We have audited the accompanying standalone Ind AS financial statements of BEML LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2024, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Cash Flow Statement for the year then ended, and other explanatory information and a summary of the significant accounting policies and Notes to the standalone Ind AS financial statements (hereinafter referred to as "Standalone Ind AS financial statements").
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Ind AS financial statements give the information required by the Companies Act, 2013("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 31st March 2024, and Profit and Other Comprehensive
Income, 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 SAs are further described in the Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements section of this 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 sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.
Key Audit Matters
Key Audit Matters ("KAM") are those matters that, in our professional judgment, were of the most significance in our audit of the standalone Ind AS financial statements of the current period. These matters were addressed in the context of our audit of the standalone Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Key Audit Matter
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How our audit addressed the Key Audit Matter
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Revenue Recognition: Sale and Service
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1.
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Assessed the appropriateness of the
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Contracts:
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revenue recognition policies of the company
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The principal products of the Company are varied and have usage in various sectors such as defense, mining & construction and metro
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and whether its adoption is as per the covenants of the respective sale contracts and applicable accounting standards.
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rail/conventional railways.
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2.
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Evaluated the design of key controls and
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Recognition of sale contracts vary from "at a point in time" to "over a period of time" and some on "bill and hold" terms. The recognition
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operating effectiveness of the relevant key controls with respect to revenue recognition, on selected transactions.
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milestones and Inco Terms differ between
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3.
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Performed substantive testing by selecting
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contracts. Amendments to original contracts
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samples of revenue transactions recorded
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add to the complexity.
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during the year by evaluating the underlying
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We identified revenue recognition as a key
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documents.
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audit matter because,
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4.
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Tested the revenue transactions recorded
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a. The Company and its external stakeholders focus on revenue as a key performance indicator.
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nearer to the financial year end date by verifying the underlying documents to determine whether the revenue had been recognized in the appropriate financial
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b. Such focus creates an incentive for revenue
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period.
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to be overstated or recognised before the company satisfies its contractual performance obligations.
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5.
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Tested the assumptions made by the management in determining full or proportionate revenue recognition in
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c. Certain performance obligations which
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respect of contracts completed over a
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do not relate to the core activity of the
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period of time by verifying appropriate
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company but form part of the deliverables,
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evidence.
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make the time and value of recognition a complicated subject.
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6.
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Validated the application of input cost method to value the contract assets
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Thus, revenue recognition is a Key Audit Matter.
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arising out of metro contracts to conform
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Refer:
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correctness and completeness of cost booking.
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Note Nos. 30 and Item No.2.2 A of Accounting Policy.
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7.
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Validated the "bill and hold" principles adopted by the company with the paper trails available with the company.
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Key Audit Matter
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How our audit addressed the Key Audit Matter
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8. Examined satisfaction of performance obligations and recognition of revenue in respect of recognitions based on milestoneachievements in the context of the overall sale contract.
Our audit approach did not reveal any noncompliance with the company's declared accounting policies, GAAP and Ind AS.
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Inventories:
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Principal Audit procedures performed include:
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Audit of Inventories comprise:
a. Physical verification
b. Confirmation of third-party holdings
c. Valuation
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1.
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System and internal controls are evaluated to ensure that there are no recording delinquencies with respect to time, quantity and item.
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d. Obsolescence
Some of the inventories held by the company are custom-made and of high value. The raw materials pass through different processes
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2.
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The variances between planned and actual consumption, both in value and quantity, were flagged for high values and explanations were obtained.
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and evolve as Components, Semi-finished goods, Work-in-Progress and reach the stage of Finished Goods.
Certain processes are outsourced where
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3.
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Applied audit procedures to validate the physical availability of the inventories as supported by physical verification reports of the management teams.
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materials are given to third parties for processing and return.
The company's products have evolved over the years due to design changes, market
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4.
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Perused third party confirmations and physical verification reports, and matched with the company's records. Variances if any, are reduced from inventory values.
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requirements and technological advancements. Therefore, the marketability of materials, spares and components of discontinued models required to be validated for obsolescence.
The valuation of inventories in accordance with IND AS considering all relevant costs required a detailed audit process, including the charging of overheads.
The application of the declared policy on obsolescence and its appropriateness also needed to be validated.
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5.
6.
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Sample checking of valuation methodology by the system was done through manual validation for the material portion of the inventory.
Methodology of loading actual overheads to the inventory values were validated and confirmed to be in tune with costing principles.
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Key Audit Matter
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How our audit addressed the Key Audit Matter
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Inventories form a major portion of the total of the Balance Sheet. The focus on inventories is thus significant in the audit process and a Key Audit Matter.
Please refer Note No. 12 and Accounting Policy No.M. The total inventories held as at 31.03.2024 is Rs 2,25,590.38 lakhs
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7. The policy of recognizing redundancy of materials (Accounting policy No. M) and Management's override of such policy was tested with appropriate evidences to conform that such policies as well as the override are reasonable and in tune with technical assessments market conditions.
Our audit approach did not reveal any noncompliance with the company's declared accounting policies, GAAP and Ind AS.
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New Product Development:
The company is involved in development of a new product under a customer contract where different milestones have been prescribed for revenue recognition.
