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Auditor Report of HMT Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of HMT Limited (the Company), which comprises of the Balance Sheet as at 31st March 2015, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information, annexed hereto in which are incorporated the accounts of Corporate Head Office audited by us and the accounts of Tractor Division-Pinjore, Food Processing Unit- Aurangabad and Common Service Division-Bangalore audited by the Branch Auditors appointed by the C&AG of India, has been forwarded to us as required by the Companies Act, 2013, which have been dealt with while preparing our report in the manner considered necessary by us.

Management''s Responsibility 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 preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with the accounting principles generally accepted in India, including accounting standards specified under section 133 of the Act read with Rule 7of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility:

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation and presentation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Basis of our Qualified Opinion CHO:

1. No actuarial valuation has been obtained in respect of contributions required for Provident Fund liability by the Company as per the requirements of AS - 15 "Employee Benefits". The amount of contribution to Provident Fund is Rs. 26.30 Lakhs during the year under audit.

2. The amount of Gratuity Provision (Unfunded) to be recognized in Balance Sheet as per actuary valua tion report is Rs. 6,842.12 Lakhs. Whereas as per Note No. 5 & Note No. 9 the aggregate provision amounts to Rs. 6,857.34 Lakhs.

Tractor Division, Pinjore:

1. No actuarial valuation has been obtained with re

spect to the provisions made for Provident Fund and Outstanding amount has been shown amount ing toRs. 2,174.38 Lakhs

Opinion:

In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of the reports of other Branch Auditors, except for the effects of the matter described in the "Basis for Qualified Opinion" paragraph, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2015, and its loss and its cash flow for the year ended on that date,

Other Matters:

1. We did not audit the financial statements of certain branches/units. These have been audited by other Branch Auditors whose reports have been furnished to us and our opinion is solely based on the reports of Other Branch Auditors.

2. The financial statements of Lamp Division have been merged with CHO Accounts and our report insofar as it relates to the amounts included in re spect of this Division is based solely on Closing Balances of Last Year''s Financial Statement of CHO Accounts.

3. The Physical share certificates for 26,08,99,037 Equity Shares of M/s. HMT Machine Tools Ltd having value of Rs. 26,089.90 Lakhs and 4,43,00,000 Preference Shares of M/s. HMT Machine Tools Ltd having value of Rs. 44,300.00 Lakhs are not in the possession of the Company.

4. Payments to third parties are being made relating to SUDMO-HMT Engineering (India) Ltd, an associate, are paid by the Company against which it receives the reimbursements from them.

5. The Branch Auditors of Tractor Division, Pinjore have Reported the following other matters:

a) Balance in Current Maturities of GOI Loans - Statutory Dues and Working Capital and Bridge Loan as given in Note - 9 of Balance Sheet amounting Rs. 2148.64 Lakhs has been given and we have relied on the basis of the Certificate received from the Management.

b) During the year 2014-15, the Management has declared doubtful debts amounting Rs. 4410.10 Lakhs which is very high in percentage and full provision has been made in the Profit & Loss Account and accordingly, provision has been made of interest receivable on debts amounting Rs. 4756.73 Lakhs and we have relied upon the certificate obtained from the Management.

c) During the year 2014-15, the provision for obsolesce has been shown by the Company amounting Rs. 438.29 Lakhs and we have relied upon the Certificate received from the Management of the Company. These matters give an unmodified opinion on Financial Statements of the unit.

Report on Other Legal and Regulatory Requirements:

1. As required by Section 143 (5) of the Act, our sub missions are as under:

a. we give in the Annexure ''A, a statement on the compliance to Directions issued by the Comptroller and Auditor General of India

b. we give in the Annexure ''B'', a statement on the compliance to specific sub directions issued by the Principal Director, Commercial Audit and Ex-Officio Member, Audit Board, Hyderabad

2. As required by the Companies (Auditor''s Report) Order, 2015 (''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 ''C'', a statement on the matters specified in the paragraph 3 and 4 of the Order, to the extent applicable.

3. 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.

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 and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d) in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 with an exception to those mentioned in the paragraph of Basis for Qualified Opinion and Other matters;

e) on the basis of the written representations received from the directors as on 31 March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act; and

f) with respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Financial Statement as referred to in Note No. 39 (A) to 39 (E) to the Financial Statement.

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, and as required on long-term contracts including derivative contracts; and

iii. There were no amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

ANNEXURE ''C'' TO THE INDEPENDENT AUDITORS REPORT

I. a) The company has maintained proper records showing full particulars, including quantitative details and situations of Fixed Assets on the basis of available information.

b) The Company has a regular programme of physical verification of its moveable fixed assets by which they are verified in a phased manner over a period of three years. In accordance with the programme, some fixed assets have been verified during the year and management has confirmed that no material discrepancies were noticed on such physical verification when compared with the book records. In our opinion, the periodicity of three years is reasonable having regard to the size of the Company and the nature of its assets.

II. a) The management has conducted physical verification of inventory at reasonable intervals during the year. In our opinion the frequency of verification is reasonable.

b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the company and nature of its business.

c) The company is maintaining proper records of inventory and management has confirmed that no material discrepancies were noticed on such physical verification when compared with the book records.

III. a) As informed to us, the company has granted loans to the bodies corporate, but has not maintained a register U/s 189 of the Companies Act, 2013.

b) In the case of granting of loans to body corporate, the borrowers have been regular in the payment of interest. The terms of agreements do not stipulate any repayment schedule and the loans are repayable on demand. Accordingly, Sub-Clause (b) of the Clause (iii) of the Paragraph 3 of the Order is not applicable.

c) According to the information given to us, there are no overdue amounts more than Rupees One Lakh in respect of the loans granted to the bodies corporate.

IV. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and nature of its business for the purchase of inventory and fixed assets and for the sale of its goods and services. During the course of our audit, we have not observed any continuous failure to correct major weakness in internal control system.

V. According to the information and explanations given to us, the company has not accepted any deposits from the public during the year. Hence, the provisions relating to this clause of the order are not applicable.

VI. The Company has maintained cost records pursuant to the Rules made by the Central Government under Section 148 (1) of the Act. On the broad review of the accounts by the Branch Auditors of Tractor Division-Pinjore prima facie they are of the opinion that the prescribed accounts and records have been made and maintained. The respective Branch Auditors of Food Processing Unit, Aurangabad have broadly reviewed such records and prima facie, they are of the opinion that the prescribed accounts and records have been made and maintained. Maintenance of Cost records is not prescribed at Corporate Head Office and Common Service Division.

VII. In respect of Statutory Dues:

a) According to the information & explanations given to us and on the basis of examination of the records of the company, undisputed Statutory dues including provident fund, employees'' state insurance, income tax, wealth-tax, service tax, customs duty, excise duty, value added tax, cess and other material statutory dues have been generally regularly deposited with the appropriate authorities.

There are no outstanding amounts of Statutory dues on account of as on the last date of the Financial Year concerned for a period of more than 6 months from the date they became payable except the following:

The records of CHO, report the irregularities as under:

Sl. Nature of the Nature of Amount Period to which No. Statute Dues (Rs.) amount related

1. Income Tax* TDS Defaults 349613.95 2014 - 15

2. Income Tax* TDS Defaults 1882503.25 2013 - 14

3. Income Tax* TDS Defaults 2059936.74 2012 - 13

4. Income Tax* TDS Defaults 180257.95 2011 - 12

5. Income Tax* TDS Defaults 5182992.87 Prior Years

6. Greater Hyderabad Property Tax 5218224.00 Previous Years

Municipal 7815398.00 Arrear Penalty

Corporation 4776018.00 Current Tax

TOTAL 37464944.76

* Income Tax Website

The auditors of Tractor Division, Pinjore reports the irregularities as under:

Sl. Nature of the Nature of Amount Period to which No. Statute Dues (Rs.) amount related

1. Pinjore Sales Tax Interest on Demand 21773033.00 2001-02 to 2005-06

2. Sales Tax Sales/ VAT Tax 2001521.00 November 2013 September 2014

3. CPF Provident Fund 49849972.00 Nov 2013 - Sept 2014

4. EPF Provident Fund 52246226.00 Nov 2013 - Sept 2014

5. EPS Provident Fund 3718381.00 Nov 2013 - Sept 2014

6. VPF Provident Fund 28928500.00 Nov 2013 - Sept 2014

7. PF Loan and Interest Provident Fund 53935211.00 Nov 2013 - Sept 2014

8. Professional Tax Professional Tax 10200.00 Nov 2013 - Sept 2014

b) According to the information & explanations given to us, there are no dues outstanding with respect to income-tax, wealth-tax, service tax, customs duty, excise duty, value added tax or cess on account of any disputes. However, according to the information and explanations given to us, the following dues of Sales Tax have not been deposited by the Company on account of disputes:

The Branch Auditors of Food Processing Unit, Aurangabad have reported that there is dues of Sales Tax on account of dispute and the details are as under:

Sr. No. Name of Authority Amount (Rs. Lakhs) Period

1. Appeal before 2.96 1989-90

2. Joint Commis- 39.05 1999-00

3. sioner (Appeal), 25.71 2000-01

4. Aurangabad 14.78 2001-02

5. 13.48 2003-04

6. 9.35 2004-05

105.33

c) According to the information and explanations given to us, no amounts were required to be transferred to the investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules there under.

