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GMR Infrastructure Ltd.

BSE: 532754 Sector: Engineering
NSE: GMRINFRA ISIN Code: INE776C01039
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VOLUME 1355874
52-Week high 46.10
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Mkt Cap.(Rs cr) 22,604
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OPEN 38.00
CLOSE 38.65
VOLUME 1355874
52-Week high 46.10
52-Week low 22.50
P/E
Mkt Cap.(Rs cr) 22,604
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

GMR Infrastructure Ltd. (GMRINFRA) - Auditors Report

Company auditors report

To the Members of GMR Infrastructure Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

1. We have audited the accompanying standalone financial statements of GMRInfrastructure Limited (‘the Company’) which comprise the Balance Sheet as at31 March 2021 the Statement of Profit and Loss (including Other Comprehensive Income)the Cash Flow Statement and the Statement of Changes in Equity for the year then endedand a summary of the significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according to theexplanations given to us except for the effects/possible effects of the matters describedin the Basis for Qualified Opinion section of our report the aforesaid standalonefinancial statements give the information required by the Companies Act 2013(‘Act’) in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India including Indian AccountingStandards (‘Ind AS’) specified under section 133 of the Act of the state ofaffairs of the Company as at 31 March 2021 and its loss (including other comprehensiveloss) its cash flows and the changes in equity for the year ended on that date.

Basis for Qualified Opinion

3. As stated in note 5(4) to the accompanying standalone financial statementsthe Company has invested in GMR Generation Assets Limited (‘GGAL’) and GMREnergy Projects Mauritius Limited (‘GEPML’) subsidiaries of the Company whichhave further invested in step down subsidiaries and joint ventures. Further the Companyhas outstanding loan (including accrued interest) amounting to Rs. Nil crorerecoverable (net of impairment) from GGAL as at 31 March 2021. Also the Company togetherwith GGAL and GEPML has investments in GMR Energy Limited (‘GEL’) a jointventure of the Company amounting to Rs. 1272.32 crore and has outstanding loan(including accrued interest) amounting to Rs. 709.01 crore recoverable from GEL asat 31 March 2021. GEL has further invested in GMR Vemagiri Power Generation Limited(‘GVPGL’) and GMR (Badrinath) Hydro Power Generation Private Limited ('GBHPL')both subsidiaries of GEL and in GMR Kamalanga Energy Limited (‘GKEL’) jointventure of GEL and GGAL has further invested in GMR Rajahmundry Energy Limited(‘GREL’) an associate company of GGAL. The aforementioned investments arecarried at their respective fair value in the accompanying standalone financial statementsas per Ind AS 109 – ‘Financial Instruments’.

As mentioned in note 5(8) GVPGL and GREL have ceased operations due to continuedunavailability of adequate supply of natural gas and other factors mentioned in the saidnote and have been incurring significant losses including cash losses with consequentialerosion of their respective net worth. Further GREL has entered into a resolution planwith its lenders to restructure its debt obligations during the year ended 31 March 2019.The Company has given certain corporate guarantees for the loans including CumulativeRedeemable Preference Shares (‘CRPS’) outstanding in GREL amounting to Rs.2056.59 crore.

The carrying value of the investment of the Company in GEL to the extent of amountinvested in GVPGL and the Company’s obligations towards the corporate guaranteesgiven for GREL are significantly dependent on the achievement of key assumptionsconsidered in the valuation performed by the external expert particularly with respect toavailability of natural gas future tariff of power generated and realization of claimsfor losses incurred in earlier periods from the customer as detailed in the aforementionednote. The Company has provided for its investment in full in GREL and the management isconfident that no further obligation would arise for the guarantees provided to thelenders against the servicing of sustainable and unsustainable debts.

As mentioned in note 5(7) the management has accounted the investment in GKEL based onthe valuation performed by an external expert using the discounted future cash flowsmethod which is significantly dependent on the achievement of certain assumptionsconsidered in aforementioned valuation such as settlement of disputes with customers andtimely realization of receivables expansion and optimal utilization of existing capacityrescheduling/refinancing of existing loans at lower rates amongst other key assumptionsand the uncertainty and the final outcome of the litigations with the capital creditors asregards claims against GKEL.

Further as mentioned in note 5(9) GBHPL has stopped the construction of the 300 MWhydro based power plant on Alaknanda river Uttarakhand since 7 May 2014 on directions ofHon'ble Supreme Court of India ('the Supreme Court'). The carrying value of theinvestments in GBHPL is significantly dependent on obtaining requisite approvals fromSupreme court environmental clearances availability of funding support for developmentand construction of the aforesaid power plant and achievement of the other key assumptionsmade in the valuation assessment done by an external expert.

