You are here » Home » Companies » Company Overview » Hindustan Construction Company Ltd

Hindustan Construction Company Ltd.

BSE: 500185 Sector: Infrastructure
NSE: HCC ISIN Code: INE549A01026
BSE LIVE 15:44 | 19 Sep 37.90 0.15
(0.40%)
OPEN

37.70

HIGH

38.65

LOW

37.25

NSE 15:57 | 19 Sep 37.90 0.20
(0.53%)
OPEN

37.95

HIGH

38.60

LOW

37.20

OPEN 37.70
PREVIOUS CLOSE 37.75
VOLUME 1008303
52-Week high 48.00
52-Week low 29.00
P/E 51.22
Mkt Cap.(Rs cr) 3,849
Buy Price 37.90
Buy Qty 654.00
Sell Price 0.00
Sell Qty 0.00
OPEN 37.70
CLOSE 37.75
VOLUME 1008303
52-Week high 48.00
52-Week low 29.00
P/E 51.22
Mkt Cap.(Rs cr) 3,849
Buy Price 37.90
Buy Qty 654.00
Sell Price 0.00
Sell Qty 0.00

Hindustan Construction Company Ltd. (HCC) - Auditors Report

Company auditors report

To the Members of Hindustan Construction Company Limited

Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of HindustanConstruction Company Limited (‘the Company') which comprise the Balance Sheet asat 31March 2017 the Statement of Profit and Loss (including Other Comprehensive Income)the Cash Flow Statement and the Statement of Changes in Equity for the year then ended anda summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

2. 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 state ofaffairs (financial position) profit or loss (financial performance including othercomprehensive income) cash flows and changes in equity of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (‘Ind AS') specified under Section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding the assets of the Company and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring 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.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

4. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

5. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthese standalone financial statements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial controls 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 the 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.

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

Basis for Qualified Opinion

8. As stated in Note 33(a) to the standalone financial statements the Company'snon-current investments as at 31 March 2017 include investments aggregating Rs. 630.83crore in two of its subsidiaries; and non-current loans other non-current financialassets and other current financial assets as at that date include dues from suchsubsidiaries aggregating Rs. 512.42 crore Rs. 38.17 crore and Rs. 4.77 crorerespectively being considered good and recoverable by the management considering thefactors stated in the aforesaid note including valuation report from an independentvaluer. However these subsidiaries have accumulated losses and their net worth is fullyeroded. Further these subsidiaries are facing liquidity constraints due to which it maynot be possible to realize projections made as per business plans. In the absence ofsufficient appropriate evidence we are unable to comment upon the carrying value of theseinvestments and recoverability of the aforesaid dues and the consequential impact if anyon the accompanying standalone financial statements. Our audit opinion on the standalonefinancial statements for the year ended 31 March 2016 was also qualified in respect ofthis matter.

Qualified Opinion

9. In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the Basis forQualified Opinion paragraph 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 including Ind ASspecified under Section 133 of the Act of the state of affairs (financial position) ofthe Company as at 31March 2017 and its profit (financial performance including othercomprehensive income) its cash flows and the changes in equity for the year ended on thatdate.

Emphasis of Matters

10. We draw attention to:

a) Note 33(b) to the standalone financial statements regarding the Company'snon-current investment in a subsidiary company non-current loans other non-currentfinancial assets and other current financial assets due from such subsidiary aggregatingRs. 2.24 crore Rs. 1124.36 crore Rs. 141.14 crore and Rs. 2.47 crore respectively asat 31 March 2017. The consolidated net-worth of the aforesaid subsidiary has been fullyeroded; however based on certain estimates and other factors including subsidiary'sfuture business plans growth prospects and valuation report from an independent valueras described in the said note management believes that the realizable amount is higherthan the carrying value of the investment non-current loans other non-current financialassets and other current financial assets due to which these are considered as good andrecoverable. Our opinion is not qualified in respect of this matter.

b) Note 34 to the standalone financial statements regarding uncertainties relating torecoverability of unbilled work-in-progress (other current financial assets) non-currenttrade receivables and current trade receivables aggregating Rs. 911.80 crore Rs. 123.39crore and Rs. 90.30 crore respectively as at 31 March 2017 raised in the earlier yearsin respect of projects suspended or substantially closed and where the claims arecurrently under negotiations / discussions / arbitration. Pending the ultimate outcome ofthese matters which is presently unascertainable no adjustments have been made in theaccompanying standalone financial statements. Our opinion is not qualified in respect ofthis matter.

c) Note 26.1 and 26.3 to the standalone financial statements regarding remuneration ofRs. 10.66 crore paid for each of the financial years ended 31 March 2014 and 31 March 2016to the Chairman and Managing Director (CMD) which is in excess of the limits prescribedunder the provisions of the erstwhile Companies Act 1956/ the Companies Act 2013respectively and for which the Company has filed an application for review / anapplication respectively with the Central Government; however approval in this regard ispending till date. Our opinion is not qualified in respect of this matter.

