To the Members of Titagarh Rail Systems Limited (formerly known as Titagarh Wagons Limited) Report on the Audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying standalone financial statements of Titagarh Rail Systems Limited (formerly known as Titagarh Wagons Limited) (“the Company”), which comprise the Standalone Balance Sheet as at March 31, 2024, and the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows for the year then ended, and notes to the standalone financial statements, including material accounting policy information 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 (“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 March 31,2024, and total comprehensive income (comprising of profit and other comprehensive income), changes in equity and its cash flows for the year then ended.
Basis for Opinion
3. 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 “Auditor’s 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 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.
Key audit matters
4. Key audit matters a re those matters that, in our professional judgement, 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 standalone 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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Assessment of carrying value of Investment in Shivaliks Mercantile Private Limited and Titagarh Firema S.p.A
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Our audit procedures included the following:
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(Refer to Note 4.5 — “Investments in Subsidiaries, Associate
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• Obtained an understanding, evaluated the design, and
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and Joint Venture”, Refer Note 3 — “Critical Estimates and
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tested the operating effectiveness of controls over the
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Judgements — Impairment of Investments in Subsidiaries, Associate and joint ventures” and Note 7 — “Investments
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assessment of the carrying value of investments.
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(Non current)”)
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• Checked on a sample basis relevant input data
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The Company has investment in equity shares of Titagarh
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used in the impairment assessment back to the latest
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Firema S.p.A, an associate Company amounting to Rs
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budgets and checked the mathematical accuracy of
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1,272.63 Lacs as at March 31,2024. During the year, the Company has invested an amount of Rs. 10,000.00 Lacs
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the impairment model.
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in equity shares of Shivaliks Mercantile Private Limited,
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• We used auditors’ expert to assess the appropriateness
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a joint venture Company, which in turn has invested Rs. 9,013.10 lacs in Titagarh Firema S.p.A. These investments are carried at cost, net of impairment losses, if any, in
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of the methodology used in the impairment model, the underlying assumptions such as discount rate, future
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accordance with the accounting policies as stated in the
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growth rates, terminal value and performed sensitivity
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notes referred to above.
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on key assumptions to assess the reasonableness of
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For investments where an indication of impairment exists,
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the impairment analysis.
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the carrying value of investment is assessed for impairment.
Impairment assessment is carried out by the Company using discounted cash flow method which involves
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• Evaluated the adequacy of the disclosures made in the standalone financial statements.
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Key audit matter
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How our audit addressed the key audit matter
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significant judgements and estimates such as future cash flow projections, discount rates, terminal growth rate etc.
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Based on the above procedures performed, we noted that
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This has been considered as a key audit matter as the balance of aforesaid investments is significant to the standalone financial statements and the assessment of impairment, if any, in the carrying value of these investments involves significant management judgement and estimates.
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the management’s assessment in relation to the carrying value of Shivaliks Mercantile Private Limited and Titagarh Firema SpA is reasonable.
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Revenue recognition - appropriateness of estimation of contract cost and contract revenue
(Refer to Note 4.6 and 5.9 — “Revenue Recognition”, Refer Note 3 — “Critical Estimates and Judgements — Accounting for revenue from contracts wherein company satisfies performance obligation and recognises revenue over time” and Note 25 — “Revenue from operations”)
In respect of certain contracts with customers, the Company recognises revenue over a period of time in accordance with its accounting policy. Recognition of contract revenue involves determination of percentage completion of the project and contract margin to be recognised on the project, which is dependent on the actual cost incurred and total budgeted cost, which is cost incurred till date and estimation of future cost to complete the contract.
This estimation involves exercise of significant judgement by the management in making forecasts of future cost to complete the contract considering future activities to be carried out in the contract, and the related assumptions. This has been considered as a key audit matter in view of the significant management judgements and complexities involved in determining future costs to complete with consequential impact on the recognised contract revenue.
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Our audit procedures included the following:
• Obtained an understanding, evaluated the design, and tested the operating effectiveness of key controls around determination of contract revenue and estimation of future costs to complete the contracts.
