GAIL (India) Ltd.
|BSE: 532155||Sector: Others|
|NSE: GAIL||ISIN Code: INE129A01019|
|BSE 14:49 | 10 Jul||102.40||
|NSE 14:44 | 10 Jul||102.30||
|Mkt Cap.(Rs cr)||46,184|
|Mkt Cap.(Rs cr)||46183.84|
GAIL (India) Ltd. (GAIL) - Auditors Report
Company auditors report
To the Members of GAIL (India) Limited
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statementsof GAIL (India) Limited (the Company) which comprise the Balance Sheet as atMarch 31 2019 the Statement of Profit and Loss (including Other Comprehensive Income)the Statement of Changes in Equity the Statement of Cash Flows for the year then endedand notes to the financial statements including a summary of significant accountingpolicies and other explanatory information.
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone Ind AS financial statements give theinformation required by the Companies Act 2013 (the Act) in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019its profit including other comprehensive income changes in equity and its cash flows forthe year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing(SAs) specified under section 143(10) of the Act. Our responsibilities under thoseStandards are further described in the Auditors' Responsibilities for the Audit ofthe Standalone Ind AS Financial Statements section of our report. We are independent ofthe Company in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India (ICAI) together with the ethical requirements that arerelevant to our audit of the standalone Ind AS financial statements under the provisionsof the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Emphasis of Matter
We draw attention to the following matters in the Notes to thefinancial statements:
1. Note No: 33 (c) - regarding various provisional transportationtariff orders issued by Petroleum and Natural Gas Regulatory Board (PNGRB) these ordershave been contested by the Company at Appellate Tribunal for Electricity (APTEL) and alsocertain customers have challenged these orders of PNGRB in Court of Law. Adjustment if anywill be recognized as and when matter is finally decided.
2. Note no. 56 pending opinion of Expert Advisory Committee (EAC) ofICAI with respect to applicability of provisions of Ind-AS 109 (Financial instruments) foraccounting of embedded derivative in certain contracts entered into by the Company throughinternational competitive bidding the Company has not considered such transaction asembedded derivatives. Any adjustment if any will be recognized as and when the EAC opinionis received.
3. Note no. 29 (I) (a) (iii) regarding CESTAT order confirming thedemand for the differential amount by the Central Excise Department in the matterpertaining to classification of Naphtha' manufactured by the Company of Rs.2888.72 crore including applicable penalty and interest thereon. Considering the meritsof the case Company has filed an appeal before the Hon'ble Supreme Court. Based onthe legal opinion obtained the Company does not foresee any probable outflow in thematter and accordingly has disclosed the same under contingent liability.
4. Note No. 48 (ii) regarding subsequent investment of Rs. 143.01 crorein equity and Rs. 252 crore in preference shares of a joint venture Company Konkan LNGPrivate Limited (KLPL') as approved by Board of Directors of the Companytowards construction of Breakwater and other business requirements of KLPL. Investment inKLPL of Rs. 139.75 crore stood fully impaired in view of accumulated losses and erodednet-worth upto March 31 2018. In order to assess impact of further infusion of capital asaforesaid the Company has during the year carried out fresh impairment study of KLPLwhich projects positive future cash flows after commencement of operation of breakwaterand accordingly a sum of Rs. 2.18 crore has been reversed from the aforesaid Impairmentprovision.
Our opinion is not modified in respect of above matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone Ind AS financial statements ofthe current period. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. We have determined the mattersdescribed below to be the key audit matters to be communicated in our report
Information Other than the Standalone Ind AS Financial Statements andAuditors' Report Thereon
The Company's Board of Directors is responsible for thepreparation of other information. The other information comprises the Director'sreport Corporate Governance report Business Responsibility report and ManagementDiscussion and Analysis of Annual report but does not include the Standalone Ind ASFinancial Statements and our report thereon. The Directors report Corporate Governancereport Business Responsibility report and Management Discussion and Analysis of Annualreport is expected to be made available to us after the date of this auditors'report.
Our opinion on the Standalone Ind AS Financial Statements does notcover the other information and we will not express any form of assurance conclusionthereon.
In connection with our audit of the Standalone Ind AS FinancialStatements our responsibility is to read the other information identified above when itbecomes available to us and in doing so consider whether the other information ismaterially inconsistent with the Standalone Ind AS Financial Statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
When we read such other information as and when made available to usand if we conclude that there is a material misstatement therein we are required tocommunicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with Governance forthe Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation of these standaloneInd AS financial statements that give a true and fair view of the financial positionfinancial performance including other comprehensive income changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the Indian Accounting Standards (Ind AS) prescribed under section 133 ofthe Act read with the Companies (Indian Accounting Standards) Rules 2015 as amended. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation 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 Ind AS financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Those charged with governance are also responsible for overseeing theCompany's financial reporting process.