Other Matters

11. a) The Company had prepared separate sets of statutory financial statements for theyear ended 31 March 2016 and 31 March 2015 in accordance with Accounting Standardsprescribed under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2014 (as amended) on which we issued auditor's reports to the shareholders of theCompany dated 28 April 2016 and 30 April 2015 respectively. These financial statementshave been adjusted for the differences in the accounting principles adopted by the Companyon transition to Ind AS which have also been audited by us. Our opinion is not qualifiedin respect of this matter.

b) We did not audit the separate financial statements of six joint operations includedin these standalone financial statements whose financial statements reflect total assetsof Rs. 53.93 crore and net assets of Rs. 16.14 crore as at 31 March 2017 total revenuesof Rs. 45.58 crore and net cash inflows amounting to Rs. 4.23 crore for the year ended onthat date as considered in these standalone financial statements. The Company hadprepared separate set of statutory financial statements of these joint operations for theyears ended 31 March 2017 31 March 2016 and 31 March 2015 in accordance with accountingprinciples generally accepted in India and which have been audited by other auditors undergenerally accepted auditing standards applicable in India. These financial statements havebeen adjusted for the differences in the accounting principles adopted by the Company ontransition to Ind AS. Our opinion in so far as it relates to the amounts and disclosuresin respect of these joint operation is solely based on report of the other auditors andthe conversion adjustments prepared by the management of the Company which have beenaudited by us. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

12. As required by the Companies (Auditor's Report) Order 2016 (‘the Order')issued by the Central Government of India in terms of Section 143(11) of the Act we givein the Annexure I a statement on the matters specified in paragraphs 3 and 4 of theOrder.

13. Further to our comments in Annexure I as required by Section 143(3) of the Act wereport that:

a) we have sought and except for the possible effects of the matter described in theBasis for Qualified Opinion paragraph obtained all the information and explanations whichto the best of our knowledge and belief were necessary for the purpose of our audit;

b) except for the possible effects of the matter 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 standalone financial statements dealt with by this report are in agreement withthe books of account;

d) except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph in our opinion the aforesaid standalone financial statements complywith Ind AS specified under Section 133 of the Act;

e) the matters described in paragraphs 8 10(a) and 10(b) under the Basis for QualifiedOpinion/ Emphasis of Matters paragraphs in our opinion may have an adverse effect on thefunctioning of the Company;

f) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as at 31 March2017 from being appointed as a director in terms of Section164(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;

h) we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as at 31 March 2017 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 4 May 2017 as per Annexure II expressed a qualified opinion;

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 (as amended) inour opinion and to the best of our information and according to the explanations given tous: i. the Company as detailed in Notes 6.1 32 A(i) to (iii)and 34 to the standalonefinancial statements has disclosed the impact of pending litigations on its financialposition;

ii. except for the possible effects of the matter described in the Basis for QualifiedOpinion paragraph the Company as detailed in Note 18.1to the standalone financialstatements has made provision as required under the applicable law or Ind AS formaterial foreseeable losses if any on long-term contracts including derivativecontracts;

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

iv. the Company as detailed in Note 13.1 to the standalone financial statements hasmade requisite disclosures in these standalone financial statements as to holdings as wellas dealings in Specified Bank Notes during the period from 8 November 2016 to 30 December2016. Based on the audit procedures performed and taking into consideration theinformation and explanations given to us in our opinion these are in accordance with thebooks of account maintained by the Company.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
per Adi P. Sethna
Partner
Place : Mumbai Membership No.: 108840
Date : 4 May 2017

Annexure to the Independent Auditors' Report

Annexure I

Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that:

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

(b) The fixed assets have been physically verified by the management during the yearand no material discrepancies were noticed on such verification. In our opinion thefrequency of verification of the fixed assets is reasonable having regard to the size ofthe Company and the nature of its assets.

(c) The title deeds of all the immovable properties (which are included under the head‘Property plant and equipment') are held in the name of the Company.

(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year and no material discrepancies between physicalinventory and book records were noticed on physical verification.

