To the Members of
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone IndAS financial statements of CESC Limited ("theCompany") which comprise the Balance Sheetas at March 31 2020 the Statement ofProfit and
Loss including the statement of Other ComprehensiveIncome the Cash Flow Statement and the Statementof Changes in Equity for the year thenended and notes to the standalone Ind ASfinancial statements including a summary of significantaccounting policies and other explanatory information.
In our opinion and to the best of ourinformation and according to the explanations givento us the aforesaid standalone Ind AS financialstatementsgive the information required by the CompaniesAct 2013 as amended ("the Act") inthe manner so required and give a trueand fair view in conformity with the accountingprinciples generally accepted in India of thestate of affairs of the Company as atMarch 31 2020 its profit including othercomprehensive income its cash flows and thechanges in equity for the year ended onthat date.
Basis for Opinion
We conducted our audit of the standalone IndAS financial statements in accordance with theStandards on Auditing (SAs) as specified undersection . Our responsibilities under those 143(10)oftheActStandards are further described in the Auditor'sResponsibilities for the Audit of the StandaloneInd AS Financial Statements' section of ourreport. We are independent of the Companyin accordance with the Code of Ethics'issuedby the Institute of Chartered Accountants ofIndia together with the ethical requirements thatare relevant to our audit of the financialstatements under the provisions of the Actand the Rules thereunder and we have fulfilledour other ethical responsibilities in accordancewith these requirements and the Code of Ethics.We believe that the audit evidence we haveobtained is sufficient and appropriate to providea basis for our audit opinion on thestandalone Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that inour professional judgment were of most significancein our audit of the standalone Ind ASfinancial statements for the financial year endedMarch 31 2020. These matters were addressedin the context of our audit of thestandalone Ind AS financial statements as awhole and in forming our opinion thereonand we do not provide a separate opinionon these matters. For each matter below ourdescription of how our audit addressed thematter is provided in that context.
We have determined the matters described belowto be the key audit matters to be communicatedin our report. We have fulfilled the responsibilitiesdescribed in the Auditor's responsibilities for theaudit of the standalone Ind AS financial statementssection of our report including in relationto these matters. Accordingly our audit includedthe performance of procedures designed to respondto our assessment of the risks of materialmisstatement of the standalone Ind AS financialstatements. The results of our audit proceduresincluding the procedures performed to address thematters below provide the basis for our auditopinion on the accompanying standalone Ind ASfinancial statements.
1. Accrual of regulatory income and corresponding asset / liability
(as described in note 39 of the standaloneInd AS financial statements)
Key Audit Matter:
The company recognizes regulatory income/ assets/liability basis its understanding and interpretationofTariffordersand regulationsnotified by the West Bengal ElectricityRegulatory Commission (WBERC) which are subjectmatter of Annual Performance Review (APR) andwill beadjustedintariffs to be notified in thefuture years. Management exercises judgement in estimatingsuch amounts using past experience from theissued Tariff/APR orders including interpretation ofthe regulations. Such regulatory deferral balancesare discounted over an estimated period ofrecovery using an appropriate discounting rate.
In consideration of the significant value ofregulatory balances complexity and high degree ofestimation involved in computation thereof and pendingannual performance reviews we identifiedaccrual auditmatter.
How our audit addressed the key audit matter:
Our audit procedures included the following:
We considered the Company's accounting policieswith respect to accrual for regulatory deferralsand assessing compliance with Ind AS 114 "RegulatoryDeferral Accounts".
We have understood and carried out testingof the design and implementation of key financialcontrols related to accounting valuation and recoverabilityof such regulatory balances and its disclosure inthe financialstatements of the Company.
We discussed with the management on thekey assumptions and estimates used for recognitionof these regulatory balances and corroborated themwith the applicable regulatory provisions APR ordersTariff orders and underlying records of the Company.
We discussed with the management on theconsistency of its key assumptions and basis ofestimation for all the years for which APRassessments are pending to be completed and alsoverified the arithmetical accuracy of such workings.
We enquired from the management for notificationsand correspondences with the regulator on the pendingAPR assessments.
We audited and discussed with the managementthe impact considered in the financial statementsin respect of APR order received during theyear.
We also assessed the discounting rate andthe estimated period of recovery considered by themanagement with reference to the APR process andthe tariff regulations.
We have assessed the disclosures in accordancewith the requirements of Ind AS 114 "RegulatoryDeferral Accounts".
2. Investments in subsidiaries of the Company
(as described in note 7 of the standaloneInd AS financial statements)
Key Audit Matter:
The company carries its investment in subsidiariesat cost as per the applicable Ind-AS standardand performs an impairment assessment wherever required.
