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Hindustan Construction Company
BSE: 500185|NSE: HCC|ISIN: INE549A01026|SECTOR: Construction & Contracting - Civil
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« Mar 14
Auditor's Report (Hindustan Construction Company) Year End : Mar '15
1. We have audited the accompanying standalone financial statements of
 Hindustan Construction Company Limited (the Company), which
 comprise the Balance Sheet as at 31 March 2015, the Statement of Profit
 and Loss, the Cash Flow Statement for the year then ended, and a
 summary of the significant accounting policies and other explanatory
 information.
 
 Management''s Responsibility for the Standalone Financial Statements
 
 2. The Company''s Board of Directors is responsible for the matters
 stated in Section 134(5) of the Companies Act, 2013 (the Act) with
 respect to the preparation of these standalone financial statements,
 that give a true and fair view of the financial position, financial
 performance and cash flows of the Company in accordance with the
 accounting principles generally accepted in India, including the
 Accounting Standards specified under Section 133 of the Act, read with
 Rule 7 of the Companies (Accounts)
 
 Rules, 2014 (as amended). This responsibility also includes maintenance
 of adequate accounting records in accordance with the provisions of the
 Act for safeguarding 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.
 
 Auditor''s Responsibility
 
 3. Our responsibility is to express an opinion on these standalone
 financial statements based on our audit.
 
 4. We have taken into account the provisions of the Act, the accounting
 and auditing standards and matters which are required to be included in
 the audit report under the provisions of the Act and the Rules made
 thereunder.
 
 5. We conducted our audit in accordance with the Standards on Auditing
 specified under Section 143(10) of the Act. Those Standards require
 that we comply with ethical requirements and plan and perform the audit
 to obtain reasonable assurance about whether the standalone financial
 statements are free from material misstatement.
 
 6. An audit involves performing procedures to obtain audit evidence
 about the amounts and the disclosures in the financial statements. The
 procedures selected depend on the auditor''s judgment, including the
 assessment of the risks of material misstatement of the financial
 statements, whether due to fraud or error. In making those risk
 assessments, the auditor considers internal financial controls relevant
 to the Company''s preparation of the financial statements that give a
 true and fair view in order to design audit procedures that are
 appropriate in the circumstances, but not for the purpose of expressing
 an opinion on whether the Company has in place an adequate internal
 financial controls system over financial reporting and the operating
 effectiveness of such controls. An audit also includes evaluating the
 appropriateness of the accounting policies used and the reasonableness
 of the accounting estimates made by the Company''s Directors, as well as
 evaluating the overall presentation of the financial statements.
 
 7. We believe that the audit evidence we have obtained is sufficient
 and appropriate to provide a basis for our audit opinion on the
 standalone financial statements.
 
 Opinion
 
 8. 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 Act in the manner so
 required and give a true and fair view in conformity with the
 accounting principles generally accepted in India, of the state of
 affairs of the Company as at 31 March 2015, and its profit and its cash
 flows for the year ended on that date.
 
 Emphasis of Matters
 
 9. We draw attention to
 
 a) Note 29.2 to the standalone financial statements regarding
 managerial remuneration of Rs. 10.66 crore paid to the Chairman and
 Managing Director for the financial year ended 31 March 2014, which is
 in excess of the limits prescribed under the provisions of the
 erstwhile Companies Act, 1956 and for which, the Company, has submitted
 a review application with the Central Government; however approvals
 in this regard is pending till date. Pending the final outcome of the
 aforesaid matter, which is presently unascertainable, no adjustments
 have been made in the accompanying standalone financial statements.
 Our opinion is not qualified in respect of this matter
 
 b) Note 34 to the standalone financial statements regarding the
 Company''s investments in its subsidiaries, HCC Infrastructure Limited
 and HCC Real Estate Limited, amounting to Rs. 474.36 crore and Rs. 0.25
 crore, respectively, long term loans and advances due from such
 subsidiaries amounting to Rs. 404.06 crore and Rs. 634.82 crore,
 respectively, and other current assets (including interest) due from
 such subsidiaries amounting to Rs. 28.44 crore and Rs. 319.64 crore,
 respectively. The net worth of the aforesaid subsidiaries have been
 fully eroded; however, based on certain estimates and the other factors
 as more fully described in the said note, management considers the
 decline in the value of investment as temporary in nature and believes
 that long-term loans and advances and other current assets are fully
 recoverable, and hence no provision in respect
 
 of aforesaid amounts has been made in the accompanying standalone
 financial statements. Our opinion is not qualified in respect of this
 matter.
 
 c) Note 35 to the standalone financial statements regarding
 uncertainties relating to recoverability of uncompleted contracts and
 value of work done and long-term trade receivables aggregating Rs. 1,181
 crore and Rs. 241 crore, respectively, recognised in the earlier years in
 respect of projects which were suspended or substantially closed and
 where the claims are currently under negotiations/ arbitration/
 litigation.  Pending the ultimate outcome of these matters, which is
 presently unascertainable, no adjustments have been made in the
 accompanying standalone financial statements. Our opinion is not
 qualified in respect of this matter.
 