Accordingly owing to the aforementioned uncertainties we are unable to comment uponadjustments if any that may be required to the carrying value of the aforesaid loans andinvestments and further provisions if any required to be made for the said obligationsand the consequential impact on the accompanying standalone financial statements.

The opinion expressed by us on the consolidated financial statements for the year ended31 March 2020 vide our report dated 30 July 2020 was also qualified with respect to theabove matters.

4. We conducted our audit in accordance with the Standards on Auditing specifiedunder section 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’)together with the ethical requirements that are relevant to our audit of the financialstatements under the provisions of the Act and the rules thereunder and we have fulfilledour other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our qualified opinion.

Emphasis of Matter

5. We draw attention to note 5(14) to the accompanying standalone financialstatements in relation to the recoverability of sale consideration receivable as at 31March 2021 amounting to Rs. 513.21 crore pursuant to the sale of equity stake andinter-corporate deposits given to Kakinada SEZ Limited (‘KSEZ’) which isdependent on the achievement of the milestones as detailed in the aforementioned note.Such achievement of milestones is significantly dependent on future development in theKakinada SEZ and basis independent assessment by property consultancy agency managementis confident of achieving such milestones and is of the view that no adjustment to theaforesaid balance is required to be made in the accompanying standalone financialstatements. Our opinion is not modified in respect of this matter.

Key Audit Matters

6. Key audit matters are those matters that in our professional judgment wereof most significance in our audit of the standalone financial statements of the currentperiod. These matters were addressed in the context of our audit of the standalonefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.

7. In addition to the matters described in the Basis for Qualified Opinionsection we have determined the matters described below to be the key audit matters to becommunicated in our report.

Key audit matter How our audit addressed the key audit matter
1. Assessment of going concern basis - (refer note 2.1 to the accompanying standalone financial statements)
The Company has incurred loss before tax amounting to Rs. 1280.16 crore for the year ended 31 March 2021 and its current liabilities exceeds its current assets by Rs. 1923.21 crore as at 31 March 2021. While the above factors indicated a need to assess the Company’s ability to continue as a going concern as mentioned in aforesaid note the Company has taken into consideration the following mitigating factors in its assessment for going concern basis of accounting. Our audit procedures included but were not limited to the following in relation to assessment of appropriateness of going concern basis of accounting:
Receipts from sale of stake in certain non-core assets Obtained an understanding of the management’s process for identifying all the events or conditions that could impact the Company’s ability to continue as a going concern and the process followed to assess the mitigating factors for such events or conditions.
Monetization of assets and refinancing of existing debts Also obtained an understanding around the methodology adopted and the associated controls implemented by the Company to assess their future business performance to prepare a robust cash flow forecast;
Recovery of outstanding claims in highway and power sector investee companies Reconciled the cash flow forecast to the future business plans of the Company as approved by the Board of Directors and considered the same for our assessment of the Company’s capability to meet its financial obligation falling due within next twelve months;
Management has prepared future cash flow forecasts taking into cognizance the above developments and performed sensitivity analysis of the key assumptions used therein to assess whether the Company would be able operate as a going concern for a period of at least 12 months from the date of financial statements and concluded that the going concern basis of accounting used for preparation of the accompanying financial statements is appropriate with no material uncertainty. In order to corroborate management’s future business plans and to identify potential contradictory information we read the minutes of the Board of Directors and discussed the same with the management;
We have considered the assessment of management’s evaluation of going concern basis of accounting as a key audit matter due to the pervasive impact thereof on the standalone financial statements and the significant judgements and assumptions that are inherently subjective and dependent on future events involved in preparation of cash flow projections and determination of the overall conclusion by the management. Tested the appropriateness of key assumptions used by the management including the impact of COVID-19 pandemic on such assumption that had most material impact in preparation of the cash flow forecast such as expected realization from proceeds on account of divestment of stake in certain entities realization from various claims in investee entities and evaluation of the expected outflow on account of debt repayments;
Performed independent sensitivity analysis to test the impact of variation on the cash flows due to change in key assumptions;
Reviewed the historical accuracy of the cash flow projections prepared by the management in prior periods;
Inspected the relevant documents for management’s plan of raising funds from strategic investors and raising of additional funds from financial institutions; and
Assessed the appropriateness and adequacy of the disclosures made in the standalone financial statements in respect of going concern.

