Precision Camshafts Ltd Directors Report.

To the Members of

Precision Camshafts Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of Precicison Camshafts Limited ("the Company"), which comprise the balance sheet as at March 31, 2020, and the statement of Profit and Loss, statement of changes in equity and statement of Cash Flows for the year then ended, and notes to the standalone financial statements, including accounting summary policies and other of significant explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial Companies Act, 2013("the Act) in the manner so required and give a true and fair view in conformity with the Accounting Standards prescribed under section 133 of the Act read with Companies (Indian Accounting Standards) Rules, 2015 as amended and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2020, and profit, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) 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 Standalone 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 standalone 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 statements give the information required by the sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial period. These matters were addressed in the context of our audit of the standalone financial and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Sr. Key Audit Matter No. How the Key Audit Matter was addressed in our audit
1 Provision for credit loss for accounts receivables Our audit procedures in respect of this area include but are not limited to:
Refer Note 8 of Financial statement.
Trade receivables as on March 31, 2020 amounts to Rs. 11247.49 lakhs against which provision of Rs. Nil was made towards expected credit loss in the books of account. 1. Obtained understating of the Companys policy on assessment of impairment of trade receivables, including design and implementation of controls, validation of management review controls. We have verified the operating effectiveness of these controls.
We have identified provisioning for credit loss as a key audit matter as the calculation of credit loss provision is a complex area and requires management to make on customer payment behaviour significant and estimating the level and timing of expected future cash flows. 2. Requested for and obtained independent balance confirmations from the Companys customers on sample basis.
3. Verified subsequent receipts after the year-end on sample basis.
4. Verified aging of trade receivables for sample of customer transactions.
5. Evaluated management comments and recovery plans for trade receivables outstanding for more than 180 days
6. Assessed the trade receivables impairment methodology applied in the current year and compared the Companys provisioning rates against historical collection data.
2 Provision for Impairment of Investment in subsidiaries
Refer Note 5 of Financial statement with respect to the disclosures of Investment in subsidiaries. On March 31, 2020, Investment in subsidiaries amounts to Rs. 7978.12 Lakhs against which provision of Rs. Nil was made towards impairment in the books of account. Our audit procedures in respect of this area include but are not limited to:
We have considered this as a key audit matter due to the fact that processes and methodologies for assessing and determining the recoverable amount of each investments are based on complex assumptions, that by their nature imply the use of the managements judgment, in indicators, forecast of future cash flows relating to the period covered by the Companys strategic business plan, normalized cash flows assumed as a basis for terminal value, as well as the long-term growth rates and discount rates applied to such forecasted cash flows. 1. Obtained understating of the Companys policy on assessment of impairment of investments in shares and the assumption used by the management, including design and implementation of controls, validation of management review controls.
2. Verified the operating effectiveness of the controls.
3. Obtained and read the valuation report provided by the Companys independent valuation experts, and assessed the particular with reference to identification of impairment experts competence, capability and objectivity
4. Evaluated managements methodology, assumptions and estimates used in the calculations
5. Verified completeness, arithmetical accuracy and validity of the data used in the calculations
3 Assessment of Covid-19 Impact
The World Health Organization announced a global health emergency because of a new strain of coronavirus ("COVID-19") and classified its outbreak as a pandemic on March 11, 2020. On March 24, 2020, the Indian government announced a strict 21-day lockdown across the country to contain the spread of the virus, which was further extended till May 31, 2020. This pandemic and response are creating disruption in global supply chain and adversely impacting most of the industries which has resulted in global slowdown. Our audit procedures in respect of this area include but are not limited to:
The management has made an assessment of the impact of COVID-19 on the Companys operations, financial performance and position as at and for the year ended March 31, 2020 and has concluded that there is no impact which is required to be recognised in the financial statements. 1. Verified the design and operating effectiveness of key controls (including application controls) over revenue recognition and provisions relating to expenses and impairment.
The full extent and duration of the impact of COVID-19 is currently unknown and involves significantamount of judgement including the duration and spread of the pandemic and any new information that may emerge concerning the severity of the virus, its spread to other regions and the actions to contain the virus or treat its impact, among others. Hence, we have ascertained the assessment of the impact of Covid-19 as a Key Audit Matter. 2. Verified the selected sample to assess its correct classification and provision amount as per company policy.
3. Obtained management assessmentofCOVID-19andverified the impact of COVID -19 is appropriately considered in the cash flow projections
4. Obtained Cash Flow Projections from the management to assess need for impairment and evaluated with following procedures:
Verified the management estimates as considered in the cash flow projections and Discounted Cash Flow (‘DCF) working Verified the arithematic accuracy of the DCF valuation Compared the carrying value of PPE to DCF valuation to test impairment of PPE Performed Sensitivity Analysis on the DCF valuation
5. Obtain management assessment of going concern procedures and validated the same to verify the current ratio and base data considered in the assessment
6. Performed alternate procedures wherever required. Example: Performed stock count by appointing third Party CA Firm, etc.

