GVK Power & Infrastructure Ltd.
|BSE: 532708||Sector: Engineering|
|NSE: GVKPIL||ISIN Code: INE251H01024|
|BSE 00:00 | 02 Aug||GVK Power & Infrastructure Ltd|
|NSE 05:30 | 01 Jan||GVK Power & Infrastructure Ltd|
|BSE: 532708||Sector: Engineering|
|NSE: GVKPIL||ISIN Code: INE251H01024|
|BSE 00:00 | 02 Aug||GVK Power & Infrastructure Ltd|
|NSE 05:30 | 01 Jan||GVK Power & Infrastructure Ltd|
To the Members of GVK Power & Infrastructure Limited
Report on audit of the Financial Statements
1. We have audited the accompanying standalone financial statements of GVK Power &Infrastructure Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2019 the Statement of Profit and Loss (including Other Comprehensive Income)Statement of Changes in Equity Statement of Cash Flows for the year then ended and notesto the financial statements including a summary of significant accounting policies andother explanatory information.
2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required except for theindeterminate effects of the matter referred to in Basis for Qualified Opinion sectionbelow give a true and fair view in conformity with the accounting principles generallyaccepted in India of the state of affairs of the Company as at March 31 2019 and totalcomprehensive income (comprising of profit and other comprehensive income) changes inequity and its cash flows for the year then ended.
Basis for Qualified Opinion
3. We draw your attention to note 44 to the standalone financial statements with regardto multiple significant uncertainties faced by certain subsidiaries and a joint venture ofGVK Energy Limited (a joint venture) due to factors such as (a) non -availability of fuel(coal/gas) (b) outstanding application for increase in tariff and (c) compensation inrelation to deallocated coal mine etc. Pending resolution of these uncertainties we areunable to comment on the adequacy of impairment loss/loss allowance for expected creditlosses to be recognised in relation to (i) investment in and loans to GVK Energy Limitedaggregating to Rs. 104213 lakhs and (ii) financial guarantees issued by the Company tothe jointly controlled entity amounting to Rs. 4500 lakhs. The impact of the abovematters if any on the standalone financial statements is presently not ascertainable.
4. We conducted our audit in accordance with the Standards on Auditing (SAs) 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 together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our qualified opinion.
Material Uncertainty Related to Going Concern
5. We draw attention to note 45 to the standalone financial statements which statesthat the Company has significant accumulated losses as at year ended March 312019 andhas defaulted in repayment of loan and interest payments. Further material uncertaintiesare faced by various projects in which the Company has made investments providedguarantees/ commitments and / or has undertaken to provide financial assistance. Theseevents or conditions along with other matters as set forth in aforementioned noteindicate that a material uncertainty exists that may cast significant doubt on theCompany's ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Emphasis of Matter
6. We draw your attention to note 43 to the Standalone financial statements regardingmaterial uncertainties being faced by GVK Coal Developers (Singapore) Pte. Limited anassociate company in which the Company has investment and has receivables aggregating toRs. 75655 lakhs and to whom it has provided guarantees and commitments for loansaggregating to Rs. 783297 lakhs and has undertaken to provide financial assistance of USD7.61 million (Rs.5263 lakhs) as at March 31 2019.
Our opinion is not modified in respect of this matter.
Key audit matters
7. Except for the matters described in the Basis for Qualified Opinion section andMaterial Uncertainty Related to Going Concern section we have determined that there areno other key audit matters to communicate in our report.
8. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe financial statements and our auditor's report thereon. The Annual report is expectedto be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated.
When we read the Annual report if we conclude that there is a material misstatementtherein we are required to communicate the matter to those charged with governance andtake appropriate action as applicable under the relevant laws and regulations.
Responsibilities of management and those charged with governance for the financialstatements
9. The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance changesin equity and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Accounting Standards specified under section133 of the Act. This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theCompany and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
10. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Auditor's responsibilities for the audit of the financial statements
11. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
12. As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
13. 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.
14. 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.
15. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
16. As required by the Companies (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the Annexure B a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
17. As required by Section 143(3) of the Act we report that:
a. We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b. In our opinion except for the indeterminate effects of the matter referred to inBasis for Qualified Opinion paragraph above proper books of account as required by lawhave been kept by the Company so far as it appears from our examination of those books.
c. The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Statement of Changes in Equity and Cash Flow Statement dealt with by thisReport are in agreement with the books of account.
d. Except for the indeterminate effects of the matter referred to in Basis of QualifiedOpinion paragraph above in our opinion the aforesaid standalone financial statementscomply with the Accounting Standards specified under Section 133 of the Act.
e. The matters described in Basis for Qualified Opinion Material Uncertainty Relationto Going Concern and Emphasis of Matter Sections above in our opinion may have anadverse effect on the functioning of the Company.
f. On the basis of the written representations received from the directors as on March312019 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2019 from being appointed as a director in terms of Section 164 (2) of theAct.
g. The qualification relating to the maintenance of accounts and other mattersconnected therewith are stated in the Basis of Qualified Opinion paragraph above asreferred to in paragraph 3 above.
h. With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure A".
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 opinion and to the best of our information andaccording to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note 32(c)to the financial statements;
ii. The Company has long-term contracts as at March 312019 for which there were nomaterial foreseeable losses and did not have any derivative contracts.
iii. There were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company during the year ended March 312019.
iv. The reporting on disclosures relating to Specified Bank Notes is not applicable tothe Company for the year ended March 312019.