 

2. Revenue recognition and measurement of upfront losses on Long-term construction contracts (refer note 2.2 for the accounting policy and note 36 for disclosures of the accompanying standalone financial statements)
For the year ended 31 March 2021 the Company has recognized revenue from Engineering procurement and construction (EPC) contracts of Rs.1055.20 crore and has accumulated provisions for upfront losses amounting to Rs. 28.60 crore as at 31 March 2021. Our audit procedures for recognition of contract revenue margin and contract costs and related receivables and liabilities included but were not limited to the following:
The Company’s revenue primarily arises from construction contracts which is recognised over a period of time in accordance with the requirements of Ind AS 115 Revenue from Contract with Customers as further explained in note 2.2 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;
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. Assessed the design and implementation of key controls over the recognition of contract revenue and margins and tested the operating effectiveness of these controls;
The recognition of contract revenue contract costs and the resultant profit/ loss therefore rely on the estimates in relation 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. Changes in these judgements and the related estimates as contracts progress can result in material adjustments to revenue and margins/ onerous obligations. For a sample of contracts we have 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:
Owing to these factors we have determined revenue recognition and provision for upfront losses from EPC contracts as a key audit matter for the current year audit. - reviewed the contract terms and conditions;
- evaluated the identification of performance obligation of the contract;
- evaluated the appropriateness of management’s assessment that performance obligation was satisfied over time and consequent recognition of revenue using percentage of completion method;
- obtained an understanding of the assumptions applied in determining the forecasted revenue and cost to complete;
- assessed management’s estimates of the impact to revenue and budgeted costs arising from scope changes made to the original contracts claims disputes and liquidation damages with reference to supporting documents including variation orders and correspondence between the Company and the customers; and
Assessed the appropriateness and adequacy of disclosures made by the management with respect to revenue recognised during the year in accordance with applicable accounting standards.

 

3. Fair value measurement of investments in subsidiaries associates and joint ventures (refer note 2.2 for the accounting policy and note 5 for disclosures of the accompanying standalone financial statements)
The Company has determined the fair value of its investments in unquoted equity and preference shares of its subsidiaries joint ventures and associates as at the year end. Determining the fair value of such unquoted investments requires use of valuation techniques which has been performed by independent valuation experts applying applicable valuation methodologies. The Company has total investment of Rs. 13687.42 crore as at 31 March 2021 which constitutes 75.00 % of total assets of the Company. Our audit procedures to assess the reasonableness of fair valuation of investments included the following: Obtained a detailed understanding of the management’s process and controls for determining the fair valuation of unquoted equity and preference instruments;
The determination of carrying value of the Company’s investments in subsidiaries joint ventures and associates is dependent on management’s estimates of future cash flows and their judgment with respect to final determination of tariff rates operational performance of the plants and coal mines life extension plans availability and market prices of gas coal and other fuels restructuring of loans outcome of litigations etc. in case of investments in entities in the energy business and estimation of passenger and vehicle traffic and rates and favourable outcomes of litigations etc. in case of investments in airport and expressway business. Evaluated the design and tested the operating effectiveness of key controls implemented for fair valuation of the investments;
Owing to the uncertainties involved in forecasting and discounting future cash flows significant management’s judgement and subjectivity involved in estimates and underlying key assumptions used in the valuation models and the significance of the Company’s investments as at 31 March 2021 in context of standalone financial statements we have determined this as a key audit matter for current year audit. Obtained the valuation reports of the management’s valuation expert and assessed the expert’s professional competence objectivity and capabilities in performing the valuation of the investments;
In addition to the above considering the following matters to be fundamental to the understanding of the financial statements we draw attention to: Assessed the appropriateness of the valuation methodology used for the fair valuation computation;
a. Note 5(3)(d)(i) of the accompanying standalone financial statements which describes the uncertainties due to the outbreak of COVID-19 pandemic and management’s evaluation of its impact on the assumptions underlying the valuation of investments which are carried at fair value in the standalone financial statements of the Company as at 31 March 2021. Further we also draw attention to note 5(3)(d)(ii) in relation to the carrying value of investments in the subsidiaries as specified in the note which are further dependent on the uncertainties relating to the future outcome of the ongoing matters. Carried out an assessment of forecasts of future cash flows prepared by the management across various sectors and business of the investee companies which involved evaluating the key assumptions including the discount rate and comparing the estimates to externally available industry economic and financial data and assessed the impact of COVID-19 outbreak on these assumptions with the support of our auditor’s expert and assessed the appropriateness of the aforesaid key assumptions;
b. Note 5(5) and 5(6) in relation to the investment made by the Company in GEL amounting to Rs. 1272.32 crore as at 31 March 2021 which is in addition to the matters described in paragraph 3 above. The recoverability of such investment is further dependent upon various claims counter claims and other receivables from customers of GMR Warora Energy Limited (‘GWEL’) a subsidiary of GEL which are pending settlement / realization as on 31 March 2021 and certain other key assumptions considered in the valuation performed by an external expert including capacity utilization of plant in future years management’s plan for entering into a new long-term power purchase agreement (‘PPA’) to replace the PPA expired in June 2020 with one of its customers and the pending outcome of the debt resolution plan being discussed with the lenders of GWEL as explained in the said note. Engaged in discussions with the management on the performance of the Company’s investments as compared to previous year in order to evaluate whether the inputs and assumptions used in the cash flow forecasts were suitable;
The above claims also include recovery of transmission charges from Maharashtra State Electricity Distribution Company Limited (Rs.MSEDCL') by GWEL amounting to Rs. 611.58 crore for the period from 17 March 2014 to 31 March 2021 based on the Order of the Appellate Tribunal for Electricity (Rs.APTEL’) (Rs.the Order') dated 8 May 2015 which is currently contested by MSEDCL in the Supreme Court as described in aforesaid note. Discussed the significant ongoing litigations in the investee companies which had a material impact to ascertain the appropriateness of the outcome considered in the respective valuation models;
The management of the Company based on its internal assessment legal opinion certain interim favourable regulatory orders and valuation assessment made by an external expert is of the view that the carrying value of the aforesaid investment of the Company in GEL taking into account the matters described above in relation to the investments made by GEL in its aforementioned subsidiaries is appropriate and accordingly no adjustments to the aforesaid balance have been made in the accompanying standalone financial statements for the year ended 31 March 2021. Tested the arithmetical accuracy of the computations done in accordance with the valuation models; and
Ensured the appropriateness and adequacy of the related disclosures in the standalone financial statements in accordance with the accounting standards.