VIII The accumulated losses of the Company are Rs. 95,828.07 Lakhs (Previous Year-Rs.86,024.58 Lakhs) at the end of financial year. The Company has incurred cash losses of Rs. 9,385.31 Lakhs during the financial year covered by our audit and no cash losses were incurred in the immediately preceding financial year. The said accumulated losses are more than 50% of its net worth as at the end of the financial year.

IX. In our opinion and according to the information and explanations given to us, the company has not continued defaults in repayment of dues to the financial institutions or banks or Govt of India. Hence, the provisions relating to this clause of the order are not applicable.

X. In our opinion and according to the information and the explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. Hence, the provisions relating to this clause of the order are not applicable.

XI According to the information and explanations given to us by the management and on overall examination of the Balance Sheet, no term loans were taken by the company. Hence, the provisions relating to this clause of the order are not applicable.

XIII. According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the year. Hence, the provisions relating to this clause of the order are not applicable.

For M/s. DOKANIA S.KUMAR & CO.

Firm Registration Number : 322919E

CHARTERED ACCOUNTANTS



(CA. Sushil Kumar Dokania)

Partner

Membership No. 057020

Place: Howrah

Date: 09/07/2015


Mar 31, 2014

We have audited the accompanying financial statements of HMT Limited which comprise the Balance Sheet as at 31st March 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended on that date, annexed thereto in which are incorporated the accounts of Corporate Head Office audited by us and the accounts of Tractor Division-Pinjore, Food Processing Machinery Division-Aurangabad and Common Services Division- Bangalore audited by Branch Auditors appointed under Sec.619(2) of the Companies Act, 1956, has been forwarded to us as required by Section 228 (3) (C) and have been dealt with in preparing our report in the manner considered necessary by us.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 read with the General Circular 15/2003 dt.13.09.2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act 2013. This responsibility includes a design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those

Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

(b) In the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

(c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Other Matters

1. The company has not re-constituted the Audit Committee as required under Section 292 A of The Companies Act, 1956, since appointment of Independent Directors by the Government of India is pending, as explained to us.

2. Being a Government Company provision of Sec 274(1) (g) of the Companies Act, 1956, is not applicable as per notification No.GSR 829(e) Dated October 21, 2003, issued by the Department of Company Affairs, Government of India.

3. The audit reports on the accounts of the units of the Company audited by the branch auditors appointed under section 619(2) of the Companies Act, 1956 have been considered by us in preparing our report and necessary adjustments in the accounts of the units have been made to the extent required on the basis of the information made available to us.

4. The Company has sought confirmation of most of the trade receivables, Advances & trade payables. Balances thereon are subject to confirmations & reconciliations in case of differences, if any. (Ref Note No.11 of the Additional information to the Balance Sheet-B18). However, the Company has made provision of (a) Rs. 43.53 crores towards trade receivables, (b) Rs. 51.87 Crores towards interest on trade receivables and (c) Rs. 1.13 crores towards advances, in the books of accounts of the Company as on 31.03.2014.

5. The Company had sold certain lands vested with HMT Machine Tools Limited, a subsidiary company, during the years 2002-03 and 2003-04, for a consideration of Rs. 36.57 Crores and the profit on sale of such land amounting to Rs. 36.55 Crores were accounted by the company. The company had an understanding with the Subsidiary to adjust the consideration by transferring land of equivalent value. However the company is yet to identify equivalent land for the said value for transfer to HMT Machine Tools Limited. This fact has not been disclosed in the financial statements.

6. During the year the Company has made provision of Rs. 1.66 Crores towards loss in value of investment made in HMT Chinar Watches Limited, the Subsidiary Company, and Rs. 81.09 Crores towards loans given to the above Subsidiary as on 31.03.2014, which were included under the head ‘Other Expenses''.

7. The Branch Auditor of Tractor Division, Pinjore, has observed the following on the accounts of Tractor Division, Pinjore:

a) Miscellaneous Income includes interest of Rs. 64.96 lakhs accounted for @14% on due basis on account of loan given to M/s.HMT Watches Limited (Watch Marketing Division).

b) During the year 2013-14, total Cess amounting to Rs. 15,360/- in respect of sale / transfer of 30 tractor made during the month of April to September, 2013 at Hyderabad Unit has been adjusted against excise duty on dummy production / sale of 30 tractors made during the year 2012-13 which in our opinion should have been paid.

c) During the previous financial year 2012-13, sale reversal of Rs. 6562.69 lacs was done due to dummy / excess sale booking on which sales tax of Rs. 40.45 Lacs was reversed during 2012-13 which has been shown under short term loan and advances as on 31.03.2013. However, during the current year 2013-14 the Company has created an additional sales tax liability of Rs. 64.75 Lacs through Prior Period adjustment account and the same has been adjusted against Rs. 40.45 lacs.

d) The quantative figures in Main Store ledger have not been fully reconciled with reference to Production of 1546 tractors during the year 2013-14.

e) The Sales Tax Return of Pinjore Unit is subject to reconciliation with the books of accounts.

f) During the year a sum of Rs. 236.78 lacs has been debited to Statement of Profit and Loss Account under head "Bad Debts / Advances written off" under Note No.30 – Other Expenses, which pertains to Interest reversal of dealers for the FY 2011-12 and FY 2012-13 have been relied upon the basis of certificate received from Management of the Company.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 (as amended by Companies (Auditor''s Report) Amendment Order, 2004), issued by the Central Government of India in terms of Section 227 (4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227 (3) of the Act, we report that:

(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books (and proper returns adequate for the purposes of our audit have been received from branches not visited by us);

(c) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account (and with the returns received from branches not visited by us);

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards notifies under the Companies Act, 1956 read with the General Circular 15/2013 dated 13.09.2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013.

ANNEXURE REFERRED TO IN PARA 1 - (REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS) - OF OUR REPORT OF EVEN DATE

1. (a) The Company has maintained proper records showing full particulars including quantative details and situation of fixed assets. In respect of Tractor Division-Pinjore the fixed asset registers are showing negative values.

(b) The fixed assets have been physically verified by the management during the year in accordance with its phased programme designed to cover the assets of all locations/ units by physical verification once in three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, fixed assets at certain locations were physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c ) The Company has not disposed off any substantial part of its fixed assets. Hence going concern status is not affected.

2. (a) The inventories other than those held by sub- contractors, ancillary units and goods stored in Custom''s warehouses have been physically verified during the year by the management. Confirmations in respect of stocks held sub-contractors, ancillary units and goods stored in custom''s warehouses are not received in certain cases, where book values are adopted. Excepting the above, in our opinion the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records for inventory and as informed to us, the discrepancies noticed on physical verification by the management, which reported to be not material, same have been properly dealt with in the books of account of the company.

3. The Company has neither granted nor taken any loans, Secured or Unsecured to/from companies, firms or other parties covered in the register maintained u/s 301 of the Act. Accordingly sub clauses (a) to (g) are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of Inventory and Fixed Assets and with regards to Sale of Goods and Services. Further, on the basis of our examination of the books and records of the Company carried out in accordance with the Auditing Standards generally accepted in India and according to the information and explanations given to us, we state that we have neither come across nor have been informed of any continuing failure to correct major weakness in the aforesaid internal control system except at Tractor Division, wherein the branch auditor has expressed that there does not exist adequate internal control systems commensurate with the size of the Unit.

5. (a) In our opinion and according to the information and explanations given to us, there are no transactions that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 having regard to the view taken that the transactions with the government companies need not be entered in the register as no personal interest of the directors is involved.

