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Force Motors Ltd.

Auditor Report

NSE: FORCEMOTEQ BSE: 500033ISIN: INE451A01017INDUSTRY: Auto - LCVs/HCVs

BSE   Rs 7243.80   Open: 7269.55   Today's Range 7171.90
7387.95
 
NSE
Rs 7244.00
+57.05 (+ 0.79 %)
+51.80 (+ 0.72 %) Prev Close: 7192.00 52 Week Range 1097.85
7387.95
You can view full text of the latest Auditor's Report for the company.
Market Cap. (Rs.) 9544.88 Cr. P/BV 5.09 Book Value (Rs.) 1,423.03
52 Week High/Low (Rs.) 7390/1098 FV/ML 10/1 P/E(X) 71.42
Bookclosure 28/09/2023 EPS (Rs.) 101.42 Div Yield (%) 0.14
Year End :2023-03 

Report on the audit of Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of Force Motors Limited (“the Company”), which comprise the Balance Sheet as at March 31,2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity andthe Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred toas “the standalonefinancial statements”).

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 Indian Accounting Standards prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2023, the profit and total comprehensive Income, changes in equity and its cash flowsforthe yearended onthatdate.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) specified under Section 143(10) ofthe 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 (ICAI) together with the independence requirements that are relevant to ouraudit of the standalone financial statements under the provisions ofthe Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements andthe ICAI's Code of Ethics. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Emphasis of Matter

Attention is invited to Note No. 28 of standalone financial statements regarding recognition of Government incentives and writing off Intangible Assets under development and Capital Work-in-Progress as exceptional item. OurOpinion is not modified in this respect.

KeyAuditMatters

Sr.

No.

Key Audit Matter

How our audit addressed the key audit matter

1.

Contingent Liability

The Company has in duties and taxes litigations that are pending with various tax authorities. Whether a liability is recognized or disclosed as a contingent liability in the financial statements is inherently judgmental and dependent on assumptions and assessments. We placed specific focus on the judgements in respect to these demands against the Company. Determining the amount, if any, to be recognized or disclosed in the financial statements, is inherently subjective. Therefore, it is considered to be a key audit matter.

(Refer Note No. 31(a) to standalone financial statements)

Our procedures included, but were not limited to, the following :

• Obtained an understanding from the management with respect to process and controls followed by the Company for identification and monitoring of significant developments in relation to the litigations, including completeness thereof.

• Obtained the list of litigations from the management and reviewed their assessment of the likelihood of outflow of economic resources being probable, possible or remote in respect of the litigations.

• Assessed management's discussions held with their legal consultants and understanding precedents in similar cases;

• Our own teams of tax experts assessed and validated the adequacy and appropriateness of the disclosures made by the management in the financial statements.

2.

Intangible assets

Product development costs incurred on new vehicle platforms; engines are recognised as intangible assets only when technical feasibility has been established. The costs capitalised during the year include technical know-how expenses, materials, direct labour, inspecting and testing charges, designing and other direct expenses incurred on respective projects, up to the date the intangible asset is capitalised. The capitalisation of product development cost is considered to be a key audit matter given

Our audit approach consisted evaluation of design and implementation of controls, and testing the operating effectiveness around initiation of capitalisation of the product development cost including management's validation of relevant data elements and benchmarking the assumptions;

The audit procedures included:

• Obtained the list of approved project wise details and verify the completeness and accuracy of cost data with respect to various system generated reports.

• Inspected the respective approvals for initiation of capitalisation including government approvals (DSIR) where applicable;

Sr.

No.

Key Audit Matter

How our audit addressed the key audit matter

that the assessment of the capitalisation criteria set out in Ind AS 38 Intangible Assets is made at an early stage of product development and there are inherent challenges with accurately predicting the future economic benefit, which must be assessed as probable for capitalisation to commence.

(Refer Note No. 2 (f) and Note No. 5 of the standalone financial statements)

• Reviewed the cost allocation for the year and determined that costs capitalised are directly attributable.

• Tested on sample basis costs incurred towards projects i.e. in respect of manpower cost, we verified hours booked on respective projects, hourly rates for respective persons and sample vouchers / invoices for directly attributable expenses.

• We reviewed judgments used by the management for expected probable economic benefits and associated expenditures, and their assessment of feasibility of the projects, including appropriateness of past / present useful life applied in calculation of amortization.

