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GVK Power & Infrastructure Ltd.

BSE: 532708 Sector: Engineering
NSE: GVKPIL ISIN Code: INE251H01024
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VOLUME 4028673
52-Week high 13.68
52-Week low 5.05
P/E
Mkt Cap.(Rs cr) 2,091
Buy Price 13.24
Buy Qty 2508.00
Sell Price 0.00
Sell Qty 0.00
OPEN 12.85
CLOSE 0.00
VOLUME 4028673
52-Week high 13.68
52-Week low 5.05
P/E
Mkt Cap.(Rs cr) 2,091
Buy Price 13.24
Buy Qty 2508.00
Sell Price 0.00
Sell Qty 0.00

GVK Power & Infrastructure Ltd. (GVKPIL) - Auditors Report

Company auditors report

To

The Members of GVK Power & Infrastructure Limited

Report on the Financial Statements

We have audited the accompanying standalone financial statements of GVK Power &Infrastructure Limited ("the Company") which comprise the Balance Sheet as atMarch 312016 the Statement of Profit and Loss and Cash Flow Statement for the year thenended and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the 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 withaccounting 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 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 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 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 issued by the Institute of CharteredAccountants of India as specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the 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 financial statements.

Basis for qualified opinion

As discussed more fully in Note 31 to the accompanying financial statements theHon'ble Supreme Court of India has de-allocated coal mine allocated to GVK Coal (Tokisud)Private Limited subsidiary company and Nominated Authority has offered compensation ofRs. 11129 lakhs as against the carrying value of assets of Rs. 34862 lakhs in books ofsubsidiary. In the absence of appropriate evidence we are unable to comment uponrecoverability of assets together with consequential impact if any arising out of thesame in these accompanying financial statements.

Qualified opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of matter described in the Basis forQualified Opinion paragraph above the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 312016 of its loss and its cash flows for the yearended on that date.

Emphasis of Matter

i. We draw attention to note 35 to the financial statements regarding losses beingincurred by the Company defaults in loan and interest payments and material uncertaintiesfaced by various projects in which the Company has made investments or provided guaranteesand commitments. These conditions indicate the existence of a material uncertainty thatmay cast significant doubt about the Company's ability to continue as a going concern.These financial statements have been prepared on a going concern basis for the reasonsstated in the said note.

ii. We draw attention to note 33 to the financial statements regarding applicationmade by the Company for the waiver of excess managerial remuneration for the year endedMarch 312013 amounting to Rs. 21 lakhs paid to a director in excess of the limitsprescribed under Schedule XIII of the Companies Act 1956.

iii. We draw attention to note 34 to the financial statements material uncertaintiesare being faced by subsidiaries of GVK Energy Limited one of the subsidiaries of theCompany in which the Company has an investment of Rs. 108323 lakhs as detailed below:

a. Uncertainty towards recovery of capacity charge and supplies/availability of naturalgas to gas based power generating plants and power projects under construction ofsubsidiary companies of subsidiary company GVK Energy Limited.

b. Uncertainty towards availability of fuel and regulatory approvals faced by coalplant under construction of subsidiary company of GVK Energy Limited.

iv. We draw attention to note 32 to the financial statements the Company has madeinvestments and has receivables aggregating to Rs. 39071 lakhs and provided guaranteesand commitments for loans amounting to Rs. 769444 lakhs taken by GVK Coal Developers(Singapore) Pte. Limited (GVK Coal) as at March 312016 an entity whose currentliabilities exceeds current assets by USD 900 million (Rs. 574160 lakhs) as at June 302015 and is witnessing material uncertainties. The Management believes that for reasonsstated in the note the entity will establish profitable operations and no adjustments isrequired to aforesaid investments receivables guarantees and commitments.

The ultimate outcome of the above matters cannot presently be determined pendingapprovals acceptances notification legal interpretations resolution of uncertaintyaround availability of gas coal and coal prices ability to establish profitableoperations as referred to in the relevant notes to the financial statements referredabove accordingly no provision for any liability and/or adjustment that may result hasbeen made in the financial statements. Our opinion is not qualified in respect of theaforesaid 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 sub-section (11) of section 143 ofthe Act we give in the Annexure 1 a statement on the matters specified in paragraphs 3and 4 of the Order.

