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IL&FS Engineering & Construction Co Ltd.

BSE: 532907 Sector: Infrastructure
NSE: IL&FSENGG ISIN Code: INE369I01014
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OPEN 3.80
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OPEN 3.80
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VOLUME 5558
52-Week high 5.68
52-Week low 1.47
P/E
Mkt Cap.(Rs cr) 54
Buy Price 3.80
Buy Qty 919.00
Sell Price 4.10
Sell Qty 50.00

IL&FS Engineering & Construction Co Ltd. (IL&FSENGG) - Auditors Report

Company auditors report

To the Members of IL&FS Engineering and Construction Company Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion:

We have audited the standalone financial statements of IL&FS Engineering andConstruction Company Limited ("the Company") which comprise the standalonebalance sheet as at March 31 2019 the standalone statement of profit and loss (includingother comprehensive income) standalone statement of changes in equity and standalonestatement of cash flows for the year then ended and notes to the standalone financialstatements including a summary of the significant accounting policies and otherexplanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matters described in the ‘Basisfor Qualified Opinion' paragraph below the aforesaid standalone financial statements givethe information required by the Companies Act 2013 ("Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019and loss and other comprehensive income changes in equity and its cash flows for the yearended on that date.

Basis for Qualified Opinion:

We draw attention to the following notes to the stand alone financial statements:

Note 13 (a) relating to deferred tax asset amounting to Rs. 242.99 Crores as at March31 2019 recognised by the Company in earlier years. Considering the material uncertaintyrelated to going concern that exists in the Company the threshold of reasonable certaintyfor recognising the deferred tax assets as per Ind AS 12- Income Taxes has not been met.Consequently deferred tax asset is overstated and loss for the year and retained earnings(accumulated loss) are understated by Rs. 242.99 Crores.

Note 49 regarding Inter Corporate Deposits (ICDs) amounting to Rs. 323.78 Crores. TheseICDs represents advances given by the Company to other entities which as informed to usby the management were ultimately given by these other entities to erstwhile SatyamComputer Services Ltd which has since merged into Tech Mahindra Ltd. In the absence ofadequate and sufficient audit evidence to establish the recoverability of said advanceswe are unable to express an opinion on the recoverability of the said ICDs.

Note 51 relating to non-recognition of interest expense of Rs. 144.99 Crores for theyear on the borrowings availed by the Company considering the process initiated forsubmission of a resolution proposal to lenders for restructuring of existing debt.Consequently interest expense and loss for the year are understated by Rs. 144.99 Croresand retained earnings (accumulated loss) is understated by Rs. 144.99 Crores.

As stated in the Note 52 relating to the provision for advance aggregating to Rs. 65Crores for purchase of cement paid during the period to a party the Management is of theopinion that these transactions are suspicious in nature and the Board decided to initiateinvestigation by informing the Ministry of Corporate Affairs (MCA). In the absence ofsufficient and appropriate audit evidence we are unable to opine on the appropriatenessof the recognition of the transaction pending result of the outcome of the investigation

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our qualified opinion.

Material uncertainty related to going Concern:

Attention is invited to Note 30 in the standalone financial statements regarding alikely significant reduction in the Company's future income from operations in theabsence of new business orders management's expectation of Company's inability to meetits obligations over the next 12 months out of its earnings and liquid assets. During theyear ended March 31 2019 the Company was unable to discharge its obligations forrepayment of loans and settlement of other financial and non-financial liabilitiesincluding statutory liabilities. The Company's management represented to us that processhas been initiated for submission of a resolution proposal to lenders for restructuring ofexisting debt. These events and conditions indicate a material uncertainty which cast asignificant doubt on the Company's ability to continue as a going concern and thereforeit may be unable to realise its assets and discharge its liabilities including potentialliabilities in the normal course of business. The ability of the Company to continue as agoing concern is solely dependent on the acceptance of the debt restructuring proposal /finalisation and approval of the resolution plan which is not wholly within the controlof the Company.

The Management of the Company has accordingly prepared these Standalone FinancialStatements on going concern basis based on their assessment of the successful outcome ofthe restructuring proposal / finalisation and approval of the resolution plan.

Our opinion is not modified in respect of this matter.