(b) In our opinion and according to the information and explanations given to us, there are no transactions that need to be entered in the register maintained under section 301 of the Companies Act, 1956, paragraph 4 (v) (b) of the Order is not applicable.

6. The Company has not accepted any deposits from the public during the year and hence the directives issued by the Reserve Bank of India and the provisions of Sec 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under are not applicable.

7. The Company has an Internal Audit System, the scope and coverage of which is commensurate with its size and nature of its business, except at Tractor Division-Pinjore, the branch auditor has expressed the internal audit system is not satisfactory and hence ineffective.

8. The Company has maintained cost records pursuant to the Rules made by the Central Government under section 209 (1) (d) of the Companies Act, 1956 in respect of its Tractor Division, Pinjore and Food Processing Machinery Division, Aurangabad. The respective Branch Auditors have broadly reviewed such cost records and prima facie, they are of the opinion that the prescribed accounts and records have been made and maintained. However, the detailed examination of the same has not been done by the concerned Branch Auditors.

9. a) According to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, , Service Tax, Custom Duty, Excise Duty, Cess and any other Statutory dues with the appropriate authorities. The outstanding statutory dues as at the last day of the financial year concerned for a period of more than six months from the date they became payable by Tractor Division, Pinjore, are furnished below:

Sl. Nature of the Nature of Amount Period to which Amount No. Statute Dues (Rs.) amount related remitted on

1 Pinjore Sales Tax Sales / Vat Tax 24,30,427 2012-13

2 CPF P F 1,55,45,249 April to Aug 2013 03.03.14

3 EPF P F 1,89,03,767 April to Aug 2013 03.03.14

4 EPS P F 7,56,318 April to Aug 2013 04.03.14

b) According to the information & explanations given to us, the dues of Income Tax / Sales Tax / Wealth Tax / Service Tax / Customs Duty / Excise Duty / Cess have not been deposited on account of any disputes are mentioned below:

Financial year Total amount Statute Nature of dues which Amount ( Rs. in lacs ) relates

1989-90, 1999-2000 Sales Tax Act Sales Tax 105.33 to 2001-2002 & 2003-2004 to 2004-05

Non-submission Sales Tax Act 112.17 1990-91 to of Form C&D 1996-97

Central Excise 1990-91 to Excise Duty 2.48 Act 1944 1996-97

Haryana General Sales Tax /VAT 227.73 2001-02 to Sales Tax Act 2005-06

TOTAL 447.71

Statue Forum where Nature of dispute is Dispute pending

Sales Tax Act Jt. Comm. Applicability of (Appeal) levy Aurangabad

Sales Tax Act Various States before Non submission Dy. of Form C Commissioner (Appeals)

Central Excise Act 1944 Applicability of CESTAT, levy Bangalore

Haryana General Sales Tax Act Punjab & - do - Haryana High Court

10. The company has accumulated losses more than 50% of its net worth as at the end of the financial year. The company has no cash losses in the current year and but has cash loss in the immediately preceding financial year.

11 . In our opinion and according to the information and explanations given to us the Company has no defaults in repayment of dues to financial institution or bank or debenture holders as at the end of the year.

12. The Company has not granted any advance or loan on the basis of security by way of pledge of shares, debentures and other securities.

13. The Company is not a Chit Fund/Nidhi/Mutual Benefit Fund/Society. Therefore the relative reporting requirements are not applicable.

14. The Company is not dealing or Trading in shares, Securities, Debentures or other investments. Therefore the relative reporting requirements are not applicable.

15. According to the information and explanation given to us, the Company has not given any guarantee for loans taken by others from banks or financial Institutions. Hence, the relative reporting requirements are not applicable.

16. According to the information and explanation given to us, the Company has not availed any term loans during the year.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, the Company has not raised any funds on short term basis during the year.

18. During the year, the Company has not made any preferential allotment of shares to the parties and companies covered in the register maintained under sec 301 of the Act. Hence, the relative reporting requirements are not applicable.

19. The clause is not applicable since there are no debentures/bonds at the end of the year.

20. The Company has not raised money from the public issues during the year, hence the relative reporting requirements are not applicable.

21. In our opinion and according to the information and explanation given to us, during the period under audit, no cases of fraud on or by the Company were noticed or reported.

For M/s. S R R K SHARMA ASSOCIATES

CHARTERED ACCOUNTANTS

(ICAI Regn. No. 003790S)

(CA. G. S. Krishna Murthy) Partner (M.No. 013841)

Place: Bangalore Date : 23rd June, 2014


Mar 31, 2013

Report on Financial Statements

We have audited the accompanying financial statements of HMT Limited which comprise the Balance Sheet as at 31st March 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended on that date, annexed thereto in which are incorporated the accounts of Corporate Head Office audited by us and the accounts of Tractor Division, Food Processing Machinery Division and Common Services Division audited by Branch Auditors, appointed under section 619(2) of the Companies Act, 1956, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3c) of section 211 of the Companies Act, 1956. This responsibility includes a design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error, in making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis of qualified audit Opinion

1. The Company has made long term investments aggregating to Rs. 1.66 Crores in subsidiary company, namely, HMT Chinar Watches Limited whose net-worth has eroded and this company is suffering continuous losses. Market value of the assets of this company, results and expected cash flows from these investments is not ascertained. In view of the above deficiencies, in our opinion, there is a total decline in the value of this investment, which is other than temporary. No provision for above diminution is made. This is in contravention of the requirement of AS 13 prescribed under Companies (Accounting Standards) Rules, 2006, resulting in the understatement of loss for the year & cumulative loss and overstatement of investments to that extent.

2. The Company has also given loans and advances to the subsidiary stated in clause above and the aggregate dues from them as at 318t March, 2013 amounting to Rs. 79.37 Crores. In view of our observations made above, these dues should have been considered as doubtful of recovery requiring provision for the same. Consequently loss for the year & cumulative loss is understated and loans and advances are overstated to that extent.

3. Certain balances under Trade payables, other current liabilities, Trade receivables, loans and advances are subject to confirmation and reconciliation. These balances include certain old balances requiring review and reconciliation. Consequential impact of the same on the loss for the year/accumulated loss is not ascertainable.

4. During the years 2002-03 and 2003-04, the company had sold certain lands vested with HMT Machine Tools Limited, a subsidiary company for a consideration of 7 36.57 Crores and the profit on sale of such land amounting to 736.55 Crores were accounted by the company. The company had an understanding with the subsidiary to adjust the consideration by transferring land of equivalent value. However the company is yet to identify equivalent land for the said value for transfer to HMT Machine Tools Limited. This fact has not been disclosed in the financial statements.

Qualified Opinion :

We further report that, observations made in paragraphs 1 to 4 above been considered, loss for the year would have been 7 226.41 Crores (as against reported figure of 7145.38 Crores); the adverse balance in statement of Profit & loss (Cumulative) would have been 7 893.95 Crores (as against reported figure of 7 812.92 Crores), Investments would have been 7 763.90 Crores (as against reported figure of 7 765.56 Crores), Loans and Advances would have been 7 521.73 Crores (as against reported figure of 7 601.10 Crores).

Subject to the above Qualified Opinion paragraph, in our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31,2013;

(b) In the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

(c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Other Matters

1. The company has not re-constituted the Audit Committee as required under Section 292 A of The Companies Act, 1956, since appointment of Independent Directors by the Government of India is pending, as explained to us.

2. The Authorised Share Capital was enhanced from 7 1000 Crores to 7 1450 Crores vide resolution passed at 55th Annual General Meeting of the members of the company held on September 27, 2008, but the company has not notified the Registrar of Companies filing Form-5 prescribed under the Companies General Rules and Forms.

3. Being a Government Company provision of clause (g) of sub section (1) of Sec 274 of the Companies Act, 1956, is not applicable as per notification No.GSR 829(e) Dated October 21,2003, issued by the Department of Company Affairs, Government of India.

4. The audit reports on the accounts of the units of the Company audited by the branch auditors appointed under section 619(2) of the Companies Act, 1956 have been considered by us in preparing our report and necessary adjustments in the accounts of the units have been made to the extent required on the basis of the information made available to us.