For these assessments the company involves avaluer to determine the recoverable value ofsuch investments using the discounted cash flowmethod of valuationwhich is highly sensitive tochanges in inputs used in valuation and involvesjudgement due to inherent uncertainty in theassumptions used for forecasting the future cash
Accordingly the impairment assessment of investmentsin
Subsidiary Companies was determined to be akey audit matter in our audit of thestandalone Ind AS financial statements.
How our audit addressed the key audit matter:
Our audit procedures included the following:
We evaluated the objectivity valuation specialistinvolved for such valuation and obtainedconfirmation of independence from them.
We discussed with the management the methodologyand assumptionsused in the valuation including discountexpected growth rates and terminal growth rates.
We obtained suitable management representation onthe projections used in the valuation.
We read the audited financial statements ofthese subsidiary companies since the year of commencementof their operations. We discussed with the managementthe reported improvement in performance of thesecompanies over the years.
We tested the arithmetical accuracy of thefinancial projections
We have determined that there are no otherkey audit matters to communicate in our report.
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsiblefor the other information. The other informationcomprises the Directors
Report Management Discussion and Analysis Reporton Corporate
Governance Additional Shareholder Information Report onCSR
Business Responsibility Report and Statement containingsalient features of the financial Joint Venturesbut does not include the standalone Ind ASfinancial statements and our auditor's report thereon.
Our opinion on the standalone Ind AS financialstatements does not cover the other informationand assurance conclusion thereon.
In connection with our audit of the standaloneInd statements our responsibility is to readthe other information and in doing so considerwhether such other information is materially inconsistentwith the financial statements or our knowledgeobtained in the audit or otherwise appearsto be materially misstated. If based on thework we have performed we conclude that thereis a material misstatement of this other informationweare required to report that fact. We havenothing to report in this regard.
Responsibilities of Management for the Standalone Ind AS . Financial Statements
The Company's Board of Directors is responsiblefor the matters stated in section134(5) ofthe Act with respect to the preparation ofthese standalone Ind AS fair view of thefinancial other comprehensive income cash flowsand changes in equity of the Company inaccordance with the accountingprinciples generally acceptedin India including the Indian Accounting competenceoftheexternalStandards (Ind AS) specified under section 133of the Act read with the Companies (IndianAccounting Standards) Rules 2015 as amended. Thisresponsibility also includes maintenance of adequateaccountingrecords in accordance with the provisionsof the Act for safeguarding of the assetsof the Company and for preventing and detectingfrauds and other irregularities; selection and applicationof appropriate accounting policies; making judgmentsand estimates that are reasonable and prudent;and the design implementation and maintenance ofadequate internal futurecashflowsandthevariousassumptions financialcontrols that were operating effectively for ensuringthe accuracy and completeness of the accountingrecords relevant to the preparation and presentationof the standalone Ind AS financial statementsthat give a true and fair view andare free from material misstatement whether dueto fraud or error.
In preparing the standalone Ind AS financialstatements management is responsible for assessingthe Company's ability to continue as a goingconcern disclosing as applicable matters relatedto going concern and using the going concernbasis of accounting unless management either intendsto liquidate the Company or to cease operationsor has no realistic alternative but to doso.
Those Board of Directors are also responsiblefor overseeing the Company's financial reportingprocess.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
assurance about whether Our the standalone IndAS financial statements as a whole are freeersfrom material misstatement whether due to fraudor error and to issue an auditor's reportthat includes our opinion. Reasonable assurance isa high level of assurance but is nota guarantee that an audit conducted in accordancewith SAs will always detect a material misstatementwhen it exists. Misstatements can arise fromfraud or error and are considered materialif individually or in the aggregate theycould reasonablybeexpectedtoinfluencethe economic decisions ofusers taken on the basis of these standaloneInd AS financial statements.
As part of an audit in accordance withSAs we exercise professional judgment and maintainprofessional skepticism throughout the audit. Wealso:
Identify andassess the risks of material misstatementof the standalone Ind AS financial statements whetherdue to fraud or error design and performaudit procedures responsive to those risks and obtainaudit evidence that is sufficient and appropriateto provide a basis for our opinion. Therisk of not detecting a material misstatement resultingfrom fraud is higher than for one resultingfrom error as fraud may involve collusion forgeryintentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal controlrelevant to the audit in order to design auditprocedures that are appropriate in the circumstances.Under section 143(3)(i) of the Act we arealso responsible for expressing our opinion onwhether the Company has adequate internal financialcontrols with reference to financial statements inplaceandtheoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policiesused and the reasonableness of accounting estimatesand related disclosures made by management.
