We have audited accompanying standalone Ind AS financial statements of Salzer Electronics Limited (“the Company”), which comprise of the balance sheet as at March 31, 2023, the statement of Profit and Loss (Including other comprehensive income), the Statement of changes in Equity and the Statement of Cash Flows for the year ended on that date, including a summary of significant accounting policies, notes to the financial statements, and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by The Companies Act, 2013 (“The Act') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as amended, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, its profit, total comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis of Opinion
We conducted our audit of the standalone Ind AS
financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independent requirement that are relevant to our audit of the standalone Ind AS financial statements under the provisions of the Act and the rules made there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the standalone Ind AS financial statements of the current period. These matters were addressed in the context of our audit of the standalone Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report
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Sr.No
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Key Audit Matter
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Auditor's Response
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1.
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Accuracy of recognition, measurement, presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 “Revenue from Contracts with Customers”
The application of this revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of the identified performance obligations, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, this revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date
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Principal Audit Procedures
We assessed the Company's process to identify the
impact of adoption of the revenue accounting standard.
Our audit approach consisted testing of the design and
operating effectiveness of the internal controls and
substantive testing as follows:.
• Evaluated the design of internal controls relating to implementation of the new revenue accounting standard.
• It is observed that transaction price charged is ex works price and revenue is booked at the time of dispatch of the goods.
• The above method followed by the Company is in line with the provisions of Ind AS 115-'Revenue from contracts with customers'
Conclusion:
We agree with the management's evaluation.
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2.
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Accuracy of revenues and onerous obligations in respect of fixed price contracts.
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Principal Audit Procedures
In the process of verifying the accuracy of recognition of revenues of fixed price contracts, we have undertaken the following audit approach
• Understood, evaluated and tested the key controls over the recognition of revenue from fixed price
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Sr.No
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Key Audit Matter
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Auditor's Response
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contracts. We selected a sample of transactions and
• Agreed the applied tariff to the respective terms in the contract.
• Tested revenue calculations and agreed the revenue recognized to the underlying accounting records.
Conclusion:
We agree with the management's evaluation.
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3.
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Assessment of carrying value of investments
The Company has invested in listed equity instruments. We consider this a key audit matter given the relative significance of the value of investments.
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Our procedures in relation to assessing the
carrying value of investments include the following
observations.
• The equity investments are carried at fair value as on 31st March, 2023.
• Due to market fluctuation, there has been significant value reduction in the equity investments.
• The Company has also invested in equity oriented mutual funds, and the same has also been recognized at fair market value as on 31st March, 2023.
Conclusion:
We agree with the management's evaluation
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4.
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Impairment assessment of carrying value of Investment in Kaycee Industries limited
The Company's investment in Kaycee Industries Limited, a subsidiary of the Company, aggregates to Rs. 1,636.47 Lakhs as at March 31,2023.
KCL is engaged in the business of manufacture and sale of Industrial Switchgears. The carrying value of investment is greater than the net worth of the subsidiary as at March 31, 2023 which is an indicator of potential impairment of this investment and accordingly an impairment assessment has been performed by the Management.
This is a key audit matter as the investment is significant to the financial statements and Management judgement is required in certain key areas such as discount and growth rates in estimating future cash flows prepared by the Company (the Model) along with the Management's valuer to support the carrying value of its investment.
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Our audit procedures included the following:
• Understanding and evaluating the design and testing the operating effectiveness of key controls in relation to the impairment testing Model.
• Assessing the Model and evaluating the independence, competence, capabilities and objectivity of the management's valuer
• Assessing the historical accuracy of the Company's forecasts by comparing the forecasts used in the prior year models with the actual performance in the current year.
• Testing the mathematical accuracy of the underlying calculations and agreeing the forecasts for the ensuing year with the latest
Board approved budgets.
• Evaluating, along with the auditor's experts, the key assumptions such as discount rate and growth rate used in the Model.
• Performing sensitivity tests on the Model for a range of certain assumptions, such as discount rate and growth rate.
• Evaluating adequacy of the disclosures made in the financial statements.
Based on the procedure performed , we did not identify
any material exceptions in the impairment assessment
carried out by the management in respect of the carrying
value of its investment Kaycee Industries Limited.
Conclusion: We agree with the management's evaluation
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Sr.No
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Key Audit Matter
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Auditor's Response
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5.
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Assessment of carrying value of goodwill as per Ind AS 36 (Refer Note 1 (viil to the Standalone financial Statements)
The Company has a goodwill balance of Rs 190.72 Lakhs as at March 31, 2023 relating to the acquisition of business, which is considered as a Cash Generating Unit (CGU). For the year ended March 31, 2023, the company performed an assessment of the carrying value of goodwill as required under Ind AS 36 by:
• Calculating the recoverable amount for CGU using a discounted cash flow model (DCF model).
• Comparing the recoverable amount of the respective carrying amount of assets and liabilities. The preparation of discounted cash flows requires assumptions for projections of cash flows for a specific period, typically for 5 years. A terminal growth rate is applied in determining the terminal value.