5. The following are the observations made by the Branch Auditors of HMTTractor Division, Pinjore, in their Audit Report:

(a) During the FY. 2012-13 there is sale reversal of 1539 tractors amounting to Rs. 6562.69 lacs on the last day of financial year 2012-13 i.e., 31st March, 2013 at the Unit. These sales reversals pertain to invoices raised during the whole of the year 2012-13. No satisfactory reply has been given by the management for this reversal.

(b) There are some discrepancies in recording the production as well as sales during the year 2012-13. More production of Tractors were recorded in the production records maintained at the Unit as well as in the Excise records and likewise more sales to sundry parties were recorded by raising fictitious sales invoices in the books of accounts of the Unit.

It came to notice at the Ministry of Heavy Industries, New Delhi and action was taken on 14th June, 2013 by suspending four officers at the higher level including Chairman cum Managing Director of the Company. The Special Audit was assigned / entrusted to M/s. A.K.G. & Associates, Chartered Accountants, New Delhi on 4th July, 2013 to find out the actual production and actual sales for the financial year 2011 -12 and 2012-13 and they have submitted the report on 27h July, 2013. The Management has not complied with all the discrepancies as mentioned in the report of special auditor which has an effect on financial accounts of the Company wherever required. There were 331 tractors whose invoicing were done in the financial year 2011 -12 but dispatches made after 31 * March 2012. However, the same has been reversed during the financial year 2012-13 on the face of statement of profit and loss account for the year ended 31st March, 2013 by showing below the line item by Debiting Prior Period Adjustment account with Rs. 1246.09 lacs and crediting again the same head "Prior Period Adjustment A/c" with Rs. 1246.09 lacs to have the nil effect.

Since this pertains to Sale for Financial Year 2012-13, the amount should have been debited to "Prior Period Adjustment A/c" with Rs. 1246.09 lacs and Sales Tractor Account should have been credited with Rs. 1246.09 lacs. However, no entry has been passed in the Sales account during the year 2012-13. Thus Sales for the financial year 2012-13 has been understated to the extent of Rs. 1246.09 lacs.

Further, there 37 tractors whose invoicing has been done in the financial year 2012-13 but dispatches made after 31st March, 2013 has not been reversed as on 31st March, 2013, thus resulting in inflated Sales to the extent of Rs. 147 lacs (value of 37 Nos. tractors).

The same has not been explained satisfactorily by the Management, with respect to the discrepancies in basic records i.e., Excise Register & Sales Tax Record of Production/Sales etc., during the financial year 2012-13.

(c) The complete reconciliation of Finished Stock i.e., Tractors at the manufacturing Unit, Pinjore and at Depots/Stock Yards showing the Opening Stock, Production during the year, Transfer to Depots, Actual Sale and Closing Stock has not been made. Further, these have neither been reconciled with financial books nor with Excise records, cost records and sales tax returns etc.

(d) There has been no system of reconciliation of Quantitative records with financial records and cost records as well.

(e) Trading Results showing Gross Profit/Loss Ratio i.e., direct Cost only

The comparative chart showing Trading Results of financial year 2012-13 shows an abnormal picture if compared with early two year are summarized as under:

It shows that either purchases have been inflated or more consumption of raw material, consumable stores and spares etc., has been booked. There is hardly any justification of depicting Gross Loss at a higher percentage during the Financial Year 2012-13. No satisfactory explanation has been given for major variation on these ratios.

(f) On test check basis, it is verified the few items of Store/Purchases (being used in mfg of Tractors) during the financial year 2012-13, detail given as under:

Manufacturing Goods: (As certified by the Management)

Tractors Produced during the financial year 2012-13: 1309 Numbers.

The above data clearly shows that there is mismatch in consumption of bought out items and tractor produced during the year for example total tractor produced during the year 2012-13 are 1309 numbers (As certified by management) and total number of Front Rims consumed are 4543 i.e., for 2271 tractors means difference of rim consumption for 962 tractors.

(g) Reversal of Material Consumption amounting toRs. 1656 lacs

As on 31st March, 2013 the Unit has passed a journal entry for Rs. 1656 lacs as follows:

Debit relating to previous year A/c Rs. 1656 lacs

To Credit Consumption of Raw Material (Previous year) Rs. 1656 lacs.

The debit side i.e., Debit relating to previous year has been shown below the line on the face of statement of Profit and Loss under Head "Prior Period Adjustment"

Thus in view of above entry loss for the current year before adjustment has been understated to the tune of Rs. 1656 lacs and further material consumption ratio has also been adjusted.

(h) Sales Tax Recoverable amounting to Rs. 40.45 lacs.

The Unit has shown a sum of Rs. 40.45 lacs as recoverable under short term Loans & Advances in the Balance Sheet as on 31st March, 2013 on the asset side in respect of sale tax on sale bills total valuing Rs. 6562.69 lacs raised during the whole of the financial year 2012-13 and later on reversed on 31st March, 2013 as already referred above at point No. 5 (a). The above balance of Rs. 40.45 lacs is subject to confirmation.

(i) During the year 2012-13 to reconcile the Balance of excise duty in financial accounts with the excise record, the Unit has passed the following entry for which no supporting / explanation has been made available. Details are as under:

Provision no longer required A/c Debit Rs. 354826

Rate, Fee & Taxes A/c Debit Rs.1488983

To Deposit with Central Excise (PLA) (Credit) Rs.1843809

In the consolidated accounts of HMT Limited approved by the Board and presented to us, the observations by the Branch Auditor of the Tractor Division, Pinjore, as per Point No.5 of Other Matters are not subsisting.

Our opinion is not qualified in respect of Other Matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 (as amended by Companies (Auditor''s Report) Amendment Order, 2004), issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227 (3) of the Act, we report that:

a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books (and proper returns adequate for the purposes of our audit have been received from branches not visited by us);

c) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account (and with the returns received from branches not visited by us);

d) Except for the effects/possible effects of the matters specified in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

1. (a) The Company has maintained proper records showing full particulars including quantative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management during the year in accordance with its phased programme designed to cover the assets of all locations/ units by physical verification once in three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, fixed assets at certain locations were physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) The Company has not disposed off any substantial part of its fixed assets. Hence going concern status is not affected.

2. (a) The inventories other than those held by sub contractors, ancillary units and goods stored in Custom''s warehouses have been physically verified during the year by the management. Confirmations in respect of stocks held sub-contractors, ancillary units and goods stored in custom''s warehouses are not received in certain cases, where book values are adopted. Excepting above, in our opinion the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records for inventory and as informed to us, the discrepancies noticed on physical verification by the management, which reported to be not material, same have been properly dealt with in the books of account of the company.

3. The Company has neither granted nor taken any loans, Secured or Unsecured to/from companies, firms or other parties covered in the register maintained u/s 301 of the Act. Accordingly sub clauses (a) to (g) are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of Inventory and Fixed Assets and with regards to Sale of Goods and Services. Further, on the basis of our examination of the books and records of the Company carried out in accordance with the Auditing Standards generally accepted in India and according to the information and explanations given to us, we state that we have neither come across nor have been informed of any continuing failure to correct major weakness in the aforesaid internal control system.

5. (a) In our opinion and according to the information and explanations given to us, there are no transactions that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 having regard to the view taken that the transactions with the government companies need not be entered in the register as no personal interest of the directors is involved.

(b) In our opinion and according to the information and explanations given to us, as there are no transactions that need to be entered in the register maintained under section 301 of the Companies Act, 1956, paragraph 4 (v) (b) of the Order is not applicable.

6 The Company has not accepted any deposits from the public during the year and hence the directives issued by the Reserve Bank of India and the provisions of Sec 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under are not applicable.

7. The Company has an Internal Audit System, the scope and coverage of which is commensurate with its size and nature of its business, except at Tractor Division, Pinjore, where the internal audit system is inadequate and ineffective.

8. The Company has maintained cost records pursuant to the Rules made by the Central Government under section 209 (1) (d) of the Companies Act, 1956 in respect of its Tractor Division. The Branch Auditors have broadly reviewed such cost records and prima facie, they are of the opinion that the prescribed accounts and records have been made and maintained. However, the detailed examination of the same has not been done by the Branch Auditors.

9.According to the information and explanations given to us, the Company is regular in de positing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Cess, Excise Duty, Service Tax and any other Statutory dues with the appropriate authorities.

According to the information and explanation given to us no undisputed amounts payable in respect of statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales Tax, service tax, customs duty, wealth tax, excise duty, cess applicable were outstanding at the yearend for a period of more than six months from the date they became payable except, Rs. 35.35 lacs towards Sales Tax.

