Eastern Treads Ltd Directors Report.

To the Members of Eastern Treads Limited Report on the Audit of the Standalone Financial Statements Opinion

1. We have audited the accompanying standalone financial statements of Eastern Treads Limited (‘the Company), which comprise the Balance Sheet as at 31 March 2020, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (‘Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Indian Accounting Standards (‘Ind AS) specified under section 133 of the Act, of the state of affairs of the Company as at 31 March 2020, and its loss (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the 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 ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter COVID 19

4. We draw attention to Note 2.37 of the accompanying standalone financial statements, which describes the uncertainties due to the effects of Covid-19 pandemic on the Companys operation and the managements evaluation of the impact on the standalone financial statements of the Company as at the balance sheet date. In view of these uncertainties, the impact on these standalone financial statements is significantly dependent on future developments. 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 most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

6. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key audit matter How our audit addressed the key audit matter
Provision for expected credit losses for trade receivables Our audit work included, but was not limited to, the following procedures:
• Obtained an understanding of the process adopted by the Company in estimating expected credit loss including the key inputs and assumptions. Since assumptions and parameters are based on historical data, we assessed whether historical experience was representative of current circumstances and was relevant in view of the recent impairment losses incurred;
(Refer note 1.17 of the accompanying financial statements for significant accounting policy and note 2.31 for credit risk disclosures)
Trade receivables comprises a significant portion of the current assets of the Company. As at 31 March 2020, the Company has reported trade receivable of ?2574.23 lakhs (net of provision towards expected credit loss of ?62.13 lakhs). • Assessed and tested the design and operating effectiveness of key controls over completeness and accuracy of the key inputs and assumptions considered for calculation, recording and monitoring of the impairment loss recognized. Also evaluated the controls over the process, validation of data and related approvals.
• For a selected sample, performed procedures to evaluate:
- Appropriateness of exposure at default, probability of default and loss given default in the calculation of ECL;
These significant judgements in applying the expected credit loss (ECL method arises due to the nature of the customers that the Company deals with, which mainly construed the state-owned road transportation entities and various dealers/traders from the unorganized sector. Further, the payment plan varies from customer to customer, resulting in complexity in estimation of amount to be recorded expected credit loss.
- Timely identification of exposures with a significant increase in credit risk and appropriateness of the Companys method of determining the stages; and
- arithmetic accuracy of ECL calculation
• Tested the methodology applied in the credit loss provision calculation by comparing it to the requirements of Ind AS 109, Financial Instruments, and appropriateness and reasonableness of the assumptions related to credit loss rate including the historical bad-debts applied in their assessment of the receivables allowance.
• Evaluated responses to direct confirmation request circulated to customers and ensured the reconciling items have been adequately recorded in the books of account
Considering the materiality of the amount involved and significant degree of judgement and subjectivity involved in the estimates and assumptions used in determining the expected credit loss, we have determined this matter as a key audit matter
• Tested the documents received as security against the trade receivables and amount received subsequent to year-end on sample basis.
• Assessed the appropriateness and adequacy of the related presentation and disclosures of note 2.31 "Financial risk management" disclosed in the financial statements in accordance with the applicable accounting standards.
Existence of inventory Our audit work in respect of testing the existence of inventories included, but was not restricted to, the following procedures:
(Refer note 2.8 of the accompanying Standalone financial statements)
• Obtained understanding of management process of inventory management including the changes required thereto as a result of COVID-19 related restrictions, and evaluated the design and tested the operating effectiveness of key controls with respect to physical verification of inventory;
As at 31 March 2020, the Company held inventories of Rs 1050.25 lacs as disclosed in Note 2.8 to the standalone financial statements. Inventories mainly consist of raw materials, work in progress, finished goods, stores and spares and others.
• Evaluated the design effectiveness of controls over inventory management process/inventory physical verification process and tested key controls for their operating effectiveness;
• Observed the physical count procedures carried out by the management subsequent to year end and compliance with the stock count instructions by the managements personnel; observing steps taken by management to ascertain the existence inventory on the date of the count (including identification of non-moving, obsolete / damaged inventory) along with roll-back procedures to confirm valuation of inventory at year end Obtained managements inventory count records (count sheets) and tested the reconciliation of the differences in inventory quantity between the physical count and the Companys perpetual inventory records and accounting of such variances basis management approval.
As per the Companys inventory verification plan, management performs physical verification of inventory at all locations, under the supervision of finance team, quarterly.
Due to Covid-19 outbreak and related lock-down restrictions, management was unable to perform the year end physical verification of inventories on 31 March 2020. The physical verification was carried out subsequent to year end on different dates in various locations. • Tested the reconciliation of differences, if any, between management physical count and inventory records including accounting of such variances basis management approval; and
• Tested managements roll-back procedure of the inventory count performed at locations on sample basis from date of count to the 31 March 2020 and the as the physical verification of inventory was undertaken by management on different dates across various locations during the year, tested completeness, arithmetical accuracy and validity of the data used for the procedures.
Considering the above, we have reassessed our audit approach with respect to assessing the existence and condition of physical inventory as at year end and adopted alternate audit procedures as further described in our audit procedures.
• Performed independent physical inventory count for certain locations on a sample basis subsequent to year end and reconciled the same to the management counts (wherever applicable).
• Performed cut off testing for purchase and sales transactions made near the reporting date to assess whether transactions are recorded in the correct period by testing shipping records, sales / purchase invoices (as applicable), for sample transactions.
Considering the significance and size of the Inventory at the year end, reliance on roll-back and other alternate procedures, existence of inventory is considered as a key audit matter for the current year audit.

