To the Members of Hero MotoCorp Limited
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of HERO MOTOCORP LIMITED("the Company"), which comprise the Balance Sheet as at 31st March, 2014, theStatement of Profit and Loss and the Cash Flow Statement for the year then ended, and asummary of the significant accounting policies and other explanatory information.
MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL
The Company's Management is responsible for the preparation of these financialstatements that give a true and fair view of the financial position, financial performanceand cash flows of the Company in accordance with the Accounting Standards notified underthe Companies Act, 1956 ("the Act") (which continue to be applicable in respectof Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13thSeptember, 2013 of the Ministry of Corporate Affairs) and in accordance with theaccounting principles generally accepted in India. This responsibility includes thedesign, implementation and maintenance of internal control relevant to the preparation andpresentation of the financial statements that give a true and fair view and are free frommaterial misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India. Those Standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgment, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments, theauditor considers internal control relevant to the Company's preparation and fairpresentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company's internal control. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Management, as well as evaluating the overall presentation of thefinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion.
In our opinion and to the best of our information and according to the explanationsgiven to us, the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31stMarch, 2014;
(b) in the case of the Statement of Profit and Loss, of the profit of the Company forthe year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows of the Company for theyear ended on that date.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by the Companies (Auditor's Report) Order, 2003 ("the Order")issued by the Central Government in terms of Section 227(4A) of the Act, we give in theAnnexure a statement on the matters specified in paragraphs 4 and 5 of the Order.
2. As required by Section 227(3) of the Act, we report that:
(a) We have obtained all the information and explanations which to the best of ourknowledge 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, and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.
(d) In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the CashFlow Statement comply with the Accounting Standards notified under the Act (which continueto be applicable in respect of Section 133 of the Companies Act, 2013 in terms of GeneralCircular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs).
(e) On the basis of the written representations received from the directors as on 31stMarch, 2014 taken on record by the Board of Directors, none of the directors isdisqualified as on 31st March, 2014 from being appointed as a director in terms of Section274(1)(g) of the Act.
For DELOITTE HASKINS & SELLS
(Firm Registration No. 015125N)
(Membership No. 094468)
May 28, 2014
annexure to the independent auditors' report
(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements'section of our report of even date)
Having regard to the nature of the Company's business/activities/ result, clause4(xiii) of Companies (Auditor's Report) Order, 2003 (hereinafter referred to as the Order/ CARO) are not applicable.
(i) I n respect of its fixed assets:
(a) The Company has maintained proper records showing full particulars, includingquantitative details and situation of fixed assets.
(b) The Company has a programme of verification of fixed assets to cover all the itemsin a phased manner over a period of three years which, in our opinion, is reasonablehaving regard to the size of the Company and the nature of its assets. Pursuant to theprogramme, certain fixed assets were physically verified by the Management during the yearother than for assets lying with third parties, for which confirmations have been obtainedby the Company. According to the information and explanations given to us discrepanciesnoticed on such verification were not material and have been properly dealt in the booksof account.
(c) The fixed assets disposed off during the year, in our opinion, do not constitute asubstantial part of the fixed assets of the Company and such disposal has, in our opinion,not affected the going concern status of the Company.
(ii) In respect of its inventories:
(a) As explained to us, the inventories were physically verified during the year by theManagement at reasonable intervals other than for inventories lying with third parties atthe end of the year for which confirmations have been obtained in most of the cases.
(b) In our opinion and according to the information and explanations given to us, theprocedures of physical verification of inventories followed by the Management werereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.
(c) In our opinion and according to the information and explanations given to us, theCompany has maintained proper records of its inventories and discrepancies noticed on suchverification were not material and have been properly dealt in the books of account.
(iii) In respect of loans, secured or unsecured, granted by the Company to companies,firms or other parties covered in the Register maintained under Section 301 of theCompanies Act 1956, according to the information and explanations given to us:
(a) The Company has granted loans aggregating Rs. 605 crores to a party during theyear. At the year-end, the outstanding balances of such loans granted aggregated Rs. 220crores and the maximum amount involved during the year was Rs. 240 crores.
(b) The rate of interest and other terms and conditions of such loans are, in ouropinion, prima facie not prejudicial to the interest of the Company.
(c) The receipts of principal amounts and interest have been regular.
(d) There are no overdue amounts in respect of the loans granted as referred to inparagraph (iii)(a) above and interest thereon.
The Company has, during the year, not taken any loans, secured or unsecured fromcompanies, firms and other parties covered in the register maintained under Section 301 ofthe Companies Act, 1956. Accordingly, paragraph 4(iii) (f) and (g) of CARO are notapplicable
(iv) In our opinion and according to the information and explanations given to us,having regard to the explanations that some of the items purchased are of special natureand suitable alternative sources are not readily available for obtaining comparablequotations, there is an adequate internal control system commensurate with the size of theCompany and the nature of its business with regard to purchases of inventory, fixed assetsand the sale of goods and services. During the course of our audit, we have not observedany major weakness in such internal control system.
(v) In respect of contracts or arrangements entered in the Register maintained inpursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge andbelief and according to the information and explanations given to us:
(a) The particulars of contracts or arrangements referred to in Section 301 that neededto be entered in the Register maintained under the said Section have been so entered.
(b) Where each of such transaction (excluding loans reported under paragraph (iii)above) is in excess of Rs. 5 lakhs in respect of any party, having regard to our commentsin paragraph (iv) above the transactions have been made at prices which are prima faciereasonable having regard to the prevailing market prices at the relevant time, other thancertain purchases which are of a special nature for which comparable quotations are notavailable.