Auditors' Responsibilities for the Audit of the Standalone Ind ASFinancial Statements
Our objectives are to obtain reasonable assurance about whether thestandalone Ind AS financial statements as a whole are free from material misstatementwhether due to fraud or error and to issue an auditors' report that includes ouropinion. Reasonable assurance is a high level of assurance but is not a guarantee that anaudit conducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone Ind AS financialstatements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditors' report to therelated disclosures in the standalone Ind AS financial statements or if such disclosuresare inadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditors' report. However future events or conditionsmay cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone Ind AS financial statements including the disclosures and whether thestandalone Ind AS financial statements represent the underlying transactions and events ina manner that achieves fair presentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalone IndAS financial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditors' report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.
We draw attention to the following matters in the Notes to thefinancial statements:
1. Note no. 45(B)(iii)- regarding inclusion of proportionate share inJointly Controlled Operations in the standalone financial statements of the Company. Thetotal proportionate share includes Assets of Rs. 1567.91 crore Liabilities of ` 430.75crore Expenditure of ` 365.48 crore Income of ` 639.35 crore along with the elementsmaking up the Cash Flow Statement and related disclosures. The aforesaid amounts have beenincluded based on the unaudited statements of these entities. Management is of view thatthis will not have a material impact on the Company's financial statements.
Our opinion is not modified in respect of above matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) Order 2016(the Order) issued by the Central Government of India in terms of Section143(11) of the Act and on the basis of such checks of the books and records of theCompany as we considered appropriate and according to the information and explanationgiven to us we give in Annexure A a statement on the matters specified inparagraphs 3 and 4 of the said Order to the extent applicable.
2. As required by Comptroller and Auditor General of India throughdirections/sub-directions issued under Section 143 (5) of the Companies Act 2013 on thebasis of written representation received from the management we give our report on thematter specified in the Annexure B attached.
3. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;
(b) 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;
(c) The Balance Sheet the Statement of Profit and Loss (including theOther Comprehensive Income) the Statement of Changes in Equity and the Cash FlowStatement dealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid standalone Ind AS financialstatements comply with the Indian Accounting Standards (Ind AS) prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended.;
(e) Pursuant to the Notification No. GSR 463(E) dated 5th June 2015issued by the Ministry of Corporate Affairs Government of India provisions ofsub-section (2) of Section 164 of the Companies Act 2013 are not applicable to theCompany being a Government Company.;
(f) We are enclosing herewith a report in Annexure C forour opinion on adequacy of internal financial controls system in place in the Company andthe operating effectiveness of such controls;
(g) Pursuant to the Notification No. GSR 463(E) dated 5th June 2015issued by the Ministry of Corporate Affairs Government of India provisions of Section197 of the Companies Act 2013 are not applicable to the Company being a GovernmentCompany; and
(h) With respect to the other matters to be included in theAuditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according to theexplanations given to us:
i. The Company has disclosed the impact of pending litigations on itsfinancial position in its standalone Ind AS financial statements Refer Note 29(l)(a) tothe financial statements;
ii. The Company has made provision as required under the applicablelaw or accounting standards for material foreseeable losses if any and to the extentascertainable on long-term contracts including derivative contracts.
iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
ANNEXURE - A TO THE INDEPENDENT AUDITORS' REPORT
Referred to in paragraph 1 to Report on Other legal andregulatory requirements of the Independent Auditors' Report of even date to themembers of GAIL (INDIA) LIMITED on the Standalone Ind AS Financial Statements for the yearended March 31 2019.
(b) According to information and explanation given to us there is aregular programme of physical verification of these fixed assets by the management whichin our opinion is reasonable having regard to the size of the Company and nature of itsassets. As informed to us no material discrepancies were noticed on such verification.
(c) As informed to us and as verified by us during the course of ouraudit the title deeds of immovable properties are held in name of the Company except forthe cases as follows.
(ii) As informed to us physical verification of inventory has beenconducted at reasonable intervals by the management except the store and spares lying withthe third parties. We have been explained that the stock of gas at the end of the year hasbeen taken with reference to reading of Turbine Flow Meter/Gas Chromatograph installed atTerminals Stock of LPG/Pentane/SBP Solvent are determined with reference to Tank LevelGauge measurement which are converted into tonnage by measurement of density and applyingcorrection factor for temperature. LPG vapors volume is converted to tonnage by standardformulae. As informed to us no material discrepancies were noticed on physicalverification of inventory.