Information other than the Financial Statements and Auditor’s Report thereon

8. The Company’s Board of Directors is responsible for the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Report on Corporate Governance Directors’ Report etc. butdoes not include the standalone financial statements and our auditor’s reportthereon. These reports are expected to be made available to us after the date of thisauditor’s report.

Our opinion on the standalone financial statements does not cover the other informationand we do 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 these reports if we conclude that there is material misstatement thereinwe are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements

9. The accompanying standalone financial statements have been approved by theCompany’s Board of Directors. The Company’s Board of Directors is responsiblefor the matters stated in section 134(5) of the Act with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance including other comprehensive income changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Ind AS specified under section 133 of the Act. 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 financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

10. In preparing the standalone 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.

11. Those Board of Directors is also responsible for overseeing the Company’sfinancial reporting process.

Auditor’s Responsibilities for the Audit of the Standalone Financial Statements

12. 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. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with Standards on Auditing 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 financial statements.

13. 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 standalone 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 in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to standalone financial statements inplace and the operating effectiveness of such controls;

Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management;

Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists 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 auditor’s report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor’s report. However future events or conditionsmay cause the Company to cease to continue as a going concern; and

Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

14. 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.

15. 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.

16. 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 publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

17. As required by section 197(16) of the Act based on our audit we report that theCompany has paid remuneration to its directors during the year in accordance with theprovisions of and limits laid down under section 197 read with Schedule V to the Act.

18. As required by the Companies (Auditor’s Report) Order 2016 (‘theOrder’) issued by the Central Government of India in terms of section 143(11) of theAct we give in the Annexure I a statement on the matters specified in paragraphs 3 and 4of the Order.

