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GMR Infrastructure Ltd.

BSE: 532754 Sector: Engineering
NSE: GMRINFRA ISIN Code: INE776C01039
BSE 15:47 | 23 Feb 18.75 1.15
(6.53%)
OPEN

17.55

HIGH

19.00

LOW

17.55

NSE 15:44 | 23 Feb 18.75 1.20
(6.84%)
OPEN

17.70

HIGH

19.00

LOW

17.60

OPEN 17.55
PREVIOUS CLOSE 17.60
VOLUME 4084890
52-Week high 25.00
52-Week low 13.91
P/E
Mkt Cap.(Rs cr) 11,317
Buy Price 18.75
Buy Qty 189213.00
Sell Price 0.00
Sell Qty 0.00
OPEN 17.55
CLOSE 17.60
VOLUME 4084890
52-Week high 25.00
52-Week low 13.91
P/E
Mkt Cap.(Rs cr) 11,317
Buy Price 18.75
Buy Qty 189213.00
Sell Price 0.00
Sell Qty 0.00

GMR Infrastructure Ltd. (GMRINFRA) - Auditors Report

Company auditors report

To the Members of GMR Infrastructure Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statementsof GMR Infrastructure Limited ("the Company") which comprise the Balance Sheetas at March 31 2017 the Statement of Profit and Loss including the Statement of OtherComprehensive Income the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and a summary of significant accounting policies and otherexplanatory information.

Management's Responsibility for the Ind AS financial statements

The Company's Board of Directors is responsible for the mattersstated in Section 134(5) of the Companies Act 2013 ("the Act") with respect tothe preparation of these standalone Ind AS financial statements that give a true and fairview of the financial position financial performance including other comprehensiveincome cash flows and changes in equity of the Company in accordance with accountingprinciples generally accepted in India including the Accounting Standards specified undersection 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015as amended. 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 the design implementation and maintenance of adequateinternal financial control that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe Ind AS 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 Ind ASfinancial statements based on our audit. We have taken into account the provisions of theAct the accounting and auditing standards and matters which are required to be includedin the audit report under the provisions of the Act and the Rules made there under. Weconducted our audit in accordance with the Standards on Auditing issued by the Instituteof Chartered Accountants of India as specified under Section 143(10) of the Act. ThoseStandards require that we comply with ethical requirements and plan and perform the auditto obtain reasonable assurance about whether the standalone Ind AS financial statementsare free from material misstatement.

An audit involves performing procedures to obtain audit evidence aboutthe amounts and disclosures in the standalone Ind AS financial statements. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the standalone Ind AS financial statements whether due to fraudor error. In making those risk assessments the auditor considers internal financialcontrol relevant to the Company's preparation of the standalone Ind AS financialstatements that give a true and fair view in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of the accounting estimates made by theCompany's Directors as well as evaluating the overall presentation of the standaloneInd AS financial statements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our qualified audit opinion on thestandalone Ind AS financial statements.

Basis for qualified opinion

As detailed in note 5(9) GMR Hyderabad Vijayawada Expressways PrivateLimited (‘GHVEPL') a subsidiary of the Company has been incurring losses sincethe commencement of its commercial operations. As detailed in the aforesaid note themanagement believes that these losses are on account of certain events constituting aChange in Law as per the Concession Agreement with National Highways Authority of India(‘NHAI') and accordingly GHVEPL is entitled to a claim for losses and hencehas initiated arbitration to recover the losses. We were unable to obtain sufficientappropriate audit evidence about the carrying value of the Company's investment(including advances) of Rs 320.06 crore in GHVEPL in the accompanying standalone Ind ASfinancial statements of the Company.

Qualified opinion

In our opinion and to the best of our information and according to theexplanations given to us except for the possible effects of the matter described in theBasis for Qualified Opinion paragraph above the aforesaid standalone Ind AS financialstatements give the information required by the Act in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted inIndia of the state of affairs of the Company as at March 31 2017 of its loss includingother comprehensive loss its cash flows and the changes in equity for the year ended onthat date.