Emphasis of Matter:

We draw attention to the following notes to the standalone financial statements:

Note 31 (vii) regarding ongoing investigations by Serious Fraud Investigation Office ofMinistry of Company Affairs (SFIO) Enforcement Directorate (ED) and other regulators /agencies against Infrastructure Leasing & Financial Services Limited (‘IL&FS'or ‘the Holding Company') and its subsidiaries (including the Company).The NationalCompany Law Tribunal (NCLT) has issued an Order to re-open books of accounts of IL&FSand its two subsidiaries (other than this Company) for the past financial years. Thefinancial statements of the Company for the year do not include adjustments if any thatmay arise on account of the ongoing investigations by the investigating and other agenciesand Regulatory Authorities as the management at this juncture cannot foresee anyadjustments to be made in these financial statements of the Company as a result of anysuch investigations.

Note: 48 (a) and Note 48 (b) regarding recoverability of Trade Receivables and Contractassets respectively from the terminated / foreclosed / revived projects aggregating to Rs.475.26 Crores. Based on its internal assessment no adjustments have been made in thecarrying value of the receivables / contract assets.

Note 8 and Note 9 which include carrying value of loans / advances / interest accruedon such loans or advances to the investee entities of aggregating to Rs. 146.19 Crores.Recoverability of these investments / receivables / loans and advances is dependent uponrecovery of capacity charges and supplies increase in traffic on road investments finalaward of the claim and positive outcome of the litigations in the ultimate investeeentities.

The ultimate outcome of the matters stated above cannot presently be determinedpending approvals acceptances legal interpretations conclusion of legal proceedingsachievement of traffic projections favourable settlement of claims and ultimaterealisation etc. as referred to in the relevant notes to the accompanying standalonefinancial statements referred above accordingly no adjustment has been made in thecarrying value of the aforesaid assets.

Note 53 regarding exceptional items aggregating to Rs. 1640.42 Crores comprising writeoff / provisions made and other adjustments made during the year based on comprehensivereview / assessment carried out by the management during the year.

Our opinion is not modified in respect of the aforementioned matters.

Key Audit Matters:

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. In addition to the matter described in the ‘Basisfor Qualified Opinion' and Material Uncertainty Related to Going Concern section we havedetermined the matters described below to be the key audit matters to be communicated inour report. For each matter below our description of how our audit addressed the matteris provided in that context.

Description of Key Audit Matter:

Key audit matter How the matter was addressed in our audit
Estimated Cost to complete the Project:
Refer note 3 (a) to the standalone financial statements
The Company recognises revenue under percentage fi of completion method as speci ed under Indian Accounting Standard (IND AS)-115 Revenue from contract with customers. Recognition of revenue requires estimation of total contract cost which comprises of the actual cost incurred till date and estimated cost further to be incurred to complete the projects. Estimation of the cost to complete involves exercise of significant judgement by management including assessment of technical data and hence identified as Key Audit Matter. Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
1. Tested the design implementation and operating effectiveness of the controls surrounding determination and approval of estimated cost.
2. Verified the contracts with customers on test check basis and the actual cost incurred and terms and condition related to the variation of the cost.
3. Obtained and relied on the internal assessments supporting the accuracy of the estimate of the total cost of the project for selected contracts on test check basis.

Trade receivables and Contract Assets

Refer Note: 7 and 12 to the standalone Financial statements

Trade receivables and contract assets amounting to Rs 256.09 Crores and Rs 1314.65 Crores respectively represents approximately 49.41% of the total assets of the Company as at March 31 2019. In assessing the recoverability of the aforesaid balances management's judgement involves consideration of aging status evaluation of litigations and the likelihood of collection based on the terms of the contract. Management estimation is required in the measurement of work completed during the period for recognition of unbilled revenue. We considered this as key audit matter due to the materiality of the amounts and significant estimates and judgements as stated above. Our audit procedures amongst others included the following:
We understood and tested on a sample basis the design and operating effectiveness of management control over the recognition and the recoverability of the trade receivables and contract assets.
We performed test of details and tested relevant contracts documents and subsequent settlements for material trade receivable balances and amounts included in contract assets that are due on performance of future obligations.
• We tested the aging of trade receivables at year end.
We performed test of details and tested relevant contracts and documents with specific focus on measurement of work completed during the period for material unbilled revenue balances included in contract asset.
We performed additional procedures in respect of material over-due trade receivables and long outstanding contract assets i.e. tested historical payment records correspondence with customers.
We assessed the allowance for impairment made by management.