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

(a) We have sought and except for the matters described in the Basis for QualifiedOpinion paragraph obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit;

(b) Except for the possible effects of the matters described in the Basis for QualifiedOpinion paragraph In our opinion proper books of account as required by law have beenkept by the Company 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 matters described in the Basis for QualifiedOpinion paragraph above in our opinion the aforesaid financial statements comply withthe Accounting Standards specified under section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;

(e) The matters described in Basis of qualified opinion paragraph paragraphs i and iiiof Emphasis of Matter paragraph and paragraph viii to statement on the matters specifiedin paragraph 3 and 4 of the Order above in our opinion may have an adverse effect on thefunctioning 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 disqualified as on March 312016 frombeing appointed as a director in terms of section 164 (2) of the Act;

(g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above;

(h) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure 2" to this report; and

(i) With respect to the other matters 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 financialposition in its financial statements- Refer note 25 (a) to the financial statements.

ii) The Company did not have any material foreseeable losses in long-term contractsincluding derivative contracts.

iii) There are no amounts which are required to be transferred to the InvestorEducation and Protection Fund by the Company.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Vikas Kumar Pansari

Partner

Membership No.: 093649

Place : Hyderabad Date : May 20 2016

Annexure-1 referred to in our report of even date

Re: GVK Power & Infrastructure Limited (‘the Company')

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) All fixed assets have been physically verified by the management during the yearand no material discrepancies were identified on such verification.

(c) According to the information and explanations given by the management there are noimmovable properties included in fixed assets of the Company and accordingly therequirements under paragraph 3(i)(c) of the Order are not applicable to the Company andhence not commented upon.

(ii) The Company's business does not involve inventories and accordingly therequirements under paragraph 3(ii) of the Order are not applicable to the Company andhence not commented upon.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii)(a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.

(iv) I n our opinion and according to the information and explanations given to usprovisions of section 185 and 186 of the Companies Act 2013 in respect of loans todirectors including entities in which they are interested and in respect of loans andadvances given investments made and guarantees and securities given have been compliedwith by the Company.

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

(vi) To the best of our knowledge and as explained the Central Government has notspecified the maintenance of cost records under Section 148(1) of the Companies Act 2013for the services of the Company and accordingly the requirements under paragraph 3(vi)of the Order are not applicable to the Company and hence not commented upon.

(vii) (a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees' state insurance income-taxsales-tax wealth-tax service tax customs duty excise duty value added tax cess andother material statutory dues applicable to it.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxsales-tax duty of custom duty of excise value added tax cess and other materialstatutory dues were outstanding at the year end for a period of more than six monthsfrom the date they became payable.

(c) According to the records of the Company the dues outstanding of income-taxsales-tax service tax duty of custom duty of excise value added tax and cess onaccount of any dispute are as follows :

Name of the statute Nature of dues Amount in (Rs. Lakhs) Period to which the amount includes Forum where dispute is pending
The Finance Act 1994 Service Tax 877 July 12003 to March 312013 Commissioner of central excise and customs Visakhapatnam II
Indian stamp Act 1899 Stamp Duty 2829 February 4 2008 High Court of Andhra Pradesh
Income Tax Act 1961 Income tax liability 73* Assessment Year 08-09 Income tax Appellate Tribunal
Income Tax Act 1961 Income tax liability 10 Assessment Year 09-10 Commissioner of Income tax (Appeals) - Visakhapatnam
Income Tax Act 1961 Income tax liability 279* Assessment Year 10-11 Income tax Appellate Tribunal Visakhapatnam
Income Tax Act 196) Income tax liability 11* Assessment Year 11-12 Commissioner of Income tax (Appeals) - Visakhapatnam
Income Tax Act 1961 Income tax liability 44* Assessment Year 12-13 Commissioner of Income tax (Appeals) - Visakhapatnam

*Paid under protest/refund adjusted.