19. Further to our comments in Annexure I as required by section 143(3) of the Actbased on our audit we report to the extent applicable that:

a) we have sought and except for the matters described in the Basis for QualifiedOpinion section obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit of the accompanyingstandalone financial statements;

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;

c) the standalone financial statements dealt with by this report are in agreement withthe books of account;

d) 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;

e) the matters described in Emphasis of Matter reported in S. No. 3(a) and 3(b) of theKey audit matters section in paragraph 7 above and paragraph 3 of Basis for QualifiedOpinion section in our opinion may have an adverse effect on the functioning of theCompany;

f) on the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2021 from being appointed as a director in terms 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 section;

h) we have also audited the internal financial controls with reference to standalonefinancial statements of the Company as on 31 March 2021 in conjunction with our audit ofthe standalone financial statements of the Company for the year ended on that date and ourreport dated 18 June 2021 as per Annexure II expressed modified opinion; and

i. with respect to the other matters to be included in the Auditor’s Report inaccordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 (as amended) inour opinion and to the best of our information and according to the explanations given tous:

ii. except for the effects/possible effects of the matters described in paragraph 3 ofthe Basis for Qualified Opinion section the standalone financial statements disclose theimpact of pending litigations on the standalone financial position of the Company as at 31March 2021 as detailed in note 37(II) to the accompanying standalone financialstatements;

iii. except for the effects/possible effects of the matters described in the Basis forQualified Opinion section the Company as detailed in note 36(e) to the accompanyingstandalone financial statements has made provision as at 31 March 2021 as required underthe applicable law or Ind AS for material foreseeable losses if any on long-termcontracts including derivative contracts;

iv. there has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company during the year ended 31 March 2021;and

v. 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

Anamitra Das

Partner

Membership No.: 062191

UDIN: 21062191AAAAIP8074

Place: New Delhi

Date: 18 June 2021

Annexure I to the Independent Auditor’s Report of even date to the members of GMRInfrastructure Limited on the standalone financial statements for the year ended 31 March2021

Based on the audit procedures performed for the purpose of reporting a true and fairview on the standalone financial statements of the Company and taking into considerationthe information 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 property plant and equipment.

(b) The Company has a regular program of physical verification ofits property plantand equipment under which property plant and equipment are verified in a phased mannerover a period of 3 years which in our opinion is reasonable having regard to the sizeof the Company and the nature of its assets. In accordance with this program certainproperty plant and equipment were verified during the year and no material discrepancieswere 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 not granted any loan secured or unsecured to companies firmsLimited Liability Partnerships (LLPs) or other parties covered in the register maintainedunder Section 189 of the Act. Accordingly the provisions of clauses 3(iii)(a) 3(iii)(b)and 3(iii)(c) of the Order are not applicable.

(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/servicesand are of the opinion that prima facie the prescribed accounts and records have beenmade and maintained. However we have not made a detailed examination of the cost recordswith a 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 cess goods and services tax and other material statutory dues as applicablehave generally been regularly deposited to the appropriate authorities though there hasbeen a slight delay in a few cases. Further no undisputed amounts payable in respectthereof were outstanding at the year-end for a period of more than six months from thedate they became payable.

(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 Statute Nature of Dues Amount (Rs. in Crore) Amount paid under Protest (Rs. in Crore) Period to which the amount relates Forum where dispute is Pending
Finance Act1994 Service tax 9.00 - July 2013 to March 2014 Central Excise and service Tax Appellate Tribunal
Tamil Nadu Value Added Tax Act 2006 Value Added tax 0.31 - April 2018 to March 2018 Assistant Commissioner (Circle) Poonmallee- Chennai Tamil Nadu
Telangana Value Added Tax Act 2005 Value Added tax 0.17 - April 2013 to March 2014 Deputy Commissioner Saroornagar -Hyderabad Telengana
Income Tax Act 1961 Income taxes 209.20 - Assessment year 2008-09 to 2015-16 Income Tax Appellate Tribunal Bengaluru
Income Tax Act 1961 Income taxes 10.34 - Assessment year 2017-18 Commissioner of Income tax (A) Bengaluru

(viii) The Company had dues to bonds holders as on 31 March 2021 amounting to Rs.185.25 crore which were overdue for 90 days for which the formal extension had beenobtained subsequent to the year end. During the year there were certain delays in duespayable to debenture holders/ bond holders amounting to Rs. 246.31 crore ranging7-11 days which were made good by the Company before 31 March 2021. Further with respectto dues to one debenture holder amounting to Rs. 58.73 crore due on 25 June 2020the Company in reference with COVID-19 – Regulatory Package notified by RBI submittedan application for moratorium of dues. In absence of any further communication from thedebenture holder on the matter the dues were made good on 25 August 2020.

The Company has no defaults in repayment of loans or borrowings to any financialinstitution or a bank as at balance sheet date though during the year there werecertain delays noted in the case of ICICI Bank Limited Yes Bank Limited IndustrialFinance Corporation of India Limited and Life Insurance Corporation of India amounting to Rs.26.62 crore Rs. 78.59 crore Rs. 41.72 crore and Rs. 143.33 crorerespectively ranging from 1 to 29 days which were paid within the same or next month inwhich they were due. The Company does not have any loans or borrowings payable to thegovernment.