Information Other than the Standalone Financial Statements and Auditors Report Thereon

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Directors report including Annexures to the Directors Report in the Annual Report of the Company but does not include the standalone financial statements auditors report thereon.

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

In connection with our audit of the standalone statements, our 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 our knowledge obtained in the audit or otherwise appears to 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 Financial Statements

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 that give a true and fair view of the financial 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. 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 financial a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial of Directors 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 the Board of Directors 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 Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone 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 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 financial statements.

We give in "Annexure A" a detailed description of Auditors responsibilities for Audit of the Standalone Financial Statements.

Other Matter

(a) The standalone Ind AS financial statements of the Company for the year ended March 31, 2019, were audited by another auditor whose report dated May 27. 2019 expressed an unmodified opinion on those statements.

(b) We have not attended the physical inventory verification at locations as it was impracticable under current lock down restrictions imposed by the government. We relied on alternate audit procedures such as performing inventory count by appointing third-party Chartered Accountant, verifying roll back procedures, etc. to obtain comfort over the existence and condition of inventory at the locations statement that give Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors Report) Order, 2016 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in "Annexure B" a statement on the matters specifiedin paragraphs 3 and 4 of the Order, to the extent applicable.

2. 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 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, the Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the books of account.

(d) In our 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 March 31, 2020 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2020 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 with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure C".

(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, 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 33 (b) to the 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 13 to the 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

3. As required by The Companies (Amendment) Act, 2017, in our opinion, according to information, explanations given to us, the remuneration paid by the Company to its directors is within the limits laid prescribed under Section 197 of the Act and the rules thereunder.

Annexure A to the Independent Auditors Report on even date on the Standalone Financial Statements of Precision Camshafts Limited

Auditors Responsibilities for the Audit of the Financial Statements

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism 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 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 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 doubt on the Companys that may cast significant 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 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 financialstatements, including the disclosures, and whether the financial statements underlying transactions and events in a manner that achieves fair presentation.

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

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.

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 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.

Annexure B Independent Auditors Report of even date on the Standalone Financial Statements of Precision Camshafts Limited for the year ended March 31, 2020

[Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements in the Independent Auditors Report]

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

(b) All the fixed assets (Property, Plant and Equipment) have not been physically verified by the management during the year but there is a regular programme which, in our opinion, is reasonable ofverification having regard to the size of the Company and the nature of its assets. No material discrepancies were . noticedonsuchverification

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

ii. The inventory has been physically verified year by the management. In our opinion, the frequency reasonable. No material discrepancies ofverification between the physical stock werenoticedonverification and the book records.

iii. The Company has granted unsecured loans to its wholly owned subsidiary company covered in the register maintained under section 189 of the Act.

No. Name Opening Balance Closing Balance Maximum Outstanding
( in Lakhs) ( in Lakhs) ( in Lakhs)
1. PCL International Holding B V 3,092.33 4,961.16 4,961.16

(a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the rate of interest and other terms and conditions on which the loans have been granted to its wholly owned subsidiary listed in the register maintained under Section 189 of the Act are not, prima facie, prejudicial to the interest of the Company.

(b) In case of the loans granted to its wholly owned subsidiary listed in the register maintained under section 189 of the Act, schedule of repayment of principal and payment of interest have been stipulated. The principal amount is not due for repayment. However, the wholly owned subsidiary has not been regular in the payment of interest to the company.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the details of amount overdue for more than ninety days are as follows:

No. of Cases Principal overdue amount Interest overdue Total overdue Remarks (specify whether reasonable steps have been taken by the Company for recovery of principal amount and interest)
1 - 1,29,65,956 1,29,65,956 The overdue interest is receivable from wholly owned subsidiary and based on discussion with the management the company is in the process of collecting the interest amount.

iv. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act, in respect of loans, investments, guarantees and security made.

v. In our opinion and according to the information and explanations given to us, there are no amounts outstanding which are in the nature of deposits as on March 31, 2020 and the Company has not accepted any deposits during the year.

