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GMR Infrastructure Ltd.

BSE: 532754 Sector: Engineering
NSE: GMRINFRA ISIN Code: INE776C01039
BSE 11:51 | 21 Nov 20.90 0.20
(0.97%)
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21.00

HIGH

21.35

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20.80

NSE 11:39 | 21 Nov 20.80 0.10
(0.48%)
OPEN

21.05

HIGH

21.35

LOW

20.80

OPEN 21.00
PREVIOUS CLOSE 20.70
VOLUME 680755
52-Week high 22.70
52-Week low 13.45
P/E
Mkt Cap.(Rs cr) 12,615
Buy Price 20.80
Buy Qty 62803.00
Sell Price 20.90
Sell Qty 27645.00
OPEN 21.00
CLOSE 20.70
VOLUME 680755
52-Week high 22.70
52-Week low 13.45
P/E
Mkt Cap.(Rs cr) 12,615
Buy Price 20.80
Buy Qty 62803.00
Sell Price 20.90
Sell Qty 27645.00

GMR Infrastructure Ltd. (GMRINFRA) - Auditors Report

Company auditors report

To the Members of GMR Infrastructure Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of GMRInfrastructure Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2018 the Statement of Profit and Loss including the statement of OtherComprehensive Income the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and a summary of significant accounting policies and otherexplanatory information.

Management's Responsibility for the Standalone Ind AS financial statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with accounting principles generallyaccepted in India including the Accounting Standards specified under section 133 of theAct 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; andthe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Ind AS financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financialstatements based on our audit. We have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made thereunder. We conductedour audit in accordance with the Standards on Auditing issued by the Institute ofChartered Accountants of India as specified under Section 143(10) of the Act. ThoseStandards require that we comply with ethical requirements and plan and perform the auditto obtain reasonable assurance about whether the standalone Ind AS financial statementsare free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the standalone Ind AS financial statements. The procedures selected dependon the auditor's judgment including the assessment of the risks of material misstatementof the standalone Ind AS financial statements whether due to fraud or error. In makingthose risk assessments the auditor considers internal financial control relevant to theCompany's preparation of the standalone Ind AS financial statements that give a true andfair view in order to design audit procedures that are appropriate in the circumstances.An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the standalone Ind AS financial statements. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified audit opinion on the standalone Ind AS financial statements.

Basis for qualified opinion

a) As detailed in note 5(4) GMR Generation Assets Limited (‘GGAL') along with itssubsidiaries/ joint ventures and associates have been incurring losses for reasons as morefully discussed in the aforesaid note.

Based on the valuation assessment carried out by an independent expert during the yearended March 31 2018 the Company has not accounted for a further diminution in the valueof the Company's investment in GGAL as at March 31 2018 of Rs. 2830 crore in theaccompanying standalone Ind AS financial statements. In our opinion the aforesaidaccounting treatment is not in accordance with the relevant accounting standards. Had themanagement accounted for the aforesaid diminution the loss after tax for the year endedMarch 31 2018 in the accompanying standalone Ind AS financial statements would have beenhigher by Rs. 2830 crore with a consequent impact on the reserves of the Company as atMarch 31 2018.

b) As detailed in note 5(7) GMR Energy Limited (‘GEL') GMR Vemagiri PowerGeneration Limited (‘GVPGL') and GMR Rajahmundry Energy Limited (‘GREL') jointventures of the Company have ceased operations and have been incurring losses with aconsequent erosion of net worth resulting from the unavailability of adequate supply ofnatural gas. Further GREL have rescheduled the repayment of project loans with theconsequent implementation of the Strategic Debt Restructuring Scheme to convert part ofthe debt outstanding into equity and to undertake flexible structuring of balance debt forimproving viability and revival of the project pending linkage of natural gas supply.Continued uncertainty exists as to the availability of adequate supply of natural gaswhich is necessary to conduct operations in these entities at varying levels of capacityin the future and the appropriateness of the going concern assumption of these entities isdependent on the ability of the aforesaid entities to establish consistent profitableoperations as well as raising adequate finance to meet short term and long termobligations and accordingly we are unable to comment on the carrying value of theCompany's investment (including advances) in these entities as at March 31 2018 in theaccompanying standalone Ind AS financial statements.

