Get App Open
In App
Open App
you are here:

Kennametal India Ltd.

BSE: 505890 | NSE: KENNAMET |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE717A01029 | SECTOR: Machine Tools

BSE Live

Dec 02, 16:01
2661.05 -59.65 (-2.19%)
Volume
AVERAGE VOLUME
5-Day
2,800
10-Day
2,881
30-Day
2,672
1,790
  • Prev. Close

    2720.70

  • Open Price

    2725.75

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    0.00 (0)

NSE Live

Dec 02, 15:54
2665.65 -53.80 (-1.98%)
Volume
AVERAGE VOLUME
5-Day
37,623
10-Day
30,432
30-Day
22,898
17,199
  • Prev. Close

    2719.45

  • Open Price

    2697.25

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    0.00 (0)

Annual Report

For Year :
2021 2018 2017 2016 2015 2014 2013 2012 2011

Auditor's Report

To the Members of Kennametal India Limited

Report on the Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements of Kennametal India Limited (‘the Company’), which comprise the Balance Sheet as at 30 June 2021, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement 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 find AS’) specified under Section 133 of the Act, of the state of affairs of the Company as at 30 June 2021, its profit (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 Auditor’s 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.

Key Audit Matter

4. 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.

5. We have determined the matter 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

Inventory:

Refer note 2.9 for accounting policy and note 12 for financial disclosures in relation to inventory.

At the Standalone Balance Sheet dated 30 June 2021, the Company held inventories comprising of raw materials and components, finished goods, work-in-progress and stores and spares worth X 2,051 millions detailed in note 12 to the accompanying standalone financial statements.

During the year ended 30 June 2021, the management has performed 100% physical verification for the inventory between 28 June 2021 and 15 July 2021 in multiple intervals with the assistance of management experts and has performed roll forward/roll back workings based on system generated reports.

The raw material and other components of inventory are valued based on weighted average cost. The Company follows standard costing for Hard Metal Products segment and actual costing for Machining Solutions Group segment to arrive at the inventory value. At the end of each reporting period, price variance and various production related overheads are allocated on actual basis and manually adjusted, as necessary, to value the inventory.

Owing to its nature, with respect to manufacture of engineering products specific to the needs of the customers, valuation of inventory involves preparation of specific bill of materials (BOM) for each product being manufactured.

In addition to the above, the complexities involved in this assessment include:

• Identification of products where specific production overheads and other allocations such as labour cost, depreciation on machineries, etc. to be added to the cost of inventory.

Our audit procedures around inventory to assess valuation and

allowance for inventories included, but were not limited to the following:

Existence, Completeness, Cut-off and Accuracy of Inventory:

• Obtained understanding of management process of inventory management and inventory physical verification performed at various intervals during the year and near to the reporting date;

• Evaluated the design effectiveness of controls over inventory management process/inventory physical verification and tested key controls for their operating effectiveness;

• Observed physical count carried out by the management.

• Obtained the report of the expert and verified the treatment of count difference in the books of accounts. Independently verified the physical quantities of inventory on test check basis to the physical count report provided by the management and performed roll back procedures from date our physical verification till the balance sheet date.

• On test check basis, tested the roll forward/back procedures from the date of management count to the balance sheet date.

• Performed cut-off procedures to ensure completeness of the inventory recorded in the books of accounts and completeness of goods-in-transit as at reporting date.

Valuation of inventory:

• Obtained an understanding of the management’s process of valuation of inventory.

• Evaluated the design and tested the operating effectiveness of key

• Assessment of the completion percentage of products.

• Allocation of price variance on raw materials to inventories in work-in-progress and finished goods.

The management of the Company reviews the list of aged stocks and provides for aged inventory basis policy set forth by the management. Inventories of general use are reviewed further and any provision on these stocks are reversed. Further, at the end of each reporting period, the management of the Company also assesses whether there is any objective evidence that net realisable value of any item of inventory is below the carrying value. If so, such inventories are written down to their net realizable value in accordance with Ind AS 2, Inventories. Such specific identification performed by management to ascertain slow moving and obsolete inventories, and assessment of net realisable value of such slow moving and obsolete inventory items require significant judgement and estimation.

Considering the complexities and materiality of amounts involved, this matter is considered to be a key audit matter for current year audit.

controls around valuation including estimates such as stage of completion, overhead computations, and determination of net realizable value of inventory items.

• Discussed with management the rationale supporting assumptions and estimates used in carrying out the inventory valuation, and corroborated the same to our understanding of the business.

• On a sample basis, recomputed the cost of the inventory by applying management’s valuation model, testing underlying cost of acquisition of raw materials consumed, and testing overheads and labour cost allocation to such inventory items. This also included testing of BOM on sample basis for specialised inventory to ensure the BOM is approved as the internal process of the Company.

• Evaluated the appropriateness of the Company’s accounting policy and valuation method of inventory in accordance with the accounting standards.

Inventory allowance:

Obtained and understood management process for identification of slow moving, non-moving or obsolete inventories and ensured that the same is consistently applied.

Performed an independent analysis of the ageing of inventory line items leading to specific inquiries with the management to ensure the completeness of the inventory identified as slow moving, nonmoving and obsolete.

On sample basis, tested the ageing of inventory items obtained through system reports, as applicable.

For slow and non-moving inventories as at 30 June 2021 identified by the management, recomputed the allowance created by the management using management’s model which has been consistently applied. Further, tested the net realisable value of finished goods inventory on a sample basis to average of 6 months historical selling prices less costs to sell, to identify allowance required, if any, for finished goods.

Presentation and disclosure:

Evaluated the disclosures made in the accompanying financial statements in accordance with the applicable accounting standards.

Information other than the Financial Statements and Auditor’s Report thereon

6. The Company’s 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 auditor’s report thereon. The Annual Report is expected to be made available to us after the date of this auditor''s 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

7. The accompanying standalone financial statements have been approved by the Company’s Board of Directors. The Company’s 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.

8. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

9. Those Board of Directors is also responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit ofthe Financial Statements

10. 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 auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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.

11. 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, orthe 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 management’s 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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s 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 auditor’s 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 standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation;

12. 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 ouraudit.

13. 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.

14. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s 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

15. As required by Section 197(16) of the Act, based on our audit, we report that the Company has paid 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.

16. As required by the Companies (Auditor’s 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.

17. 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 30 June 2021 from being appointed as adirector in terms of Section 164(2) of the Act;

f) we have also audited the internal financial controls with reference

to the financial statements of the Company as on 30 June 2021 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated 18 August 2021 as per Annexure II expressed an unmodified opinion; and

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 (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 30 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 30 June 2021;

ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 30 June 2021;

iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 30 June 2021; and

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

Firm’s Registration No.: 001076N/N500013

Vijay Vikram Singh

Partner

Membership No.: 059139

UDIN:21059139AAAAEH3170

Bengaluru

18 August 2021