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GVK Power & Infrastructure Ltd.

BSE: 532708 Sector: Engineering
NSE: GVKPIL ISIN Code: INE251H01024
BSE 00:00 | 18 Jun 11.20 -0.34
(-2.95%)
OPEN

11.36

HIGH

11.60

LOW

11.10

NSE 00:00 | 18 Jun 11.20 -0.25
(-2.18%)
OPEN

11.45

HIGH

11.60

LOW

11.05

OPEN 11.36
PREVIOUS CLOSE 11.54
VOLUME 308694
52-Week high 27.85
52-Week low 5.91
P/E 33.94
Mkt Cap.(Rs cr) 1,769
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 11.36
CLOSE 11.54
VOLUME 308694
52-Week high 27.85
52-Week low 5.91
P/E 33.94
Mkt Cap.(Rs cr) 1,769
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

GVK Power & Infrastructure Ltd. (GVKPIL) - Auditors Report

Company auditors report

To

The Members of GVK Power & Infrastructure Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of GVK Power& Infrastructure Limited ("the Company") which comprise the Balance Sheetas at March 31 2017 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 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 and 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 operating effectively forensuring the accuracy and completeness of the accounting records relevant financial tothe preparation and presentation of the Ind AS financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial intoaccount the provisions of the Act the accounting and auditing standards and matters whichare required to be included in the audit report under the provisions of the Act and theRules made thereunder. We conducted our audit in accordance with the Standards onAuditing issued by the Institute of Chartered Accountants of India as specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the Ind AS financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of theInd AS financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control relevant to the Company'spreparation of the Ind AS financial statements that give a true and fair view in order todesign audit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of theaccounting estimates made by the Company's

Directors as well as evaluating the overall presentation of the Ind AS financialstatements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our qualified audit opinion on the standalone Ind ASfinancial statements.

Basis for qualified opinion

As discussed more fully in Note 37 to the accompanying standalone Ind AS financialstatements the Hon'ble Supreme Court of India has de-allocated coal mine allocated to GVKCoal (Tokisud) Private Limited subsidiary company of GVK Energy Limited jointlycontrolled entity of the Company and Nominated Authority has offered compensation of Rs.11129 lakhs as against the carrying value of assets of Rs. 31115 lakhs in books of GVKCoal (Tokisud) Private Limited. In the absence of sufficient appropriate audit evidencewe are unable to comment upon recoverability of assets together with consequential impactif any arising out of the same in these accompanyingIndASfinancialstatements. . Our auditreport for previous year was also qualified in respect of this matter.

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 the Basis for QualifiedOpinion paragraph above the aforesaid standalone Ind AS financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 31 2017 of its loss including other comprehensiveincome its cash flows and the changes in equity for the year ended on that date.

Emphasis of Matter

i. We draw attention to note 40 to the standalone Ind AS financial statementsregarding losses being incurred by the Company defaults in loan and interest payments andmaterial uncertainties faced by various projects in which the Company has madeinvestments provided guarantees and commitments and/or has undertaken to providefinancial assistance. However these conditions indicate the existence of a materialuncertainty that may cast significant doubt about the Company's ability to continue as agoing concern. These Ind AS financial statements have been prepared on a going stated inthe said note.

ii. We draw attention to note 39 to the standalone Ind AS financial statementsregarding material uncertainties being faced by subsidiaries and jointly controlled entityof GVK Energy Limited a jointly controlled entity of the Company in which the Companyhas an investment of Rs. 108323 lakhs as detailed below: a. Uncertainty towards recoveryof capacity charge and supplies/availability of natural gas to gas based power generatingplants and power projects under construction of a subsidiary company and a jointlycontrolled entity of GVK Energy Limited. b. Uncertainty towards availability of fuel andregulatory approvals faced by coal plant of subsidiary company of GVK Energy Limited. c.Uncertainty towards determination of final tariff pending disposal of petitions forapproval of extension of scheduled commercial operation date approval of capital cost andother matters of hydro plant of a subsidiary company of GVK

Energy Limited.

iii. We draw attention to note 38 to the standalone Ind AS financial statements theCompany receivables aggregating to Rs. 51815 lakhs and provided guarantees andcommitments for loans amounting to Rs. 752110 lakhs taken by GVK Coal Developers(Singapore) Pte. Limited (GVK Coal) an investee company as at March 31 2017 and hasundertaken to provide financialassistance of USD 46 million (Rs. 31104 lakhs) as at June30 2016 an entity whose current liabilities exceeds current assets by USD 2119 million(Rs. 1432932 lakhs) as at June 30 2016 and has incurred loss of USD 122 million (Rs.83017 lakhs) for the year ended June 30 2016 based on unaudited financial statements iswitnessing material uncertainties. The Management believes that for reasons more fullystated in the note the entity would establish profitable operations and no adjustments isrequired to aforesaid investments receivables guarantees and commitments.