(iii) The Company has granted unsecured loans to six companies covered in the registermaintained under Section 189 of the Act; and with respect to the same:

(a) in our opinion the terms and conditions of such loans are not prima facieprejudicial to the Company's interest;

(b) the schedule of repayment of the principal and the payment of the interest has notbeen stipulated and hence we are unable to comment as to whether repayments/receipts ofthe principal amount and the interest are regular;

(c) in the absence of stipulated schedule of repayment of principal and payment ofinterest we are unable to comment as to whether there is any amount which is overdue formore than 90 days and whether reasonable steps have been taken by the Company for recoveryof the principal amount and interest.

(iv) In our opinion the Company has complied with the provisions of Sections 185 and186 of the Act to the extent applicable in respect of loans investments guarantees andsecurity.

(v) In our opinion the Company has not accepted any deposits within the meaning ofSections373 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Company's products/services andare of the opinion that prima facie the prescribed accounts and records have been madeand maintained. However we have not made a detailed examination of the cost records witha view to determine whether they are accurate or complete.

(vii) (a) Undisputed statutory dues including provident fund employees' stateinsurance income-tax sales-tax service tax duty of custom duty of excise value addedtax cess and other material statutory dues as applicable have not been regularlydeposited with the appropriate authorities and there have been significant delays in alarge number of cases. Undisputed amounts payable in respect thereof which wereoutstanding at the year-end for a period of more than six months from the date they becamepayable are as follows:

Statement of arrears of statutory dues outstanding for more than six months

Name of the statute Nature of dues Amount (Rs. in Crore) Period to which the amount relates Due Date Date of Payment
The Sales Tax Act Sales Tax/ Value Added Tax/ Entry Tax 1.99 December 2015 20 January 2016 Not paid till date
March to August 2016 various due dates

(b) There are no dues in respect of duty of customs and duty of excise that have notbeen deposited with the appropriate authorities on account of any dispute. The duesoutstanding in respect of income-tax sales-tax service-tax and value added tax onaccount of disputes are as follows:

Statement of Disputed Dues

Name of the statute Nature of dues Amount (Rs. in Crore) Amount Paid Under Protest (Rs. in Crore) Period to which the amount relates Forum where dispute is pending
The Income Tax Act 1961 Income Tax 24.63 24.63 A.Y. 2006-07 to 2010-11 Income Tax Appellate Tribunal
The Sales Tax Act Sales Tax/ Value Added Tax/ Entry Tax 0.16 4.70 0.15 - A.Y. 2008-09 2010-11 A.Y.1997-98 and 2012-13 Supreme Court High Court
45.76 0.49 A.Y. 1996-97 to A.Y. 2000-01 A.Y. 2005-06 A.Y. 2006-07 and A.Y. 2013-14 Taxation Tribunal
91.82 3.28 A.Y. 2002-03 A.Y. 2004-05 to A.Y. 2013 to A.Y. 2013- 14 Commissioner level up to Appellate Authority
The Finance Act 1994 Service tax including interest and penalty as applicable 2.84 - April 2003 to December 2003 High Court
2.97 - January 2006 to March 2006 Taxation Tribunal
313.94 - December 2008 to March 2013 Commissioner level up to Appellate Authority

(viii) The are no loans or borrowings payable to government. The Company has defaultedin repayment of following dues to the financial institution banks and debenture holdersduring the year which were paid on or before the Balance Sheet date.

