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A2Z Infra Engineering Ltd.

BSE: 533292 Sector: Engineering
NSE: A2ZINFRA ISIN Code: INE619I01012
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NSE 00:00 | 11 May 5.10 0.40
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VOLUME 1363112
52-Week high 6.47
52-Week low 3.49
P/E
Mkt Cap.(Rs cr) 90
Buy Price 0.00
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Sell Price 0.00
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OPEN 4.60
CLOSE 4.71
VOLUME 1363112
52-Week high 6.47
52-Week low 3.49
P/E
Mkt Cap.(Rs cr) 90
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

A2Z Infra Engineering Ltd. (A2ZINFRA) - Auditors Report

Company auditors report

To The Members of A2Z Infra Engineering Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

1. We have audited the accompanying standalone financial statements of A2Z InfraEngineering Limited (‘the Company') which comprise the Balance Sheet as at 31 March2019 the Statement of Profit and Loss (including Other Comprehensive Income) the CashFlow Statement and the Statement of Changes in Equity for the year then ended and asummary of the significant accounting policies and other explanatory information in whichare included the returns for the year ended on that date audited by the branch auditors ofthe Company's branches located at Zambia Uganda Nepal and Tanzania.

2. In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matters described in the Basis forQualified Opinion section of our report the aforesaid standalone financial statementsgive the information required by the Companies Act 2013 (‘Act') in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India including Indian Accounting Standards (‘Ind AS')specified under section 133 of the Act of the state of affairs (financial position) ofthe Company as at 31 March 2019 and its profit (financial performance including othercomprehensive income) its cash flows and the changes in equity for the year ended on thatdate.

Basis for Qualified Opinion

3. As stated in note 18.1 to the accompanying standalone financial statements wherethe Company's ‘Non-current Financial Liability -borrowings' ‘Current FinancialLiability- borrowings' and ‘Other Current Financial Liabilities' include balancesaggregating to Rs. 216.46 lakhs Rs. 11618.85 lakhs and Rs. 538.10 lakhs respectively asat 31 March 2019 pertaining to borrowings from certain banks (‘Lenders') which havebeen classified as non-performing assets and in respect of which the Company has notrecognised interest for the year ended 31 March 2019 aggregating to Rs.1595.92 lakhs.Such amount is determined by the management basis terms of the agreements with Lendersbut in the absence of sufficient appropriate evidence to substantiate such estimate of themanagement we are unable to comment on the adjustments that would be required to thecarrying value of these balances on account of changes and its consequential impact onthe standalone financial statements.

4. As stated in note 18.2 to the accompanying standalone financial statements theCompany had entered into settlement agreement(s) (‘Agreements') with certain banks/asset reconstruction company (‘the Lenders') during the year ended 31 March 2018 and31 March 2019. As at 31 March 2019 the Company delayed payments in respect of certaindeferred instalments which were due and payable pursuant to these settlements. Furtherthe management is in negotiations/ reconciliations with certain other lenders to settleits existing obligations. Pending confirmations from the Lenders and in the absence of therequisite information we are unable to comment on the impact of such delays and ongoingnegotiations/ reconciliations if any on the accompanying standalone financialstatements.

5. We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the audit of the financial statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (‘ICAI') togetherwith the ethical requirements that are relevant to our audit of the financial statementsunder the provisions of the Act and the rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified opinion.

Material Uncertainty Related to Going Concern

6. We draw attention to note 31 to the accompanying standalone financial statementswhich indicates that the Company has accumulated net losses of Rs. 43672.11 lakhs as at31 March 2019 and as of that date the Company has made defaults in repayment ofborrowings from banks as detailed in note 17.5 18.2 and 20.3 up till 31 March 2019. Theseconditions along with other matters as set forth in such note indicate the existence ofmaterial uncertainty that may cast significant doubt about the Company's ability tocontinue as a going concern. However in view of the ongoing discussions relating torestructuring of its borrowings and other debts with the lenders which includes bindingOne Time Settlement (OTS) offers made by the Company better financial performance as aresult of favorable business conditions expected in future and other mitigating factorsmentioned in the aforementioned note the management is of the view that the going concernbasis of accounting is appropriate for preparation of the accompanying standalonefinancial statements. Our report is not modified in respect of this matter.

