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GAIL (India) Ltd.

BSE: 532155 Sector: Others
NSE: GAIL ISIN Code: INE129A01019
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OPEN 441.70
PREVIOUS CLOSE 436.00
VOLUME 15696
52-Week high 457.15
52-Week low 300.98
P/E 21.36
Mkt Cap.(Rs cr) 73,250
Buy Price 433.10
Buy Qty 5.00
Sell Price 0.00
Sell Qty 0.00
OPEN 441.70
CLOSE 436.00
VOLUME 15696
52-Week high 457.15
52-Week low 300.98
P/E 21.36
Mkt Cap.(Rs cr) 73,250
Buy Price 433.10
Buy Qty 5.00
Sell Price 0.00
Sell Qty 0.00

GAIL (India) Ltd. (GAIL) - Auditors Report

Company auditors report

To the Members of GAIL (India) Limited Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of GAIL (India)Limited (‘the Company’) which comprise the balance sheet as at 31 March 2016the statement of profit and loss and the cash flow statement for the year then ended anda summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 (“the Act”) with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit. We have taken into account the provisions of the Act the accountingand auditing standards and ma ers which are required to be included in the audit reportunder the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified underSection143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor’s judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial control relevant to the Company’spreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Company’s Directors as well as evaluating theoverall presentation of the financial statements.

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

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31 March 2016 and its profit and its cash flows for the year ended on that date.

Emphasis of Ma3er

We draw a ention to the following ma ers in Notes to Financial Statement:-1. Note No:42(c) -regarding various provisional transportation tariff orders issued by Petroleum andNatural Gas Regulatory Board (PNGRB) these orders have been contested by the company atAppellate Tribunal for Electricity (APTEL) and adjustment if any will be recognized as andwhen ma er is finally decided. 2. Note No: 47 - in respect of stating the investment in ajoint venture entity at book value whereas net worth of the entity has been eroded andmanagement has considered the diminution in value of investment as non- permanent.

3. Note No: - 51-in respect of revenue recognition during the year for ship or paycharges where the customer has disputed the claim of the company and final outcome isuncertainOur opinion is not modified in respect of these ma ers.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order 2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure “A” statement on the ma ersspecified in the paragraph 3 and 4 of the Order to the extent applicable.

2. As required by C&AG of India through directions/sub-directions dated 11.12.2015and 29.04.2016 and issued under Section 143(5) of the Companies Act 2013 on the basis ofwri en representation received from the management we give our report on the ma erspecified in the Annexure “B” a ached.

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 bestof 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 theCompany 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 statementdealt with by this Report are in agreement with the books of account;

(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;

(e) On the basis of the wri en representations received from the directors as on 31March 2016 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2016 from being appointed as a director in terms of Section164 (2) of the Act.

(f) We are enclosing herewith a report in “Annexure C” for our opinion onadequacy of internal financial controls system in place in the company and the operatingeffectiveness of such controls; and

(g) With respect to the other ma ers to be included in the Auditor’s Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 positionin its financial statements – Refer Note 33(1)(a) and 34 to the financial statements;

ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses; and

iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For O.P. Bagla & Co. For G.S. Mathur & Co.
Chartered Accountants Chartered Accountants
Firm No.: 000018N Firm No.: 08744N
(Rakesh Kumar) (Rajiv Kumar Wadhawan)
(Partner) (Partner)
Membership No.:087537 Membership No.:091007
Place: New Delhi
Dated: 25th May 2016

ANNEXURE TO THE AUDITORS’ REPORT OF GAIL (INDIA) LIMITED

Referred to in paragraph 1 to “Report on Other legal and regulatoryrequirements” of the Independent Auditors’ Report of even date to the members ofGAIL (INDIA) LIMITED on the financial statements for the year ended March 31 2016.

i(a) As informed to us the company has generally maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.

(b) According to information and explanation given to us there is a regular programmeof physical verification of these fixed assets by the management which in our opinion isreasonable having regard to the size of the company and nature of its assets. As informedto us no material discrepancies were noticed on such verification.