10. The company has accumulated losses more than 50% of its net worth as at the end of the financial year. The company has incurred cash losses in the current year and also in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us the Company has defaulted in repayment of dues to the Bond Holders as detailed below:

12. The Company has not granted any advance or loan on the basis of security by way of pledge of shares, debentures and other securities.

13. The Company is not a Chit Fund/Nidhi/Mutual Benefit Fund/Society. Therefore the relative reporting requirements are not applicable.

14. The Company is not dealing or Trading in shares, Securities, Debentures or other investments. Therefore the relative reporting requirements are not applicable.

15. According to the information and explanation given to us, the Company has not given any guarantee for loans taken by others from banks or financial Institutions. Hence, the relative reporting requirements are not applicable.

16. According to the information and explanation given to us, the Company has not availed any term loans during the year.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, the Company has not raised any funds on short term basis during the year.

18. During the year, the Company has not made any preferential allotment of shares. Hence, the relative reporting requirements are not applicable.

19. The Company has not created charge in respect of the following:

a. 10% Non Convertible Bonds- Rs. 29.30 Crores

b. 12% Non Convertible Bonds- Rs. 28.70 Crores

Even though the bonds were issued as secured bonds, trust deed in favour of bond holders has not been executed. Moreover the above Bonds are overdue for redemption since 1st June, 2004, being earliest date of redemption.

20. The Company has not raised money from the public issues during the year, hence the relative reporting requirements are not applicable.

21. In our opinion and according to the information and explanation given to us, during the period under audit, no cases of fraud on or by the Company were noticed or reported.

For M/s. S R R K SHARMA ASSOCIATES

CHARTERED ACCOUNTANTS

(ICAI Regn. No. 003790S)

(CA. S R R K SHARMA)

Partner

(M.No. 018088)

Place: Bangalore

Date: 8th August, 2013


Mar 31, 2012

We have audited the attached Balance Sheet of HMT Limited as at 31st March 2012, Statement of Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto in which are incorporated the accounts of Corporate Head office audited by us and the accounts of Tractor Division, Food Processing Machinery Division and Common Services Division audited by Branch Auditors, appointed under section 619(2) of the Companies Act, 1956. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these Financial Statements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in India. These standards require to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The audit reports on the accounts of the units of the Company audited by the branch auditors appointed under section 619(2) of the Companies Act, 1956 have been considered by us in preparing our report and necessary adjustments in the accounts of the units have been made to the extent required on the basis of the information made available to us.

A. As required by the Companies (Auditor's Report) Order, 2003 as amended by Companies (Auditor's Report) Amendment Order, 2004, issued by the Central Government of India, in terms of Section 227(4A) of the Companies Act, 1956, and on the basis of such checks of books and records of the Company, as we considered appropriate and according to the information and explanations given to us, and relying on the audit reports of the branch auditors in respect of units audited by them, we enclose in the annexure a statement on the matters specified in Paragraphs 4 and 5 of the said Order.

B. Further to our comments in the Annexure referred to above, we report that:

1. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of the audit.

2. In our opinion, proper books of account as required by law, have been kept by the Company so far as appears from our examination of those books.

3. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account.

4. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement referred to in this report comply with the Accounting Standards referred to Sec.211 (3C) of the Companies Act, 1956 to the extent applicable.

5. Being a Government Company provision of clause (g) of sub section (1) of Sec 274 of the Companies Act, 1956, is not applicable as per notification No.GSR 829(E) Dated October 21,2003, issued by the Department of Company Affairs, Government of India.

C. Without qualifying our opinion, we invite attention to the following points

1. The company has not re-constituted the Audit Committee as required under Section 292 A of The companies Act, 1956, since appointment of independent directors by the Govt of India is pending, as explained to us.

2. The Authorised Share Capital was enhanced from 1000 Crores to Rs. 1450 Crores vide resolution passed at 55th Annual General Meeting of the members of the company held on September 27, 2008, but the company has not notified the Registrar of Companies by filing Form-5 prescribed under the Companies General Rules and Forms.

D. Opinion:

1 The Company has made long term investments aggregating to Rs. 1.66 Crores in subsidiary company, namely, HMT Chinar Watches Limited whose net worth has eroded and this company is suffering continuous losses. Market value of the assets of this company, results and expected cash flows from these investments is not ascertained. In view of the above deficiencies, in our opinion, there is a total decline in the value of this investment, which is other than temporary. No provision for above diminution is made. This is in contravention of the requirement of AS 13 prescribed under Companies (Accounting Standards) Rules, 2006, resulting in the understatement of loss for the year & cumulative loss and overstatement of investments to that extent.

2 The company has also given loans and advances to the subsidiary stated in clause above and the aggregate dues from them as at 31st March, 2012 amount to Rs. 76.65 Crores. In view of our observations made above, these dues should have been considered as doubtful of recovery requiring provision for the same. Consequently loss for the year & cumulative loss is understated and loans and advances are overstated to that extent.

3. Certain balances under Trade payables, other current liabilities, Trade receivables, loans and advances are subject to confirmation and reconciliation. These balances include certain old balances requiring review and reconciliation. Consequential impact of the same on the loss for the year/ accumulated loss is not ascertainable.

4 During the years 2002-03 and 2003-04, the company had sold certain lands vested with HMT Machine Tools Limited, a subsidiary company for a consideration of Rs. 36.57 Crores and the profit on sale of such land amounting toRs. 36.55 Crores were accounted by the company. The company had an understanding with the subsidiary to adjust the consideration by transferring land of equivalent value. However the company is yet to identify equivalent land for the said value for transfer to HMT Machine Tools Limited. This fact has not been disclosed in the financial statements.

E. We further report that, observations made by us in paragraphs D. (1) & (2) above been considered, los for the year would have been Rs. 160.51 Crores ( as against reported figure ofRs. 82.20 Crores); the adverse balance in statement of Profit & loss (Cumulative) would have been Rs. 880.38 Crores (as against reported figure ofRs. 802.07 Crores), Investments would have been Rs. 763.90 Crores (as against reported figure of Rs. 765.56 Crores), Loans and Advances would have been Rs. 497.64 Crores (as against reported figure of Rs. 574.29 Crores).

F. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with accounting policies and notes thereon, give the information required by the Act, in the manner so required, subject to our comments in paragraph D and E above and clause 11 and 19 of Annexure to paragraph (A) above, give a true and fair view in conformity with the accounting principles generally accepted in India:

a. In the case of the Balance Sheet, of the State of Affairs of the Company as at 31st March 2012;

b. In the case of the Statement of Profit and Loss, of the LOSS for the year ended on that date; and

c. In the case of Cash Flow Statement, of cash flows for the year ended on that date.

ANNEXURE REFERRED TO IN PARA 'A' OF OUR REPORT OF EVEN DATE

1. a). The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b). The fixed assets have been physically verified by the management during the year in accordance with its phased programme designed to cover the assets of all locations/units by physical verification once in three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, fixed assets at certain locations were physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

c). The Company has not disposed off any substantial part of its fixed assets. Hence going concern status is not affected.

2. a). The inventories other than those held by sub contractors, ancillary units and goods stored in Custom's warehouses have been physically verified during the year by the management. Confirmations in respect of stocks held sub-contractors, ancillary units and goods stored in custom's warehouses are not received in certain cases, where book values are adopted. Excepting above, in our opinion the frequency of verification is reasonable.

b). The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c). The Company is maintaining proper records for inventory and as informed to us, the discrepancies noticed on physical verification by the management, which reported to be not material, same have been properly dealt with in the books of account of the company.

3. The Company has neither granted nor taken any loans, Secured or Unsecured to/from companies, firms or other parties covered in the register maintained u/s 301 of the Act. Accordingly sub clauses (a) to (g) are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of Inventory and Fixed Assets and with regards to Sale of Goods and Services. Further, on the basis of our examination of the books and records of the Company carried out in accordance with the Auditing Standards generally accepted in India and according to the information and explanations given to us, we state that we have neither come across nor have been informed of any continuing failure to correct major weakness in the aforesaid internal control system.

5. (a) In ouropinion and according to the information and explanations given to us, there are no transactions that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 having regard to the view taken that the transactions with the government companies need not be entered in the register as no personal interest of the directors is involved.

(b) In ouropinion and according to the information and explanations given to us, as there are no transactions that need to be entered in the register maintained under section 301 of the Companies Act, 1956, paragraph 4 (v) (b) of the Order is not applicable.