(vi) According to the information and explanations given to us, the Company has notaccepted any deposits from the public during the period within the meaning of section 58Aand 58AA of the Companies Act, 1956 and the rules framed thereunder. Accordingly,paragraph 4(vi) of the Order is not applicable.
(vii) In our opinion, the internal audit functions carried out during the year by firmsof Chartered Accountants appointed by the Management have been commensurate with the sizeof the Company and the nature of its business.
(viii) We have broadly reviewed the cost records maintained by the Company pursuant tothe Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Governmentunder Section 209(1) (d) of the Companies Act, 1956 and are of the opinion that, primafacie, the prescribed cost records have been made and maintained. We have, however, notmade a detailed examination of the cost records with a view to determine whether they areaccurate or complete.
(ix) According to the information and explanations given to us, in respect of statutorydues:
(a) The Company has been regular in depositing undisputed statutory dues, includingProvident Fund, Investor Education and Protection Fund, Employees' State Insurance,Income-tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and othermaterial statutory dues applicable to it with the appropriate authorities.
(b) There were no undisputed amounts payable in respect of Provident Fund, InvestorEducation and Protection Fund, Employees' State Insurance, Income-tax, Sales Tax, WealthTax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues, inarrears as at March 31, 2014 for a period of more than six months from the date theybecame payable.
(c) According to the information and explanations given to us and the records of theCompany examined by us, there are no disputed dues in respect of wealth tax, customs dutyand cess which have not been deposited. The following are the particulars of excise duty,service tax, sales tax and income tax dues not deposited/deposited under protest by theCompany on account of disputes:
|Name of the Statute ||Nature of the Dues ||Amount* ( Rs. in crores) ||Amount paid under protest ( Rs. in crores) ||Period to which the amount relates ||Forum where dispute is pending |
|Central Excise Laws ||Excise Duty ||603.17 0.05 ||177.06 ||2000-01 and 2002 - 2013 ||CESTAT |
| || || ||- ||2006-2013 ||Commissioner (Appeals) |
| ||Service Tax ||0.89 ||0.45 ||2004-05 to 2005-06 ||Supreme Court |
| || ||254.42 ||22.04** ||2004-05 to 2011-12 ||CESTAT |
|Sales Tax ||Sales Tax ||1.90 ||1.90 ||1998-99 to 2000-2001 ||Haryana Tax Tribunal |
|Income tax Act, 1961 ||Income tax ||1,878.54 ||50.00*** ||2007-08 ||Income Tax Appellate Tribunal |
| || ||81.60 ||29.90 ||2004-05 ||Commissioner (Appeals) |
| || ||1.11 ||- ||2005-06 |
| || ||3.77 ||- ||2006-07 |
* Amount as per demand orders including interest and penalty wherever indicated in theorder and excludes disputed fully paid. ** Appeal along with stay application has beenfiled.
*** Balance of unpaid amount has been stayed as the said cases have been decided infavour of the Company in previous assessment years on the similar matters.
The following matters have been decided in favour of the Company but the department haspreferred appeals at higher levels:
|name of the Statute ||nature of the Dues ||Amount ( Rs. in crores) ||Period to which the amount relates ||Forum where dispute is pending |
|Central Excise Laws ||Excise duty ||2.57 ||1986-87 to 1990-91 ||Supreme Court |
| || ||16.66 ||2005-06 to 2010-11 ||CESTAT |
| ||Service Tax ||0.17 ||2005 ||High Court |
|Income-tax Act, 1961 ||Income-Tax ||1,224.84 ||1987-88, 1989-90, 1992-93, 1993-94, 1995-96, 1996-97, 1997-98, 1998-99, 1999-00, 2000-01, 2001-02, 2005-06 2006-07 ||High Court |
| || ||11.85 ||1999-00, 2002-03 2007-08 ||Income Tax Appellate Tribunal |
(x) The Company does not have accumulated losses at the end of the financial year andthe Company has not incurred cash losses during the financial year covered by our auditand in the immediately preceding financial year.
(xi) In our opinion and according to information and explanations given to us, theCompany has not defaulted in repayment of dues to banks during the year. The Company hasnot taken any loans from financial institutions and has not issued debentures during theyear.
(xii) In our opinion and according to the information and explanations given to us, theCompany has not granted any loans and advances during the year on the basis of security byway of pledge of shares, debentures and other securities.
(xiii) In our opinion and according to the information and explanations given to us,the Company is not dealing or trading in shares, securities, debentures and otherinvestments.
(xiv) According to the information and explanations given to us, the Company has notgiven any guarantees during the year for loans taken by others from banks or financialinstitutions.
(xv) In our opinion and according to the information and explanations given to us, theCompany has not taken any term loans during the year.
(xvi) In our opinion and according to the information and explanations given to us, andon an overall examination of the Balance Sheet of the Company, we report that funds raisedon short-term basis have, prima facie, not been used during the year for long-terminvestment.
(xvii) During the year the Company has not made any preferential allotment of shares tothe parties and companies covered in the Register maintained under Section 301 of theCompanies Act, 1956.
(xviii) The Company has not issued any debentures during the year.
(xix) The Company has not raised any money by way of public issue during the year.
(xx) To the best of our knowledge and according to the information and explanationsgiven to us, no fraud by the Company and no material fraud on the Company has been noticedor reported during the year.
For DELoITTE HASKINS & SELLS
(Firm Registration No. 015125N)
(Membership No. 094468)
May 28, 2014