(c) As informed to us and as verified by us during the course of our audit the titledeeds of immovable properties are held in name of the company except for the cases asdisclosed in Note no 45(b) & (c).

ii. As informed to us physical verification of inventory has been conducted atreasonable intervals by the management except the store and spares lying with EngineersIndia Limited and other contractors. We have been explained that the stock of gas at theend of the year has been taken with reference to reading of Turbine Flow Meter/GasChromatograph installed at Terminals Stock of LPG/Pentane/SBP Solvent are determined withreference to Tank Level Gauge measurement which are converted into tonnage by measurementof density and applying correction factor for temperature. LPG vapors volume is convertedto tonnage by standard formulae. As informed to us no material discrepancies were noticedon physical verification of inventory.

iii. As informed to us the company has granted unsecured loans to companies covered inthe register maintained under section189 of the Companies Act 2013. In respect of suchloans:

a) As informed to us and as verified by us the terms and conditions of grant of suchloans are not prejudicial to the interest of the company.

(b) Repayment of the principal amount and payment of interest on such loans have beenstipulated. However repayment of principal and payment of interest has not been regular inone of the loan given to Bhagyanagar Gas Limited. Please refer Note No.50 to the financialstatements in this regard.

(c) As informed to us no amount of loan is overdue as at end of the year for a periodmore than ninety days.

iv. According to the information and explanations given to us the company has compliedwith the provisions of Section 185 and 186 of Companies Act 2013 in res pect ofloans/investment/guarantee/security granted during the year.

v. The company has not accepted any deposits in terms of the directives issued by theReserve Bank of India and the provisions of sections 73 to 76 or any other relevantprovisions of the Companies Act 2013 and the rules framed there under.

vi. In respect of business activities of the company maintenance of cost records hasbeen specified by the Central Government under sub-section (l) of section 148 of theCompanies Act 2013 read with rules framed thereunder and in our opinion prima facieprescribed accounts and records have been made and maintained by the company.

vii.a) According to records of the company and information and explanation given to usthe company has generally been regular in depositing undisputed statutory dues includingprovident fund employees’ state insurance income-tax sales-tax service tax dutyof customs duty of excise value added tax cess and any other statutory dues with theappropriate authorities. According to information and explanation given to us there are nooutstanding statutory dues as referred above as at the last day of the financial yearunder audit for a period of more than six months from the date they became payable.

b) As certified by the management on which we have relied upon the dues of income taxor sale tax or service tax or duty of custom or duty of excise or value added tax or cesswhich have not been deposited on account of dispute and the forum where the dispute ispending are given below:

List of Cases of Unpaid Disputed Demand under various Statutes as on 31.03.2016

( ` in Crores)