6 The Company has not accepted any deposits from the public during the year and hence the directives issued by the Reserve Bank of India and the provisions of Sec 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under are not applicable.

7. The Company has an Internal Audit System, the scope and coverage of which is commensurate with its size and nature of its business.

8. The Company has maintained cost records pursuant to the Rules made by the Central Government under section 209 (1) (d) of the Companies Act, 1956 in respect of its tractor division as reported by the auditors of the said division. The Branch Auditors have broadly reviewed such cost records and prima facie, they are of the opinion that the prescribed accounts and records have been made and maintained.

9. a) According to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Cess, Excise Duty, Service Tax and any other Statutory dues with the appropriate authorities.

b) According to the information and explanation given to us no undisputed amounts payable in respect of statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales Tax, service tax, customs duty, wealth tax, excise duty, cess applicable were outstanding at the yearend for a period of more than six months from the date they became payable except, Rs 195.03 lakhs towards Sales Tax.

c) According to the information & explanations given to us, and records of the company there are no dues payable in respect of Sales Tax, Income Tax, Excise Duty, Wealth Tax, Custom Duty, Service Tax and Cess which were disputed except the following:

Total Financial Statute Nature Amount year which of dues (in lakhs) amt relates

Sales Tax Act Sales Tax 159.70 1989-90, 1999-2000 to

2001-2002 &

2003-2004 to

2004-05

Non-submission Sales Tax Act of Form 112.17 1990-91 to C&D 1996-97

Central Excise Excise 2.48 1990-91 to Act 1944 Duty 1996-97

Central Excise Excise 3.00 1988-89 Act 1944 Duty

Haryana Sales Tax 299.71 2001-02 to General Sales Vat 2005-06 Tax Act

Total 577.06

Statute Forum where Nature of dispute is Dispute pending

Sales Tax Act Applicability Jt. Comm. of levy (Appeal) Aurangabad

Sales Tax Act Various States Non Submission before Dy. of Form C Commissioner (Appeals)

Central Excise Applicability CESTAT, Act 1944 of levy Bangalore

Central Excise -do- Excise Appellate Act 1944 Tribunal

Haryana -do- Punjab & General Sales Haryana Tax Act High Court

10. The company has accumulated losses more than 50% of its net worth as at the end of the financial year. The company has incurred cash losses in the current year and also in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us the Company has defaulted in repayment of dues to the Bond Holders as detailed below:

Rs.in crores

Particulars Principal Interest Due since

10% Secured Bonds-A,B, C&E Series 31.80 29.14 June 2004 to August 2006

12% Secured Bonds-A,B&C Series 28.70 31.29 June 2004 to August 2006

12. The Company has not granted any advance or loan on the basis of security by way of pledge of shares, debentures and other securities.

13. The Company is not a Chit Fund/Nidhi/Mutual Benefit Fund/Society. Therefore the relative reporting requirements are not applicable.

14. The Company is not dealing or Trading in shares, Securities, Debentures or other investments. Therefore the relative reporting requirements are not applicable.

15. According to the information and explanation given to us, the Company has not given any guarantee for loans taken by others from banks or financial Institutions. Hence, the relative reporting requirements are not applicable.

16. According to the information and explanation given to us, the Company has not availed any term loans during the year.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, the Company has not raised any funds on short term basis during the year.

18. During the year, the Company has not made any preferential allotment of shares. Hence, the relative reporting requirements are not applicable.

19. The Company has not created charge in respect of the following:

a. 10% Non Convertible Bonds - Rs.31.80 Crores

b. 12% Non Convertible Bonds - Rs.28.70 Crores

Even though the bonds were issued as secured bonds, trust deed in favour of bond holders has not been executed. Moreover the above Bonds are overdue for redemption since 1st June, 2004, being earliest date of redemption.

20. The Company has not raised money from the public issues during the year, hence the relative reporting requirements are not applicable.

21. In our opinion and according to the information and explanation given to us, during the period under audit, no cases of fraud on or by the Company were noticed or reported.

For M/s. S R R K SHARMA ASSOCIATES

CHARTERED ACCOUNTANTS

(ICAI Regn. No. 003790S)

(CA. SRRK SHARMA)

Partner (M.No. 018088)

Place: Bangalore

Date : 31-07-2012


Mar 31, 2011

I. We have audited the attached Balance Sheet of HMT Limited (the Company) as at 31st March 2011, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto in which are incorporated the accounts of Corporate Head office audited by us and the accounts of Tractor Division, Food Processing Machinery Division and Common Services Division audited by Branch Auditors, appointed under section 619(2) of the Companies Act, 1956.

Revised Audit Report:

We had given our report on the accounts of the company on July 29, 2011. In the light of C & AG's observations under section 619 (4) of The Companies Act, 1956, on the accounts of the company, the above report is revised by modifying Sub Paras 2 (c ); 4; 7; & 9 (ii) of Para V and by adding Sub Paras 11 and 12 to Para VII. This report is in substitution of our earlier report dated July 29, 2011.

Management's Responsibility for the Financial Statements:

II. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

Auditors Responsibility:

III. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

IV. The audit reports on the accounts of the units of the Company audited by the branch auditors appointed under section 619(2) of the Companies Act, 1956 have been considered by us in preparing our report and necessary adjustments in the accounts of the units have been made to the extent required on the basis of the information made-available to us.

Companies (Auditor's Report) Order. 2003 (CARO):

V. As required by the Companies (Auditor's Report) Order, 2003 (as amended in 2004) issued by the Central Government of India in terms of sub- section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks as considered appropriate and according to the information and explanations given to us and relying on the audit reports of the branch auditors in respect of units audited by them, we state that:

Fixed Assets:

1. (a) The company has maintained proper records showing full particulars, including quantitative details and the situation of fixed assets.

(b) The fixed assets have been physically verified by the management during the year in accordance with its phased programme designed to cover the assets of all locations/ units by physical verification once in three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, fixed assets at certain locations were physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) The Company has not disposed off any substantial part of the fixed assets during the year, which affects the going concern status of the company.

Inventories:

2. (a) The inventories other than those held by sub- contractors, ancillary units and goods stored in Custom's warehouses have been physically verified during the year by the management. Confirmations in respect of stocks held sub-contractors, ancillary units and goods stored in custom's warehouses are not received in certain cases, where book values are adopted. Excepting above, in our opinion the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c ) The Company is maintaining proper records of inventory except in one unit, viz., Food Processing Machinery Division, Aurangabad, where stock records/ Bin cards are not properly maintained / updated. The discrepancies between the physical stocks and the book records were not material and have been properly dealt with in the books of account except in one unit where in the absence of adequate stock records, discrepancies, if any, could not be ascertained.

Loans borrowed or given:

3. The company has not granted or taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence, clauses (a) to (g) of the said order are not applicable.

Internal control Procedures:

4. Subject to non maintenance of stock records/ Bin Cards at Food Processing Machinery Division, Aurangabad, in our opinion and.according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system of the company.

Transactions covered u/s 301 of the Companies Act. 1956:

5. (a) In our opinion and according to the information and explanations given to us, there are no transactions that need to be entered into the register maintained under Section 301 of the Companies Act, 1956 having regard to the view taken that the transactions with the government companies need not be entered in the register as no personal interest of the directors is involved.

(b) In our opinion and according to the information and explanations given to us, as there are no transactions that need to be entered in the register maintained under section 301 of the Companies Act, 1956, paragraph 4 (v) (b) of the Order is not applicable.

Deposits from Public:

6. The Company has not accepted any deposits from the public within the meaning of section 58A of the Companies Act, 1956 and Rules framed there under and accordingly the provisions of Section 58A & 58 AA of the Companies Act, 1956 are not applicable to the company.

Internal Audit System:

7. In our opinion, the company has an internal audit system commensurate with the size and nature of its business..

Maintenance of Cost records:

8. The Company has maintained cost records pursuant to the Rules made by the central government under section 209 (1) (d) of the Companies Act, 1956 in respect of its tractor division as reported by the auditors of the said division. The Branch Auditors have broadly reviewed such cost records and prima facie, they are of the opinion that the prescribed accounts and records have been made and maintained.

Remittance of Statutory dues:

9. (i) The company is regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other statutory dues applicable to it barring certain delay in provident fund dues remittances, Central Sales Tax and Central Excise.