Qualified opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in point (a) and the possibleeffect of the matter described in point (b) in the Basis for Qualified Opinion paragraphabove the aforesaid standalone Ind AS financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2018 of its loss including other comprehensive income its cash flows andthe changes in equity for the year ended on that date.

Emphasis of Matter

We draw attention to the following matters in the notes to the accompanying standaloneInd AS financial statements for the year ended March 31 2018:

a) Notes 5(6) and 5(9)(a) with regard to the ongoing arbitration for compensation oflosses being incurred since the commencement of commercial operations by GMR AmbalaChandigarh Expressways Private Limited (‘GACEPL') and GMR Hyderabad VijayawadaExpressways Private Limited (‘GHVEPL') subsidiaries of the Company for reasons asdetailed in the aforesaid notes. Pending outcome of the aforesaid arbitrations based onmanagement's internal assessment and an external legal opinion obtained by the managementof GACEPL and GHVEPL the management of the Group is of the view that the carrying valueof the investments (including loans and advances and other receivables) in GACEPL andGHVEPL as at March 31 2018 is appropriate in the accompanying standalone Ind AS financialstatements. Further the auditors of these subsidiaries have included an emphasis ofmatter in their respective audit reports issued for the year ended March 31 2018 withregard to the aforesaid matters.

b) Note 5(12) with regard to the ongoing arbitration and the uncertainty regarding theconversion/settlement of Class A Compulsorily Convertible Preference Shares issued by GMRAirports Limited (‘GAL') to the Private Equity Investors (‘the Investors')("CCPS A"). The Company had exercised the call option to acquire CCPS A subjectto obtaining the requisite regulatory approvals which was disputed by the Investors andthey initiated arbitration proceedings against GAL and the Company seeking conversion ofCCPS A. In view of ongoing arbitration as regards the aforesaid uncertainty noadjustments have been made for the call option exercised by the Company to purchase CCPS Aand for reasons as explained in the aforesaid note the Class B Compulsorily ConvertiblePreference Shares ("CCPS B") issued to the Company continue to be carried atcost of Rs. Nil in the accompanying standalone Ind AS financial statements.

Our opinion is not qualified in respect of these aforesaid matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure I a statement on the matters specified in paragraphs 3and 4 of the Order.

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

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

(b) Except for the effect of the matter described in point (a) and the possible effectof the matter described in point (b) in the Basis for Qualified Opinion paragraph abovein our opinion proper books of account as required by law have been kept by the Company sofar as appears from our examination of those books;

(c) The Balance Sheet Statement of Profit and Loss including the Statement of OtherComprehensive income Cash Flow Statement and Statement of Changes in Equity dealt with bythis Report are in agreement with the books of account;

(d) Except for the effect of the matter described in point (a) and the possible effectof the matter described in point (b) in the Basis for Qualified Opinion paragraph abovein our opinion the aforesaid standalone Ind AS financial statements comply with theAccounting Standards specified under section 133 of the Act read with the Companies(Indian Accounting Standards) Rules 2015 as amended;

(e) The matter described in the Basis for Qualified Opinion paragraph Emphasis ofMatter paragraph and Qualified Opinion paragraph of ‘Annexure II' to this report inour opinion may have an adverse effect on the functioning of the Company;

(f) We draw attention to Note 46 to the standalone Ind AS financial statementsregarding one of the directors of the Company as at March 31 2018 Mr SrinivasanSandilya reported as disqualified from being appointed as a director in terms of section164(2) of the Act pursuant to his inclusion in the list of Disqualified Directorspublished by Ministry of Corporate Affairs in September 2017. The defaulting company hasfiled an application with the Registrar of Companies under Condonation of Delay Scheme2018. Based on the written representations received from other directors of the Company ason March 31 2018 and taken on record by the Board of Directors other Directors of theCompany are not disqualified as on March 31 2018 from being appointed as a director interms of section 164 (2) of the Act;

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

(h) With respect to the adequacy of the internal financial controls over financialreporting of the Company with reference to these standalone Ind AS financial statementsand the operating effectiveness of such controls refer to our separate Report dated May30 2018 in "Annexure II" to this report;

(i) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements – Refer Note 36 to thestandalone Ind AS financial statements;

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts; iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.