Conclude on the appropriateness of management'suse of the going concern basis of accountingand based on the audit evidence obtained whethera material uncertainty exists related to events orconditionsthat may cast significant doubt on theCompany's ability to continue as a going concern.If we conclude that a material uncertainty existswe are required to draw attention in our auditor'sreport to the related disclosures in the financialstatements or if such disclosures are inadequateto modify our opinion. Our conclusions arebased on the audit evidence obtained up tothe date of our auditor's report. However futureevents or conditions may cause the Company tocease to continue as a going concern.
Energising Lives -Since 1899
Evaluate the overall presentation structureand content of the standalone Ind AS financialstatements including the disclosures and whetherthe standalone Ind AS financial statements representthe underlying transactions and events in amanner that achieves fair presentation.
We communicate with those charged with governanceregarding matt the planned scope and timingof the audit amongother and significant auditfindingsincluding any significant deficiencies in internalcontrol that we identify during our audit.
We also provide those charged with governancewith a statement that we have complied withrelevant ethical requirements regarding independence andto communicate with them all relationships andother matters that may reasonably be thoughtto bear on our independence and where applicablerelated safeguards.
From the matters communicated with those chargedwith governance we determine those matters thatwere of most significance in the audit ofthe standalone Ind AS financial statements forthe financial year ended March therefore thekey audit matters. We describe these mattersin our auditor's report unless law or regulationprecludes public disclosure about the matter orwhen in extremely rare circumstances we determinethat a matter should not be communicated inour report because the adverse consequences ofdoing so would reasonably be expected to outweighthe public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report)Order 2016 ("the Order") issued by theCentral Government of India in terms of sub-section(11) of section 143 in the "Annexure 1"a statement on the matters specified paragraphs 3and 4 of the Order.
2. AsrequiredbySection 143(3) ofthe Act report that:
(a) We have sought and obtained all the informationexplanations which to the best of our knowledgeand belief were necessary for the purposes ofour audit;
(b) In our opinion proper books of accountas required by law have been kept by theCompany so far as it appears from our examinationof those books;
(c) The Balance Sheet the Statement of Profitand Loss including the Statement of Other ComprehensiveIncome the Cash Flow Statement and Statement ofChanges in Equity dealt with by this Reportare in agreement with the books of account;
(d) In our opinion the aforesaid standalone IndAS financial statements comply with the Accountingspecified under Section133 of the Act read withCompanies (Indian Accounting Standards) Rules 2015as amended;
(e) On the basis of the written representationsreceived the directors as on March 31 2020taken on record by the Board of Directorsnone of the directors is disqualified as onMarch 31 2020 from being appointed as adirector in terms of Section 164 (2) of theAct;
(f) With respect to the adequacy of the internalfinancial controls over financial reporting of theCompany with reference to these standalone Ind ASfinancial and the operating effectiveness of suchcontrols refer our separate Report in "Annexure2" to this report;
(g) In our opinion the managerial remuneration forthe year ended March 31 2020 has been paid/ provided by the Company to its directorsin accordance with the provisions of section 197read with Schedule V to the Act;
(h) With respect to the other matters to beincluded in the Auditor's Report in accordance withRule 11 of the Companies (Audit and Auditors)Rules 2014 as amended in our opinion andto the best of our information according tothe explanations given to us:
i. The Company has disclosed the impact ofpending litigations on its financial position inits Ind AS financial standalone Ind AS financialstatements;
ii. The Company has made provision as requiredunder the applicablelaworaccountingstandards for material foreseeablelosses if any on long- term contracts includingderivative contracts in the standalone Ind AS financialstatements;
iii. There has been no delay in transferringamounts required to be transferred to the InvestorEducation and Protection Fund by the Company.
Annexure 1' to Independent Auditors' Report
Annexure 1 referred to in paragraph 1 of the section on "Report on other legal andregulatory requirements" of our report on even date
i. (a) The Company has maintained proper recordsshowing full particulars including quantitative detailsand situation of fixed assets.