Further since the central government has till date not prescribed the amount of cess payable u/s 441 A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the company in depositing the same.

(ii) According to the information and explanation given to us no undisputed amounts payable in respect of statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales Tax, service tax, customs duty, wealth tax, excise duty, cess applicable were outstanding at the year end for a period of more than six months from the date they became payable except Rs.20.32 lakhs towards Central Excise, Rs.196.27 lakhs towards Central Sales Tax and Rs.45.86 lakhs towards Provident Fund dues.

(iii) According to the information and explanation given to us and records of the company, there are no dues of income tax, sales tax, "service tax, customs duty, excise duty, cess which have not been deposited on account of any dispute, other than the following:

Name of the Amount Period to which Nature of Dues (Rs. In the amount Statute Lakhs) relates

Sales Tax Act Sales Tax 159.70 1989-90, 1999-2000 to 2001-2002 & 2003-2004 to 2004-05

Sales Tax Act Non-submission of 112.17 1990-91 to Form C&D 1996-97

Central Excise Excise Duty 2.48 1990-91 to Act 1944 1996-97

Central Excise Excise Duty 24.36 1988-89 Act 1944

Haryana General Sales Tax A/AT 299.71 2001-02 to Sales Tax Act 2005-06

TOTAL 598.42

Name of the Statute Nature of Forum where dispute is Dispute pending

Sales Tax Act Applicability Jt. Comm. (Appeal) of levy Aurangabad

Sales Tax Act Non submission Various States before of Form C Dy. Commissioner (Appeals)

Central Excise Act 1944 Applicability CESTAT, of levy Bangalore

Central Excise Act 1944 - do - Excise Appellate Tribunal

Haryana General Sales Tax Act - do - Punjab & Haryana High Court

Accumulated Cash Losses:

10. The company has accumulated losses more than 50% of its net worth as at the end of the financial year. The company has incurred cash losses in the current year and also in the immediately preceding financial year.

Dues to Financial Institutions:

11. In our opinion and according to the information and explanations given to us the Company has defaulted in repayment of dues to the Bond Holders and Bank as detailed below:

Principle Interest

Particulars (Rs. in (Rs. in Due since Remarks Crores) Crores)

10% Secured Bonds- 31.80 25.96 June 2004 to A,B,C & E Series August 2006

12% Secured Bonds- 28.70 27.85 June 2004 to A,B & C Series August 2006

8 Year 8.5% HMT 5.20 27.11.2010 Paid on 5th April, 2011 Bonds 2002

Term Loan from Re-scheduled for a further period from UCO Bank 93.98 10.8.2009 to 10.8.2010 and repaid on re-scheduled date.

Short Term Loan from 20.00 Re-scheduled to be paid up to 31.3.2012. UCO Bank

Loans and Advances against Securities:

12. Based on our examination and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities

Provisions applicable to Nidhi and Chit Fund Companies:

13. In our opinion, the Company is not a Chit fund or a nidhi / mutual benefit fund / society. Therefore, clause 4 (xiii) of the Companies (Auditor's Report) Order, 2003 is not applicable to the Company.

Dealing in shares and securities:

14. In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

Guarantees given by the company for loans taken by others:

15. In our opinion, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the company.

End use of Term Loans raised :

16. In our opinion, the term loans have been applied for the purpose for which they were raised. However no term loans are obtained during the year under audit.

Utilisation of Short Term Funds:

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment.

Preferential Allotment of Shares:

18. During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.

19. The Company has not created charge in respect of the following:

a. 10% Non Convertible

Bonds- T31.80 Crores

b. 12% Non Convertible

Bonds- TZ8.70 Crores

Even though the bonds were issued as secured bonds, trust deed in favour of bond holders has not been executed. Moreover the above Bonds are over due for redemption since 1st June, 2004, being earliest date of redemption.

Public Issues:

20. The Company has not raised any money by way of public issues during the year. Hence disclosure and verification of end use of money raised by public issue does not arise.

Frauds:

21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the period under audit.

Emphasis of Matter

VI. With out qualifying our opinion, we invite attention to the following:

1. The company has not re-constituted the Audit Committee as required under Section 292 A of The companies Act, 1956, since appointment of independent directors by the Govt of India is pending, as explained to us.

2. The Authorised Share Capital was enhanced from 1000 Crores to Rs.1450 Crores vide resolution passed at 55th Annual General Meeting of the members of the company held on September 27, 2008, but the company has not notified the Registrar of Companies by filing Form-5 prescribed under the Companies General Rules and Forms.

3. Following Accounting Policies disclosed in the financial statements either not complete or they are not in line with the Accounting Standards notified under The Companies (Accounting Standards) Rules, 2006:

a) Inventories: Cost formula used in respect of Finished Goods and Work-in- Progress are not stated.

b) Development & Commissioning

Charging to revenue over four financial years is not in consonance with AS- 10,

c) Defferred Revenue Expenditure : Amortisation of Technical Assistance Fee is not in consonance with AS-26.

d) Foreign Currency transactions : Recognising exchange differences on forward contracts to P& L Account is not in consonance with AS-11.

However there is no impact on the financial statements for the year since there are no transactions in the above areas.

VII. Further to our comments in Paragraphs IV , V and VI above:

Information & Explanations:

1. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

Maintenance of books of accounts:

2. Subject to our comments in Paragraphs VII 6 to VII 12 below, in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches audited by branch auditors;

3. The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

Reporting Requirements under section 274 (11 (g):

4. In our opinion, based on the notification no. GSR 829 (E) dated 21.10.03 issued by the Department of Company Affairs, Government of India, the requirements under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 with regard to directors' qualifications do not apply to the Company, being a Government Company;

5. subject to our comments at paragraphs VI 3 above and VII 6 to 12 below, in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

Basis for Opinion:

6. The Company has made long term investments aggregating to 745.62 Crores in subsidiary companies, viz., HMT Watches Limited, HMT Chinar Watches Limited and HMT Bearings Limited whose net worth has eroded and these companies are suffering continuous losses. Market value of the assets of these companies, results and expected cash flows from these investments is not ascertained. In view of the above deficiencies, in our opinion, there is a total decline in the value of these investments, which is other than temporary. No provision for above diminution is made. This is in contravention of the requirement of AS 13 prescribed under Companies (Accounting Standards) Rules, 2006, resulting in the understatement of loss for the year & cumulative loss and overstatement of investments to that extent.

7. The company has also given loans and advances to the subsidiaries stated in clause VII 6 above and the aggregate dues from them as at 31st March, 2011 amount to 7516.18 Crores. In view of our observations made in clause VII 6 above, these dues should have been considered as doubtful of recovery requiring provision for the same. Consequently loss for the year & cumulative loss is understated and loans and advances are overstated to that extent.

8. Five acres of lease hold land with book value of 70.03 Crores as at 31st March, 2011 at Food Processing Unit, Aurangabad has been encroached for which eviction suits filed by the company before Joint Civil Judge, Aurangabad was dismissed vide Court's order dated 20th October, 2006 and the company had not preferred any appeal before higher courts. The said land is continued to be shown in the books of the company. Consequently loss for the year & cumulative loss is under stated and the fixed assets are overstated by 70.03 Crores.

9. Identification of impaired assets, recognition and measurement of impairment loss as required by AS-28 has not been carried out. Consequential impact on the financial statements is indeterminate.

10. Certain balances under sundry creditors, other liabilities, sundry debtors, loans and advances are subject to confirmation and reconciliation. These balances include certain old balances requiring review and reconciliation. Consequential impact of the same on the loss for the year/ accumulated loss and current liabilities is not ascertainable.

11. During the years 2002-03 and 2003-04, the company had sold certain lands vested with HMT Machine Tools Limited, a subsidiary company for a consideration of 736.57 Crores and the profit on sale of such land amounting to 736.55 Crores were accounted by the company. The company had an understanding with the subsidiary to adjust the consideration by transferring land of equivalent value. However the company is yet to identify equivalent land for the said value for transfer to HMT Machine Tools Limited. This fact has not been disclosed in the financial statements.

12. Fixed Assets include 839.40 acres of land at Pinjore gifted by the State Government to the company, in respect of which mutation of title in the name of the company is yet to be carried out in the revenue records. This fact has not been disclosed in the financial statements. Further, about 11.73 acres out of above land at Pinjore have been acquired by National Highway Authority of India (NHAI). Pending mutation of title, the offer of compensation of approx. 73.20 Crores by NHAI is yet to be obtained by the company, which fact also not been disclosed in the financial statements.