The above assessment of the Company's ability to continue as going concern is by itsnature considered as a key audit matter in accordance with SA 701. Our audit workincluded but was not limited to the following procedures:

• Obtained understanding of the management's process for identifying all events orconditions that could impact the Company's ability to continue as a going concern and theprocess to assess the corresponding mitigating factors existing against each such event orcondition;

• Evaluated the design and tested the operating effectiveness of key controlsaround aforesaid identification of events or conditions and mitigating factors andcontrols around cash flow projections prepared by the management;

• Tested the appropriateness of the key assumptions in the cash flow projectionsfor next 12 months and the aforementioned mitigating factors by considering ourunderstanding of the business past performance of the Company external data and marketconditions apart from discussing these assumptions with the management;

• Reconciled the cash flow projections to future business plans and restructuringplan of the Company as approved by the management;

• Tested the arithmetical accuracy of the calculations including those related tosensitivity analysis performed by the management;

• Reviewed communications with the lenders for the settlement the minutes ofmeetings of lenders etc. with respect to the status of OTS offer; and

• Evaluated the appropriateness of the disclosures made in the standalonefinancial statements in respect of going concern basis of accounting in accordance withapplicable accounting standards.

Emphasis of Matters

7. We draw attention to note 40 (a) of accompanying standalone financial statementswhich describes the uncertainty relating to the outcome of litigation pertaining toincome-tax matters pursuant to orders received by the Company against which management andthe assessing authorities have filed appeals with relevant Income-tax authorities. Thefinal outcome of these matters is presently unascertainable. Our opinion is not modifiedin respect of this matter.

Key Audit Matters

8. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.

9. In addition to the matters described in the Basis for Qualified Opinion and MaterialUncertainty Related to Going Concern section we have determined the matters describedbelow to be the key audit matters to be communicated in our report.