(viii) Based on our audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and according to information and explanationsgiven by the management the Company has delayed in repayment of dues to banks during theyear. The Company did not have any outstanding dues in respect of a financial institutionor to government during the year. The lender wise details are tabulated as under:

Particulars Name of the Lender Period Amount in (Rs. Lakhs) Delay in days
Interest on loans from banks Axis Bank Limited May 2015 and June 2015 410 2 to 15 days
Interest on loans from banks Axis Bank Limited July 2015 and August 2015 324 30 to 60 days
Interest on loans from banks Axis Bank Limited September 2015 and December 2015 1066 61 to 130 days
Interest on loans from banks Axis Bank Limited January 2016 and February 2016 454 Unpaid as at March 312016
Interest on loans from banks Syndicate Bank Limited April 2015 to July 2015 466 2 to 15 days
Interest on loans from banks Syndicate Bank Limited August 2015 to February 2016 1280 Unpaid as at March 312016
Principal payment on loans Syndicate Bank Limited August 2015 14956 Unpaid as at March 312016

(ix) Based on our audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management and on an overall examination of the balance sheet we report thatmonies raised by way of term loans were applied for the purposes for which those wereraised.

(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the Company or on the Company by theofficers and employees of the Company has been noticed or reported during the year.

(xi) Based on our audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no managerial remuneration has been paid/ providedand hence reporting under clause 3(xi) are not applicable and hence not commented upon.

(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.

(xiii) Based on our audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and according to the information andexplanations given by the management transactions with the related parties are incompliance with section 177 and 188 of Companies Act 2013 where applicable and thedetails have been disclosed in the notes to the financial statements as required by theapplicable accounting standards.

(xiv) According to the information and explanations given to us and on an overallexamination of the balance sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe Company and not commented upon.

(xv) Based on our audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management the Company has not entered into any non-cash transactions withdirectors or persons connected with him.

(xvi) According to the information and explanations given to us 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 Vikas Kumar Pansari

Partner

Membership No.: 093649

Place : Hyderabad

Date : May 20 2016

Annexure-2 to the Independent Auditor’s report of even date on the standalonefinancial statements of GVK Power & Infrastructure Limited Report on the InternalFinancial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act2013 ("the Act") To

The Members of GVK Power & Infrastructure Limited

We have audited the internal financial controls over financial reporting of GVK Power& Infrastructure Limited ("the Company") as of March 312016 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date.

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 the 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.

Auditor’s 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 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 Institute of Chartered Accountants of India. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively in all material respects.

An audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the internal financial controls overfinancial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial 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.

Qualified Opinion

According to the information and explanations given to us and based on our audit thefollowing material weakness has been identified as at March 312016:

(a) The Company's internal financial controls over use of assumptions for analysis ofasset impairments were not operating effectively which could potentially result in theCompany not recognising possible impairment losses.

A ‘material weakness' is a deficiency or a combination of deficiencies ininternal financial control over financial reporting such that there is a reasonablepossibility that a material misstatement of the company's annual or interim financialstatements will not be prevented or detected on a timely basis.

In our opinion the Company has in all material respects maintained adequate internalfinancial controls over financial reporting as of March 312016 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India and except for the possible effects of the material weaknessdescribed above on the achievement of the objectives of the control criteria theCompany's internal financial controls over financial reporting were operating effectivelyas of March 312016.

Explanatory paragraph

We also have audited in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India as specified under Section 143(10) of theAct the standalone financial statements of GVK Power & Infrastructure Limited whichcomprise the Balance Sheet as at March 312016 and the related Statement of Profit andLoss and Cash Flow Statement for the year then ended and a summary of significantaccounting policies and other explanatory information. This material weakness wasconsidered in determining the nature timing and extent of audit tests applied in ouraudit of the March 312016 standalone financial statements of GVK Power &Infrastructure Limited and this report affect our report dated May 20 2016 whichexpressed a qualified opinion on those financial statements.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Vikas Kumar Pansari

Partner

Membership No.: 093649

Place : Hyderabad Date : May 20 2016