• We considered the carrying value of goodwill as a key audit matter, considering its significance to the consolidated financial statements, and where applicable, the Management judgement involved in estimating future cash flows, particularly with respect to factors such as discount rates, cash flow projections and terminal growth rates
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Our audit procedures in relation to assessment of carrying value of goodwill arising on consolidation of subsidiary company, included the following:
• Understood and performed procedures to assess the design and test the operating effectiveness of relevant controls related to the annual evaluation on assessment of carrying value of goodwill.
• Together with auditor's valuation experts, evaluated the assumptions and methodologies used in the DCF models, in particular those relating to the cash flow projections used, discount rates and terminal growth rates applied, by:
a. Evaluating the reasonableness of the cash flow projections by comparing with the approved budgets, previous year performance and our knowledge and understanding of current business conditions.
b. Determining a range of acceptable discount rates and terminal growth rates, with reference to valuations of similar companies and other relevant external data, and comparing this range to the discount rates and terminal growth rates adopted by the Company.
c. Performing sensitivity tests on the DCF Model by analysing the impact of using other possible growth rates and discount rates within a reasonable and foreseeable range.
d. Tested the arithmetical accuracy of the calculations carried out by the Management.
Based on above procedures performed, we found the management's assessment of carrying value of goodwill to be reasonable.
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B.
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Allowance for credit losses
The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to industries the Company deals with and the countries where it operates. In calculating expected credit loss, the Company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID-19. We identified allowance for credit losses as a key audit matter because the Company exercises significant judgment in calculating the expected credit losses.
Refer Note No: 46 to the Standalone Ind AS financial statements
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Our audit procedures related to the allowance for credit losses for trade receivables and unbilled revenue included the following, among others: We tested the effectiveness of controls over the (1) development of the methodology for the allowance for credit losses, including consideration of the current and estimated future economic conditions (2) completeness and accuracy of information used in the estimation of probability of default and (3) computation of the allowance for credit losses. For a sample of customers: We tested the input data such as credit reports and other credit related information used in estimating the probability of default by comparing them to external and internal sources of information. We tested the mathematical accuracy and computation of the allowances by using the same input data used by the Company.
Conclusion:
We agree with the management's evaluation
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Standalone Ind AS Financial Statements and Auditor's Report Thereon
The Company's Board of Directors are responsible for the preparation of the other information. The other information comprises of the information included in the Management Discussion and Analysis, Board's report including Annexures to Boards Report, Business Responsibility Report, Corporate Governance and Shareholder's Information, but does not include the standalone Ind AS financial statements and our auditor's report thereon.
Our opinion on the standalone Ind AS financial statements does not cover the other information and we do not express any form of assurance and conclusion thereon.
In connection with our audit of the standalone Ind AS financial statement, our responsibility is to read the other information and in doing so, consider whether the other information is materially inconsistent with the standalone Ind AS financial statements or other information obtained during the course of our audit or otherwise appearto be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and those charged with governance for the Standalone Ind AS Financial Statements
The Company's Board of Directors are responsible for the matters stated in section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India, including the accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for 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 Standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error
In preparing the standalone Ind AS 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.
The Board of Directors are responsible for overseeing the Company's financial reporting process.
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 AS 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 our 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 standalone Ind AS financial statements.
A further description of the auditor's responsibilities for the audit of the standalone Ind AS financial statements is included in Annexure “A”. This description forms part of our auditor's report.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act, based on
our Audit, we report that:
a) We have sought and obtained all the information and explanations which to the best of 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 the Company so far as it appears from our examination of those books.
c) The Balance Sheet, the Statement of Profit and Loss including other comprehensive income, the statement of change in equity, and the Cash Flow Statement dealt with by this Report are in agreement with the relevant books of account.
d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Ind AS 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 March 31, 2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 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 our separate Report in
"Annexure C”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting.
g) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act, as amended:
In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of Section 197 of the Act.
h) 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, as amended in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements Refer Note 31.1 to Standalone Financial Statements.
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts - Refer Note 19 to Standalone Financial Statements
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
(a) The Management has represented that, to the best of their knowledge and belief, no funds (which are material either individually or in the aggregate) 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 person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any
manner whatsoever by or on behalf of the Company or any of such subsidiaries ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
(b) The Management has represented that, to the best of their knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(c) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatements
iv. (a) The final dividend proposed in the previous year, declared and paid by the Company during the year is in accordance with Section 123 of the Act, as applicable.
(b) The Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The amount of dividend proposed is in accordance with section 123 of the Act, as applicable.
2. 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 of the Companies Act, 2013, we give in the Annexure “C” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
In Terms Of Our Report Of Even Date
For. JDS ASSOCIATES Chartered Accountants FRN:008735S
Place: Coimbatore
?ate : May 24,2023 B. JAYARAM
Partner
UDIN NO.: 23028346BGRPPI8938 Memb.No. 028346
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