Advances to Subcontractors and Suppliers

Refer note 8 and 12 to the standalone financial statements

The Company has recoverable advances (in cash or in kind) of Rs. 128.08 Crores. Our audit procedures amongst others included the following:
Management's assessment of recoverable amounts in cash or in kind has been identified as key audit matter due to the significance of the balances as at March 31 2019. We understood and tested on a sample basis the design and operating effectiveness of management control over disbursing the advance and the recoverability of the advances to vendors – for supply of goods and services.
We performed test of details and tested relevant contracts documents and subsequent settlements for material balances outstanding for recovery either in cash or kind as at March 31 2019.
We tested the aging of these advances as at the year end.
We assessed the allowance for provisioning made by management.

Provisions and Contingent Liabilities:

Refer note 3 (p) to the standalone financial statements

The Company is involved in various taxes and other disputes for which final outcomes cannot be easily predicted and which could potentially result in significant liabilities. The assessment of the risks associated with the litigations is based on complex assumptions which require the use of judgements and such judgements relates primarily to the assessment of the uncertainties connected to the prediction of the outcome of the proceedings and to the adequacy of the disclosures in the financial statements. Because of the judgement required the materiality of such litigations and the complexity of the assessment process the area is a key matter for our audit. Our audit approach was combination of test of internal controls and substantive procedures which included the following:
1. Assessing the appropriateness of the design and implementation of the Company's controls over the assessment of litigations and completeness of disclosures.
2. Testing the supporting documentation for the positions taken by the management conducting meetings with in-house legal counsel and/or legal team and reviewing the minutes of Board and subcommittee to confirm the operating effectiveness of these controls.
3. Review of assumptions used in the evaluation of potential risk and tax risks performed by the legal and tax department of the Company considering the legal precedence and other rulings in similar cases.
4. Consideration of recent judgements passed by the appropriate authorities in order to challenge the basis used for the accounting treatment and resulting disclosures.

Information Other than the standalone financial statements and Auditors' ReportThereon:

The Company's management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Annualreport but does not include the standalone financial statements and our auditor's reportthereon. The Annual report is 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 will 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 the Annual report if we conclude that there is material misstatementtherein we are required to communicate the matter to those charged with governance.

Management's Responsibility for the standalone financial statements:

The Company's management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the accuracy and completeness of the accounting records relevantto the preparation and presentation of the standalone financialstatements that give a trueand fair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

Board of Directors is also responsible for overseeing the Company's financial reportingprocess.

Auditor's Responsibilities for the Audit of the standalone financial statements:

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. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.

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 standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient to provide a basisfor our opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional 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 standalone financial statements inplace and the 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 standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe matters in ourauditors' report unless law or regulation precludes public disclosure about the matter orwhen 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:

1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of section 143 (11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.

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

a. Except for the matters stated in the "Basis for qualified opinion"paragraph hereinabove we have obtained all the information and explanations which we hadsought and to the best of our knowledge and belief were necessary for the purposes of ouraudit.

b. Except for the possible effects of the matters described in the Basis for QualifiedOpinion paragraph above 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 balance sheet the standalone statement of profit and loss (includingother comprehensive income) the standalone statement of changes in equity and thestandalone statement of cash flows dealt with by this Report are in agreement with thebooks of account.

d. Except for the possible effect of the matters described in the Basis for QualifiedOpinion paragraph above in our opinion the aforesaid standalone financial statementscomply with the Ind AS specified under section 133 of the Act.

e. The matter relating to going concern described under Material Uncertainty Related toGoing Concern paragraph above and the matters stated at paragraphs 1 to 3 under Emphasisof Matter paragraph above in our opinion may have an adverse effect on the functioningof the Company.

f. On the basis of the written representations received from the directors as on 31March 2019 taken on record by the Board of Directors none of the directors aredisqualified as on 31 March 2019 from being appointed as a director in terms of Section164(2) of the Act.

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

h. With respect to the adequacy of the internal financial controls with reference tostandalone financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure B".

i. With respect to the matter to be included in the Auditors' Report under section 197(16) according to the information and explanations given to us the company has not paidany remuneration to its directors during the current year except sitting fee paid to thenon- executive / independent directors. The same is in accordance with the applicableprovisions of the Companies Act 2013.