Key Audit Matter How our audit addressed the key audit matter
Valuation of investment in and other dues from the associate company Our audit procedures were focused on obtaining sufficient appropriate audit evidence that the carrying value of investment in associate company is not materially misstated. These procedures included but were not limited to the following:
As disclosed in note 5.2 to the accompanying standalone financial statements the Company has investment in equity shares and preference shares of A2Z Green Waste Management Limited its associate company amounting to Rs. 983.14 lakhs and Rs. 19883.11 lakhs respectively. Such investment in the aforesaid associate company is accounted for at cost in accordance with Ind AS 27 Separate Financial Statements. The Company also has other current financial assets (net of impairment) and current financial assets loan receivable aggregating to Rs.411.51 lakhs and Rs. 372.63 lakhs as at 31 March 2019 from the aforesaid associate company. The Company assesses the recoverable amount of the investment when impairment indicators exist by comparing the fair value (less costs of disposal) and carrying amount of the investment as on the reporting date. We obtained an understanding of the management's processes and controls for determining the fair valuation of investment. We performed the following procedures:
• Assessed the qualification and objectivity of the management appointed independent valuation specialist to determine the fair value of investment;
• Assessed the appropriateness of valuation methodology used for the fair valuation computation with the help of an auditor's expert and tested the mathematical accuracy of management's model;
• Reconciled the cash flow projections to the business plans approved by the Company's management;
The aforesaid associate has incurred loss during the year ended 31 March 2019 and as at the year end the consolidated net worth of such company is fully eroded which indicates potential impairment of the investment in the associate. • Evaluated management's assessment of underlying assumptions used for the cash flow projections including the implied growth rates considering evidence available to support these assumptions and our understanding of the business;
The aforesaid investment is not traded in the market and its fair value has been determined by a management appointed independent valuation specialist using discounted cash flow (‘DCF') method. The process of computation of fair valuation for investment in associate company using DCF method is complex and requires estimation and judgement around assumptions used therein. The key assumptions underpinning management's assessment of the fair valuation include but are not limited to projections of future cash flows growth rates discount rates estimated future operating and capital expenditure. • Tested the discount rate and long-term growth rates used in the forecast including comparison to economic and industry forecasts where appropriate;
• Evaluated the sensitivity analysis performed by management in respect of the key assumptions such as discount and growth rates to ensure there was sufficient headroom with respect to the estimation uncertainty impact of such assumptions on the fair value calculation;
During the year ended 31 March 2019 pursuant to a share purchase agreement the Company has transferred certain equity shares of the investee company to an external buyer (refer note 5.1.4 for details). Based on the aforementioned sale transaction the Company has recognised an impairment charge of Rs. 929.01 lakhs on the remaining investment during the year ended 31 March 2019. • Tested the impairment made during the year by inspecting the equity share sale agreement for transfer of part shareholding during the year; and
• Evaluated the appropriateness of disclosures in relation to investment in associate company and related impairment indicators.
Considering the materiality of the amounts involved complexity and management judgement involved in assessment of impairment losses to be recognised if any on the carrying value of investment in and loan receivable from the associate company this matter has been considered to be a key audit matter for current year's audit. We also obtained written representations from management and those charged with governance on whether the significant assumptions used in valuation of the investment in the associate company are considered reasonable.
Emphasis of Matter
Considering this matter is fundamental to the understanding of the users of standalone financial statements we draw attention to note 5.2 of the accompanying standalone financial statement regarding the Company's investment in and dues receivable from the associate company.
Utilisation of input tax credit and levy of interest on service tax: Our audit in relation to assessment of input tax credit and levy of interest on service tax as at reporting date included but were not limited to the following procedures:
As disclosed in note 22.1 to the accompanying standalone financial statements the Company has non-current assets in respect of input tax credit amounting to Rs. 1144.62 lakhs as at 31 March 2019. There exists uncertainty relating to utilisation of such input tax credit and levy of interest on service tax with respect to service tax liability determined by the Company as described in note 22.1 to the accompanying standalone financial statements. Based on the terms of the contract with the customers/vendors and independent legal opinion the management believes that the service tax liability outstanding including interest thereon if any is recoverable from the customer of the Company and further that the Company would be able to avail the existing input tax credit recognized on services received by the Company from the sub-contractors for settlement of such service tax liability. • Evaluated the design and tested the operating effectiveness of the controls that the Company has established in relation to assessing recoverability of amounts of service tax from the customers including interest thereon and utilisation of input tax credit;
• Obtained an understanding of the current period developments in the matter from the management and corroborated such understanding from relevant underlying documents;
• Tested the appropriateness and mathematical accuracy of the underlying calculations for the input tax credit and indirect tax receivables recognised by the management with respect to services received from sub-contractors;
Evaluation of management's assessment of payment of interest on the service tax liability and utilization of service tax input required a detailed analysis of the appropriate statutory provisions and required application of material judgement in interpretation of law. • Inspected the correspondence between the Company and the customer for reimbursement to the Company for any possible cash outflow that arise on account of the service tax liability;
• Obtained an independent legal opinion from the management's external tax experts on the likely outcome of the case the status of the matter and the magnitude of the potential exposure involved;
Accordingly considering the materiality of amounts and significance of management judgement involved this matter was also identified as one of the areas which required significant auditor attention and a matter which was of most significance in the current year audit.
• Evaluated management's assessment on the likely outcome and potential magnitude of the aforementioned matter; and
Emphasis of Matter • Evaluated that the disclosures made by the management are in accordance with applicable accounting standards.
Considering this matter is fundamental to the understanding of the users of standalone financial statements we draw attention to note 22.1 of the accompanying standalone financial statement regarding uncertainties relating to utilization of input tax credit and levy of interest on service tax.
Impairment assessment of carrying value of certain power generation plants of the Company classified as property plant and equipment and Capital Work in Progress (CWIP): Our audit procedures included but were not limited to the following:
As at 31 March 2019 the Company has power generation plants and CWIP relating to such plants with carrying values of Rs 8550.81 lakhs and Rs. 14156.80 lakhs respectively as disclosed in note 3 of the accompanying standalone financial statements. • Obtained an understanding of the management process for identifying impairment indicators as well as determining the appropriate methodology to carry out impairment testing for the carrying value of the cogeneration power plants;
• Assessed the experience professional competence and objectivity of the management expert involved for carrying out the valuation of the said assets;
In accordance with Ind AS 36 Impairment of assets such property plant and equipment and CWIP balances are tested for impairment when impairment indicators exist at the cash generating unit level whereby the carrying amount of the cash generating unit (including goodwill) is compared with the recoverable amount of the cash generating unit. • Reconciled the cash flow projections to the business plans approved by the Company's management;
• Assessed the appropriateness of the significant underlying assumptions used for cash flow projections including extension of the concession period plant operating levels implied growth rates etc. considering the evidence available to support these assumptions and our understanding of the business and industry including comparison to economic and industry forecasts where appropriate;