Emphasis of Matter

We draw attention to the following matters in the notes to theaccompanying standalone Ind AS financial statements for the year ended March 31 2017:

a) Note 5(6) regarding losses being incurred by GMR Ambala ChandigarhExpressways Private Limited (‘GACEPL') since the commencement of its commercialoperations and ongoing arbitration regarding compensation for losses arising as a resultof diversion of partial traffic on parallel roads. Based on management's internalassessment and a legal opinion obtained by the management of GACEPL the investments inGACEPL have been carried at cost and accordingly no provision for diminution in the valueof investments has been made in the accompanying standalone Ind AS financial statementsfor the year ended March 31 2017.

b) Note 5(7) regarding (i) reduction of operations and the lossesincluding cash losses incurred by GMR Energy Limited (‘GEL') and GMR VemagiriPower Generation Limited (‘GVPGL') and the consequent erosion of net worth ofthese entities resulting from the unavailability of adequate supply of natural gas and(ii) rescheduling of the commercial operation date and the repayment of certain projectloans by GMR Rajahmundry

Energy Limited (‘GREL') and the consequent implementation ofthe Strategic Debt Restructuring Scheme to convert part of the debt outstanding intoequity and to undertake flexible structuring of balance debt for improving viability andrevival of the project pending linkage of natural gas supply. Continued uncertainty existsas to the availability of adequate supply of natural gas which is necessary to conductoperations at varying levels of capacity in the future and the appropriateness of thegoing concern assumption of these entities is dependent on the ability of the aforesaidentities to establish consistent profitable operations as well as raising adequate financeto meet short term and long term obligations. In the opinion of the management of theCompany no further provision for diminution in the value of investments is considerednecessary in the accompanying standalone Ind AS financial statements for the year endedMarch 31 2017 for the reasons explained in the said note.

c) Note 5(8) regarding uncertainties in tying up power and fuel supplyagreements achieving profitability in operations achievement of final mega power statusfuel linkage tie ups refinancing of existing loans at lower rates of interest and otherkey assumptions made in the valuation assessment of the investments in GMR ChhattisgarhEnergy Limited (‘GCEL'). The carrying value of the investments in GCEL iscritically dependent upon the achievement of the key assumptions as discussed in theaforesaid note. In the opinion of the management of the Company no further provision fordiminution in the value of investments is considered necessary in the accompanyingstandalone Ind AS financial statements for the year ended March 31 2017 for the reasonsexplained in the said note.

d) Note 5(11) regarding the achievement of certain key assumptions madeby the management in the valuation assessment of its investments in entities which areengaged in the operation and development of coal mines. In the opinion of the managementof the Company no provision for diminution in the value of investments is considerednecessary at this stage in the accompanying standalone Ind AS financial statements for theyear ended March 31 2017 for the reasons explained in the said note.

e) Note 5(12) regarding the call option exercised by the Company toacquire Class A Compulsorily Convertible Preference Shares ("CCPS A") issued byGMR Airports Limited (‘GAL') to the Private Equity Investors (‘theInvestors') subject to obtaining the requisite regulatory approvals. However theInvestors have initiated arbitration proceedings against GAL and the Company seekingconversion of CCPS A. In view of ongoing arbitration and considering the uncertaintyregarding the conversion / settlement of CCPS A no adjustments have been made for thecall option exercised by the Company to purchase CCPS A and for reasons as explained inthe aforesaid note. Class B Compulsorily Convertible Preference Shares ("CCPSB") issued to the Company continue to be carried at cost of Rs Nil.

Our opinion is not qualified in respect of these aforesaid matters.

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 subsection(11) of section 143 of the Act we give in the Annexure 1 a statement on the mattersspecified in paragraphs 3 and 4 of the Order.

2. As required by section 143(3) of the Act we report that:

(a) We have sought and obtained all the information and explanationswhich 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 beenkept by the Company so far as appears from our examination of those books;

(c) The Balance Sheet Statement of Profit and Loss including theStatement of Other Comprehensive income Cash Flow Statement and Statement of Changes inEquity dealt with by this Report are in agreement with the books of account;

(d) Except for the possible effects of the matter described in theBasis for Qualified Opinion paragraph above in our opinion the aforesaid standalone IndAS financial statements comply with the Accounting Standards specified under section 133of the Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended;

(e) The matter described in the Basis for Qualified Opinion paragraphand Emphasis of Matter paragraph above in our opinion may have an adverse effect on thefunctioning of the Company;

(f) On the basis of written representations received from the directorsas on March 31 2017 and taken on record by the Board of Directors none of the directorsis disqualified as on March 31 2017 from being appointed as a director in terms ofsection 164 (2) of the Companies Act 2013;

(g) The qualification relating to the maintenance of accounts and othermatters connected therewith are as stated in the Basis for Qualified Opinion paragraphabove.