The development process is spread over different financial years and consequently revenue recognition.
Design and product specifications are sourced from a foreign vendor and materials are majorly sourced from local vendors.
The development involves creation of PPE, though part of the deliverables, is expected to be used by the company for future operations and cannot be physically removed from the place of installation.
There is a time lag between the date of the contract and actual time of its execution leading to costs variances, without any variation in price. This leads to assessment of profitability of the contract as a whole.
The development is in progress where part of the costs is incurred and part of the costs are estimated.
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Principal Audit procedures performed include:
1. Understanding the basic covenants of the customer contract customer vis-avis the milestones specified for revenue recognition.
2. Ascertaining the various cost components of the development process.
3. Understanding the covenants with the foreign vendor and the specified milestones for recognition of expenditure and liability.
4. Applied audit procedures to validate that material issues and other direct expenditure of the development project are appropriately charged to the project.
5. Ascertained the total cost of the project, validated the costs that are actually incurred and costs that are contracted to be incurred through issue of purchase contracts.
6. Applied appropriate audit procedures and obtained technical certification and explanations about the nature of costs to be incurred and estimated values.
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Key Audit Matter
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How our audit addressed the Key Audit Matter
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The factors
a. the process of ascertaining overall cost of the project vis-a-vis the contract price,
b. The ongoing nature of the project
c. the nature of PPE being created whether to be classified as a capital asset or revenue expenditure,
d. ascertaining whether the overall project requires recognition of any onerous provision.
make this product development activity a Key
Audit Matter.
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7. Obtained technical explanations and justification for the proposed future use of the PPE being created for future use of the company.
Our audit procedures as detailed above has not
revealed any.
a. incorrect revenue recognition,
b. deficiency in cost booking and
c. incorrect capitalisation
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Emphasis of Matter
We draw attention to Note No. 11 to the standalone financial statements regarding the company's outlay on the MAMC Consortium.
Our opinion is not modified in respect of the above matter.
Information other than the Standalone Financial Statements and Auditor's Report thereon
The Company's Management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company's Annual Report but does not include the standalone Ind AS financial statements and our auditor's report thereon.
Our opinion on the standalone Ind AS 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 Ind AS financial 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 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 Ind
AS 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 Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with relevant rules issued thereunder.
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 the estimates that are reasonable and prudent; and the 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, management and Board of Directors are 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. Board of Directors are responsible for overseeing the Company's financial reporting process.
Auditor's 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 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 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.
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 standalone 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 controls.
• Obtain an understanding of internal financial controls 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 control with reference to standalone 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 in preparation of Standalone Financial Statements 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 standalone Ind AS 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 standalone Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone Ind AS financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors
(i) in planning the scope of our audit work and in evaluating the results of our work; and
(ii) to evaluate the effect of any identified misstatements in the financial statements.
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.
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 standalone Ind AS 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
1. As required by the Companies (Auditor's Report) Order,2020 ("the Order"), issued by the Central Government in terms of sub-section (11) of Section 143 of the Act, we give in Annexure A, a statement on the matters specified in Paragraphs 3 and 4 of the Order, to the extent applicable.
2. As required under 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, including Other Comprehensive Income, the Statement of Changes in Equity and Cash Flow Statement dealt with this Report are in agreement with the books of account.
d) In our opinion, the aforesaid Standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act and the Rules made thereunder.
e) In terms of Notification no.
G.S.R.463(E)dt. 05.06.2015 issued
by Ministry of Corporate Affairs, the provision of Section 164(2) of the Companies Act, 2013 in respect of disqualification of Director are not applicable to the Company.
f) With respect to adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure B;
g) With respect to Directions issued by the Comptroller and Auditor General of India under Section 143 (5) we give our report in Annexure C:
h) The provisions of Section 197 are not applicable to this government company
(in terms of MCA Notification NO.GSR 463 (E) dated 05th June 2015) as the managerial remuneration is paid as per the appointment letter from the Government of India, and
i) 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 has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements. [Refer Note No. 39(D)(I)(a)(ii)]
ii) The company has made provision as required under Ind AS for material foreseeable losses on long term contracts-Rs 2,314.04 lakhs ( Previous Year-Nil). The company does not have any derivative contracts.
iii) There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund
iv) The management has represented that, to the best of its knowledge and belief that no funds have been advanced to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of
the company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
v) The management has represented that, to the best of its knowledge and belief that the company has not received any funds from any persons or entities, including foreign entities ("Funding Parties") with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries other than those disclosed in the notes to accounts
vi) Based on the audit procedures that we considered reasonable and appropriate in the circumstances, nothing has come to our notice that that has caused us to believe that the representations under sub clause(iv) and (v) contain any material mis-statement.
vii) a. The final dividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with Section 123 of the Companies Act 2013 to the extent it applies to payment of dividend.
b. The interim dividend declared and paid by the Company during the year and until the date of this audit report is in accordance with section 123 of the Companies Act 2013.
c. The Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.
viii) Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023. Based on our examination which included test checks, the company has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with.
For G Natesan & Co, Chartered Accountants FRN :002424S
Sd/-
Place : Bengaluru K Murali
Date : 01.07.2024 Partner,
UDIN: 24024842BKDAQC8228 M. No : 024842
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