The ultimate outcome of the above matters cannot presently be determined pendingapprovals acceptances restructuring of loans obtaining additional funds notificationlegal interpretations resolution of uncertainty around availability of gas and coal andcoal prices ability to establish profitable operations as referred to in the relevantnotes to the standalone Ind AS financial statements referred above accordingly noprovision for any liability and/or adjustment that may result has been made in thestandalone Ind AS financial statements. Our opinion is not qualified in respect of theaforesaid 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 1 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; eff of the mattersdescribed in the Basis for Qualified Opinion paragraph in our opinion proper books of(b)Exceptforthe account as required by law have been kept by the Company so far as appearsfrom 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 by this Report are in agreementwith the books of account.

(d) Except for the effects of the matters described in the Basis for Qualified Opinionparagraph above in our opinion the aforesaid standalone Ind AS financial statementscomply with the Accounting Standards specified under section 133 of the Act and Companies(Indian Accounting Standards) Rules 2015 as amended; (e) The matters described in Basisof qualified opinion paragraph Emphasis of Matter paragraph and paragraph (viii) tostatement on the matters specified in paragraph 3 and 4 of the Order above in ouropinion may have an adverse effect on the functioning of the Company.

(f) On the basis of written representations received from the directors as on March 312017 and taken on record by the Board of Directors none of the directors isdisqualifiedas on March 31 2017 from being appointed as a director in terms of section164 (2) of the Companies Act 2013; (g) The qualificationrelating to the maintenance ofaccounts and other matters connected therewith are as stated in the Basis for QualifiedOpinion paragraph above.

(h) With respect to the adequacyoftheinternalfinancialcontrols over financial reportingof the Company and the operating effectiveness of such controls refer to our separateReport in "Annexure 2" 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 financialpositionin its standalone Ind AS financial statements Refer Note 24 to the Ind AS financialstatements;

ii. The Company did not have any material foreseeable losses in long term contractsincluding derivative contracts;

iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company and

iv. The Company has provided requisite disclosures in Note 44 to these standalone IndAS financial holding of Specified Bank Notes on November 8 2016 and December 30 2016 aswell as dealings in Specified Notes during the period from November 8 2016 to December30 2016. Based on our audit procedures and relying on the management representationregarding the holding and nature of cash transactions including Specified we report thatthese disclosures are in accordance with the books of accounts maintained by the Companyand as produced to us by the Management.

Annexure - 1 referred to in our report of even date

Re: GVK Power & Infrastructure Limited (‘the Company')

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

(b) Property plant and equipment have been physically verified by the managementduring the year and no material discrepancies were identified on such verification.

(c) According to the information and explanations given by the management there are noimmovable properties included in property plant and equipment of the Company andaccordingly the requirements under paragraph 3(i)(c) of the Order are not applicable tothe Company and hence not commented upon.

(ii) The Company's business does not involve inventories and accordingly therequirements under paragraph 3(ii) of the Order are not applicable to the Company andhence not commented upon.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii) (a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to usprovisions of section 185 and 186 of the Companies Act 2013 in respect of loans todirectors including entities in which they are interested and in respect of loans andadvances given investments made and guarantees and securities given have been compliedwith 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) To thebest of our knowledge and as explained the Central Government has not specified themaintenance of cost records under Section 148(1) of the Companies Act 2013 for theservices of the Company and accordingly the requirements under paragraph 3(vi) of theOrder are not applicable to the Company and hence not commented upon.

(vii)(a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund employees' state insurance income-taxsales-tax wealth-tax service tax customs duty excise duty value added tax cess andother material statutory dues applicable to it.

(b) According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax service taxsales-tax duty of custom duty of excise value added tax cess and other materialstatutory dues were outstanding at the year end for a period of more than six monthsfrom the date they became payable.

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

Name of the Statute Nature of the dues Amount Period relates Forum
(Rs. Lakhs)
The Finance Act 1994 Service Tax 1317 July 1 2003 to March 31 2014 Customs Excise & Service Tax Appellate Tribunal
The Finance Act 1994 Service Tax 169 April 1 2014 to March 31 2015 Commissioner of central excise and customs Visakhapatnam II
Indian stamp Act 1899 Income Tax Act 1961 Stamp Duty Income tax liability 2829 10 February 4 2008 Assessment Year 09-10 High Court of Andhra Pradesh Commissioner of Income tax (Appeals) Visakhapatnam
Income Tax Act 1961 Income tax liability 279* Assessment Year 10-11 Income tax Appellate Tribunal Visakhapatnam
Income Tax Act 1961 Income tax liability 11* Assessment Year 11-12 Commissioner of Income tax (Appeals) Visakhapatnam
Income Tax Act 1961 Income tax liability 44* Assessment Year 12-13 Commissioner of Income tax (Appeals) Visakhapatnam

* Paid under protest/refund adjusted.