For S.R. BATLIBOI & ASSOCIATES LLP

ICAI Firm Registration Number: 101049W/E300004 Chartered Accountants

per Sandeep Karnani Partner

Membership number: 061207

Place: New Delhi Date: May 30 2018

Annexure I referred to in clause 1 of paragraph on the report on other legal andregulatory requirements of our report of even date Re: GMR Infrastructure Limited

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of property plant and equipment;

(b) All property plant and equipment have not been physically verified by themanagement of the Company during the year but there is a regular programme of verificationwhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. No material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us by the management of theCompany the title deeds of immovable properties included in property plant and equipmentare held in the name of the Company.

(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification.

(iii) According to the information and explanations given to us by the management ofthe Company the Company has not granted any loans secured or unsecured to companiesfirms limited liability partnerships or other parties covered in the register maintainedunder section 189 of the Act. Accordingly the provisions of clause 3(iii)(a) (b) and (c)of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to us bythe management of the Company there are no loans guarantees and securities granted inrespect of which provisions of sections 185 and 186 of the Act are applicable and hencenot commented upon. In our opinion and according to the information and explanations givento us by the management of the Company the provisions of section 186 of the CompaniesAct 2013 in respect of investments made has been complied with by the Company.

(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).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 undersection 148(1) of the Act related to the construction activities and are of the opinionthat prima facie the specified accounts and records have been made and maintained. Wehave not however made a detailed examination of the same.

(vii) (a) Undisputed statutory dues including employees' state insurance income-taxsales-tax service-tax duty of customs duty of excise value added tax goods andservice tax cess and other material statutory dues as applicable to the Company havegenerally been regularly deposited with the appropriate authorities though there have beenslight delays in remittance of provident fund in few cases.

(b) According to the information and explanations given to us by the management of theCompany no undisputed amounts payable in respect of provident fund employees' stateinsurance income-tax service tax sales-tax duty of customs duty of excise valueadded tax goods and service tax cess and other material statutory dues as applicable tothe Company were outstanding at the year end for a period of more than six months fromthe date they became payable.

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

Name of the statute Nature of dues Amount (Rs. in Crore) Period for which amounts relates to Forum where dispute is pending
Finance Act 1994 Service tax 41.53 October 2007 to March 2014 Commissioner of Service Tax Bangalore
Finance Act 1994 Service tax 0.80 FY 2012-13 to 2014-15 Joint Commissioner of Central Tax Bangalore
Central Excise Act 1944 Central excise duty (including penal charges and excluding interest) 1.03 March 2011 to December 2012 Office of the Commissioner of Customs Central Excise and Service Tax Hyderabad-III Commissionerate
Odisha Value Added Tax Act 2004 Value Added Tax 2.40 November 2012 to March 2015 Additional Commissioner of Sales Tax Bhubaneswar
Income Tax Act 1961 Income Taxes* 148.79 FY 2007-08 to 2012-13 Income Tax Appellate Tribunal
Income Tax Act 1961 Income Taxes* 66.41 FY 2013-14 to 2014-15 Commissioner of Income Tax (Appeals)

*Net of Rs. 29.12 Crore paid by the Company.

(viii) In our opinion and according to the information and explanations given to us bythe management of the Company the Company has not defaulted in repayment of loans orborrowing to a financial institution bank or government or dues to debenture holders asat March 31 2018.

(ix) According to the information and explanations given to us by the management of theCompany the Company has not raised any money by way of initial public offer / furtherpublic offer / debt instruments except term loans during the year. In our opinion andaccording to the information and explanations given to us by the management of theCompany the Company has utilized the monies raised by way of term loans during the yearfor the purposes for which they were raised.

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

(xi) According to the information and explanations given to us by the management of theCompany the managerial remuneration has been paid / provided in accordance with therequisite approvals mandated by the provisions of section 197 read with Schedule V to theAct.

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

(xiii) According to the information and explanations given to us by the management ofthe Company transactions with the related parties are in compliance with section 177 and188 of the Act where applicable and the details have been disclosed in the notes to thestandalone Ind AS financial statements as required by the applicable accountingstandards.

