The Members Of Gammon Infrastructure Projects Limited
Report on Standalone Financial Statements
We have audited the accompanying Standalone Financial Statements of GammonInfrastructure Projects Limited ("the Company") which comprises of the Balancesheet as at March 31 2016 the Statement of Profit and Loss and the Cash Flow Statementfor the period October 01 2014 to March 31 2016 ("Period") and a summary ofsignificant accounting policies and other explanatory notes.
Managements Responsibility for the Financial Statements
The Companys Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparationand presentation of these standalone financial statements that give a true and fair viewof the financial position financial performance and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.
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 matters which are required to be included in the audit reportunder the provisions of the Act and the Rules made thereunder. We conducted our audit inaccordance 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 theaudit to obtain reasonable assurance about whether the standalone financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on theauditors 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 Companyspreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances but not for the purpose ofexpressing an opinion on the effectiveness of the entitys internal control. An auditalso includes evaluating the appropriateness of accounting policies used and thereasonableness of the accounting estimates made by Companys directors as well asevaluating the overall 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.
Basis of Qualified Opinion
Attention is invited to note 22a to the standalone financial statement relating to theexcess managerial remuneration paid of Rs. 20449402 /- for the previous period.The Company had made an application for waiver of refund of the managerial remuneration tothe Ministry of Corporate Affairs which has been rejected by the Ministry. The Companyhowever has sought to make an application for review of the rejection and therefore nosteps for recovery have been initiated and no effects have been given for the same. If theCompanys application is not accepted then the company would be required to recoverthe excess remuneration from the managerial personnel and to that extent the profit forthe period will be higher by an amount of Rs. 20449402 /-. For the current period alsothere is an excess remuneration paid of Rs. 18395890 /- to the Managing Director whichis in excess of the limits specified u/s 197 of the Companies act 2013 read with ScheduleV to the Companies Act. The Company proposes to make an application for the waiver forrecovery for the same to the Ministry of Corporate Affairs. Subject to the outcome of theapplication we are unable to ascertain the impact on profits on this account for theeighteen month period ended 31st March 2016.
Except for the possible effect of the matter mentioned here in above in the basis ofqualified opinion in our opinion and to the best of our information and according to theexplanations given to us the standalone financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at March 31 2016 its profit and its cash flows for the period October 012014 to March 31 2016.
Emphasis of Matter:
Without qualifying our opinion we report that:
a. We invite attention to Note 35 of the Standalone Financial Statement regardingunilateral termination and closure of Concessions in a bridge project which is subject topending litigations/arbitrations at various forums which may impact the carrying valuesof investments and loans and advances given to a subsidiary. The Companys exposuretowards the said project (funded and non-funded) is Rs. 251587013/-. Pending conclusionon these legal matters no adjustments have been made in these financial statements.
b. We invite attention to Note 36 of the Standalone Financial Statement in relation tointention to exit one of the hydro power projects at Himachal Pradesh and seeking a claimof an amount against the amount spent on the project. The Companys subsidiary hascited reasons for non-continuance on account of reasons beyond its control. The subsidiaryis negotiating with its client for an amicable settlement on beneficial terms and is alsoexploring legal steps. The Companys exposure towards the said project includesinvestment and loans and advances of Rs. 713694045/-. Pending conclusion between theparties no adjustments have been made in these financial statements.
c. We invite attention to Note 37 of the Standalone Financial Statement in connectionwith an amount invested (including deposits and advances given) in a joint venture of Rs.1277561752/-(funded and non-funded). The only project of the JV Company has beendelayed resulting in the company incurring losses and consequent default in repayment ofits debt obligation culminating in the bank facility being designated as NPA. Consideringthe MBPT permission to allow Ro-Ro operations on a trial basis and based on the managementassessment and plans to address these issues no provision is considered necessary againstthe aforesaid amounts.
d. We invite attention to Note 38 of the Standalone Financial Statements in respect ofa tolling bridge project in Andhra Pradesh where the monthly toll collections are notsufficient to pay the interest and the resultant defaults in the loan repayment resultingin the facility being marked NPA Considering the steps the management proposes to take toreplace the high cost debts and the terms of the concession agreement in which the Companyis eligible for revenue shortfall loans no provisions is considered necessary against theCompanys exposure of Rs. 2932871549/-.
e. We invite attention to Note 39 of the Standalone Financial Statements wherein theCompany has stated that as of that date the Companys current liabilities exceededcurrent assets despite the sale of some of the SPVs. These conditions along with othermatters as set forth in the said Note of the Statement indicate the existence of anuncertainty as to timing and realization of cash flow.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order 2015 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure A a statement on the matters Specified inparagraphs 3 and 4 of the said Order.