(viii) Based on our audit procedures performed for the purpose of reporting the trueand fair view of the financial statements and according to information and explanationsgiven by the management the Company has delayed in repayment of dues to banks during theyear. The Company did not have any outstanding dues in respect of a financial institutionor to government during the year. The lender wise details are tabulated as under:

Particulars Name of the Lender Period Amount in Delay in days
(Rs. Lakhs)
Interest on loans from banks Axis Bank Limited January 2016 to March 2016 691 61 to 149 days
Interest on loans from banks Axis Bank Limited April 2016 to August 2016 1170 29 to 121 days
Interest on loans from banks Axis Bank Limited October 2016 to January 2017 802 27 to 87 days
Principal payment on loans from banks Axis Bank Limited April 2016 to August 2016 2050 30 to 153 days
Principal payment on loans from banks Axis Bank Limited October 2016 to January 2017 2460 28 to 90 days
Interest on loans from banks Syndicate Bank Limited August 2015 to December 2015 915 318 to 440 days
Interest on loans from banks Syndicate Bank Limited January 2016 to February 2017 2523 21 to 415 days
Principal payment on loans from banks Syndicate Bank Limited August 2015 14956 Unpaid as at March 31 2017

(ix) According to the information and explanations given by the management the Companyhas not raised any money way of initial public offer / further public offer / debtinstruments and term loans hence reporting under clause (ix) is not applicable to theCompany and hence not commented upon.

(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 by the management we report that no fraud by the company or no fraud / materialfraud on the company by the officers and employees of the Company has been noticed orreported during the year. (xi) Based on our audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and according to theinformation and explanations given by the management we report that no managerialremuneration has been paid/ provided and hence reporting under clause 3(xi) are notapplicable and hence not commented upon.

(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 by the managementtransactions with the related parties are in compliance with section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.

(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 not commented upon. xv) According to the information and explanationsgiven by the management the Company has not entered into any non-cash transactions withdirectors or persons connected with him as referred to in section 192 of Companies Act2013. (xvi) According to the information and explanations given to us the provisions ofsection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.

Annexure-2 to the Independent Auditor's report of even date on the standalone Ind ASfinancial statements of GVK Power & Infrastructure Limited.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of GVK Power& Infrastructure Limited ("the Company") as of March 31 2017 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 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 Reportingissued by the Institute of Chartered

Accountants of India. These responsibilities include the design implementation andmaintenance of adequate internal financial of its business including adherence tocontrolsthat wereoperatingeffectivelyforensuringtheorderlyandefficient 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 ofreliablefinancialinformation 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 based on our audit.

We conducted our audit in accordance with the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting (the "Guidance Note") and theStandards on Auditing as specified under section 143(10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls both issued by theInstitute of Chartered Accountants of India. Those

Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financialreporting was established and maintained and if suchcontrols operated effectively in all material respects.

An audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficientand appropriate toprovide a basisforourqualifiedaudit opinion on the internal financial controls overfinancial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting that the internal financial controloverfinancialreporting may become inadequatebecause of changes in 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 as at March 31 2017:

The Company's internal financialcontrols over use of assumptions for analysis of assetimpairments were not operating effectively which could potentially result in the Companynot recognising possible impairment losses.

A ‘material weakness' is a deficiency or a combination of deficiencies ininternal financialcontrol over financialreporting such that there is a reasonablepossibility that a material misstatement of the company's annual or interim financial notbe prevented or detected on a timely basis.

In our opinion the Company has in all material respects maintained adequate internalfinancial controls over financial reporting as of March 31 2017basedontheinternalcontroloverfinancialreporting 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 and except for the possible effects of the materialweakness described above on the achievement of the objectives of the control criteria theCompany's internal financial controls over financial reporting were operating effectivelyas of March 31 2017.

Explanatory paragraph

We also have audited in accordance with the Standards on Auditing issued by theInstitute of Chartered Accountants of India as specified under Section 143(10) of theAct the standalone Ind AS financial statements of GVK Power & Infrastructure Limitedwhich comprise the Balance Sheet as at March 31 2017 related Statement of Profit andLoss including the statement of Other

Comprehensive Income the Cash Flow Statement for the year then ended the Statement ofChanges in Equity for the year then ended and a summary of significant accounting policiesand other explanatory information. This material weakness was considered in determiningthe nature timing and extent of audit tests applied in our audit of the March 31 2017standalone

Ind AS financialstatements of GVK Power & Infrastructure Limited and this reportaffect our report dated May 24 2017 which expressed a qualified opinion on thosestandalone Ind AS financial statements.

For S.R. Batliboi & Associates LLP

Chartered Accountants

ICAI Firm Registration Number: 101049W/E300004

per Vikas Kumar Pansari

Partner

Membership Number: 093649

Place of Signature: Hyderabad

Date: May 24 2017