(h) With respect to the adequacy of the internal financial controlsover financial reporting of the Company and the operating effectiveness of such controlsrefer to our separate Report dated June 01 2017 in "Annexure II" to thisreport;

(i) With respect to the other matters to be included in theAuditor'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 theexplanations given to us: i. The Company has disclosed the impact of pending litigationson its financial position in its standalone Ind AS financial statements – Refer Note36 to the standalone Ind AS financial statements;

ii. Except for the possible effect of the matter described in the Basisfor Qualified Opinion paragraph the Company did not have any long-term contractsincluding derivative contracts for which there were any material foreseeable losses.

iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.

iv. The Company has provided requisite disclosures in Note 13 to thesestandalone Ind AS financial statements as to the holding of Specified Bank Notes (SBNs) onNovember 8 2016 and December 30 2016 as well as dealings in Specified Bank Notes duringthe period from November 8 2016 to December 30 2016. Based on audit procedures andrelying on management representations except for the segregation between SBNs and otherdenominations as more fully described in Note 13 to these standalone Ind AS financialstatements upon which we are unable to comment on in the absence of necessary details wereport that the amounts disclosed in the said note is in accordance with the books ofaccount maintained by the Company and produced to us for verification.

For S.R. BATLIBOI & ASSOCIATES LLP
Chartered Accountants
ICAI Firm Registration Number: 101049W/E300004
per Sandeep Karnani
Partner
Membership number: 061207
Place: New Delhi
Date: June 01 2017

Annexure I referred to in clause 1 of paragraph on the report on otherlegal and regulatory requirements of our report of even date Re: GMR InfrastructureLimited

(i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets;

(b) Fixed assets have not been physically verified by the managementduring the year in accordance with a planned programme of verifying them once in threeyears which in our opinion is reasonable having regard to the size of the Company andthe nature of its assets.

(c) According to the information and explanations given to us by themanagement of the Company the title deeds of immovable properties included in fixedassets are held in the name of the Company.

(ii) The management has conducted physical verification of inventory atreasonable intervals during the year and no material discrepancies were noticed on suchphysical verification.

(iii) According to the information and explanations given to us by themanagement of the Company the Company has not granted any loans secured or unsecured tocompanies firms limited liability partnerships or other parties covered in the registermaintained under section 189 of the Act. Accordingly the provisions of clause 3(iii)(a)(b) and (c) of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanationsgiven to us by the management of the Company there are no loans guarantees andsecurities granted in respect of which provisions of sections 185 and 186 of the Act areapplicable and hence not commented upon. In our opinion and according to the informationand explanations given to us provisions of section 186 of the Companies Act 2013 inrespect of investments made has been complied with by the Company.

(v) The Company has not accepted any deposits from the public.

(vi) We have broadly reviewed the books of account maintained by theCompany pursuant to the rules made by the Central Government for the maintenance of costrecords under section 148(1) of the Act related to the construction activities and are ofthe opinion that prima facie the specified accounts and records have been made andmaintained. We have not however made a detailed examination of the same.

(vii) (a) Undisputed statutory dues including employees' stateinsurance sales-tax wealth-tax duty of customs duty of excise value added tax cessand other material statutory dues as applicable to the Company have generally beenregularly deposited with the appropriate authorities though there have been delays inremittance of service tax tax deducted at source and provident fund in a few cases.

(b) According to the information and explanations given to us by themanagement of the Company no undisputed amounts payable in respect of provident fundemployees' state insurance income-tax wealth-tax service tax sales-tax duty ofcustoms duty of excise value added tax cess and other material statutory dues wereoutstanding at the year end for a period of more than six months from the date theybecame payable.