 Other Matters
 
 10. We did not audit the financial statements of six unincorporated
 integrated joint ventures, included in the standalone financial
 statements, whose financial statements reflect Company''s net share in
 profit of Rs. 5.39 crore for the year ended 31 March 2015. These
 financial statements have been audited by other auditors whose audit
 reports have been furnished to us, by the management, and our opinion
 on the standalone financial statements
 
 of the Company for the year then ended to the extent they relate to the
 financial statements not audited by us as stated in this paragraph is
 based on solely on the audit reports of the other auditors. Our opinion
 is not qualified in respect of this matter.
 
 11. We did not the audit the financial statements of an unincorporated
 integrated joint venture, included in the standalone financial
 statements, whose financial statements reflect Company''s share in
 profit of Rs. 2.71 crore for the year ended 31 March 2015. These
 financial statements have been certified by the Company''s management,
 and our opinion on the standalone financial statements of the Company
 for the year then ended to the extent they relate to the financial
 statements as stated in this paragraph is based solely on, on such
 management certified financial statements. Our opinion is not qualified
 in respect of this matter.
 
 12. The standalone financial statements for the year ended 31 March
 2014 were audited by another auditor, Messrs K. S. Aiyar & Co.,
 Chartered Accountants, who had expressed an unmodified opinion on those
 financial statements; vide their audit report dated 2 May 2014. Our
 opinion is not qualified in respect of this matter.
 
 Report on Other Legal and Regulatory Requirements
 
 13. As required by the Companies (Auditor''s Report) Order, 2015 (the
 Order) issued by the Central Government of India in terms of Section
 143(11) of the Act, we give in the Annexure a statement on the matters
 specified in paragraphs 3 and 4 of the Order.
 
 14. 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
 purpose 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 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 the Accounting Standards specified under Section 133 of the Act,
 read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended);
 
 e. the matters described in paragraphs 9(b) and 9(c) under the Emphasis
 of Matters paragraph, in our opinion, may have an adverse effect on the
 functioning of the Company;
 
 f. on the basis of the written representations received from the
 directors as at 31 March 2015 and taken on record by the Board of
 Directors, none of the directors is disqualified as at 31 March 2015
 from being appointed as a director in terms of Section 164(2) of the
 Act;
 
 g. with respect to the other matters to be included in the Auditor''s
 Report in accordance with Rule 11 of the Companies (Audit and Auditors)
 Rules, 2014, in our opinion and to the best of our information and
 according to the explanations given to us:
 
 i. as detailed in Notes 33 A (i) to (iii), 35 and 45 to the standalone
 financial statements, the Company has disclosed the impact of pending
 litigations on its standalone financial position;
 
 ii. the Company, as detailed in Note 13 (b) to the standalone financial
 statements, has made provision, as required under the applicable law or
 accounting standards, for material foreseeable losses, if any, on
 long-term contracts;
 
 iii. there has been no delay in transferring amounts, required to be
 transferred, to the Investor Education and Protection Fund by the
 Company.
 
 Annexure to the Independent Auditors'' Report of even date to the
 members of Hindustan Construction Company Limited, on the standalone
 financial statements as at and for the year ended 31 March 2015
 
 Based on the audit procedures performed for the purpose of reporting a
 true and fair view on the 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, 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.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year.
 
 (b) The procedures of physical verification of inventory followed by
 the management are reasonable and adequate in relation to the size of
 the Company and the nature of its business.
 
 (c) The Company is maintaining proper records of inventory and no
 material discrepancies between physical inventory and book records were
 noticed on physical verification.
 
 (iii) The Company has not granted any loan, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under Section 189 of the Act. Accordingly, the provisions of clauses
 3(iii)(a) and 3(iii)(b) of the Order are not applicable.
 