Information other than the Financial Statements and Auditors Report thereon

7. The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditors report thereon. The Annual Report is expected to be made available to us after the date of this auditors report. Our opinion on the standalone financial statements does not cover the other information and we will not express any form of assurance conclusion thereon. In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

8. The accompanying standalone financial statements have been approved by the Companys Board of Directors. The Companys Board of Directors is responsible for the matters stated in section 134(5) of 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 including other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Ind AS 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

9. In preparing the financial statements, management is responsible for assessing the Companys 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.

10. Those Board of Directors is also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Financial Statements

11. Our 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 auditors 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 Standards on Auditing 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.

12. As part of an audit in accordance with Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

Obtain an understanding of internal control relevant to the audit in order to design 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 has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls;

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern;

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation;

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

14. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

15. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

16. As required by Section 197(16) of the Act, based on our audit, we report that the Company has not paid or provided for any remuneration to its directors during the year in accordance with the provisions of and limits laid down under Section 197 read with Schedule V to the Act.

17. As required by the Companies (Auditors Report) Order, 2016 (‘the Order) issued by the Central Government of

India in terms of Section 143(11) of the Act, we give in the Annexure I a statement on the matters specified in paragraphs 3 and 4 of the Order.

18. Further to our comments in Annexure I, as required by Section 143(3) of the Act, based on our audit, we report to the extent applicable, 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 purpose of our audit of the accompanying standalone financial statements;

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 standalone financial statements dealt with by this report are in agreement with the books of account;

d) in our opinion, the aforesaid standalone financial statements comply with Ind AS specified under Section 133 of the Act;

e) on the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2020 from being appointed as a director in terms of section 164(2) of the Act;

f) we have also audited the internal financial controls with reference to financial statements of the Company as on 31 March 2020 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated 29 June 2020 as per Annexure II expressed unmodified opinion; and

g) with respect to the other matters to be included in the Auditors 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, as detailed in note 2.30 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2020;

ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2020; iii. there has been no amounts which are required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended 31 March 2020;

iv. the disclosure requirements relating to holdings as well as dealings in specified bank notes were applicable for the period from 8 November 2016 to 30 December 2016, which are not relevant to these standalone financial statements. Hence, reporting under this clause is not applicable.

For Walker Chandiok & Co LLP
Chartered Accountants
Firms Registration No.: 001076N/N500013
Krishnakumar Ananthasivan
Partner
Membership No.: 206229
UDIN: 20206229AAAABY6512
Place: Kochi
Date: 29 June 2020

Annexure I

Based on the audit procedures performed for the purpose of reporting a true and fair view on the standalone financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, and to the best of our knowledge and belief, we report that:

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification of the fixed assets is reasonable having regard to the size of the Company and the nature of its assets.

(c) The title deeds of all the immovable properties (which are included under the head ‘Property, plant and equipment are held in the name of the Company.

(ii) In our opinion, the management has conducted physical verification of inventory at reasonable intervals during the year, except for goods-in-transit. No material discrepancies were noticed on the aforesaid verification.

(iii) The Company has granted unsecured loan to a company covered in the register maintained under Section 189 of the Act; and with respect to the same:

(a) In our opinion the terms and conditions of grant of such loans are not, prima facie, prejudicial to the companys interest.

(b) The schedule of repayment of principal has been stipulated wherein the principal amounts are repayable on demand and since the repayment of such loans has not been demanded, in our opinion, repayment of the principal amount is regular.

(c) There is no overdue amount in respect of loans granted to such companies, firms, LLPs or other parties.

(iv) In our opinion, the Company has complied with the provisions of section 185 and 186 of the Act in respect of loans, investments, guarantees and security.

