviewed the books of account maintained by the Company pursuant to therules made by the Central Government for the maintenance of cost records under section148(1) of the Companies Act 2013 related to the manufacture of its products andgeneration of electricity 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) Undisputed statutory dues including goods and services tax provident fundemployees' state insurance income-tax duty of customs cess and other statutory duesapplicable to it have generally been regularly deposited with the appropriate authoritiesthough there has been a slight delay in a few cases. According to the information andexplanations given to us and based on audit procedures performed by us no undisputedamounts payable in respect of these statutory dues were outstanding at the year end fora period of more than six months from the date they became payable.

(b) The dues of goods and services tax provident fund employees' state insuranceincome-tax sales-tax service tax duty of custom duty of excise value added tax cessand other statutory dues have not been deposited on account of any dispute are asfollows:

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 Branch
Income Tax Act 1961 Income Tax 52.82 AY 2015-16 to AY 2021-22 Commissioner of Income Tax (Appeals) Pune
Income Tax Act 1961 Income Tax 25.36 AY 2018-19 Dispute Resolution Panel Mumbai
The Central Excise Act 1944 Excise Duty 118.06 FY 2011-16 Commissioner of Central Excise Aurangabad
The Central Excise Act 1944 & The Finance Act 1994 Excise Duty and Service Tax 11.94 FY 2012-20 Various Tax authorities
Customs Act 1962 Custom Duty 37.64 FY 2021-22 DC- Customs Mumbai

* Against the litigation amount as mentioned above Rs 38.08 Million have beendeposited with the respective authorities. The amounts are excluding interest/penalties.

(viii) The Company has not surrendered or disclosed any transaction previouslyunrecorded in the books of account in the tax assessments under the Income Tax Act 1961as income during the year. Accordingly the requirement to report on clause 3(viii) of theOrder is not applicable to the Company.

(ix) (a) The Company has not defaulted in repayment of loans or other borrowings or inthe payment of interest thereon to any lender.

(b) The Company has not been declared wilful defaulter by any bank or financialinstitution or government or any government authority.

(c) Term loans were applied for the purpose for which the loans were obtained.

(d) On an overall examination of the financial statements of the Company no fundsraised on short-term basis have been used for long-term purposes by the Company.

(e) On an overall examination of the financial statements of the Company the Companyhas taken funds from following entities and persons on account of or to meet theobligations of its subsidiaries associates or joint ventures as per details below:

Nature Of fund taken Name of lender Amount involved (Rs in Million) Name of the subsidiary joint venture associate Relation Nature of transaction for which funds utilised
Non- convertible Debenture (listed) Axis Bank Limited IDBI Bank Limited HDFC Bank Limited 3750 Varroc Corp Holding B.V. The Netherlands Wholly Owned Subsidiary Repayment of existing debts of overseas subsidiaries and for meeting fund
Inter-corporate Deposit Varroc Polymers Private Limited 2860 Varroc Corp Holding B.V. The Netherlands Wholly Owned Subsidiary requirements for business operations of overseas subsidiaries

(f) The Company has not raised loans during the year on the pledge of securities heldin its subsidiaries joint ventures or associate companies. Hence the requirement toreport on clause (ix)(f) of the Order is not applicable to the Company.

(x) (a) The Company has not raised any money during the year by way of initial publicoffer / further public offer (including debt instruments) hence the requirement to reporton clause 3(x)(a) of the Order is not applicable to the Company.

(b) The Company has not made any preferential allotment or private placement of shares/fully or partially or optionally convertible debentures during the year under audit. Theunutilised amount of Rs 1235.22 Million which was raised from private placement of equityshares in previous year has been used for the purposes for which the funds were raised.

(xi) (a) No material fraud by the Company or no material fraud on the Company has beennoticed or reported during the year.

(b) During the year no report under subsection (12) of section 143 of the CompaniesAct 2013 has been filed by cost auditor/ secretarial auditor or by us in Form ADT –4 as prescribed under Rule 13 of Companies (Audit and Auditors) Rules 2014 with theCentral Government.

(c) As represented to us by the management there are no whistle blower complaintsreceived by the Company during the year.

(xii) The Company is not a nidhi Company as per the provisions of the Companies Act2013. Therefore the requirement to report on clause 3(xii)(a) (b) and (c) of the Orderis not applicable to the Company. (xiii) Transactions with the related parties are incompliance with sections 177 and 188 of Companies Act 2013 where applicable and thedetails have been disclosed in the notes to the financial statements as required by theapplicable accounting standards. (xiv)(a) The Company has an internal audit systemcommensurate with the size and nature of its business.

(b) The internal audit reports of the Company issued till the date of the audit reportfor the period under audit have been considered by us.

(xv) The Company has not entered into any non-cash transactions with its directors orpersons connected with its directors and hence requirement to report on clause 3(xv) ofthe Order is not applicable to the Company.

(xvi) (a) The provisions of section 45-IA of the Reserve Bank of India Act 1934 (2 of1934) are not applicable to the Company. Accordingly the requirement to report on clause(xvi)(a) of the Order is not applicable to the Company. (b) The Company is not engaged inany Non-Banking Financial or Housing Finance activities. Accordingly the requirement toreport on clause (xvi)(b) of the Order is not applicable to the Company.

(c) The Company is not a Core Investment Company as defined in the regulations made byReserve Bank of India. Accordingly the requirement to report on clause 3(xvi)(c) of theOrder is not applicable to the Company. (d) There is no Core Investment Company as part ofthe Group hence the requirement to report on clause 3(xvi)(d) of the Order is notapplicable to the Company.

(xvii) The Company has not incurred cash losses in the current financial year andimmediately preceding financial year.