The recoverable amount is determined on the basis of the value in use which is the present value of future cash flows of the cash generating unit. The present value is determined using discounted cash flow model. In the current year the management identified that impairment indicators existed for the power plants owing to significant delay in commencement of commercial production. Accordingly the management performed a fair valuation of such assets with the help of an external valuation expert and based on such valuation recognised an impairment charge of Rs. 4200 lakhs during the year ended 31 March 2019.
• Evaluated the discount rate used with the help of an auditor's valuation expert including the underlying parameters such as risk free rate market risk premium and the beta factor) basis the publicly available information;
• Performed a sensitivity analysis for reasonably possible changes in the sales growth discount rate applied and the long-term growth rate;
The aforesaid assessment of the fair valuation and determination of the impairment charge required management to exercise significant judgement in respect of assumptions and estimates involved in forecasting future cash flows including extension of the concession period of such power generation plants. These assumptions also include useful life of assets achievement of certain operating capacity discount rates implied growth rates etc. Changes in the management forecasts or assumptions can impact the assessment of the discounted cash flows and consequently the valuation of such power plants and impairment charge determined by the management. • Tested the mathematical accuracy of the management's working; and
• Assessed the appropriateness of the Company's description of the accounting policy as stated in note 2.3 and the disclosures related to property plant and equipment in accordance with the applicable accounting standards.
A significant amount of audit effort was also required in this matter particularly as some of these assumptions are dependent on the economic factors and trading conditions in the markets in which the Company operates which involves high estimation uncertainty. Considering the significance of the amounts involved degree of judgement and subjectivity involved in the estimates and key assumptions used in determining the cash flows used in the impairment evaluation we have determined impairment of power generating plants as a key audit matter.
Emphasis of Matter
Considering this matter is fundamental to the understanding of the users of standalone financial statements we draw attention to note 3.1 of the accompanying standalone financial statements which describes the aforesaid significant estimates and assumptions used by the management for determining recoverable amount of the aforesaid cogeneration power plants with respect to the impairment assessment in accordance with the requirements of Ind AS 36.
Uncertainties relating to recoverability of contract revenue in excess of billing (other financial assets) and trade receivables Our audit work included but was not limited to the following:
• Obtained an understanding of the management's process for assessing the recoverability of contract revenue in excess of billing (other current assets) and trade
The Company as at 31 March 2019 has contract revenue in
excess of billing (other financial assets) and trade receivable of Rs. 13499.08 lakhs and Rs. 89474.71 lakhs respectively and has written off contract revenue in excess of billing and trade receivables of Rs. 8959.11 lakhs and Rs 18922.59 lakhs respectively during the current year as detailed in note 42 to the accompanying standalone financial statements. receivables the computation of provisioning and write-offs against these receivables and related accounting policies adopted by the management;
• Discussed with the management regarding steps taken for recovering the amounts and tested the design implementation and operating effectiveness of the controls that the Company has established in relation to revenue recognition and allowance for contract revenue in excess of billing and trade receivables;
Owing to the nature of operations of the Company and related customer profiles the Company has significant receivable balances and contract revenue in excess of billing that are long outstanding since the performance of the contract work by the Company. There are risks that not all these receivable balances will be recovered in full.
• Assessed the reasonability of judgements exercised and estimates made by the management in recognition of the contract revenue in excess of billing validating them with corroborating evidence;
The management assesses recoverability of these balances through evaluation of the ageing of accounts receivable and unbilled revenue prior collection experience and customer's financial conditions to ascertain the ultimate collectability of these receivables which involves significant management judgements and estimates.
• Tested the accuracy of ageing of contract revenue in excess of billing and trade receivables at year end on a sample basis;
• Enquired about the ongoing reconciliations with the customers for conversion of contract revenue in excess of billing into trade receivables for the balance receivables not written off;
Considering the materiality of the amounts involved uncertainty associated with the outcome of the negotiations/ discussions/ arbitration/ litigation and significant management judgements involved in the assessment of recoverability of long outstanding dues this area is considered as a key audit matter for the current year audit.
• Verified contractual arrangements to support management's position on the tenability of the receivables and recoverability of the balance receivables not written off;
• Evaluated the management's assessment of credit risk with respect to such receivables basis the past trends for significant long outstanding receivables; and
• Ensured appropriateness of disclosures made in the standalone financial statements with respect to the contract revenue in excess of billing trade receivables and provisioning thereof.
Recognition of contract revenue margin and contract costs Our audit of the recognition of contract revenue margin and contract costs and related receivables and liabilities included but were not limited to the following:
Refer note 23 for details of revenue recognized during the year. The Company's revenue primarily arises from construction contracts which is recognised as per the accounting policy described in note 2.3 to the accompanying standalone financial statements and which by its nature is complex given the significant judgements involved in the assessment of current and future contractual performance obligations.
• Evaluated the appropriateness of the Company's accounting policy for revenue recognition from construction contracts in accordance with Ind AS 115 ‘Revenue from Contracts with Customers;
• Assessed the design and implementation of key controls over the recognition of contract revenue and margins and tested the operating effectiveness of these controls;
Effective 1 April 2018 the Company has adopted Ind AS 115 Revenue from Contracts with Customers using the cumulative catch-up transition method. Accordingly the Company recognises revenue and margins based on the stage of completion which is determined on the basis of the proportion of value of goods or services transferred as at the Balance Sheet date relative to the value of goods or services promised under the contract. All the projects of the Company satisfy the criteria for recognition of revenue over time (using the percentage of completion method) since the control of the overall asset (property/ site / project) lies with the customer who directs the Company. Further the Company has assessed that it does not have any alternate use of these assets. • For a sample of contracts tested the appropriateness of amount recognized as revenue by evaluating key management judgements inherent in the determining forecasted contract revenue and costs to complete that drive the accounting under the percentage of completion method by performing following procedures:
- reviewed the contract terms and conditions;
- evaluated the identification of performance obligation of the contract;
The recognition of contract revenue contract costs and the resultant profit/loss therefore rely on the estimates in relation - evaluated the appropriateness of management's assessment that performance obligation was satisfied over time and consequent recognition of revenue using percentage of completion method;
to forecast contract revenue and the total cost. These contract estimates are reviewed by the management on a periodic basis. In doing so the management is required to exercise judgement in its assessment of the valuation of contract variations and claims and liquidated damages as well as the completeness and accuracy of forecast costs to complete and the ability to deliver contracts within contractually determined timelines. The final contract values can potentially be impacted on account of various factors and are expected to result in varied outcomes. - obtained an understanding of the assumptions applied in determining the forecasted revenue and cost to complete; and
- assessed the ability of the Company to deliver contracts within budgeted timelines and exposures if any to liquidated damages for late delivery.
Changes in these judgements and the related estimates as contracts progress can result in material adjustments to revenue and margins. As a result of the above judgments complexities involved and material impact on the related financial statement elements this area has been considered a key audit matter in the audit of the standalone financial statements. • Assessed that the disclosures made by the management with respect to revenue recognised during the year and adoption of new accounting standard for revenue recognition are in accordance with applicable accounting standards.