 (iv) In our opinion, there is an adequate internal control system
 commensurate with the size of the Company and the nature of its
 business for the purchase of inventory and fixed assets and for the
 sale of goods and services. During the course of our audit, no major
 weakness has been noticed in the internal control system in respect of
 these areas.
 
 (v) 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 Company''s products and 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, sales-tax, wealth tax, service
 tax, duty of custom, duty of excise, value added tax, cess and other
 material statutory dues, as applicable, have generally been regularly
 deposited with the appropriate authorities, though there has been
 significant delay in a few cases. Further, no undisputed amounts
 payable in respect thereof were outstanding at the year-end for a
 period of more than six months from the date they become payable.
 
 (b) There are no dues in respect of wealth-tax, duty of excise, duty of
 customs and cess that have not been deposited with the appropriate
 authority on account of any dispute. The dues outstanding in respect of
 income- tax, sales-tax (including value added tax) and service tax on
 account of any dispute are as follows:
 
 Name of the statute       Nature of dues     Amount          Amount
                                            (Rs in crore)   Paid Under 
                                                              Proest 
                                                           (Rs in crore)
 
 The Income Tax Act, 1961  Income Tax            24.63          23.99
 
 The Sales Tax Act         Sales Tax/ Value       0.13              -
                           Added Tax/Entry Tax
 
                                                  4.70              -
 
                                                 16.32           1.90
 
                                                 67.64           2.81
 
 The Finance Act, 1994     Service tax including  3.10              -
                           Interest and penalty, 
                           as applicable
 
                                                  0.18              -
 
 Name of the statute       Period to which the   Forum where  dispute 
                           amount relates        is pending
 
 The Income Tax Act, 1961  A.Y. 2006-2007        Income Tax Appellate
                           to 2010-2011          Tribunal
 
 The Sales Tax Act         A.Y 2010-2011         Supreme Court
 
                           A.Y 1997-1998         High Court
                           and 2012-2013
 
                           A.Y 1996-97 to        Taxation Tribunal
                           2000-01, 2005-2008, 
                           2007-08 to 2009-10
                           
                           A.Y 2002- 2003,       Appellate Authority-
                           A.Y 2004-2005 to      up to Commissioner
                           2011- 2012            level
 
 The Finance Act, 1994     January 2004 to       Custom, Excise and
                           March 2006            Service Tax Appellate 
                                                 Tribunal
 
                           A.Y 2004 -2007        Commissioner -Appeal
 
 (c) The Company has transferred the amount required to be transferred
 to the investor education and protection fund in accordance with the
 relevant provisions of the Companies Act, 1956 (1 of 1956) and rules
 made thereunder within the specified time.
 
 (viii) In our opinion, the Company has no accumulated losses at the end
 of the financial year and it has not incurred cash losses in the
 current and the immediately preceding financial year.
 
 (ix) The Company has delayed in repayment of following dues to the
 financial institutions, banks and debenture holders during the year,
 which were paid before the Balance Sheet date.
 
                                                          (Rs in crore)
 
 Dues to                  Delay up to   Delay 31 to    Total
                          30 days       90 days        amount
 
 Financial institutions         57.89         63.92    121.81
 
 Banks                         145.42        142.80    288.22
 
 Debenture holders              14.98         12.33     27.31
 
 The Company has delayed in repayment of following dues to the financial
 institutions, banks and debenture holders during the year, which were
 not paid as at the Balance Sheet date.
 
                                                          (Rs in crore)
 
 Dues to                  Delay 31 to   Delay 91 to    Total
                          90 days       166 days       amount
 
 Financial institutions         32.08          3.50     35.58
 
 Banks                          82.00             -     82.00
 
 Debenture holders                             7.05 -    7.05
 
 (x) In our opinion, the terms and conditions on which the Company has
 given guarantee for loans taken by others from banks or financial
 institutions are not, prims facie, prejudicial to the interest of the
 Company.
 
 (xi) In our opinion, the Company has applied the term loans for the
 purpose for which these loans were obtained.
 
 (xii) No fraud on or by the Company has been noticed or reported during
 the period covered by our audit.
 
                                   For Walker Chandiok & Co LLP 
                                  (Formerly Walker, Chandiok & ) 
                                       Chartered Accountants 
                             Firm''s Registration No.: 001076N/ N500013
 
 Place : Mumbai                              per Amyn Jassani 
                                                  Partner 
 Date : 30 April 2015                      Membership No.: 46447
Source : Dion Global Solutions Limited
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