(Rs. in crore)
Debenture Days Principal Interest Total
Holders
AXIS - Non- Convertible Debentures 0 to 30 days - 0.77 0.77
31 to 90 days 4.78 3.06 7.84
91 to 180 days 4.78 4.52 9.30
LIC - Non- Convertible Debentures 0 to 30 days - 0.83 0.83
31 to 90 days 2.50 1.70 4.20
91 to 180 days - 0.03 0.03
181 to 365 days - 0.04 0.04
Axis Bank 0 to 30 days - 1.51 1.51
31 to 90 days 8.36 6.06 14.42
91 to 180 days 8.36 7.57 15.93
Bank of Baroda 0 to 30 days - 0.26 0.26
31 to 90 days 1.24 0.06 1.30
91 to 180 days 0.78 0.65 1.43
Bank of Maharashtra 0 to 30 days - 0.22 0.22
31 to 90 days 2.01 0.39 2.40
91 to 180 days - 0.77 0.77
Canara Bank 0 to 30 days - 2.47 2.47
31 to 90 days 9.63 3.15 12.78
91 to 180 days 9.63 7.32 16.95
Central Bank of India 0 to 30 days - 0.51 0.51
31 to 90 days 5.62 0.85 6.47
91 to 180 days 4.51 1.31 5.82
Federal Bank 0 to 30 days - 0.16 0.16
31 to 90 days 0.99 0.24 1.23
91 to 180 days 0.63 0.10 0.73
IDBI Bank 0 to 30 days - 1.97 1.97
31 to 90 days 10.76 7.86 18.62
91 to 180 days 10.76 9.83 20.59
Indian Overseas Bank 0 to 30 days - 0.72 0.72
31 to 90 days 3.81 0.32 4.13
91 to 180 days 2.40 1.89 4.29
Oriental Bank of Commerce 31 to 90 days 6.92 0.43 7.35
Punjab National Bank 0 to 30 days - 0.62 0.62
31 to 90 days 2.50 1.44 3.94
91 to 180 days 0.67 0.62 1.29
State Bank of Hyderabad 0 to 30 days - 0.39 0.39
31 to 90 days 2.61 1.56 4.17
91 to 180 days 1.19 1.95 3.14
State Bank of Mysore 0 to 30 days - 0.83 0.83
31 to 90 days 5.44 3.41 8.85
91 to 180 days 2.50 4.07 6.57
State Bank of Travancore 0 to 30 days 0.38 0.02 0.40
31 to 90 days 0.80 0.05 0.85
91 to 180 days - 0.03 0.03
Syndicate Bank 0 to 30 days - 1.83 1.83
31 to 90 days 12.87 4.65 17.52
91 to 180 days - 4.05 4.05
Union Bank of India 0 to 30 days 1.25 0.37 1.62
31 to 90 days 1.97 0.19 2.16
91 to 180 days - 1.00 1.00
United Bank of India 0 to 30 days - 2.49 2.49
31 to 90 days 7.50 2.79 10.29
91 to 180 days 7.50 7.66 15.16
Export Import Bank of United States 31 to 90 days 0.77 - 0.77
Standard Chartered Bank 31 to 90 days 4.59 - 4.59
Development Bank of Singapore 31 to 90 days 3.38 0.23 3.61
91 to 180 days - 0.45 0.45
Financial Institution
Industrial Finance Corporation of India 0 to 30 days - 1.20 1.20
31 to 90 days 3.75 2.42 6.17
91 to 180 days 3.75 4.40 8.15
Export Import Bank of India 0 to 30 days - 3.72 3.72
31 to 90 days 19.94 14.89 34.83
91 to 180 days 19.94 18.61 38.55
Life Insurance Corporation of India 31 to 90 days - 0.03 0.03
91 to 180 days - 0.02 0.02
181 to 365 days - 0.03 0.03
National Bank of Agricultural and Development 0 to 30 days - 0.57 0.57
31 to 90 days 3.90 1.50 5.40
91 to 180 days - 0.19 0.19
SREI Equipment Finance Limited 0 to 30 days - 0.95 0.95
31 to 90 days 5.78 1.19 6.97
91 to 180 days - 3.10 3.10

The Company has defaulted in repayment of following dues to the financial institutionsbanks and debenture holders during the year which were not paid as at the Balance Sheetdate.

(Rs. in crore)
Debenture Holders Days Principal Interest Total
LIC - Non Convertible Debentures 31 to 90 days 2.50 2.44 4.94
91 to 180 days 2.50 1.63 4.13
181 to 365 days 2.50 2.44 4.94
Bank of Baroda 31 to 90 days 0.46 0.98 1.44
91 to 180 days 0.00 0.65 0.65
181 to 365 days 2.50 0.00 2.50
Bank of Maharashtra 31 to 90 days 0.45 0.49 0.94
91 to 180 days 0.00 0.32 0.32
Canara Bank 31 to 90 days 5.73 7.04 12.77
91 to 180 days 5.73 4.69 10.42
Central Bank of India 31 to 90 days 2.60 1.17 3.77
91 to 180 days 0.00 1.22 1.22
Federal Bank 31 to 90 days 0.37 0.39 0.76
91 to 180 days 0.00 0.68 0.68
Indian Overseas Bank 31 to 90 days 1.41 2.55 3.96
91 to 180 days 0.00 1.70 1.70
Oriental Bank of Commerce 31 to 90 days 1.67 0.21 1.88
91 to 180 days 0.00 0.39 0.39
Punjab National Bank 31 to 90 days 0.67 0.42 1.09
Syndicate Bank 31 to 90 days 2.87 3.62 6.49
91 to 180 days 0.00 2.41 2.41
Union Bank of India 31 to 90 days 0.72 1.30 2.02
91 to 180 days 0.00 0.87 0.87
United Bank of India 31 to 90 days 4.44 7.16 11.60
91 to 180 days 4.44 4.77 9.21
Export Import 31 to 90 days 3.21 0.25 3.46
Bank of United States 91 to 180 days 3.21 0.17 3.38
181 to 365 days 8.75 0.50 9.25
Standard Chartered Bank 31 to 90 days 2.29 0.83 3.12
91 to 180 days 2.29 0.56 2.85
181 to 365 days 0.00 1.67 1.67
Development Bank of Singapore 31 to 90 days 1.69 0.68 2.37
91 to 180 days 1.69 0.45 2.14
181 to 365 days 0.00 0.68 0.68
Industrial Finance Corporation of India 31 to 90 days 2.25 2.36 4.61
91 to 180 days 2.25 1.57 3.82
Life Insurance Corporation of India 31 to 90 days 0.00 0.34 0.34
91 to 180 days 0.00 0.23 0.23
181 to 365 days 0.00 0.34 0.34
National Bank of Agricultural and Development 91 to 180 days 0.00 0.81 0.81
SREI 31 to 90 days 1.70 2.76 4.46
Equipment Finance Limited 91 to 180 days 1.70 1.84 3.54