Information other than the Standalone Financial Statements and Auditor's Report thereon

10. The Company's Board of Directors is responsible for the other information. Theother information comprises the information included in the Annual Report but does notinclude the standalone financial statements and our auditor's report thereon. The AnnualReport is expected to be made available to us after the date of this auditor's report.

Our opinion on the standalone financial statements does not cover the other informationand we will not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.

When we read the Annual Report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with

Governance for the Standalone Financial Statements

11. The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the state of affairs (financial position) profit orloss (financial performance including other comprehensive income) changes in equity andcash flows of the Company in accordance with the accounting principles generally acceptedin India including the Ind AS specified under section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

12. In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

13. Those Board of Directors are also responsible for overseeing the Company'sfinancial reporting process.

Auditor's Responsibilities for the Audit of the Standalone

Financial Statements

14. Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith Standards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these standalone financial statements.

15. As part of an audit in accordance with Standards on Auditing we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for explaining our opinion on whether the company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

16. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

17. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.

18. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the standalone financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.

Other Matter

19. We did not audit the financial statements of four branches included in thestandalone financial statements of the Company whose financial statements reflects totalassets and net assets of Rs. 10042.39 lakhs and Rs. 951.50 lakhs respectively as at 31March 2019 and the total revenue and net cash inflows of Rs. 13811.41 lakhs andRs.419.15 lakhs respectively for the year ended on that date as considered in thestandalone financial statements. These financial statements have been audited by thebranch auditors whose reports have been furnished to us by the management and our opinionon the standalone financial statements in so far as it relates to the amounts anddisclosures included in respect of branches is based solely on the report of such branchauditors.