(c) According to the records of the Company the dues outstanding ofincome-tax sales-tax service tax duty of customs duty of excise value added tax andcess on account of any dispute are as follows:

(Rs in Crore)

Name of the statute Nature of dues Amount (Rs in Crore) Period for which amounts relates to Forum where dispute is pending
Finance Act 1994 Service tax 41.53 October 2007 to March 2014 Commissioner of Service Tax Bangalore
Central Excise Act 1944 Central excise duty (including penal charges and excluding interest) 1.03 March 2011 to December 2012 Office of the Commissioner of Customs Central Excise and Service Tax Hyderabad-III Commissionerate
Odisha Value Added Tax Act 2004 Value Added Tax 2.40 November 2012 to March 2015 Deputy Commissioner of Commercial Taxes Bhubaneswar
Income Tax Act 1961 Income Taxes* 77.78 FY 2006-07 to 2012-13 Commissioner of Income Tax (Appeals)

*Net of Rs 76.77 Crore paid by the Company.

(viii) In our opinion and according to the information and explanationsgiven by the management the Company has not defaulted in repayment of loans or borrowingto a financial institution bank or government or dues to debenture holders as at March31 2017.

(ix) According to the information and explanations given to us by themanagement the Company has not raised any money way of initial public offer / furtherpublic offer / debt instruments. In our opinion and according to the information andexplanations given to us by the management of the Company the Company has utilized themonies raised by way of term loans for the purposes for which they were raised.

(x) Based upon the audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and according to theinformation and explanations given to us by the management of the Company we report thatno fraud by the Company or no material fraud on the Company by the officers and employeesof the Company has been noticed or reported during the year.

(xi) According to the information and explanations given to us by themanagement of the Company the managerial remuneration has been paid / provided inaccordance with the requisite approvals mandated by the provisions of section 197 readwith Schedule V to the Act.

(xii) In our opinion the Company is not a Nidhi Company. Thereforethe provisions of clause 3(xii) of the Order are not applicable to the Company and hencenot commented upon.

(xiii) According to the information and explanations given to us by themanagement of the Company transactions with the related parties are in compliance withsection 177 and 188 of the Act where applicable and the details have been disclosed inthe notes to the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and onan overall examination of the balance sheet the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year under review and hence reporting requirements under clause 3(xiv) are notapplicable to the Company and not commented upon.

(xv) According to the information and explanations given to us by themanagement of the Company the Company has not entered into any non-cash transactions withdirectors or persons connected with him as referred to in section 192 of the Act.

(xvi) According to the information and explanations given to us andbased on a legal opinion obtained by the management of the Company the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company

For S. R. BATLIBOI & ASSOCIATES LLP
Chartered Accountants
ICAI Firm Registration Number: 101049W/E300004
per Sandeep Karnani
Partner
Membership number: 061207
Place: New Delhi
Date: June 01 2017

Annexure II to the to the Independent auditor's report of evendate on the Standalone Ind AS financial statements of GMR Infrastructure Limited Report onthe Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of theCompanies Act 2013 (‘the Act')

We have audited the internal financial controls over financialreporting of GMR Infrastructure Limited (‘the Company') as of March 31 2017 inconjunction with our audit of the Standalone Ind AS financial statements of the Companyfor the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's Management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting ( the ‘ Guidance Note') issued by the Institute of CharteredAccountants of India (‘ICAI'). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to the Company's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note and the Standards on Auditing as specified under section143(10) of the Companies Act 2013 to the extent applicable to an audit of internalfinancial controls both applicable to an audit of Internal Financial Controls and bothissued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment ofthe risks of material misstatement of the Standalone Ind AS financial statements whetherdue to fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of the Standalone Ind AS financial statements for externalpurposes in accordance with generally accepted accounting principles. A company's internalfinancial control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation ofthe Standalone Ind AS financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton the Standalone Ind AS financial statements.

Inherent Limitations of Internal Financial Controls Over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 31 2017 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Noteissued by the ICAI.

For S. R. BATLIBOI & ASSOCIATES LLP
ICAI firm registration number: 101049W/E300004
Chartered Accountants
Sper Sandeep Karnani
Partner
Membership number: 061207
Place: New Delhi
Date: June 01 2017