• Inquired with the management the status of the contracts, the basis for estimates of future cost to complete the contracts and other factors such as consideration of any specific identified risks.
• Verified on a sample basis the contract revenue with the underlying contracts and other relevant terms and conditions as appropriate.
• Tested on a sample basis the actual costs incurred during the year with supporting documents.
• Tested on a sample basis the future cost to complete with orders placed with vendors, and other relevant supporting documents, as appropriate.
• Recomputed the percentage of completion based on the total budgeted cost and the total actual cost incurred and the revenue recognized based on the percentage of completion.
• Evaluated the adequacy of the disclosures made in the standalone financial statements.
Based on the above procedures performed, management’s estimation of future cost to complete the contracts and consequential impact on recognised contract revenue is considered reasonable.
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Other Information
5. 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
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 and take appropriate action as applicable under the relevant laws and regulations
Responsibilities of management and those charged with governance for the standalone financial statements
6. 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, 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 statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
7. In preparing the standalone financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applica ble, 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. Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the standalone
financial statements
8. 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.
9. As part of an audit in accordance with SAs, we exercise professional judgement and maintain professional scepticism 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 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 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 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 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 financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
10. 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.
11. 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.
12. 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
13. As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, we give in the Annexure B a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent a pplica ble.
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 purposes of our audit.
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In our opi
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nion, pr.
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sper books of account as required
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by law r
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elating
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to preparation of the aforesaid
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stand a Ion
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e financ
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:ial statements have been kept so
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far as it
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appeal
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-s from our examination of those
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books, ex
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cept foi
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Ý the matters stated in paragraph
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14(h)(vi)
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below c
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>n reporting under Rule 11(g) of
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the Companies (Audit and Auditors) Rules, 2014 (as amended).
(c) The Standalone Balance Sheet, the Standalone Statement of Profit and Loss (including other comprehensive income), the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows 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.
(e) On the basis of the written representations received from the directors as on March 31, 2024, taken on record by the Board of Directors, none of the directors is disqualified as on March 3 1, 2024, from being appointed as a director in terms of Section 164(2) of the Act.
(f) With respect to the maintenance of accounts and other matters connected therewith, reference is made to our remarks in paragraph 14(b) above on reporting under Section 143(3)(b) and paragraph 14(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended).
(g) With respectto 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 A”.
(h) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 1 1 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 financial statements — Refer Note 18 and 40 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 1 8 and 22 to the 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 during the year.
iv. (a) The management has represented that,
to the best of its knowledge and belief, other than as disclosed in Note 52(vi)(A) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), 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;
(b) The management has represented that, to the best of its knowledge and belief, as disclosed in the Note 52(vi)(B) to the standalone financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall,
120 | TITAGARH RAIL SYSTEMS LIMITED | Annual Report 2023-24
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; and
(c) Based on such audit procedures that we considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.
v. The dividend declared and paid during the year by the Company is in compliance with Section 123 of the Act.
vi. Based on our examination, which included test checks, the Company has used two accounting software for maintaining its books of account of which one accounting software has a feature of recording audit trail (edit log) facility and that
For Price Waterhouse & Co Chartered Accountants LLP
Firm Registration Number: 304026E/E-300009
has operated throughoutthe year for all relevant transactions recorded in the software, exceptthat the audit trail is not maintained at application level for modification, if any, by certain users with specific access and for direct database changes. In case of the other accounting software which is operated by a third party software service provider and in the absence of SOC report, we are unable to comment whether the audit trail feature of the aforesaid software was enabled and operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit except for the aforesaid instances where we are not able to comment upon, we did not notice any instance of audit trail feature being tampered with.
15.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.
For Salarpuria & Partners
Firm Registration Number: 3021 13E Chartered Accountants
Pramit Agrawal
Pa rtner
Membership Number: 099903 UDIN: 24099903BKEYQG471 3 Place: Kolkata Date: May 1 5, 2024
Anand Prakash
Partner
Membership Number: 056485 UDIN: 24056485BKGYEC8281 Place: Kolkata Date: May 1 5, 2024
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