Further all of these branches are located outside India whose financial statementsand other financial information have been prepared in accordance with accountingprinciples generally accepted in their respective countries and which have been audited bybranch auditors under generally accepted auditing standards applicable in their respectivecountries. The Company's management has converted the financial statements of suchbranches from accounting principles generally accepted in their respective countries toaccounting principles generally accepted in India. We have audited these conversionadjustments made by the Company's management. Our opinion in so far as it relates to theamounts and disclosures of such branches is based on the report of branch auditors and theconversion adjustments prepared by the management of the Company and audited by us.

Our opinion on the standalone financial statements and our report on Other Legal andRegulatory Requirements below is not modified in respect of the above matter.

Report on Other Legal and Regulatory Requirements

20. As required by section 197(16) of the Act we report that the Company has not paidthe managerial remuneration to its directors in accordance with the provisions and limitslaid down under section 197 read with Schedule V of the Act. Also refer paragraph XI ofAnnexure A.

21. 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 A statement on the matters specified in paragraphs 3 and 4 of the Order.

22. Further to our comments in Annexure A as required by section 143(3) of the Act wereport that:

a) we have sought and except for the possible effects of the matters described in theBasis for Qualified Opinion section 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 effects/possible effects of the matters described in the Basis forQualified Opinion section in our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books andproper returns adequate for the purposes of our audit have been received from the branchesnot visited by us;

c) the reports on the accounts of the branch offices of the Company audited undersection 143(8) of the Act by the branch auditors have been sent to us and have beenproperly dealt with by us in preparing this report;

d) the standalone financial statements dealt with by this report are in agreement withthe books of account and with the returns received from the branches not visited by us;

e) except for the effects/possible effects of the matters described in the Basis forQualified Opinion section in our opinion the aforesaid standalone financial statementscomply with Ind AS specified under section 133 of the Act;

f) the six matters described in paragraph 3 4 7 and 9 under the Emphasis ofMatters/Basis for Qualified Opinion paragraph in our opinion may have an adverse effecton the functioning of the Company;

g) 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 on 31 March2019 from being appointed as a director in terms of section 164(2) of the Act;

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

i) we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 23 May 2019 as per Annexure B expressed unmodified opinion;

j) 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 note 40(a) to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position as at 31 March 2019;

ii. except for the effect/possible effects of the matters described in the Basis forQualified Opinion section the Company as detailed in note 41(h) to the standalonefinancial statements has made provision as at 31 March 2019 as required under theapplicable law or Ind AS for material foreseeable losses if any on long-term contracts.The Company does not have any derivative contracts;

iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended 31 March2019; and

iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Neeraj Sharma
Place : Gurugram Partner
Date : 23 May 2019 Membership No.:502103

Annexure A to the Independent Auditor's Report of even date to the members of A2Z InfraEngineering Limited on the standalone financial statements for the year ended 31 March2019

Annexure A

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 fixed assets comprising of ‘property plant andequipment' ‘capital work-in-progress' and ‘other intangible assets'.

(b) The Company has a regular program of physical verification of its property plantand equipment and capital work-in-progress under which property plant and equipment andcapital work-in-progress are verified in a phased manner over a period of three yearswhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. In accordance with this program certain Property plant andequipment and capital work-inprogress were verified during the year and no materialdiscrepancies were noticed on such verification.

(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 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 grant of such loans are not primafacie prejudicial 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 in respect of loans investments guarantees and security.

(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 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 customs duty of excise valueadded tax goods and services tax cess and other material statutory dues as applicablehave not been regularly deposited to the appropriate authorities and there have beensignificant delays in a large number of cases. Undisputed amounts payable in respectthereof which were outstanding at the year-end for a period of more than six months fromthe date they became payable are as follows:

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

Name of the statute Nature of the dues Amount (Rs. in lakhs) Period to which the amount relates Due Date Date of payment
Income Tax Act 1961 Tax deducted at source 909.13 March 2016 to August 2018 7th day of subsequent month Not paid yet
Chapter V of Finance Act1994 Service tax 5513.25 March 2016 to June 2017 5th of subsequent month (6th for online payment) Not paid yet
Central Goods and Services Tax Act 2017 Goods and services tax 1817.21 February 2018 to August 2018 20th of subsequent month Not paid yet
The Chhattisgarh Value Added Sales Tax Act 2003 VAT 15.02 June 2017 15th day of subsequent month Not paid yet
Employees Provident Fund and Miscellaneous Provisions Act 1952 Employee Provident fund 97.20 November 2015 to August 2018 15th day of subsequent month Not paid yet
Employee State Insurance Act 1948 Employee State Insurance 29.94 June 2016 to August 2018 21st day of subsequent month Not paid yet
Employee Welfare Fund Employee welfare fund 0.49 November 2016 to August 2018 25th day of subsequent month Not paid yet
Madhya Pradesh State Tax on Professions Trades Callings and Employment Act 1995 Professional Tax 11.78 July 2012 to August 2018 10th of subsequent month Not paid yet
West Bengal State Tax on Professions Trades Callings and Employment Act 1979 Professional Tax 0.97 April 2015 to August 2018 21st of subsequent month Not paid yet
Maharashtra State Tax on Professions Trades Callings and Employments Act 1975 Professional Tax 0.25 January 2017 to August 2018 30th of subsequent month Not paid yet
The Gujarat Panchayats Municipalities Municipal Corporation and State tax on Professions Traders Callings and Employments Act 1976 Professional Tax 0.03 May 2017 to August 2018 15th of subsequent month Not paid yet
The Karnataka Tax on Professions Trades Callings And Employment Act 1976 Professional Tax 0.03 May 2017 to August 2018 20th of subsequent month Not paid yet

(b) The dues outstanding in respect of income-tax sales-tax service-tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:

Statement of Disputed Dues

Name of the statute Nature of the dues Amount (Rs. in lakhs) Amount Paid Under Protest (Rs. in lakhs) Period to which the amount relates Forum where dispute is pending
Income Tax Act 1961 Demand made under section 153A and 153B 3269.81 Assessment years 2009-10 to 2013-14 Income Tax Appellate Tribunal Delhi
The Maharashtra Value Added Tax 2002 Value Added Tax 1801.79 - 2008-09 Maharashtra Sales Tax Tribunal
Value Added Tax 15.52 - 2009-10 Joint Commissioner (Appeal) Mumbai Maharashtra
Central Sales Tax 154.06 - 2009-10 Joint Commissioner (Appeal) Mumbai Maharashtra
Value Added Tax 22.88 - 2010-11 Joint Commissioner (Appeal) Mumbai Maharashtra
Central Sales Tax 225.99 - 2010-11 Joint Commissioner (Appeal) Mumbai Maharashtra
Central Sales Tax 17.92 - 2011-12 Joint Commissioner (Appeal) Mumbai Maharashtra
Central Sales Tax 19.88 - 2012-13 Sales Tax Tribunal Mumbai Maharashtra- Appeal
Value Added Tax 29.10 - 2012-13 Sales Tax Tribunal Mumbai Maharashtra- Appeal
Bihar Value Added Tax 2005 Value Added Tax 203.61 61.08 2012-13 Commissioner Commercial Tax Bihar
Value Added Tax 1644.31 125.00 2013-14 Commissioner Commercial Tax Bihar
Value Added Tax 83.55 - 2010-11 Assessing Officer Commercial Tax Bihar
Jharkhand Value Added Tax 2005 Value Added Tax 138.46 58.24 2008-09 to 2011-12 Commissioner Commercial Tax Ranchi Jharkhand
The West Bengal Value Added Tax 2003 Value Added Tax 653.11 50.00 2009-10 West Bengal Commercial Taxes Appellate & Revisional Board Kolkata
Value Added Tax 1019.00 175.00 2010-11 West Bengal Commercial Taxes Appellate & Revisional Board Kolkata
Central Sales Tax 54.13 2010-11 West Bengal Commercial Taxes Appellate & Revisional Board Kolkata
Central Sales Tax 229.16 - 2011-12 Additional Commissioner (Appeal) Sales Tax
Central Sales Tax 2.07 - 2014-15 Joint Commissioner (Appeals) Sales tax
Value Added Tax 192.72 - 2014-15 Joint Commissioner (Appeals) Sales tax
Andhra Pradesh Value Added Tax Act 2005 Value Added Tax 62.95 31.25 2010-11 Andhra Pradesh Sales Tax and VAT Appellate Tribunal Hyderabad
Haryana VAT Act 2003 Central Sales Tax 1930.50 - 2009-10 Sales tax Revisional Authority Gurgaon
The Madhya Pradesh VAT Act 2002 Central Sales Tax 103.25 45.34 2011-12 Sales tax Tribunal - Madhya Pradesh
Central Sales Tax 3.25 - 2013-14 Joint Commissioner Indore Madhya Pradesh
Central Sales Tax 11.84 1.19 2015-16 Assistant commissioner (Sales tax)
Jammu and Kashmir Value Added Tax Act 2005 Central Sales Tax 86.02 2012-13 Deputy Commissioner (Appeals) Sales tax
Central Sales Tax 64.66 - 2013-14 Deputy Commissioner (Appeals) Sales tax
Kerala VAT Act 2003 Central Sales Tax 219.38 - 2011-12 Hon'ble High Court of Kerala Ernakulam
The Karnataka Value Added Tax Act 2003 Value Added tax 4.46 - 2012-13 Deputy Commissioner- Audit Bangalore Karnataka

