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Wendt India Ltd.

BSE: 505412 Sector: Engineering
NSE: WENDT ISIN Code: INE274C01019
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OPEN 2467.90
PREVIOUS CLOSE 2451.10
VOLUME 6
52-Week high 3390.00
52-Week low 1590.00
P/E 89.48
Mkt Cap.(Rs cr) 498
Buy Price 2445.95
Buy Qty 2.00
Sell Price 2610.00
Sell Qty 1.00
OPEN 2467.90
CLOSE 2451.10
VOLUME 6
52-Week high 3390.00
52-Week low 1590.00
P/E 89.48
Mkt Cap.(Rs cr) 498
Buy Price 2445.95
Buy Qty 2.00
Sell Price 2610.00
Sell Qty 1.00

Wendt India Ltd. (WENDT) - Auditors Report

Company auditors report

TO THE MEMBERS OF WENDT (INDIA) LIMITED.

Report on the audit of the Standalone financial statements

Opinion

1. We have audited the accompanying standalone financial statements of Wendt (India)Limited (“the Company”) which comprise the Balance Sheet as at March 31 2020and the Statement of Profit and Loss (including Other Comprehensive Income) Statement ofChanges in Equity and Statement of Cash Flows for the year then ended and notes to thestandalone financial statements including a summary of significant accounting policiesand other explanatory information.

2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 (“the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at March 31 2020 and total comprehensive income(comprising of profit and other comprehensive income) changes in equity and its cashflows for the year then ended.

Basis for Opinion

3. 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 Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India (ICAI) togetherwith the ethical requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our opinion.

Emphasis of Matter

4. We draw your attention to Note 45 to the standalone financial statements whichexplains the uncertainties and the management's assessment of the financial impact due tothe lockdown and other restrictions and conditions related to the COVID-19 pandemicsituation for which a definitive assessment of the impact in the subsequent period ishighly dependent upon circumstances as they evolve. Further our attendance at thephysical inventory verification done by the management was impracticable under the currentlock-down restrictions imposed by the Government and we have therefore relied on therelated alternate audit procedures to obtain comfort over the existence and condition ofinventory at year end. Our opinion is not modified in respect of this matter.

Key audit matters

5. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current year.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.

Description of Key Audit Matter

Appropriateness of Provision recognized for obsolescence of slow moving inventory

Refer Note 2.2 (Critical Estimates and Judgements) and Note 9 (Inventories) to thestandalone financial statements.

The Company manufactures super abrasives and precision tools which includes grindingand honing tools. The inventory of the Company (including raw materials work in progressfinished goods stock in trade and stores and spares) as at March 31 2020 aggregates toRs.2612.25 Lakhs. The Company has recognized a provision for obsolescence of the aboveinventories for Rs. 98.16 lakhs. Such provision for obsolescence mainly arises on accountof:

a) Items expected to be sold below cost (finished goods stock in trade and work inprogress) and

b) Items which have become wholly or partially obsolete (raw materials work inprogress finished goods stock in trade and stores and spares).

Management judgment is required in assessing the adequacy of provision for obsolescenceof slow moving inventory. There are key assumptions and management estimates involved inthe provision including the saleability of aged inventory and the value that will berealised on sale. These judgments may have a significant impact on the calculation ofinventory provision.

Due to the judgments involved the risk around the adequacy of inventory provision is afocus area for the audit and is determined as a key audit matter.

How our audit addressed Key Audit Matter

Our audit procedures which involved applying sampling techniques included thefollowing:

• Understanding and evaluating the design and testing the operating effectivenessof Company's controls relating to recognition of provision for obsolescence of inventory.

• Understanding the methodology used to calculate the inventory provision anddetermining whether it was consistent with that applied in the prior year.

• Testing whether all the slow moving inventory items have been considered by theManagement along with the basis for its expected usage for recognition of provision.

• Discussing with Company's personnel the rationale for recognizing a provisionfor inventory with little or no movement during the year.

• Testing the pattern of inventory movement obtained from the Management.

• Testing the reconciliation of the amount of total inventory used for thecalculation of provision to the inventory recorded.

• In respect of inventory items expected to be sold off at below cost testing themanagement's basis for determining the net realizable value based on contracted sellingprice per sales orders or historical selling price as adjusted for price fluctuations andother factors as applicable.

• Verifying the arithmetical accuracy of the computation of the provision.

Based on the above procedures performed we considered the provision recognized forobsolescence of slow moving inventory to be reasonable.

Other Information

6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard's Report Corporate Governance Report and Shareholder information but does notinclude the standalone financial statements and our auditor's report thereon.

7. Our opinion on the financial statements does not cover the other information and wedo not express any form of assurance conclusion thereon.

8. In connection with our audit of the standalone financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed 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.

Responsibilities of management and those charged with governance for the FinancialStatements

9. 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) changes in equity and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the AccountingStandards specified under section 133 of the Act. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.

10. 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 are also responsible foroverseeing the Company's financial reporting process.

Auditor's responsibilities for the audit of the financial statements

11. 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.

12. As part of an audit in accordance with SAs we exercise Professional judgment andmaintain professional scepticism throughout the audit. We also:

• 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 control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe 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 financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

13. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

14. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.

15. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the standalone financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on other legal and regulatory requirements

16. As required by the Companies (Auditor's Report) Order 2016 (“theOrder”) issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure B a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

17. 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 Cash Flow Statement dealt with by thisReport are in agreement with the books of account.

d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act.

e) On the basis of the written representations received from the directors as on March31 2020 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2020 from being appointed as a director in terms of Section164 (2) of the Act.

f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in “Annexure A”.

g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company does not have any pending litigations which would impact its financialposition.

ii. The Company has long-term contracts as at March 31 2020 for which there were nomaterial foreseeable losses. The Company did not have any derivative contracts as at March31 2020.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

iv. The reporting on disclosures relating to Specified Bank Notes is not applicable tothe Company for the year ended March 31 2020.