2. 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 Statement of Profit and Loss and Cash Flow Statement dealt withby this Report are in agreement with the books of account
(d) Except for the possible effects of the matter mentioned in the basis ofqualified opinion above in our opinion the aforesaid standalone financial statementscomply with the Accounting Standards specified under Section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014.
(e) The going concern matter described in paragraph e. of our Emphasis of Matterparagraph in our opinion may have an adverse effect on the functioning of the Company.
(f) On the basis of written representations received from the directors as on March 312016 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2016 from being appointed as a director in terms of section 164(2) of theAct.
(g) With respect to the other matters to be included in the Auditors 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 financialposition in its financial statements -Refer Note 31 to the financial statements.
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There is no delay in payment of amount to the Investor Education and ProtectionFund during the period.
For Natvarlal Vepari & Co.
Chartered Accountants Firm
Membership No. 40441
New Delhi Dated : June 06 2016
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) Fixed assets have been physically verified by the management during the period andno material discrepancies were identified on such verification.
(ii) The Company does not have any inventory and hence the provisions of clause 3(ii)of the Companies (Auditors Report) Order 2015 are not applicable to the Company.
(iii) The Company has not granted any loans to parties covered in the registermaintained u/s 189 of the Companies Act 2013. Accordingly subclause (a) and (b) of clause3(iii) of the Companies (Auditors Report) Order 2015 are not applicable to theCompany.
(iv) In our opinion and according to the information and explanations given to usthere is an adequate internal control system commensurate with the size of the Company andthe nature of its business for the purchase of fixed assets and for the rendering ofservices. During the course of our audit we have not observed any major weakness orcontinuing failure to correct any major weakness in the internal control system of theCompany in respect of these areas.
(v) The Company has not accepted any deposits from the public pursuant to sections 73to 76 or any other relevant provisions of the Companies Act 2013 and rules framedthereunder. Therefore the provisions of clause 3(v) of the Companies (Auditors Report)Order 2015 are not applicable to the Company. As informed to us there is no order thathas been passed by Company Law Board or National Company Law Tribunal or Reserve Bank ofIndia or any Court or any other Tribunal in respect of the said sections.
(vi) As informed to us the maintenance of the cost records under the sub-section (1) ofsection 148 of the Companies Act 2013 has been prescribed and we are of the opinion thatprima facie the prescribed accounts and records have been made and maintained. We havenot however carried out a detailed examination of the records to ascertain whether theyare accurate or complete.
(vii) (a) The Company is generally regular in depositing undisputed statutory duesincluding provident fund employees state insurance income-tax sales-taxwealth-tax service tax cess and other material statutory dues with the appropriateauthorities during the period. According to the information and explanations given to usno undisputed amount payable in respect of the aforesaid dues were outstanding as at March31 2016 for a period of more than six months from the date of becoming payable.
(b) According to the information and explanations given to us there are no dues ofIncome Tax or Sales Tax or Wealth Tax or Service Tax or duty of Customs or duty of Exciseor Value Added Tax or Cess which have not been deposited on account of any dispute exceptas given herein below.
|Name of the Statute ||Nature of the dues ||Amount ||Period to which it relates ||Forum where Dispute is pending |
|Income Tax Act 1961 ||Demand under u/s 153A ||45329178 ||A.Y. 2005-06 to A.Y. 2011-12 ||Commissioner of Income-Tax (Appeals) |
| ||Demand of Penalty u/s 271(1)(c) ||13440400 ||A.Y. 2007-08 ||Commissioner of Income-Tax (Appeals) |
| ||Demand under u/s 143(3) ||25391700 ||A.Y. 2012-13 ||Commissioner of Income-Tax (Appeals) |
(c) The amount required to be transferred to investor education and protection fund hasbeen transferred within the prescribed time as per the provisions of the extant laws.
(viii) The Company has no accumulated losses at the end of the financial period. It hasnot incurred cash losses during the current financial period but had incurred cash lossesin the immediately preceding financial period.
(ix) Based on our audit procedures and as per the information and explanations given bythe management we are of the opinion that the Company has not defaulted in repayment ofdues to financial institution or bank. The company has not borrowed any funds by way ofdebentures.
(x) According to the information and explanations given to us and the records examinedby us the terms and conditions of guarantee given by the Company for loans taken by itswholly owned subsidiary companies from banks are not prima facie prejudicial to theinterest of the Company.
(xi) Based on information and explanations given to us by the management the Companyhas not obtained any term loans during the period and hence clause 3(Xi) of the Companies(Auditors Report) Order 2015 are not applicable to the Company.
(xii) According to the information and explanations given to us and to the best of ourknowledge and belief no fraud on or by the Company has been noticed or reported during theyear.
|For Natvarlal Vepari & Co. |
|Chartered Accountants |
|Firm Registration no.106971W |
|N Jayendran |
|Membership No. 40441 |
|New Delhi Dated : June 06 2016 |