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

i. The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Financial Statements (Refer Note – 31 to the StandaloneFinancial Statements);

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company;

For M. Bhaskara Rao & Co.
Chartered Accountants
ICAI Firm Registration Number: 000459S
V K Muralidhar
Partner
Membership Number: 201570
Mumbai November 19 2019 UDIN: 19201570AAAADX2083

"Annexure A" to the Independent Auditors' report on the standalone financialstatements

Annexure A referred to in paragraph (1) of Report on other Legal and regulatoryrequirements of our Report of even date to the members of IL&FS Engineering andConstruction Company Limited on the standalone financial statements for the year endedMarch 31 2019.

i. With respect to fixed assets:

a. According to the information and explanation given to us the Company has maintainedproper records showing full particulars including quantitative details and situation offixed assets.

b. According to the information and explanation given to us all fixed assets have notbeen physically verified by the management during the year but there is a regularprogramme of verification which in our opinion is reasonable having regard to the sizeof the Company and the nature of its assets. Discrepancies noted on such verification werenot material and have been properly dealt with in the books of account.

c. Based on our audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to information and explanations givenby the management the title deeds of immovable properties included in fixed assets areheld in the name of the Company. In this regard we were informed that the title deedshave been lodged with bankers as Security. However confirmation from the respectivebankers was not furnished to us.

ii. The management has conducted physical verification of inventories at reasonableintervals during the year. Discrepancies noted on physical verification of inventorieswere not material and have been properly dealt with in the books of account.

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 us thereare no loans investments guarantees and securities granted in respect of whichprovisions of Section 185 and Section 186 of the Companies Act 2013 are applicable andhence not commented upon

v. The Company has not accepted any deposits from the public.

vi. We have broadly reviewed the books of account maintained by the Company pursuant tothe rules made by the Central Government for the maintenance of cost records under section148(1) of the Companies Act 2013 related to the construction industry and constructionof roads and other infrastructure projects and are of the opinion that prima facie thespecified accounts and records have been made and maintained. We have not however made adetailed examination of the same.

vii. With respect to statutory dues:

a. According to the information and explanations given to us and on the basis of ourexamination of the books of account the Company has not regularly deposited undisputedstatutory dues including Provident fund Employees' state insurance Income-tax Salestax Service tax Duty of custom Duty of excise Value added tax Goods and Service taxCess and other material statutory dues with the appropriate authorities.

b. There were arrears in respect of undisputed amounts payable in respect of Providentfund Employees' state insurance Income-tax Service tax Sales-tax Duty of custom Dutyof excise Value added tax Goods and Service tax Cess and other material statutory duesas at March 31 2019 for a period of more than six months from the date the same becamepayable are as follow:

Name of the Statute Nature of dues Amount (Rs in Crore) Period to which the amount relates Due Date Date of subsequent payment
Employees Provident Fund Act 1952 Provident fund contribution 0.73 2018-19 Various dates Various dates
Employees State Insurance Act 1948 ESI Contribution 0.42 2018-19 Various dates Various dates
Income Tax Act 1961 Tax Deducted at Source 11.66 2018-19 Various dates Not Paid
GST Act GST 16.33 2017-18 Various dates Not Paid
GST Act GST 79.84 2018-19 Various dates Not Paid

c. According to the records of the Company the amounts disputed by the Company and notdeposited in respect of Income tax Sales tax Service tax Duty of custom Duty ofexcise Value added tax and Cess are as follows:

Name of the Statute Nature of dues Amount demanded Paid under protest Period to which the amount relates (Assessment years) Forum where dispute is pending
(Rs in Crore) (Rs in Crore)
AP Value Added Tax 2005 Sales Tax and Penalty 1.13 0.32 2005-06 2006-07 and 2007-08 Sales Tax Appellate Tribunal Hyderabad
AP Value Added Tax 2005 Penalty on Sales Tax 0.36 0.18 2007-08 Appellate Deputy Commissioner Hyderabad
AP Value Added Tax 2005 Sales Tax 27.06 - 2007-08 High Court of Judicature at Hyderabad for the states of Andhra Pradesh and Telangana
Central Sales Tax Act1956 Penalty for Sales Tax 0.50 0.12 2002-03 and 2003-04 Sales Tax Appellate Tribunal Hyderabad
Central Sales Tax Act1956 Penalty on Sales Tax 0.70 0.20 2007-08 Appellate Deputy Commissioner Chhattisgarh
Finance Act 1994 Service Tax 9.70 - 2007-08 and 2008-09 Commissioner of Customs & Central Excise Hyderabad
West Bengal Vat Act 2003 Sales Tax 0.06 - 2009-10 Joint Commissioner of Commercial Taxes Behrampore
West Bengal Vat Act 2003 Sales Tax 1.52 - 2008-09 West Bengal Appellate & Revisional Board
AP Value Added Tax 2005 Sales Tax 0.92 0.51 2008-09 Appellate Deputy Commissioner Hyderabad
Andhra Pradesh Tax on Professions Trades Callings and Employments Act 1987 Professional Tax 0.06 - 2008-09 Commercial tax officer Hyderabad
AP Value Added Tax 2005 Sales Tax 1.85 - 2005-06 2006-07 2007-08 2008-09 and 2009-10 Commercial Tax Officer Hyderabad
AP Value Added Tax 2005 Sales Tax 4.12 - 2009-10 2010-11 2011-12 and 2012-13 Assistant Commissioner of Sales Tax (Enforcement) Hyderabad
AP Value Added Tax 2005 Sales Tax 0.21 0.03 2014-15 Appellate Deputy Commissioner Vishakapatnam
MP Entry Tax Act 1976 Entry Tax 0.27 0.03 2013-14 Asst. Commissioner commercial tax officer (Audit) Jabalpur MP
Orissa Entry Tax Act 1999 Entry Tax 0.21 0.07 April 1 2010 to March 31 2014 Joint Commissioner of Sales Tax Cuttack
West Bengal Vat Act 2003 Sales Tax 0.11 - 2011-12 Senior Joint Commissioner West Bengal
West Bengal Vat Act 2003 Sales Tax 1.36 0.20 2012-13 Senior Joint Commissioner West Bengal
Finance Act 1994 Service Tax 3.47 0.26 October 2010 to March 2015 Principal commissioner of service tax Hyderabad
AP Value Added Tax 2005 Sales Tax 0.11 - 2012-13 Commercial Tax Officer Hyderabad
Central Excise Act 1944 Excise Duty 12.04 0.50 February 2012 to February 2016 Commissioner of Central Excise Gurgaon
Maharashtra Vat Act 2002 Sales tax 0.35 0.02 2011-12 Sales Tax Appeals Kolhapur Maharashtra
Odisha Vat Act 2004 Sales tax 0.14 - April 2014 to September 2015 Joint Commissioner of commercial tax Cuttack
The Odisha Entry tax Act 1999 Entry tax 0.03 - April 2014 to September 2015 Joint Commissioner of commercial tax Cuttack
Maharashtra Vat Act 2002 Sales Tax and interest 0.71 0.02 2013-14 Deputy Commissioner of sales tax (Appeals) Kolhapur
Central Sales Tax Act1956 Interest on CST 1.28 - 2002-03 and 2003- 04 Sales Tax Appellate Tribunal Hyderabad
U P VAT Act 2008 VAT Assessment (Exparte) 44.31 - 2015-16
Income Tax Act 1961 Income Tax 39.82 39.21 2007-08 to 2011-12 Commissioner of Income Tax (Appeals) Hyderabad

viii. In our opinion and according to the information and explanations given to us theCompany has defaulted in the repayment of loans or borrowings to banks as at March 312019. The Company has not taken any loan from the Government and not issued any debenturesduring the year.

Details of default in repayment of borrowings from Banks as on March 31 2019 are givenbelow:

Particulars

Amount of Default

Period of Default (No of

(Rs. Crores)

days)

10.25 182
ICICI Bank 11.85 90
11.85 1
SBI (including SBH) 6.45 1
1.67 182
Bank of Maharashtra 1.67 90
1.67 1
1.49 182
IDBI Bank 1.73 90
1.73 1
Bank of India 0.39 90
0.39 1
0.80 182
Punjab National Bank 0.80 90
0.80 1
0.54 182
Vijaya Bank 1.03 90
1.03 1
1.09 182
Indian Overseas Bank 1.09 90
1.09 1
2.84 182
Allahabad Bank 2.84 90
2.84 1

Details of Interest Defaults to Banks as at March 31 2019 are as follows:

Particulars Amount of Default Period of Default

(Rs. Crores)

(No of days)
ICICI Bank 5.45 Due date for interest is on various dates on monthly basis.
SBI (including SBH) 7.96
Bank of Maharashtra 1.74
Bank of India 0.83
IDBI Bank 1.66
Punjab National Bank 3.12
Vijaya Bank 1.98
Indian Overseas Bank 2.41
Allahabad Bank 4.20

Details of default in repayment of borrowings from Financial Institutions (PromoterGroup entities) as on March 31 2019 are given below:

Particulars Amount of Default Period of Default (No of days)

(Rs. Crores)

39.70 184
Infrastructure Leasing & Financial Services Ltd 30.00 157
84.00 39
IL&FS Financial Services Limited 80.40 195
25.00 54
IL&FS Transportation Networks India Limited 3.00 32
5.00 27
Tierra Enviro Limited 4.40 307
35.00 364
IL&FS Cluster Development Initiative Limited 15.00 1
Sabarmati Capital One Limited 4.60 216
7.00 212