(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments) during the year. In our opinion the term loans wereapplied for the purposes for which the loans were obtained.

(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.

(xi) Managerial remuneration has been paid and provided by the Company in accordancewith the requisite approvals mandated by the provisions of Section 197 of the Act readwith Schedule V to the Act.

(xii) In our opinion the Company is not a Nidhi Company. Accordingly provisions ofclause 3(xii) of the Order are not applicable.

(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of the Act where applicable and the requisite details have beendisclosed in the standalone financial statements as required by the applicable Ind AS.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures except for allotment ofequity shares and optionally convertible debentures during the year to the lenderspursuant to the Scheme for Sustainable Structuring of Stressed Assets (S4A Scheme) adoptedby the Joint Lender's Forum as stated in notes 15(h)(iii) and 16.1 to the standalonefinancial statements. In respect of the same in our opinion the Company has compliedwith the requirements of Section 42 of the Act and Rules framed thereunder. Further inour opinion the amounts so raised have been used for the purposes for which the fundswere raised.

(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.

(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
per Adi P. Sethna
Partner
Membership No.:108840
Place : Mumbai
Date : 4 May 2017

Annexure to the Independent Auditors' Report

Annexure II

Independent Auditor's report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

1. In conjunction with our audit of the standalone financial statements of HindustanConstruction Company Limited ("the Company") as at and for the year ended 31March 2017 we have audited the internal financial controls over financial reporting("IFCoFR") of the Company as at that date.

Management's Responsibility for Internal Financial Controls

2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on 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 Reporting(‘the Guidance Note') issued by the Institute of Chartered Accountants of India(‘the ICAI'). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of the Company's business including adherenceto Company's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditor's Responsibility

3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theICAI and deemed to be prescribed under section 143(10) of the Act to the extentapplicable to an audit of IFCoFR and the Guidance Note issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate IFCoFR wereestablished and maintained and if such controls operated effectively in all materialrespects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the Company's IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sIFCoFR include 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

7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.

Basis for Qualified opinion

8. In our opinion according to the information and explanations given to us and basedon our audit procedure performed the following material weakness has been identified inthe operating effectiveness of the Company's IFCoFR as at 31 March 2017: The Company'sinternal financial controls in respect of supervisory and review controls over process ofdetermining of (a) carrying value of the Company's non-current investments in itssubsidiaries; and (b) recoverability of non-current loans other non-current financialassets and other current financial assets due from such subsidiaries were not operatingeffectively. Absence of aforesaid assessment in accordance with the accounting principlesgenerally accepted in India could potentially result in a material misstatement in thecarrying value of investments in such subsidiaries and the aforesaid dues from suchsubsidiaries and consequently could also impact the profit (financial performanceincluding other comprehensive income) after tax.

9. A ‘material weakness' is a deficiency or a combination of deficiencies inIFCoFR such that there is a reasonable possibility that a material misstatement of thecompany's annual or interim financial statements will not be prevented or detected on atimely basis.

Qualified Opinion

10. In our opinion except for the possible effects of the material weakness describedabove in the Basis for Qualified Opinion paragraphthe Company has in all materialrespects maintained adequate IFCoFR as at 31 March 2017 based on internal control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note issued by the ICAI and theCompany's IFCoFR were operating effectively as at 31 March 2017.

11. We have considered the material weakness identified and reported above indetermining the nature timing and extent of audit tests applied in our audit of thestandalone financial statements of the Company as at and for the year ended 31 March 2017and the material weakness has affected our opinion on the standalone financial statementsof the Company and we have issued a qualified opinion on the standalone financialstatements.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
per Adi P. Sethna
Partner
Membership No.: 108840
Place : Mumbai
Date : 4 May 2017