Sl. No. Statute Subject Matter of Dispute Amount (2015-16) Period of Dispute Status - Forum
1 Entry Tax (a) Demand of Entry Tax on Natural Gas in U.P 203.00 1999-00 to 200910 Allahabad High Court Trade Tax Tribunal & Joint Commissioner
(b) Demand of Entry Tax on Natural Gas in Rajasthan 5.69 2002-03 to 200506 Dy. Commissioner (Appeals) Ajmer
(c) Demand of Entry Tax on Natural Gas in Madhya Pradesh 5.38 2008-09 2011-12 & 2012-13 Tribunal Bhopal
2 Sales Tax & VAT (a) Non-acceptance of declaration form for concessional sales tax 0.38 1995-96 & 1996-97 Tribunal Bhopal
(b) Demand of VAT on account of disallowance of Credit Note 31.88 2005-06 2006-07 & 2009-10 Joint Commissioner (Appeals) Mumbai
(c) VAT demand on inter unit transfer of material 5.52 2011-12 Tribunal Bhopal
(d) Demand of CST on account of disallowance of LPG absorption credit notes 1.39 2011-12 & 2012-13 Tribunal Bhopal
2 Sales Tax & VAT (e) Demand of VAT on account of disallowance of input tax credit 2.77 2010-11 Joint Commissioner (Appeals) Mumbai
(f) Demand of VAT on account of disallowance of LPG subsidy 14.92 2005-06 Joint Commissioner (Appeals) Mumbai
(g) Demand of VAT on sale of Natural Gas to Power Companies 129.54 2007-08 Joint Commissioner (Appeals) Mumbai
(h) Demand of VAT on bandwidth charges 2.71 2008-09 Joint Commissioner (Appeals) Mumbai
(i) Demand of VAT on High Sea Sale 28.59 2011-12 Joint Commissioner (Appeals) Mumbai
(j) Demand of VAT on sale of LPG by treating it as non domestic 56.59 2006-07 to 2011-12 Joint Commissioner (Appeals) Mumbai
(k) Penalty for delay in payment of sales tax 0.60 2003-2004 High Court Mumbai
(l) Demand of VAT on account of rate change 0.54 Oct 2011 to Dec 2011 Joint Commissioner Trichy
(m) Demand of CST on account of disallowance of LPG subsidy discount 51.84 2005-06 High Court Gwalior
(n) Demand for treating CST sale as local sale 0.15 2003-2004 High Court Guwahati
(o) Revised Sales Tax demand as per assessment order 2.76 2003-04 Joint Commissioner (Appeals) Vadodara
3 Customs Excise and (a) LPG valuation Dispute 19.64 Jan 2001 to Feb 2005 CESTAT Mumbai
Service Tax (b) Dispute on Pentane Classificatio 99.4 Aug.2005 to Dec 2006 & Oct 2007 to July 2009 CESTAT Ahmedaba
(c) Dispute on MFO Classification 79.77 July 2004 to March 2011 CESTAT Ahmedabad
(d) Demand of duty under Rule 6(3) of CCR 2004 for credit taken on input services 14.71 April 2008 to March 2010 CESTAT Kolkata
(e) Demand of Service Tax on Marketing Margin 965.85 Oct. 2006 to Mar 2014 CESTAT Delhi
(f) Demand of Service Tax on deputation of employees to JVs & Govt. Deptt. 41.20 Oct. 2006 to June 2012 CESTAT Delhi
(g) Demand of differential service tax based on service tax returns 0.13 Oct.2006 to March 2007 CESTAT Ahmedabad
(h) Demand raised by denying Cenvat & service tax credit taken at Hazira 9.30 Aug. 2005 to Sept 2009 CESTAT Ahmedabad
(i) Demand raised by denying Cenvat credit taken on input services 0.22 2008-09 & Dec. 2010 to March 2011 CESTAT Delhi & CESTAT Allahabad
(j) Demand raised in respect of service tax on import of service 0.14 2008-09 to 2011-12 Commissioner (Appeals) Delhi
(k) Demand of CVD on purchase of SAP software 0.07 March 2006 CESTAT Delhi
SUB-TOTAL 1774.73
(a) Unpaid demand 6.23 AY- 1999-00 CIT (Appeals)
4 Income Tax (b) Demand of TDS 3.10 AY- 2008-09 to AY - 2016-17 ITO (TDS)
5 Other taxes Notified Area Tax & GIDC Tax on revised value (incl. interest) 4.16 1998-99 to 200506 & 1985-86 to 2009-10 Ahmedabad High Court
TOTAL 1788.22

viii. Based on our audit procedures and in accordance with the information andexplanations given to us by the management the company has not defaulted in repayment ofdues to a bank or government or bonds holders. ix. The company has not raised any moneyduring the year by way of initial public offer or further public offer (including debtinstrument). As informed to us the company has not raised any money by way of term loansduring the year. x. According to the information and explanation given to us there hasbeen no fraud noticed or reported during the year on the company or by the company by itsofficers or employees. xi. In our opinion the managerial remuneration paid/provided duringthe year is in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V of Companies Act 2013. xii. The company is not a nidhicompany and therefore clause 3(xii) of the Order related to such companies is notapplicable to the Company. xiii. According to the information and explanation given to usall transactions with the related parties are in compliance with sections 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the FinancialStatements as required by the applicable accounting standards.

xiv. The company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. xv. As informed tous during the year the company has not entered into any non-cash transactions with any ofits directors or persons connected with the directors. xvi. The company is not required toget registered under section 45-IA of Reserve Bank of India Act 1934.