(xviii) There has been no resignation of the statutory auditors during the year andaccordingly requirement to report on Clause 3(xviii) of the Order is not applicable to theCompany.

(xix) On the basis of the financial ratios disclosed in note 55 to the financialstatements ageing and expected dates of realisation of financial assets and payment offinancial liabilities other information accompanying the financial statements ourknowledge of the Board of Directors and management plans and based on our examination ofthe evidence supporting the assumptions nothing has come to our attention which causesus to believe that any material uncertainty exists as on the date of the audit report thatCompany is not capable of meeting its liabilities existing at the date of balance sheet asand when they fall due within a period of one year from the balance sheet date. Wehowever state that this is not an assurance as to the future viability of the Company. Wefurther state that our reporting is based on the facts up to the date of the audit reportand we neither give any guarantee nor any assurance that all liabilities falling duewithin a period of one year from the balance sheet date will get discharged by theCompany as and when they fall due. (xx) (a) In respect of other than ongoing projectsthere are no unspent amounts that are required to be transferred to a fund specified inSchedule VII of the Companies Act (the Act) in compliance with second proviso to subsection 5 of section 135 of the Act. This matter has been disclosed in note 37 to thefinancial statements.

(b) There are no unspent amounts in respect of ongoing projects that are required tobe transferred to a special account in compliance of provision of sub section (6) ofsection 135 of Companies Act. This matter has been disclosed in note 37 to the financialstatements.

For S R B C & Co LLP
Chartered Accountants
ICAI Firm Registration Number: 324982E/E300003
per Paul Alvares
Partner
Membership Number: 105754
UDIN: 22105754AJWJUN7357
Place of Signature: Pune
Date: May 30 2022

Appendix A referred to in Annexure 1 of our report of even date

1. Inventories:

(Rs In Million)

Reconciliation items

Sr. Quarter No. Amount as per books of accounts Amount as per quarterly returns Amount of difference Components not considered for the purpose of reporting (Refer Note 1 of Note 22(a) of the standalone financial statements) Post closure adjustments (Refer Note 2 of Note 22(a) of the standalone financial statements) Net difference
1 30th June 2021 3783.03 3874.15 (91.12) (121.36) 28.19 2.04
2 30th Septs 2021 3743.52 3847.94 (104.42) (104.43) - 0.01
3 31st Dec 2021 3876.01 3983.61 (107.60) (88.49) (20.00) 0.89
4 31st March 2022 3616.32 3659.95 (43.63) (103.89) 60.27 (0.01)

2. Trade Receivable

Reconciliation items

Sr. Quarter No. Amount as per books of accounts Amount as per quarterly returns Amount of difference Components not considered for the purpose of reporting (Refer Note 3 of Note 22(a) of the standalone financial statements) Post closure adjustments Net difference (Refer Note 4 of Note 22(a) of the standalone financial statements)
1 30th June 2021 3383.68 3226.47 157.21 149.06 - 8.15
2 30th Sept 2021 4768.70 4426.27 342.43 341.72 - 0.71
3 31st Dec 2021 3470.32 2338.82 1131.50 1145.58 - (14.08)
4 31st March 2022 3971.87 2513.15 1458.72 1479.66 - (20.94)

3. Trade Payables

(Rs In Million)

Reconciliation items

Sr. Quarter No. Balance as per Financials Amount as per Stock Statement Difference Components not considered for the purpose of reporting (Refer Note 5 of Note 22(a) of the standalone financial statements) Additional Components considered for the purpose of reporting (Refer Note 6 of Note 22(a) of the standalone financial statements) Post closure adjustments (Refer Note 2 of Note 22(a) of the standalone financial statements) Net difference (Refer Note 7 of Note 22(a) of the standalone financial statements)
1 30th June 2021 4577.43 3483.16 1094.27 341.09 94.74 (164.17) 822.61
2 30th Sept 2021 5980.54 4669.13 1311.41 893.86 108.19 (5.01) 314.37
3 31st Dec 2021 6414.21 5210.37 1203.84 857.48 85.36 (35.66) 296.66
4 31st March 2022 7644.68 6337.57 1307.11 957.85 87.30 (0.12) 262.08

Annexure 2

TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTSOF VARROC ENGINEERING 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 with reference to standalone financialstatements of Varroc Engineering Limited ("the Company") as of March 31 2022 inconjunction with our audit of the standalone financial statements of the Company for theyear ended 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 control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued 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 the Company's policies the safeguardingof its 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.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to these standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (the "Guidance Note") and the Standards onAuditing as specified under section 143(10) of the Act to the extent applicable to anaudit of internal financial controls both issued by ICAI. 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 controlswith reference to these standalone financial statements was established and maintained andif such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to these standalone financial statementsand their operating effectiveness. Our audit of internal financial controls with referenceto standalone financial statements included obtaining an understanding of internalfinancial controls with reference to these standalone financial statements assessing therisk that a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement 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 withreference to these standalone financial statements.

Meaning of Internal Financial Controls With Reference to these Standalone FinancialStatements

A company's internal financial controls with reference to standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to standalone 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 financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton the financial statements.

Inherent Limitations of Internal Financial Controls With Reference to StandaloneFinancial Statements

Because of the inherent limitations of internal financial controls with reference tostandalone financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to standalone financial statements to future periods are subjectto the risk that the internal financial control with reference to standalone financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols with reference to standalone financial statements and such internal financialcontrols with reference to standalone financial statements were operating effectively asat March 31 2022 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note issued by the ICAI.

For S R B C & Co LLP
Chartered Accountants
ICAI Firm Registration Number: 324982E/E300003
per Paul Alvares
Partner
Membership Number: 105754
UDIN: 22105754AJWJUN7357
Place of Signature: Pune
Date: May 30 2022

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