vi. We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the Company pursuant as specified by the Central Government for the maintenance of cost records under sub-section (1) of section 148 of the Act and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete

vii. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, undisputed statutory dues including provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of custom, duty of excise, value added tax, goods and service tax, cess and other statutory dues have generally been regularly deposited with the appropriate authorities though there has been a slight delay in a few cases.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees state insurance, income-tax, service tax, sales-tax, duty of custom, duty of excise, value added tax, goods and service tax, cess and other statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the information and explanation given to us and examination of records of the Company, the outstanding dues of income-tax, goods and service tax, customs duty, cess and any other statutory dues on account of any dispute, are as follows:

Name of the statute Nature of dues Amount Rs. in Lakhs Period to which the amount relates Forum where dispute is pending Remarks, if any
Central Excise Act, 1994 Excise Duty 20.76 2006-07 Commissioner of Central Excise
Goods and Service Tax Acts GST 83.95 2012-14 Directorate General of Goods and Service Tax Intelligence
Collector of Stamps, Solapur Stamp Duty 31.79 2007-2008 Controlling Revenue Authority, Pune
Employee Provident Funds and Miscellaneous Provision Act, 1952 Provident Fund 24.23 2003-2006 Honble High Court of Judicature Appellate The Company has deposited 12.12 Lakhs under protest
Income Tax Act, 1961 Income Tax on ESOP expenses and other disallowances 1,428.71 2013-14 CIT (Appeals) Company has paid 200 Lakhs under protest and has adjusted refund due of 39.60 lakhs with respect to FY 2006-2007 against this Demand

viii. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to the financial institution, bank or debenture holders.

ix. In our opinion, according to the information explanation provided to us, money raised by way of initial public offer or further public offer (including debt instruments) were applied for the purpose for which they were raised, though idle funds which were not required for immediate utilization have been kept in current account amounting to 194.08 Lakhs as on March 31, 2020. According to information and explanations given by the management, the Company has not raised any money by way of term loans.

x. During the course of our audit, examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud by the Company or on the Company by its officers or employees.

xi. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. In our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, the provisions stated in paragraph 3(xii) of the Order are not applicable to the Company.

xiii. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financialstatements as required by the applicable accounting standards.

xiv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, the provisions stated in paragraph 3 (xiv) of the Order are not applicable to the Company.

xv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, provisions stated in paragraph 3(xv) of the Order are not applicable to the Company.

xvi. In our opinion, the Company is not required to be registered under section 45 IA of the Reserve Bank of India Act, 1934 and accordingly, the provisions stated in paragraph clause 3 (xvi) of the Order are not applicable to the Company.

For MSKA & Associates

Annexure C to the Independent Auditors Report on even date on the Standalone Financial Statements of Precision Camshafts Limited

[Referred to in paragraph 2(f) under ‘Report on Other Legal and Regulatory Requirements in the Independent Auditors Report]

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the internal financial controls with reference to standalone financial statements of Precision Camshafts Limited ("the Company") as of March 31, 2020 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Companys Management is responsible for establishing and maintaining internal financial controls based on the internal control with reference to standalone 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 (ICAI) (the "Guidance Note"). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficientconduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the the accuracy and completeness of the accounting records, and the timely preparation of reliable financialinformation, as required under the Act.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls with reference to standalone financialstatements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls. 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 internal controls with reference to standalone financial statements was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the internal financial controls with reference to standalone financial effectiveness. Our audit of internal financial controls with reference to standalone financial statements included obtaining an understanding of internal financial controls with reference to standalone financial statements, 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 standalone financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion on the Companys internal financial reference to standalone financial statements.

Meaning of Internal Financial Controls with Reference to Standalone Financial Statements

A Companys internal financial control with reference to standalone financial provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone statements for external purposes in accordance with generally accepted accounting principles. A Companys internal financial control with reference to standalone financial statements includes 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 standalone financial generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the standalone statements.

Inherent Limitations of Internal Financial Controls With Reference to Standalone Financial Statements

Because of the inherent limitations of internal financial controls with reference to standalone financial statements, including statementsthe possibility of collusion or improper management override and their operating 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 standalone financial statements to future periods are subject to the risk that the internal financial control with reference to standalone financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, internal financial controls with reference to standalone financial controls with reference to standalone financial statements were operating effectively as at March 31, 2020, based on the internal control with reference to standalone financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note.

 For MSKA & Associates

Chartered Accountants ICAI Firm Registration No. 105047W

Nitin Manohar Jumani

Partner

Membership No. 111700

UDIN: 20111700AAAABL3933

Place: Pune

Date: June 23, 2020