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

(xv) According to the information and explanations given to us by the management of theCompany the Company has not entered into any non-cash transactions with directors orpersons connected with him as referred to in section 192 of the Act.

(xvi) According to the information and explanations given to us and based on a legalopinion obtained by the management of the Company the provisions of section 45-IA of theReserve Bank of India Act 1934 are not applicable to the Company.

For S. R. BATLIBOI & ASSOCIATES LLP

ICAI Firm Registration Number: 101049W/E300004

Chartered Accountants

per Sandeep Karnani

Partner

Membership number: 061207

Place: New Delhi

Date: May 30 2018

Annexure II to the Independent auditor's report of even date on the Standalone Ind ASfinancial statements of GMR Infrastructure Limited Report on the Internal FinancialControls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013(‘the Act')

We have audited the internal financial controls over financial reporting of GMRInfrastructure Limited (‘the Company') as of March 31 2018 in conjunction with ouraudit of the standalone Ind AS financial statements of the Company for the year ended onthat date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the‘Guidance Note') issued by the Institute of Chartered Accountants of India(‘ICAI'). These responsibilities include the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to the Company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements based on our audit. We conducted our audit in accordance with the Guidance Noteand the Standards on Auditing as specified under section 143(10) of the Companies Act2013 to the extent applicable to an audit of internal financial controls and both issuedby the ICAI. 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 with reference to thesestandalone Ind AS financial statements was established and maintained and if such controlsoperated effectively in all material respects.

An audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to thesestandalone Ind AS financial statements and their operating effectiveness. Our audit ofinternal financial controls over financial reporting included obtaining an understandingof internal financial controls over financial reporting with reference to these standaloneInd AS financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the standalone Ind AS financialstatements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our qualified audit opinion on the

Company's internal financial controls over financial reporting with reference to thesestandalone Ind AS financial statements.

Meaning of Internal Financial Controls Over Financial Reporting With Reference to theseStandalone Ind AS Financial Statements

A company's internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of thestandalone Ind AS financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting with reference to these standalone Ind AS financial statements includes thosepolicies and procedures that (1) pertain to the maintenance of records that in reasonabledetail accurately and fairly reflect the transactions and dispositions of the assets ofthe company; (2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton the standalone Ind AS financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting WithReference to these Standalone Ind AS Financial Statements

Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone Ind AS financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these standalone Ind AS financial statements to future periods are subject to the riskthat the internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.

Qualified Opinion

According to the information and explanations given to us and based on our audit thefollowing material weakness has been identified in the operating effectiveness of theCompany's internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements as at March 31 2018:

(a) The Company's internal financial control with regard to assessment of carryingvalue of investments in certain subsidiaries/ joint ventures as more fully explained innotes 5(4) and 5(7) to the standalone Ind AS financial statements were not operatingeffectively and could potentially result in the Company not providing for adjustments thatmay be required to be made to the carrying value of such investments.

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

In our opinion the Company has in all material respects maintained adequate internalfinancial controls over financial reporting with reference to these standalone Ind ASfinancial statements as of March 31 2018 based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note issued by the ICAI and except for thepossible effects of the material weakness described above on the achievement of theobjectives of the control criteria the Company's internal financial controls overfinancial reporting with reference to these standalone Ind AS financial statements wereoperating effectively as of March 31 2018.

Explanatory Paragraph

We also have audited in accordance with the Standards on Auditing issued by the ICAIas specified under Section 143(10) of the Act the standalone

Ind AS financial statements of the Company which comprise the Balance Sheet as atMarch 31 2018 and the related Statement of Profit and Loss Statement of changes inequity and Cash Flow Statement for the year then ended and a summary of significantaccounting policies and other explanatory information. The material weakness referred toin the Qualified opinion paragraph above was considered in determining the nature timingand extent of audit tests applied in our audit of the March 31 2018 standalone Ind ASfinancial statements of the Company and this report affects our report dated May 30 2018which expressed a qualified opinion on those standalone Ind AS financial statements.

For S. R. BATLIBOI & ASSOCIATES LLP

ICAI firm registration number: 101049W/E300004

Chartered Accountants

per Sandeep Karnani

Partner

Membership number: 061207

Place: New Delhi

Date: May 30 2018