(viii)There are no dues payable to debenture-holders or government. The Company hasdefaulted in repayment of loans and borrowings to the following banks and financialinstitutions during the year which is detailed below:

Particulars

Default (in months)

Banks (0-3) (3-6) (6-12) (More than 12)
Allahabad Bank 578.32 - - -
Axis Bank 320.91 33.90 - -
DBS - - 81.53 9585.90
HSBC 161.41 81.15 59.22 427.55
IDBI Bank 46.15 - 140.67 358.70
Indusind Bank 115.15 - - -
Kotak Mahindra Bank 398.27 - - -
SCB 700.00 500.00 2500.00 -
State Bank of India 3298.07 445.83 1427.54 8443.62
Union Bank of India 244.95 - 0.11 0.07
Financial Institutions:
Edelweiss ARC- Yes Bank 563.28 58.03 230.18 -
Edelweiss ARC-ICICI Bank 1315.86 335.86 841.04 7542.92

(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). In our opinion the term loans were applied for thepurposes 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) The Company has paid managerial remuneration which is not in accordance with therequisite approval mandated by the provisions of Section 197 of the Act read with ScheduleV to the Act. The details of the same are as follows:

Payment made to Financial year Amount Paid/ provided in excess of limits prescribed (Rs. in lakhs) Amount due for Recovery as at March 312019 (Rs. in lakhs) Steps taken to secure the recovery of the amount Remarks (if any)
1. Managing Director 2012-13 94.54 The Company has obtained a confirmation from the Managing Director that such amount has been held in trust and will be repaid as per agreed plan. Amount recoverable pertains to non- grant of requisite approval by Central Government under the provision of 198 309 and 310 of erstwhile Companies Act 1956.
2013-14 94.94 74.93
2. Whole time Director cum Chief Executive Officer 2017-18 7.50 7.50 The Company has obtained a confirmation from Whole time Director cum CEO that such amount has been held in trust and will be repaid as per agreed plan. Amount recoverable pertains to excess remuneration paid to managerial personnel from the date of re-appointment till the date of abatement letter received from Central Government.
2018-19 9.00 9.00
3. Executive Director 2017-18 3.00 3.00 The Company has obtained a confirmation from Executive Director that such amount has been held in trust and will be repaid as per agreed plan.
2018-19 7.50 7.50

(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 Act where applicable and the requisite details have beendisclosed in the standalone financial statements etc. as required by the applicable IndAS.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures.

(xv) In our opinion the Company has not entered into any noncash transactions with thedirectors 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
Neeraj Sharma
Place : Gurugram Partner
Date : 23 May 2019 Membership No.:502103

Annexure B to the Independent Auditor's Report of even date to the members of A2Z InfraEngineering Limited on the standalone financial statements for the year ended 31 March2019

Annexure B

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 A2Z InfraEngineering Limited (‘the Company') as of and for the year ended 31 March 2019 wehave audited the internal financial controls over financial reporting (‘IFCoFR') ofthe 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 the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (the Guidance Note) issued by the Institute of Chartered Accountants of India(‘ ICI A'). These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of the Company's business including adherence to theCompany's policies the safeguarding of its assets the prevention and detection of fraudsand 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 theInstitute of Chartered Accountants of India (‘ICAI') and deemed to be prescribedunder Section 143(10) of the Act to the extent applicable to an audit of IFCoFR and theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (‘theGuidance Note') issued by the ICAI. Those Standards and the Guidance Note require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether adequate IFCoFR were established and maintained and if suchcontrols operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes 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 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 the IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.

Opinion

8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such controls were operating effectivelyas at 31 March 2019 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'.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Neeraj Sharma
Place : Gurugram Partner
Date : 23 May 2019 Membership No.:502103

.