For O.P.Bagla & Co. For G.S Mathur & Co.
Chartered Accountants Chartered Accountants
Firm No.: 000018N Firm No.: 08744N
(Rakesh Kumar) (Rajiv Kumar Wadhawan)
(Partner) (Partner)
Membership No.:087537 Membership No.:091007
Place: New Delhi
Dated: 25th May 2016

ANNEXURE TO THE AUDITORS’ REPORT OF GAIL (INDIA) LIMITED

Referred to in paragraph 2 to “Report on Other legal and regulatoryrequirements” of the Independent Auditors’ Report of even date to the members ofGAIL (INDIA) LIMITED on the financial statements for the year ended March 31 2016.

Sl. No. Directions / Sub Directions Action taken Impact on financial statement
1. Whether the company has clear title/lease deed for freehold and leasehold respectively? If not please state the area of freehold and leasehold land for which title/lease deed are not available? As informed to us and as verified by us during the course of our audit the title deeds of immovable properties are held in the name of the company except for the cases as disclosed in Note no. 45(b) and (c) along with area of these lands. Nil
2. Whether there are any cases of waiver/ write off of debts/loans /interest etc. if any the reason there for and amount involved. We have been informed that there has been no case of waiver write off of debt/interest/loans etc. Nil
3 Whether proper records are maintained for inventories lying with third parties & assets received as gi_ from Govt. or other authorities. The company has maintained proper records of inventories including inventory lying with the third parties. The inventories have been physically verified at reasonable intervals by the Management except the stores & spares lying with Engineers India Ltd. and other contractors. We have been informed that no asset has been received as gi_ from government or other authorities. Nil
4. Independent verification may be made of information/inputs furnished to Actuary viz number of employees average salary retirement age and assumptions made by the Actuary regarding discount rate future cost increase mortality rate etc. for arriving at the provision for liability of retirement benefits viz gratuity leave encashment post retirement medical benefits etc. As directed independent verification has been done in respect of information/inputs furnished to the actuary for various components. Also assumption on different aspects made by actuary has been verified. Entries made towards provision for liability of retirement benefits viz gratuity leave encashment postretirement medical benefits etc are on the basis of actuarial valuation. Nil

 

For O.P.Bagla & Co. For G.S Mathur & Co.
Chartered Accountants Chartered Accountants
Firm No.: 000018N Firm No.: 08744N
(Rakesh Kumar) (Rajiv Kumar Wadhawan)
(Partner) (Partner)
Membership No.:087537 Membership No.:091007
Place: New Delhi
Dated: 25th May 2016

ANNEXURE TO THE AUDITORS’ REPORT OF GAIL (INDIA) LIMITED

Referred to in paragraph 3(f) to “Report on Other legal and regulatoryrequirements” of the Independent Auditors’ Report of even date to the members ofGAIL (INDIA) LIMITED on the financial statements for the year ended March 31 2016.

Report on the Internal Financial Controls under Clause (i) of Sub section 3 of Section143 of the Companies Act 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of GAIL(INDIA) LIMITED (“the Company”) as of March 31 2016 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate. Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India. These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to company’s policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the “Guidance Note”) and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects. Our auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness. Ouraudit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting assessing the riskthat a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor’s judgment including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error. We believe thatthe audit evidence I/we have obtained is sufficient and appropriate to provide a basis forour audit opinion on the Company’s internal financial controls system over financialreporting. Meaning of Internal Financial Controls Over Financial Reporting

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorised acquisitionuse or disposition of the company’s assets that could have a material effect on thefinancial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For O.P. Bagla & Co. For G.S. Mathur & Co.
Chartered Accountants Chartered Accountants
Firm No.: 000018N Firm No.: 08744N
(Rakesh Kumar) (Rajiv Kumar Wadhawan)
(Partner) (Partner)
Membership No.:087537 Membership No.:091007
Place: New Delhi
Dated: 25th May 2016