• After carrying out above audit procedures, we concluded that relevant criteria for capitalisation have been met

Information otherthanthe Standalone Financial StatementsandAuditor'sReportthereon

The Company's Board of Directors is responsible for the preparation of the other information. The other information comprises the Management Discussion and Analysis, Board's Report including Annexures to Board's Report, Corporate Governance and Business Responsibility Report, but does notincludethefinancial statements and ourauditor'sreportthereon.

Management Discussion and Analysis, Board's Report including Annexures to Board's Report, Corporate Governance and Shareholder's Information is expected to be made availableto us afterthe date ofthis auditor's report, hence ouropinion is based on Standalone Financial Statements only.

Ouropinion on the standalonefinancial statements does not coverthe otherinformation and we do not express anyform of assurance conclusion thereon.

Inconnectionwithourauditofthestandalonefinancial statements, ourresponsibilityisto readthe otherinformation and, in doing so, considerwhetherthe other information ismaterially inconsistent with the standalone financial statements orour knowledge obtained during the course ofour auditor otherwise appears to be materially misstated. When we read Management Discussion and Analysis, Board's Report including Annexures to Board's Report, Corporate Governance and Business Responsibility Report, ifwe concludethatthere is material misstatementtherein,we are requiredto communicatethe matterto those charged with governance.

Management's Responsibility forthe Standalone Financial Statements

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 atrue andfair view of thefinancial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Actfor 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 standalone financial statements that give a true andfairview and arefree from material misstatement, whether due to fraud or error.

In preparing the standalone 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 orto cease operations, or has no realistic alternative butto do so.

The Board of Directors are responsibleforoverseeingthe Company's financial reporting process.

Auditor's Responsibilities fortheAudit ofthe 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 arisefromfraudor 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 standalonefinancial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughoutthe 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, orthe override of internal control.

• 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 controls system 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 amaterial uncertainty exists relatedto events orconditions that may cast significantdoubton the Company’s ability to continueasagoing 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 ouropinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may causethe Company to cease to continue as agoing concern.

• Evaluatethe overall presentation, structure and content of the standalonefinancial statements, including the disclosures, and whetherthe standalone financial statements representthe underlying transactions and events in a mannerthatachievesfair presentation.

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) 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 standalonefinancial 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 statementthat 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 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 Section 143 (3) of the Act, based on ouraudit we reportthat:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary forthe 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, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books of account.

(d) In ouropinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act.

(e) On the basis of the written representations received from the directors for the year ended March 31, 2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2023 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 over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting.

(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 ouropinion 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 No. 31(a) to the standalonefinancial statements.

(ii) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company - Refer Note No. 42to standalonefinancial statements.

(iv) With respect to clause (e) of Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended

(a) The management has represented that, to the best of it's knowledge and belief, 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 orthe like on behalf of the Ultimate Beneficiaries.

(b) Management has represented, that, to the best of it's knowledge and belief, 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, 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 orthe like on behalf of the Ultimate Beneficiaries.

(c) Based on such audit procedures that we have considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused us to believethatthe representations under sub-clause (a) and (b) contain any material mis-statement.

(v) The final dividend paid by the Company during the year in respect for the previous year is in accordance with Section 123 of the Companies Act 2013tothe extent itapplies to payment ofdividend

As stated in Note No. 45 to the financial statements, 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 Actto theextent it appliesto declarationofdividend.

(vi) With respect to clause (g) of Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, the requirement under proviso to Rule 3(1)of the Companies (Accounts) Rules, 2014 of mandatory audittrail in the Company's accounting software is postponed to financial year commencing on or after April 01,2023 as per notification G.S.R. 235(E) dated March 31, 2022 as issued by the Ministry of Corporate Affairs. Accordingly reportingforthe same in not applicable.

2. As required by the Companies (Auditor's Report) Order, 2020 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order.

3. With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of Section 197(16) of the Act, as amended:

In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of Section 197 of the Act.

For Kirtane & Pandit LLP

Chartered Accountants

Firm Reg. No. 105215W / W100057

Place: Pune SuhasDeshpande

Date : 29th May2023 Partner

Membership No. : 031787 UDIN : 23031787BGYQGC9914

 
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