Details of Interest Defaults to Financial Institutions (Promoter Group entities) as onMarch 31 2019 are given below:

Particulars Amount of Default Period of Default

(Rs. Crores)

(No of days)
Infrastructure Leasing & Financial Services Ltd 41.34 Due date for interest is on various dates on monthly basis.
IL&FS Financial Services Limited 11.29
IL&FS Transportation Networks India Limited 2.98
Tierra Enviro Limited 1.62
IL&FS Cluster Development Initiative Limited 0.63
Sabarmati Capital One Limited 0.48
IL&FS Airports Ltd 1.58
Rohtas Bio Energy Limited 2.17
RIDCOR Infra Projects Limited 1.74

The above details of Interest Defaults to Banks and Financial Institutions is exclusiveof Rs. 144.99 Crores.

ix. In our opinion and according to the information and explanations given to us theCompany has not raised any money by way of initial public offer or further public offer(including debt instrument) during the year and term loans. Thus paragraph 3 (ix) of theOrder is not applicable to the Company.

x. According to the information and explanations given to us no material fraud by theCompany or on the Company by its officers or employees has been noticed or reported duringthe course of our audit except in respect of transactions relating to advances paid to asupplier aggregating to Rs. 65 Crores for which the reconstituted Board decided toinitiate investigation by informing the Ministry of Corporate Affairs (MCA) (Refer Note 4of Basis for Qualified Opinion Section of our report).

xi. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has neither paid nor provided formanagerial remuneration. Thus paragraph 3 (xi) of the Order is not applicable to theCompany.

xii. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company as per the Act. Thus paragraph 3 (xii) of the Order is notapplicable to the Company.

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 Standalone financial statements as required by the applicable accounting standards.

xiv. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has not made preferential allotmentor private placement of shares or allotted fully or partly convertible debentures duringthe year. Thus paragraph 3 (xiv) of the Order is not applicable to the Company.

xv. According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with Directors or person connected with him. Thus paragraph 3 (xv) of theOrder is not applicable to the Company.

xvi. According to the information and explanation given to us the Company is notrequired to be registered under Section 45-IA of the Reserve Bank of India Act 1934.Thus paragraph 3 (xvi) of the Order is not applicable to the Company.

For M. Bhaskara Rao & Co.
Chartered Accountants
ICAI Firm Registration Number: 000459S
V K Muralidhar
Partner
Membership Number: 201570
Mumbai November 19 2019 UDIN: 19201570AAAADX2083

Annexure B referred to in paragraph 2 (h) of Report on other Legal and regulatoryrequirements of our Report of even date to the members of IL&FS Engineering andConstruction Company 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 IL&FSEngineering and Construction Company Company') as of March 31 2019 in conjunction withour audit of the Standalone financial 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 (‘ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.

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 accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the ‘Guidance Note') and the Standards on Auditing issued by ICAI and prescribedunder Section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our 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 Standalone financial statements whether due to fraud orerror.

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 over financial 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 Standalone financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that:

1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of Management and directors of the company; and

3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial 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 financial the internal financial anyevaluationof the internalfinancial control over financialreporting may become inadequate because of changes inconditions or that the degree of compliance with the policies or procedures maydeteriorate.

Basis for Qualified Opinion

According to the information and explanations given to us and based on our audit amaterial weakness has been identified in the Company's internal financial controls overfinancial reporting as at 31 March 2019 relating to certain operating effectiveness insome of controls in respect of assessment of deferred tax asset assessment of realisablevalue of inventory assessment of recovery of contract assets inter corporate depositsand advances and procurement of materials

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

Qualified Opinion

In our opinion to the best of our information and according to the explanations givento us except for the possible effects of the material weakness described in Basis forQualified Opinion paragraph above on the achievement of the objectives of the controlcriteria the Company has maintained in all material respects adequate internalfinancial controls over financial reporting and such internal financial controls overfinancial reporting were operating effectively as of 31 March 2019 based on the internalcontrol over financial reporting 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.

We have considered the material weaknesses identifiedand reported above in determiningthe nature timing and extent of audit tests applied in our audit of the standalonefinancial tatements of the Company for the year ended March 31 2019 and these materialweaknesses have affected our opinion on the said standalone financial statements of theCompany.

For M. Bhaskara Rao & Co.
Chartered Accountants
ICAI Firm Registration Number: 000459S
V K Muralidhar
Partner
Membership Number: 201570
Mumbai November 19 2019 UDIN: 19201570AAAADX2083