(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments) and did not have any term loans outstanding during theyear. Accordingly the provisions of clause 3(ix) of the Order are not applicable.

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

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

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

(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of 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 non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act.

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

For Walker Chandiok & Co LLP

Chartered Accountants

Firm’s Registration No.: 001076N/N500013

Anamitra Das

Partner

Membership No.: 062191

UDIN:21062191AAAAIP8074

Place: New Delhi

Date: June 18 2021

Independent Auditor’s Report on the internal financial controls with reference tostandalone financial statements under Clause (i) of Sub-section 3 of Section 143 of theCompanies Act 2013 (‘the Act’)

1. In conjunction with our audit of the standalone financial statements of GMRInfrastructure Limited (‘the Company’) as at and for the year ended 31 March2021 we have audited the internal financial controls with reference to financialstatements of the Company as at that date.

Responsibilities of Management and Those Charged with Governance for Internal FinancialControls

2. The Company’s Board of Directors is responsible for establishing andmaintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls over Financial Reporting (‘the Guidance Note’) issued by theInstitute of Chartered Accountants of India (the ‘ICAI’). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of theCompany’s business including adherence to the Company’s policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.

Auditor’s Responsibility for the Audit of the Internal Financial Controls withReference to Financial Statements

3. Our responsibility is to express an opinion on the Company's internalfinancial controls with reference to financial statements based on our audit. We conductedour audit in accordance with the Standards on Auditing issued by the Institute ofChartered Accountants of India (‘ICAI’) prescribed under Section 143(10) of theAct to the extent applicable to an audit of internal financial controls with reference tofinancial statements and the Guidance Note issued by the ICAI. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlswith reference to financial statements were established and maintained and if suchcontrols operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about theadequacy of the internal financial controls with reference to financial statements andtheir operating effectiveness. Our audit of internal financial controls with reference tofinancial statements includes obtaining an understanding of such internal financialcontrols 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 auditor’s judgement including the assessment ofthe risks of material misstatement of the financial statements whether due to fraud orerror.

5. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our qualified audit opinion on the Company’sinternal financial controls with reference to financial statements.

Meaning of Internal Financial Controls with Reference to Financial Statements

6. A Company's internal financial controls with reference to financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to financial statements include those policies andprocedures 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 as necessary topermit 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 financial statements.

Inherent Limitations of Internal Financial Controls with Reference to FinancialStatements

7. Because of the inherent limitations of internal financial controls withreference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

Qualified opinion

8. According to the information and explanations given to us and based on ouraudit the following material weakness have been identified in the operating effectivenessof the Company’s internal financial controls with reference to financial statementsas at 31 March 2021:

The Company’s internal control system towards estimating the fair value of itsinvestment in certain subsidiaries joint ventures and associates as more fully explainedin note 5(4) to the accompanying standalone financial statements were not operatingeffectively due to uncertainties in the judgments and assumptions made by the Company insuch estimations which could result in the Company not providing for adjustment if anythat may be required to the carrying values of investments and further provisions if anyrequired to be made for the obligations on behalf of those entities and its consequentialimpact on the accompanying standalone financial statements

9. A ‘material weakness’ is a deficiency or a combination ofdeficiencies in internal financial controls with reference to financial statements suchthat there is a reasonable possibility that a material misstatement of the Company'sannual or interim financial statements will not be prevented or detected on a timelybasis.

10. In our opinion the Company has in all material respects adequate internalfinancial controls with reference to financial statements as at 31 March 2021 based onthe internal financial controls with reference to financial statements criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note issued by the ICAI and except for the effects/possible effects ofthe material weaknesses described above on the achievement of the objectives of thecontrol criteria the Company’s internal financial controls with reference tofinancial statements were operating effectively as at 31 March 2021.

11. We have considered the material weaknesses identified and reported above indetermining the nature timing and extent of audit tests applied in our audit of thestandalone financial statements of the Company as at and for the year ended 31 March 2021and the material weakness have affected our opinion on the standalone financial statementsof the Company and we have issued a modified opinion on the standalone financialstatements.

For Walker Chandiok & Co LLP

Chartered Accountants

Firm’s Registration No.: 001076N/N500013

Anamitra Das

Partner

Membership No.: 062191

UDIN: 21062191AAAAIP8074

Place: New Delhi

Date: June 18 2021

.