Elgi Rubber Company Limited
Report on the audit of Standalone Financial Statements
Opinion
1. I have audited the accompanying standalone financial statements of Elgi Rubber Company Limited (“the Company”), which comprise the standalone balance sheet as at 31st March 2023, the standalone statement of Profit and Loss, the standalone statement of changes in equity, and the standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information in which are included the financial statements/ information for the year ended on that date
2. In my opinion and to the best of my information and according to the explanations given to me, the aforesaid standalone financial statements give the information required by the Companies Act (“the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2023, and total comprehensive income (comprising of profit and other comprehensive income), changes in equity and its cash flows for the year then ended.
Basis for Opinion
3. I conducted my audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the “Standalone Financial Statements”section of my report. I am independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to my audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the Code of Ethics. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
Emphasis of Matter:
4. I draw attention to the Note No 51(b)(19) and 51(b)(20) to the Standalone Financial Statements, in which it was explained that the Company has written off the accumulated outstanding interest on the loans and advances, aggregating to Rs.116.12 million and reversed the interest recognized during the current period aggregating to Rs. 74.55 million, payable by the various overseas subsidiaries of the company. Based on independent valuation obtained from an independent valuer and impairment testing done by the management on the basis of forecast of the business operations of the overseas subsidiaries which indicates that the assets of subsidiaries when realized will be adequate to repay all the outstanding dues to the parent company, if required and meet the obligations as and when they fall due. Accordingly, the management of the Company believes that no further provision is required in respect of investment made and the loan & advances given to overseas subsidiaries on these Standalone Financial Statements.
My opinion is not modified in respect of the above matter.
Key Audit Matters:
5. Key audit matters are those matters that, in my professional judgment, were of the most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters:
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S.No.
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Key Audit Matter
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Auditor’s Response
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1.
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Assessment of carrying value of investment and Loans & Advances given to the overseas subsidiaries (Refer Note 8 and 9 to the Standalone Financial Statements)
As at March 31, 2023, the Company has equity investments of Rs.859.55/- million in its subsidiaries and Loans & advances aggregating to Rs.1345.52/- million in the aforesaid subsidiaries.
I considered the assessment of carrying value of investments and the recoverability of the Loans & Advances as a key audit matter, considering its significance to the Standalone Financial Statements, and where applicable, the judgement involved in estimating future cash flows, valuation done independent valuers particularly with respect to factors such as discount rates, cash flow projections and terminal growth rates.
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My audit procedures included the following:
Understood and performed procedures to assess the design and tested the operating effectiveness of relevant controls related to the annual evaluation on assessment of the carrying value of investments and their recoverability of the Loans & Advances.
Tested the Company’s assessment with regard to key financial indicators including net worth of those respective subsidiaries with the carrying value of the investments made in those entities.
Considered the valuation of the immovable properties of the subsidiaries, obtained from the independent valuers, and furnished to me by the management.
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S.No.
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Key Audit Matter
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Auditor’s Response
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Where future cash flow projections were prepared, evaluated the reasonableness of these projections by checking the mathematical accuracy, and discussing with the management to understand the assumptions involved and my knowledge and understanding of the current business conditions. Evaluated, the key assumptions such as discount rate and growth rate used in the preparation of the cash flow projections.
Evaluated the adequacy of the disclosures made in the Standalone Financial Statements.
Based on the above procedures performed, the management's assessment of the carrying value of investments in subsidiaries was reasonable and the management’s assessment on recoverability of the Loans & advances for the aforesaid subsidiaries are considered to be reasonable.
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2.
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Evaluation of uncertain tax positions
The Company has uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes (Refer note 46 to standalone financial statements).
I considered the evaluation of uncertain tax positions as a key audit matter, considering its significance of its impact to the Standalone Financial Statements, and where applicable, the judgement involved in evaluating the uncertain tax positions
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My audit procedures included the following:
Obtained details of completed tax assessments and demands received upto the end of the financial year and till the date of finalisation of our report, from management.
Analysed the management’s underlying assumptions in estimating the tax provision and the possible outcome of the disputes.
Considered legal precedence and other rulings in evaluating management’s position on these uncertain tax positions.
Additionally, I considered the effect of new information in respect of uncertain tax positions to evaluate whether any change was required to management’s position on these uncertainties.
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Information Other than the standalone Financial Statements and Auditor’s Report Thereon
6. The Company’s Management and Board of Directors are responsible for the other information. The other information comprises the Board’s Report and the Corporate Governance Report but does not include the standalone financial statements and my auditor’s report thereon.
My opinion on the standalone financial statements does not cover the other information and I do not express any form of assurance conclusion thereon.
In connection with my audit of the standalone financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or my knowledge obtained during the course of my audit or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a material misstatement of this other information; I am required to report that fact. I have nothing to report in this regard.
Responsibilities of Management and those charged with governance for the standalone Financial Statements
7. The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the accounting standards specified under section 133 of the Act, read with relevant rules issued thereunder.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for the safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation, and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statement that gives a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
8. My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
I give in “Annexure A” a detailed description of Auditors; responsibilities for the Audit of the Standalone Financial Statements.
Report on Other Legal and Regulatory Requirements
9. As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”), issued by the Central Government of India in terms of subsection (11) of section 143 of the Companies Act, 2013, I give in the “Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
10. As required by Section 143(3) of the Act, I report that:
(a) I have sought and obtained all the information and explanations which to the best of my knowledge and belief were necessary for the purposes of my audit.
(b) In my opinion, proper books of account as required by law have been kept by the Company so far as it appears from my examination of those books.
(c) The standalone balance Sheet, the standalone statement of Profit and Loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of Cash Flows dealt with by this Report are in agreement with the books of account.
(d) In my opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.
(e) On the basis of the written representations received from the directors as on 31st March 2023 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2023 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 over financial reporting of the Company and the operating effectiveness of such controls, refer to my separate Report in “Annexure C”.
(g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in my opinion, and to the best of my information and according to the explanations given to me:
• The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 46 to the financial statements;
• The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable
losses.
• There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the
Company.
(h) (A) The management has represented that, to the best of its knowledge and belief, 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 the Company to or in any other persons or entities, including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall:
o directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever (“Ultimate Beneficiaries”) by or on behalf of the Company or
o provide any guarantee, security, or the like to or on behalf of the Ultimate Beneficiaries.
(B) The management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall:
• directly or indirectly, lender invest in other persons or entities identified in any manner whatsoever(“Ultimate Beneficiaries”) by or on behalf of the Funding Party or
• provide any guarantee,security, or the like from or on behalf of the Ultimate Beneficiaries; and
(C) Based on such audit procedures as considered reasonable and appropriate in the circumstances, nothing has come to my notice that has caused me to believe that the representations under subclause (i) (A) and (i) (B) contain any material misstatement
(i) The Company has not declared or paid any dividend during the year and has not proposed final dividend for the year.
(j) As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 (as amended), which provides for books of account to have the feature of audit trail, edit log, and related matters in the accounting software used by the Company, is applicable to the Company only with effect from the financial year beginning April 1,2023, the reporting under clause (g) of Rule 11 of the Companies (Audit and Auditors) Rules, 2014 (as amended), is currently not applicable.
(k) With respect to the matter to be included in the Auditor’s Report under Section 197(16) of the Act:
In my opinion and according to the information and explanations given to me, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which is required to be commented upon by me.
for M/s ARUN & CO Chartered Accountants Firm Registration No.0014464S
Place : Coimbatore CA. A. Arun
Date : May 25, 2023 ProPrietor
Membership No. 227831 UDIN:23227831BGSZTM1625
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