(b) All fixed assets except those in distributionsystem for which we have been informed thatphysicalverification is not possible have been physicallyverified by the management according to phased programmedesigned to cover all items over a periodof three years which in our opinion isreasonable having regard to the size of theCompany and the nature of its assets. Pursuantto the programme a portion of the fixed assetshas been physicallyverifiedby the management during theyear and no material discrepancies were noticed onsuch ation. verific
(c) According to the information and explanationsgiven by the management the title deeds ofimmovable properties included in fixed assets areheld in the name of the Company except forland aggregating to Rs. 199.27 crore of whichthe lease deeds have expired. As explainedto us the Company is in the process ofrenewal of expired lease deeds.
ii. The inventory has been physically verified bythe management during the year. In our opinionthe frequency of verification is reasonable. No materialdiscrepancies were noticed on such physical verification.Inventorieslying withthirdpartieshave substantially been confirmedby themas at March 31 2020 and no material discrepancieswere noticed in respect of such confirmations.
iii. According to the information and explanationsgiven to us the Company has not granted anyloans secured or unsecured to companies firmsLimited Liability Partnerships or other parties coveredin the register of the Companies Act 2013.Accordingly the provisions of clause 3(iii) (a)(b) and (c) of the Order are not applicableto the Company and hence not commented upon.
iv. In our opinion and according to the informationand explanations given to us the Company hasnot to directors / to a company in whichthe Director is interested to which provisions ofsection 185 of the Companies Act 2013 applyand hence not commented upon. Provisions ofsection 186 of the Companies Act 2013 inrespect of loans and advances given investmentsmade and guarantees and securities given have beencomplied with by the Company. given by themanagement the
v. The Company has not accepted any depositswithin the meaning of Sections 73 to 76 ofthe Act and the Companies (Acceptance of Deposits)Rules 2014 (as amended). Accordingly the provisionsof clause 3(v) of the Order are notapplicable.
vi. We have broadly reviewed the books of accountmaintained by the Company pursuant to the rules madeby the Central Government for the maintenance ofcost records under section 148(1) of the CompaniesAct 2013 related to the generation and distributionof electricity and are of the opinion thatprima facie the specified accounts and recordshave been made and maintained. We have nothowever made a detailed examination of the same.
vii. (a) The Company is regular in depositing withappropriate authorities tatutory dues including providentundisputeds fund employees' state insurance income-taxsales-tax service tax duty of custom dutyof excise value added tax goods and servicetax cess and other statutory dues applicableto it.
(b) According to the information and explanationsgiven to us no undisputed amounts payable inrespect of provident fund employees' state insuranceincome-tax service tax sales-tax duty of customduty of excise value added tax goods andservice tax cess and other statutory dueswere outstanding at the year end for a periodof more than six months from the date theybecame payable.
(c) According to the records of the Companythe dues of income-tax sales-tax service tax dutyof custom duty of excise value added taxgoods and service tax and cess on accountof any dispute are as follows:
|Name of the Statute ||Nature of the Dues ||Amount (Rs. In crores) ||Period to which the amount relates ||Forum where the dispute is pending |
|West Bengal Sales Tax Act 1962 ||Sales Tax on Meter Rent ||0.30 ||1992-93 ||Hon'ble High Court of Calcutta. |
|The Customs 19.38 2011-12 and maintained under section 189 Customs Act 1962 ||Duty || ||2012-13 ||Customs Excise and Service Tax Appellate Tribunal. |
viii. In our opinion and according to the informationexplanations given by the management the Companyhas loans not defaulted in repayment of loansor borrowing from banks. There was no repaymentdue to debenture holders during the year. TheCompany did not have any outstanding loansor borrowings in respect of a financialinstitutionorGovernment during the year.
ix. In our opinion and according to the informationand has explanations utilized the monies raised byway of debt instruments in the nature of non-convertibledebenturesand term loans for the purposes for whichthey were raised. The Company has not raisedmonies by way of initial public offer orfurther public offer.
x. Based upon the audit procedures performed forthe purpose of reporting the true and fairview of the financial statements and according tothe information andexplanationsgiven by the managementwe report that no fraud by the companyor no material fraud on the company by theofficers and employees of the Company has beennoticed or reported during the year.
xi. According to the information and explanationsgiven by the management the managerial remunerationhas been paid / provided in accordance withthe requisite approvals mandated with Schedule Vto the bytheprovisions of section Companies Act2013.
xii. In our opinion the Company is not anidhi company. Therefore the provisions of clause3(xii) of the order are not applicable tothe Company and hence not commented upon.
xiii. According to the information and explanationsgivenby the management transactions with the relatedparties are in compliance with section where applicableand the details have been disclosed in thenotes to the financial statements as requiredby the applicable accountingstandards.
xiv. According to the information and explanationsgiven to us and of the balance onanoverallexaminationsheet the company has not madeanypreferentialallotmentor private placement of shares or fully orpartly convertible debentures during the year underreview and hence reporting requirements underclause 3(xiv) are not applicable to the companyand not commented upon.
xv. According to the information and explanations .management the Company has not entered into anynon-cash transactions with directors or persons connectedwith him as referred to in section 192 ofCompanies Act 2013.
xvi. According to the information and explanationsgiven to us the provisions of section 45-IAof the Reserve Bank of India Act 1934 arenot applicable to the Company.
