P G BHAGWAT LLP, Chartered Accountants

To,
Managing Director,
Hoerbiger India Pvt. Ltd.
Gat No 312 & 313, Village Kondhapuri, Taluka - Shirur,
Maharashtra, 412209 Pune, India

Dear Sir,

SUBJECT: Physical Stock verification report. Physical verification carried out on 1st March to 3rd March 2023

We have completed the Physical Stock verification of Hoerbiger India Pvt. Ltd. as of the above dates and
have to report as under:-

A. OBJECTIVE

Internal audit seeks to independently verify and provide assurance on physical existence of stock of
Hoerbiger India Pvt. Ltd.

B. CONDUCT OF PROCEDURE:
The following were the areas of planned activity during the period: -

Systems and Internal controls Conducted / Section Pg.

Not No.
conducted

Physical Verification of Stock Conducted I 2

Hoerbiger India Private Ltd. – Stock Physical verification Report – 1st March 2023
P G BHAGWAT LLP, Chartered Accountants

Section – I - PHYSICAL VERIFICATION OF STOCK

1. Audit Objective
1) To ensure physical existence of selected stock appearing in SAP.

2. Coverage
Physical verification of stock of HIPL, Kondhapuri

3. Method of Audit:
a) Stock list as on 28th February 2023, (stores location wise) was shared by the Finance department
on 1st March 2023. As informed the list was post all the effects of movements of inventory as of
28th February 2023 were completed.

b) Stock verification was conducted on 1st March 2023 to 3rd March 2023.

c) A team of 7 assistants on day 1, 5 assistants on day 2 and 3 assistants on day 3 under the
supervision of Senior Manager and Partner conducted the physical stock verification along with
HIPL stores team.

d) Verification was done item wise and stores location wise based on the SAP report shared with us.
The report contained details of unrestricted quantity, Sales order allocated quantity, QA quantity,
Blocked quantity, returns quantity and sub-contractor quantity.

e) Prints of inventory list were taken stores location wise (0001, 0002, 0003, 1000, ELGI) and as per
descending order of stock value. For verification of steel bars, all the quantities were mentioned
in meters. All the stock was measured in meters. The same was then converted into KGs as per
the conversion formula embedded in SAP.

f) Verification was based on prints taken which was signed by Assistant/s as well as the stores person
identifying the shortage / excess after the verification was complete on each day.

g) Physical verification has been done for stock of Raw Material, Semi-finished goods and Finished
Goods

h) The excess and shortage identified during stock count was reconciled by discussions, checking of
relevant documents or recounting.

i) The queries were discussed with the concerned personnel and reverts for the same were obtained
at the end of each day.

j) The excess and shortage adjustment entries were passed in SAP as per the figures finalized after
discussion as mentioned in point 8 and 9 above.

k) Stock lying at sub-contractor was verified on basis of stock confirmation provided by sub-
contractors.
l) Closing meeting was held with Stores personnel, Mr Swapnil Ramdhave, Mr Vijay Amin and their
stores team and Mr Abhishwet Kondhalkar of Finance team; the results were briefed and

Hoerbiger India Private Ltd. – Stock Physical verification Report – 1st March 2023
P G BHAGWAT LLP, Chartered Accountants

discussed with Mr. Pratod Patil and communicated to Mr. Amar Kulkarni on last day, i.e. 3rd March
2023 by Mr Abhishwet Kondhalkar.

4. Key Statistics - Hoerbiger India Private Ltd. (HIPL)

A) Inventory verification coverage -

Store Inventory Coverage % Excess Shortage Net -

Location value value coverage excess/(shortage) -
Rs
0001 219,388,615 164,477,542 # 75 19,233 (3,693) 15,541
0002 4,588,947 4,588,947 100 - (4,191) (4,191)
0003 948,577 948,577 100 - - -
1000 61,702,235 57,006,871 92 13,418 - 13,418
ELGI 11,212,275 11,212,275 100 - - -
Total 297,840,649 238,234,212 80% 32,651 (7,883) 24,768

Source: Inventory report shared by Finance (refer detail observation given below)
# Refer to General observations no. ‘b’ below.

B) Stock lying with the subcontractors and as per confirmation letters taken from subcon vendors – as of
28.02.2023 was Rs 1.54 Crs as per SAP report. The above table does not include the stock confirmation
taken from subcontractors.