Annexure A to Independent Auditors' Report
Referred to in paragraph 17(h) of the Independent Auditors' Report of even date to themembers of GVK Power & Infrastructure Limited on the standalone financial statementsfor the year ended March 312019
Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the Act
1. We have audited the internal financial controls with reference to financialstatements of GVK Power & Infrastructure Limited ("the Company") as of March312019 in conjunction with our audit of the standalone financial statements of theCompany for the year ended on that date.
Management's Responsibility for Internal Financial Controls
2. The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control with reference to financial statementsreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India (ICAI).These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to 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.
3. Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing deemedto be prescribed under Section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls with reference to financial statementswas established and maintained and if such controls operated effectively in all materialrespects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.
5. 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 financialcontrols system with reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
6. A company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control withreference to financial statements includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures 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 with reference to financialstatements
7. Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
Basis for Qualified opinion
8. According to the information and explanations given to us and based on our auditthe following material weakness has been identified as at March 312019:
The Company's internal financial controls over use of assumptions for analysis of assetimpairments were not operating effectively which could potentially result in the Companynot recognizing possible impairment losses.
9. A material weakness' is a deficiency or a combination of deficiencies ininternal financial control with reference to financial statements such that there is areasonable possibility that a material misstatement of the company's annual or interimfinancial statements will not be prevented or detected on a timely basis.
10. In our opinion except for the material weakness described above the Company hasmaintained in all material respects adequate internal financial controls with referenceto financial statements and such internal financial controls with reference to financialstatements were operating effectively as of March 312019 based on the internal controlwith reference 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 issued by the Institute of CharteredAccountants of India.
11. We have considered the material weakness identified and reported above indetermining the nature timing and extent of audit tests applied in our audit of thestandalone financial statements of the Company for the year ended March 312019 and thematerial weakness affects our opinion on the standalone financial statements of theCompany (Refer the Basis for Qualified Opinion in our main audit report)
Annexure B to Independent Auditors' Report
Referred to in paragraph 16 of the Independent Auditors' Report of even date to themembers of GVK Power and Infrastructure Limited on the standalone financial statements asof and for the year ended March 312019
i. (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets of the Company have been physically verified by the Managementduring the year and no material discrepancies have been noticed on such verification. Inour opinion the frequency of verification is reasonable.
(c) The Company does not own any immovable properties as disclosed in Note 3 on fixedassets to the financial statements. Therefore the provisions of Clause 3(i)(c) of thesaid Order are not applicable to the Company.
ii. The Company is in the business of rendering services and consequently does nothold any inventory. Therefore the provisions of Clause 3(ii) of the said Order are notapplicable to the Company.
iii. The Company has granted unsecured loans to 10 companies covered in the registermaintained under Section 189 of the Act. There are no firms /LLPs/ other parties coveredin the register maintained under Section 189 of the Act.
(a) In respect of the aforesaid loans the terms and conditions under which such loanswere granted are not prejudicial to the Company's interest.
(b) In respect of the aforesaid loans no schedule for repayment of principal has beenstipulated by the Company. Therefore in absence of stipulation of repayment terms we donot make any comment on the regularity of repayment of principal and payment of interest.
(c) In respect of the aforesaid loans there is no amount which is overdue for morethan ninety days.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 185 and 186 of the Companies Act 2013in respect of the loans and investments made and guarantees and security provided by it.
v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified.
vi. The Central Government of India has not specified the maintenance of cost recordsunder sub-section (1) of Section 148 of the Act for any of the services of the Company.
vii. (a) According to the information and explanations given to us and the records ofthe Company examined by us in our opinion the Company is generally regular in depositingundisputed statutory dues in respect of income tax though there has been a slight delayin a few cases and is regular in depositing undisputed statutory dues includingprovident fund employees' state insurance sales tax service tax duty of customs dutyof excise value added tax cess goods and service tax and other material statutory duesas applicable with the appropriate authorities. Also refer note 32(c) to the financialstatements regarding management's assessment on certain matters relating to providentfund.
(b) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of sales-tax duty of customs duty of excisevalue added tax goods and service tax which have not been deposited on account of anydispute. The particulars of dues of income tax service tax as at March 312019 whichhave not been deposited on account of a dispute are as follows:
* Paid under protest/ refund adjusted.
viii. According to the records of the Company examined by us and the information andexplanations given to us except for loans or borrowings from banks aggregating Rs. 3897as described below the Company has not defaulted in repayment of loans or borrowings toany financial institution or bank or Government or dues to debenture holders as at thebalance sheet date.
ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans. Accordingly the provisions ofClause 3(ix) of the Order are not applicable to the Company.
x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have we been informed of any such case by theManagement.
xi. No managerial remuneration is paid or payable during the year under review.Accordingly the provisions of Clause 3(xi) of the Order are not applicable to the Company.
xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company.
xiii. The Company has entered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the financial statements as required under IndianAccounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 ofthe Act.
xiv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review. Accordingly theprovisions of Clause 3(xiv) of the Order are not applicable to the Company.
xv. The Company has not entered into any non cash transactions with its directors orpersons connected with him. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.
xvi. The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.