Annexure 2' to Independent Auditors' Report
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE IND ASFINANCIAL STATEMENTS OF CESC LIMITED
Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controlsover financial reporting 31 2020 ofCESC inconjunction with our audit of the standaloneInd AS financial statements of the Companyfor the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishingand maintaining internal financial controls basedon the internal control over financial reportingcriteria established by the Company considering theessential components of internal control stated inthe Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by theInstitute of Chartered Accountants of India. Theseresponsibilities implementation and maintenance of adequateinternal financial controls that were operating effectivelyfor ensuring the orderly and efficient conductof its business including adherence to Company'spolicies the safeguarding of its assets theprevention and detection of frauds and errorsof the accounting records and the timelyfinancialinformation as required under the CompaniesAct 2013.
Our responsibility is to express an opinionon the Company's internal financial controls overfinancial reporting with reference to these standaloneInd AS financial statements based on our audit.We conducted our audit in accordance withthe Guidance Note on Audit of Internal FinancialControls Over Financial Reporting as specified undersection 2013 to the extent applicable toan audit of internal financial controls Institutof Chartered Accountants of andbothissuedbythe India.Those Standards and the Guidance Note requirethat we comply with ethical requirements andplan and perform the audit to obtain reasonableassurance about whether adequate internal financialcontrols over financial reporting with referenceto these standalone Ind AS financial statementswas established and maintained and if suchcontrols operated effectively in material respects.
Our audit involves performing procedures to obtainaudit evidence about the adequacy of the internalfinancial controls over financial reporting withreference to these standalone Ind AS financialstatements and their operating effectiveness. Ouraudit of financial controls over financial reportingincluded obtaining understanding of internal financialcontrols over financial with reference to thesestandalone Ind AS financialstatements assessing therisk that a material weakness exists andtesting and evaluating the design and operatingeffectiveness of internal control based on theassessed risk. The procedures selected depend onthe auditor's judgement including the assessmentof the risks of material misstatement of thefinancialstatements Limited("theCompany")asofMarch whetherdue to fraud or error.
We believe that the audit evidence we haveobtained is sufficient and appropriate to providea basis for our audit opinion on theinternal financial controls over financial reportingwith reference to these standalone Ind ASfinancial
Meaning of Internal Financial Controls Over Financial Reporting with Reference to theseStandalone Ind AS Financial Statements
A company's internal financial control over financialreporting with reference to these standalone IndAS financial is a process designed to providereasonable includethedesign assurance regarding the reliabilityof financial reporting financial statements for externalpurposes in accordance with generally accepted accountingprinciples. A company's internal financial controlover financial reporting with reference to theseaccuracy standalone completeness Ind AS financial statementsincludes those policies and procedurespreparation thatofreliable (1) pertain to the maintenance ofrecords that in reasonable detail accurately andfairly reflect the transactions and dispositionsof the assets of the company; (2) reasonableassurance that transactions are recorded as necessaryto permit preparation of financial statements inaccordance with generally accepted accounting principlesand that receipts and expenditures of thecompany are being made only in accordancewith authorisations of management and directors and(3) provide reasonable assurance regarding preventionor timely detection of the company's assets(the"GuidanceNote")andthe StandardsonAuditing that couldhave a material effect on the financial143(10)oftheCompaniesActstatements.
Inherent Limitationsof Internal Financial Controls Over Financial Reporting withReference to these Standalone Ind AS Financial
Because of the inherent limitations of internalfinancial controls over financial reporting withreference to these standalone Ind AS financialstatements including the possibility of collusionor improper management override of controls materialmisstatements due to error or fraud may occurand not be detected. Also projections ofany evaluationof the internal financial controlsover financial reporting with reference to thesestandalone Ind AS financial statements to futureperiods are subject to the risk that theinternal financial control over financial reportingwith reference to these standalone Ind ASfinancial become inadequate because of changes inconditionsor that the degree of compliance withthe policies or procedures may deteriorate.
In our opinion the Company has in allmaterial respects adequate internal financial controlsover financial reporting with reference to thesestandalone Ind AS financial statements and suchinternal financial controls over financial reportingwith reference to these standalone Ind ASfinancial as at March 31 2020 based onthe internal control over financial reporting criteriaestablished by the Company considering the essentialcomponents of internal control stated in theGuidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.