5. Observations relating to the verification processes: -

General Observations:
a) Most of the items including bars were properly tagged. Some bars were not tagged by material
number and only diameter and grade was mentioned on the bar.
b) Material in stores locations 0001 and 1000 comprised on Raw Material, Semi Finished goods and
Finished goods together and stored at various physical locations. Therefore, material had to be
searched for stock count tally which was time consuming. While maximum coverage of location 1000
was ensured (92%), location 0001 could be covered 75% due to this.
c) Store location – 0001 - Material code 5234111 – Housing - PVVF18 (semi-finished) – 40 pieces value
Rs 63,149 were found excess. As informed, they were sample material received against challan and
no GRN was made for the same. These are not included in table above. As discussed, action regarding
to this material was to be discussed within the team for compliance.
d) Stores location – 1000 – Material code 5190397 - Valve Plate - WAB-RP-0890 – 537 pieces value Rs
95,312 were found excess. As informed, they were sales returns pending for e-approvals. These are
not included in the above table.

Hoerbiger India Private Ltd. – Stock Physical verification Report – 1st March 2023
P G BHAGWAT LLP, Chartered Accountants

1.2 Detailed Observations

1.2.1 Shortage / (Excess) observed during physical verification of inventory on sample basis.
ISSUE
LOW RISK – since low value
Following excess and shortage of inventory was identified during physical verification. The
same was rechecked and confirmed by the stores personnel.

Stores location Excess Excess value Short Short value Net value
Rs Rs Rs
0001 146 19,233 25 3,693 15,541
0002 - - 3 4,191 4,191
0003 - - - - -
1000 12 13,418 - - 13,418
ELGI - - - - -
Grand Total 158 32,651 28 7,833 24,768

For item wise details refer Annex-Consolidation for further details

Risk/Implication:
Overstatement / understatement of stock
Recommendation:
Necessary adjustment entry should be passed to reconcile the SAP stock with the physical
count
Management Implementation Plan:
Inventories discrepancies are reconciled and posted in SAP after necessary approval from
the Senior management.
Date of implementation – 03.03.2023
Auditor’s Response: The mail confirmation on posting of adjustments in SAP is shared with
auditors. Noted and closed.

Hoerbiger India Private Ltd. – Stock Physical verification Report – 1st March 2023
P G BHAGWAT LLP, Chartered Accountants

C.COMMUNICATION DETAILS

The following were the key contact persons on the engagement:

Person’s Name Engagement Contact details

Responsibility
Sameer Karyekar Partner 98222-75133
Teja Nagarkar Sr Audit Manager 91300 29212
Purva Deshpande Assistant/s 020-27291772
Narayani Dixit Assistant/s 020-27291772
Vinayak Shukla Assistant/s 020-27291772
Saarth Sabale Assistant/s 020-27291772
Suraj Karmarkar Assistant/s 020-27291772
Atharwa Vartak Assistant/s 020-27291772
Ashutosh Dhimole Assistant/s 020-27291772
Varad Shukla Assistant/s 020-27291772
Sanskriti Shellvant Assistant/s 020-27291772

D. DECLARATION

We understand the requirements of the internal audit function that we have been asked to provide.
These requirements are that we provide management assurance, whether the system of internal
procedures and controls and transactions in relation to the areas set out above, have been executed
in accordance with management authorization and were properly recorded and reported in the books
of accounts and other records of the Company. These requirements also require us to comment as to
whether the examined assets were adequately safeguarded. We will provide this assurance based on
the examinations conducted through the procedures set out in this plan.
We further confirm that we have adequate independence in reporting and other relationships with
the Company, and that we have not undertaken or propose to undertake any actions during the period
of our engagement that will impair our independence relating to the internal audit function of the
Company.
We thank all the auditees for their kind cooperation.

Digitally signed by Sameer

Karyekar
Date: 2023.03.15 13:35:22 +05'30'

Signed by : Sameer Karyekar

(Partner)

For and on behalf of :P G BHAGWAT LLP

Chartered Accountants

Location : Suite 102, Orchard, Dr. Pai Marg, Baner, Pune: 411 045.

Date : March 14, 2023

PAN : AAACH4504M
UDIN : 23108854BGWTXZ6029

Hoerbiger India Private Ltd. – Stock Physical verification Report – 1st March 2023