18. The Company has paid managerial remuneration to the executive director inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V to the Act (refer Note 34 to the standalone financial statements).Commission payable to non-whole time independent directors aggregating to Rs. 14 lakhs issubject to shareholders' approval in the ensuing Annual General Meeting to comply with therequirements of Section 197 read with Schedule V to the Act (refer Note 28 to thestandalone financial statements). Also refer Clause xi of the CARO report on theStandalone Financial Statements.

For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/N500016
Chartered Accountants
Mohan Danivas S A
Partner
Bangalore Membership Number: 209136
May 28 2020 UDIN: 20209136AAAABT9502

ANNEXURE A TO INDEPENDENT AUDITOR'S REPORT

Referred to in paragraph 17 (f) of the Independent Auditor's Report of even date to themembers of Wendt (India) Limited on the standalone financial statements for the year endedMarch 31 2020

Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the Act

1. We have audited the internal financial controls with reference to financialstatements of Wendt (India) Limited (“the Company”) as of March 31 2020 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

2. 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 Reporting (the“Guidance Note”) issued by the Institute of Chartered Accountants of India(ICAI). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.

Auditors' Responsibility

3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note issued by the ICAI and the Standards on Auditingdeemed to be prescribed under section 143(10) of the Act to the extent applicable to anaudit of internal financial controls both applicable to an audit of internal financialcontrols and both issued by the ICAI. Those Standards and the Guidance Note require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate internal financial controls with reference to financialstatements was established and maintained and if such controls operated effectively in allmaterial respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.

5. 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 systemwith reference to financial statements.

Meaning of Internal Financial Controls with reference to financial statements

6. A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the company's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial Controls with reference to financialstatements

7. Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

Opinion

8. In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as atMarch 31 2020 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. Also refer paragraph 4 of the main audit report.

For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/N500016
Chartered Accountants
Mohan Danivas S A
Partner
Bangalore Membership Number: 209136
May 28 2020 UDIN: 20209136AAAABT9502

ANNEXURE B TO INDEPENDENT AUDITOR'S REPORT

Referred to in paragraph 16 of the Independent Auditor's Report of even date to themembers of Wendt (India) Limited on the standalone financial statements as of and for theyear ended March 31 2020

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

(b) The fixed assets are physically verified by the Management according to a phasedprogramme designed to cover all the items over a period of two years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. Pursuant to the programme a portion of the fixed assets has been physicallyverified by the Management during the year and no material discrepancies have been noticedon such verification.

(c) The title deeds of immovable properties as disclosed in Note 3 on fixed assets tothe financial statements are held in the name of the Company.

ii. The physical verification of inventory excluding stocks with third parties havebeen conducted at reasonable intervals by the Management during the year. In respect ofinventory lying with third parties these have substantially been confirmed by them. Thediscrepancies noticed on physical verification of inventory as compared to book recordswere not material. Further our attendance at the physical inventory verification done bythe management was impracticable under the current restrictions imposed by the Governmentand we have relied on the related alternate audit procedures. (refer paragraph 4 of themain audit report).

iii. The Company has not granted secured or unsecured loans to companies firmsLimited Liability Partnerships or other parties covered in the register maintained underSection 189 of the Act. Therefore the provisions of Clause 3(iii) (iii)(a) (iii)(b) and(iii)(c) of the said Order are not applicable to the Company.

iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of the loans and investments made and guarantees and security provided by it.

v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified.

vi. Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products. We have broadly reviewed the same and are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We have nothowever made a detailed examination of the records with a view to determine whether theyare accurate or complete.

vii. (a) According to the information and explanations given to us and the records ofthe Company examined by us in our opinion the Company is generally regular in depositingthe undisputed statutory dues including provident fund employees' state insuranceincome tax duty of customs goods and service tax and other material statutory dues asapplicable with the appropriate authorities. (b) According to the information andexplanations given to us and the records of the Company examined by us there are no duesof income-tax sales-tax service-tax duty of customs and duty of excise or value addedtax or goods and service tax which have not been deposited on account of any dispute.

viii. As the Company does not have any loans or borrowings from any financialinstitution or bank or Government nor has it issued any debentures as at the balancesheet date the provisions of Clause 3(viii) of the Order are not applicable to theCompany.

ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans. Accordingly the provisions ofClause 3(ix) of the Order are not applicable to the Company.

x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.

xi. The Company has paid managerial remuneration to the executive director inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V to the Act (refer Note 34 to the standalone financial statements).Commission payable to non-whole time independent directors aggregating to Rs. 14 lakhs issubject to shareholders' approval in the ensuing Annual General Meeting to comply with therequirements of Section 197 read with Schedule V to the Act (refer Note 28 to thestandalone financial statements). Also refer paragraph 18 of the main audit report to thestandalone financial statements.

xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company.

xiii. The Company has entered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required under IndianAccounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 ofthe Act.

xiv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under audit. Accordingly theprovisions of Clause 3(xiv) of the Order are not applicable to the Company.

xv. The Company has not entered into any non-cash transactions with its directors orpersons connected with him. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.

xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.

For Price Waterhouse Chartered Accountants LLP
Firm Registration Number: 012754N/N500016
Chartered Accountants
Mohan Danivas S A
Partner
Bangalore Membership Number: 209136
May 28 2020 UDIN: 20209136AAAABT9502