(iii) As informed to us the Company has granted unsecured loans tocompanies covered in the register maintained under section189 of the Companies Act 2013.In respect of such loans: a) In our opinion and as informed to us the terms and conditionsof the grant of such loans are not prejudicial to the Company's interest.
b) The schedule of repayment of principal and payment of interest hasbeen stipulated and repayments or receipts of principal amounts and interest have beenregular as per stipulations.
c) As informed to us no amount of loan is overdue as at end of theyear for a period more than ninety days.
(iv) According to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of Companies Act 2013 inrespect of loans/investment/guarantee/security granted during the year.
(v) The Company has not accepted any deposits in terms of thedirectives issued by the Reserve Bank of India and the provisions of sections 73 to 76 orany other relevant provisions of the Companies Act 2013 and the rules framed there under.
(vi) We have broadly reviewed the accounts and records maintainedby the Company pursuant to the Rules made by the Central Government for the maintenance ofcost records under sub-section (1) of Section 148 of the Companies Act 2013 read withCompanies (Cost Records & Audit) Rules 2014 and we are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We have nothowever made detailed examination of the records with a view to determine whether theyare accurate and complete.
(vii) (a) According to records of the Company and information andexplanation given to us the Company has generally been regular in depositing undisputedstatutory dues including provident fund employees' state insurance income-taxsales-tax service tax duty of customs duty of excise value added tax cess Goods andService Tax and any other statutory dues with the appropriate authorities. According toinformation and explanation given to us there are no outstanding statutory dues asreferred above as at the last day of the financial year under audit for a period of morethan six months from the date they became payable.
(b) As certified by the management on which we have relied upon thedues of income tax or sale tax or service tax or duty of custom or duty of excise or valueadded tax or cess or Goods and Service Tax which have not been deposited on account ofdispute or deposited under protest and the forum where the dispute is pending are givenbelow:
(viii) Based on our audit procedures and in accordance with theinformation and explanations given to us by the management the Company has not defaultedin repayment of dues to a bank or government or bonds holders.
(ix) The Company has not raised any money by way of initial publicoffer or further public offer or further public offer (including debt instrument). Asinformed to us no term loans have been obtained during the year.
(x) According to the information and explanations given to us and asrepresented by the Management and based on our examination of the books and records of theCompany and in accordance with generally accepted auditing practices in India no case offrauds by the Company or any fraud on the Company by its officers or employees has beennoticed or reported during the year.
(xi) As per notification no. GSR 463(E) dated 5 June 2015 issued by theMinistry of Corporate Affairs Government of India Section 197 is not applicable to theGovernment Companies. Accordingly provisions of clause 3 (xi) of the Order are notapplicable to the Company.
(xii) The Company is not a nidhi Company and therefore clause 3(xii) ofthe Order related to such companies is not applicable to the Company.
(xiii) In our opinion the Company has complied with provisions ofsections 177 and 188 of
Companies Act 2013 in respect of transactions with the related partiesand the details have been disclosed in the Financial Statements as required by theapplicable accounting standards.
(xiv) The Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview.
(xv) As informed to us during the year the Company has not enteredinto any non-cash transactions with any of its directors or persons connected with theDirectors.
(xvi) The Company is not required to get registered under section 45-IAof Reserve Bank of India Act'1934.
ANNEXURE - B TO THE INDEPENDENT AUDITORS' REPORT
Referred to in paragraph 2 to Report on Other legal andregulatory requirements of the Independent Auditors' Report of even date to themembers of GAIL (INDIA) LIMITED on the financial statements for the year ended March 312019.
ANNEXURE - C TO THE INDEPENDENT AUDITORS' REPORT
Referred to in paragraph 3(f) to Report on Other legal andregulatory requirements of the Independent Auditors' Report of even date to themembers of GAIL (INDIA) LIMITED on the standalone Ind AS financial statements forthe year ended March 31 2019.
Report on the Internal Financial Controls under Clause (i) of Sub
section 3 of Section 143 of the Companies Act 2013 (theAct)
We have audited the internal financial controls over financialreporting of GAIL (INDIA) LIMITED (the Company) as of March 31 2019 inconjunction with our audit of the standalone Ind AS financial statements of the Companyfor the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the Guidance Note) and the Standards on Auditing issued by ICAIand deemed to be prescribed under section 143(10) of the Companies Act 2013 to theextent applicable to an audit of internal financial controls both applicable to an auditof Internal Financial Controls and both issued by the Institute of Chartered Accountantsof India. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects. Our auditinvolves performing procedures to obtain audit evidence about the adequacy of the internalfinancial controls system over financial reporting and their operating effectiveness.
Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditors' judgment including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.We believe that the audit evidence I/we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controlssystem over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A Company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial control overfinancial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of theCompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the Company arebeing made only in accordance with authorisations of management and directors of theCompany; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the Company's assets thatcould have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 31 2019 basedon the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.