Opinion:

VIII. We further report that, without considering our comments mentioned in paragraphs VII 9 to 12 above, the effect of which could not be determined, had the observations made by us in paragraphs VII 6, 7 & 8 above been considered, loss for the year would have been 7641.07 Crores ( as against reported figure of 779.24 Crores); the adverse balance in Profit & loss Account (Cumulative) would have been 71281.71 Crores (as against reported figure of 7719.88 Crores), Investments would have been 7719.94 Crores (as against reported figure of 7765.56 Crores),Loans and Advances would have been 733.84 Crores (as against reported figure of 7550.02 Crores) and Net Block of Fixed assets would have been 736.05 Crores (as against reported figure of 736.08 Crores)

Subject to the above, in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and, give a true and fair view in conformity with the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2011;

ii. in the case of the Profit and Loss Account, of the loss of the Company for the year ended on that date; and

iii. in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

For Dagliya & Co.,

Chartered Accountants

F.R.N. 671S

P.Manohara Gupta

Partner

M. No. 16444

Place : Bangalore

Date : August 30, 2011






Mar 31, 2010

1. We have audited the attached Balance Sheet of HMT Limited (the Company) as at 31st March 2010, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto in which are incorporated the accounts of Corporate Head office audited by us and accounts of Tractor Division, Food Processing Machinery Division and Common Services Division audited by Branch Auditors, appointed under section 619(2) of the Companies Act, 1956. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. The audit reports on the accounts of the units of the Company audited by the branch auditors appointed under section 619(2) of the Companies Act, 1956 have been considered by us in preparing our report and necessary adjustments in the accounts of the units have been made to the extent required on the basis of the information made available to us.

4. As required by the Companies (Auditors Report) Order, 2003 (as amended in 2004) issued by the Central Government of India in terms of sub- section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks as considered appropriate and according to the

information and explanations given to us and relying on the audit reports of the branch auditors in respect of units audited by them, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

5. Attention is drawn to the following:

(i) Erosion in the value of carrying cost of long term investments made in respect of shares held in subsidiary companies, viz., HMT Machine Tools Limited,,HMT Watches Limited, HMT Chlnar Watches Limited and HMT Bearings Limited, whose net worth has eroded has not been provided which is in contravention to AS 19 prescribed under Companies (Accounting Standards) Rules, 2006, resulting in the understatement of loss to that extent. The consequent effect on the accounts is not ascertainable.

(ii) The realisability of the net amounts due from loss-making subsidiaries indicated in 5(i) above, whose net worth has eroded could not be ascertained in the absence of valuation reports from appropriate authorities on the immovable properties held by these subsidiaries, the consequential effect, if any, on accounts of the company is not ascertainable.

6. Further to our comments in Paragraphs 4 and 5 above we report that:

a) We have 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 appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches audited by branch auditors;

c) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

d) subject to our comments at paragraph 5 above, in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) In our opinion, based on the notification no. GSR 829 (E) dated 21.10.03 issued by the Department of Company Affairs, Government of India, the requirements under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 with regard to directors qualifications do not apply to the Company, being a Government Company;

f) in our opinion and to the best of our information and according to the explanations given to us, the Central Government has till date not prescribed the amount of cess

payable under section 441A of the Companies Act, 1956, and hence we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same;

g) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and subject to our comments in paragraph 5 above and clauses 11 and 19 of Annexure to Paragraph 4 above, give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) jn the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2010;

(ii) in the case of the Profit and Loss Account, of the loss of the Company for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

1. (a) The company has maintained proper records

showing full particulars, including quantitative details and the situation of fixed assets.

(b) All the assets have not been physically verified by the management during the year; but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) The Company has not disposed off substantial part of the fixed assets during the year and hence the going concern concept is not affected.

2.

(a) As explained to us, the inventories comprising of finished goods, stores, spare parts and raw materials other than those held by sub-contractors, ancilliary units and goods stored in customs warehouses have been physically verified during the year by the management. In our opinion the frequency of verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies between the physical stocks and the book records were not material and have been properly dealt with in the books of account.

3. The company has not granted or taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence, clauses (a) to (g) of the said order are not applicable.

4. In our opinion and according to the information and explanations given to us, there exists an adequate internal control system commensurate with the size

of the company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system of the company.

5. (a) In our opinion and according to the

information and explanations given to us, there are no transactions that need to be entered into the register maintained under Section 301 of the CompaniesAct, 1956.

(b) In our opinion and according to the information and explanations given to us, as there are no transactions that need to be entered in the register maintained under section 301 of the Companies Act, 1956, paragraph (v) (b) of the Order is not applicable.

6. The Company has not accepted any deposits from the public and accordingly the provisions of Section 58A of the Companies Act, 1956 are not applicable to the company.

7. In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

8. The Company has complied with the provisions of the order made by the central government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 in respect of its tractor division as reported by the auditors of the said division

9. (a) (i) According to the records, information

and explanations provided to us and records examined by us, undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other statutory dues applicable to it have been regularly deposited with appropriate authorities though there has been some delay in provident fund dues remittances.

(ii) According to the information and explanation given to us no undisputed dues payable in respect of income tax, sales Tax, service tax, customs duty, wealth tax, excise duty, cess applicable were outstanding at the year end for a period of more than six months from the date they became payable except Sales tax Rs. 195.03 lakhs relating to

1990-91 to 1996-97.

(b) According to the information and explanation given to us and records of the company, there are no dues of income tax, sales Tax, service tax, customs duty, excise duty, cess which have not been deposited on account of any dispute, other than the following:

Name of the , Nature of Dues Amount Period to which

(Rs. In the amount

Statute Lakhs) relates

Sales Tax Act Sales Tax 159.70 1989-90 to

2004-05

Sales Tax Act Non-submission of 112.17 1990-91 to

Form C&D 1996-97

Central Excise Excise Duty 2.48 1990-91 to

Act 1944 1996-97

Central Excise Excise Duty 32.82 1988-89

Act 1944

Haryana General Sales Tax /VAT 299.71 2001-02 to

Sales Tax Act 2005-06

TOTAL 606.88



Name of the

Statute Nature of Forum where

dispute is

Dispute

pending

Sales Tax Act Applicability Jt. Comm.

(Appeal)

of levy Aurangabad

Sales Tax Act Non submission Various,States

before

of Form C Dy. Commissioner

(Appeals)

Central Excise

Act 1944 Applicability CESTAT,

of levy Bangalore

Central Excise

Act 1944 - do - Excise Appellate

Tribunal

Haryana General

Sales Tax Act - do - Punjab & Haryana

High Court

10. The company has accumulated losses more than 50% of its net worth as at the end of the financial year. The company has incurred cash losses in the current year and also in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us the Company has defaulted in repayment of dues to the Bond Holders Viz., 10% Secured Bonds - A, B, C & E series, Principal amount of Rs.31.80 crores and interest - Rs. 22.78 crores, 12% Secured Bonds - A, B & C series, Principal amount of Rs.28.70 crores and Interest - Rs.25.16 crores, which became due for redemption during June 2004 to August 2006 and same are yet to be redeemed.

The Company has rescheduled repayment of unsecured GOI guaranteed Short Term Loan from UCO Bank to the extent of Rs.93.98 Crores for further period of one year from 10-08-2009 to 10- 08-2010 and short term loan from UCO Bank to the extent of Rs. 20.00 Crores is rescheduled to be paid upto 10-08-2010 as approved by bank.

12. Based on our examination and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion, the Company is not a Chit fund or a nidhi / mutual benefit fund / society. Therefore, clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 is not applicable to the Company.

14. In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

15. In our opinion, the terms and conditions on which the company has given guarantees for loans taken by others from banks or financial institutions are not prejudicial to the interest of the company.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment.

18. During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.

19. Company has not created charge in respect of the following:

10% Non Convertible Bonds - Rs.31.80 Crores plus interest

12% Non Convertible Bonds - Rs.28.70 Crores plus interest

Even though the bonds were issued as secured bonds, trust deed in favour of bond holders has not been executed.

20. The Company has not raised any money by way of public issues during the year.

21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the,course of our audit.

For Dagliya & Co.,

Chartered Accountants

F.R.N. 671S

O.D. Golcha

Partner

M. No. 12502

Place : Bangalore

Date : June 28, 2010

 
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