(v) In our opinion, the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act in respect of Companys products/services and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) (a) Undisputed statutory dues including provident fund, employees state insurance, income-tax, goods and service tax, duty of customs, duty of excise, cess and other material statutory dues, as applicable, have generally been regularly deposited to the appropriate authorities, though there has been slight delay in a few cases. Undisputed amounts payable in respect of professional tax, which were outstanding at the year-end for a period of more than six months from the date they became payable are as follows:

Statement of arrears of statutory dues outstanding for more than six months

Name of the statute Nature of the dues Amount Period to which the Due
( in lakhs) amount relates Date
State Tax on Professions, Trades, Callings and Employment Act, 1996 Professional tax 3.95 2019-20 Various dates

(b) The dues outstanding in respect of income-tax, goods and service tax, duty of customs and duty of excise and value added tax on account of any dispute, are as follows:

Statement of Disputed Dues:

Nature of statute Nature of dues Amount ( in lakhs) Amount paid under protest ( in lakhs) Period to which amount pertains to Forum where dispute is pending
Central Sales Tax Act 1956 Central Sales Tax 1.76 1.76 FY 2004-05 Deputy Commissioner of Sales Tax (Appeals)
Central Sales Tax Act 1956 Central Sales Tax 7.88 2.78 FY 2010-11 and 2011-12 Deputy Commissioner of Sales Tax (Appeals)
Central Sales Tax Act 1956 Central Sales Tax 18.03 3.22 FY 2012-13, 2013-14, 2014 -15, 2015-16, 2016-17 and 2017-18 Assistant Commissioner Special Circle
Kerala Value Added Tax Act, 2003 Value Added Tax 3.80 1.25 FY 2008-09, 2009-10, 2011-12, 2013-14 and 2015-16 Deputy Commissioner of Sales Tax (Appeals)
Kerala Value Added Tax Act, 2003 Value Added Tax 2.14 0.43 FY 2012-13, 2013-14 and 2014-15 Assistant Commissioner Special Circle
Kerala Value Added Tax Act, 2003 Value Added Tax 0.66 0.66 FY 2015-16 and 2016-17 Assessing Officer of Sales Tax
Income-tax Act, 1961 Income Tax 20.97 -- AY 2012-13 Assessing Officer, Income Tax

(viii) The Company has not defaulted in repayment of loans or borrowings to any financial institution or a bank or government or any dues to debenture-holders during the year.

(ix) The Company did not raise moneys by way of initial public offer or further public offer (including debt instruments). In our opinion, the term loans were applied for the purposes for which the loans were obtained

(x) No fraud by the Company or on the company by its officers or employees has been noticed or reported during the period covered by our audit.

(xi) The Company has not paid or provided for any managerial remuneration. Accordingly, the provisions of Clause 3(xi) of the Order are not applicable.

(xii) In our opinion, the Company is not a Nidhi Company. Accordingly, provisions of clause 3(xii) of the Order are not applicable.

(xiii) In our opinion all transactions with the related parties are in compliance with Sections 177 and 188 of Act, where applicable, and the requisite details have been disclosed in the financial statements etc., as required by the applicable Ind AS.

(xiv) During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures.

(xv) In our opinion, the Company has not entered into any non-cash transactions with the directors or persons connected with them covered under Section 192 of the Act.

(xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

For Walker Chandiok & Co LLP
Chartered Accountants
Firms Registration No.: 001076N/N500013
UDIN: 20206229AAAABY6512
Krishnakumar Ananthasivan
Partner
Membership No. 206229
Place: Kochi,
Date: 29 June 2020

Independent Auditors Report on the internal financial controls with reference to the standalone financial statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (‘the Act)

1. In conjunction with our audit of the standalone financial statements of Eastern Treads Limited

(‘the Company) as at and for the year ended 31 March 2020, we have audited the internal financial controls with reference to financial statements of the Company as at that date..

Responsibilities of Management and Those Charged with Governance} for Internal Financial Controls

2. The Companys Board of Directors is responsible for establishing and maintaining internal financial controls based on the internal financial controls with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India". These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of the Companys business, including adherence to the Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act..

Auditors Responsibility for the Audit of the Internal Financial Controls with Reference to Financial Statements

3. Our responsibility is to express an opinion on the Companys internal financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India (‘ICAI) prescribed under Section 143(10) of the Act, to the extent applicable to an audit of internal financial controls with reference to financial statements, and the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (‘the Guidance Note) issued by the ICAI. Those

Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with reference to financial statements were established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements includes obtaining an understanding of such internal financial controls, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls with reference to financial statements.

Meaning of Internal Financial Controls with Reference to Financial Statements

6. A companys internal financial controls with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial controls with reference to financial statements include those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements..

Inherent Limitations of Internal Financial Controls with Reference to Financial Statements

7. Because of the inherent limitations of internal financial controls with reference to financial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls with reference to financial statements to future periods are subject to the risk that the internal financial controls with reference to financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion, the Company has, in all material respects, adequate internal financial controls with reference to financial statements and such controls were operating effectively as at 31 March 2020, based on the internal financial controls with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.

For Walker Chandiok & Co LLP
Chartered Accountants
Firms Registration No.: 001076N/N500013
Krishnakumar Ananthasivan
Partner
Membership No.: 206229
UDIN: 20206229AAAABY6512
Place: Kochi
Date: 29 June 2020