The Members of
MEP INFRASTRUCTURE DEVELOPERS LIMITED
REPORT ON THE STANDALONE FINANCIAL STATEMENTS OPINION
We have audited the accompanying standalone financial statements of MEPINFRASTRUCTURE DEVELOPERS LIMITED ("the Company") which comprise the Balancesheet as at March 31 2019 and the Statement of Profit and Loss (including OtherComprehensive Income) the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and a summary of the significant accounting policies and otherexplanatory information (hereinafter referred to as "Standalone FinancialStatements").
In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2019the profit and total comprehensive income changes in equity and its cash flows for theyear ended on that date.
BASIS FOR OPINION
We conducted our audit in accordance with the Standards on Auditing
(SAs) specified under section 143(10) of the Companies Act 2013. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the financial statements under the provisions of the Companies Act 2013and the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our opinionon standalone financial statements.
EMPHASIS OF MATTER
We draw attention to Note 5 to the accompanying financial results whichstates that considering the Long term business outlook and future growth plans of the MEPGroup Management is of the opinion that the losses in subsidiary companies namely MEPNagzari Toll Road Private Limited MEP IRDP Solapur Toll Road Private Limited MEP ChennaiBypass Toll Road Private Limited and MEP Hyderabad Bangalore Toll Road Private Limitedare temporary in nature and overall going concern of the business is not adverselyaffected. In view of the above there is no diminution in the value of Investment andadvances given are fully recoverable.
Our opinion is not modified in respect of above.
KEY AUDIT MATTERS
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. We have determined the matters described below to be the key audit mattersto be communicated in our report:
|Key Audit Matter ||Auditor's Response |
|1. Accuracy of recognition measurement presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 "Revenue from Contracts with ||We have assessed the process to identify the impact of adoption of the new revenue accounting standard. |
|Customers" (new revenue accounting standard) ||The procedures performed included the following: |
| ||- Evaluated the design of internal controls relating to implementation of the new revenue accounting standard; |
| ||- Selected samples of continuing and new contracts and tested the operating effectiveness of the internal control relating to identification of the distinct performance obligations and determination of transaction price; and |
|Sr No Key Audit Matter ||Auditor's Response |
|The application of the new revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations determination of transaction price of the identified performance obligations the appropriateness of the basis used to measure revenue recognized over a period. Additionally new revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. Refer Note 1 (xi) to the Standalone Financial Statements. ||- Selected samples of continuing and new contracts and performed the following procedures: |
| ||i. Read and analysed contracts to identify the distinct performance obligations if any in such contracts; |
| ||ii. Compared such performance obligations with that identified and recorded by the Company; |
| ||iii. Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable consideration; |
| ||iv. In respect of samples relating to fixed price contracts progress towards satisfaction of performance obligation used to compute recorded revenue was verified with the supporting documentation validated estimates of costs to complete mathematical appropriateness of calculations and the adequacy of project accounting; and v. Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings. |
|2. Accuracy of revenue recognition in respect of fixed price construction contracts involves critical estimates. ||Our audit procedures on revenue recognized from fixed price construction contracts included |
|The Company engages in Fixed-price construction contracts where revenue is recognized using the percentage of completion computed as per the input method based on management's efforts or inputs to the satisfaction of a performance obligation relative to the total expected inputs to the satisfaction of that performance obligation. Refer Note 1 (xi) to the Standalone Financial Statements. || Obtaining an understanding of the contract processes and controls implemented by management for recording and calculating revenue and the associated contract assets and contract liabilities. |
| || Involving Civil and Roads & Infrastructure department to assess the nature of work done and status of completion of work. |
|We identified revenue recognition of fixed price construction contracts as a Key audit matter considering || |
| Application of revenue recognition accounting standard is complex and involves a number of key judgments and estimates including estimating the future cost-to-completion of these contracts which is used to determine the percentage of completion of the relevant performance obligation; ||On selected samples of contracts we tested that the revenue recognized is in accordance with the accounting standard by |
| || Evaluating the identification of performance obligation; |
| The revenue on contracts may also include variable consideration (variations and claims). Variable consideration is recognised when the recovery of such consideration is highly probable. || Testing management's calculation of the estimation of contract cost and onerous obligation. - Observed that the estimates of cost to complete were reviewed and approved by appropriate levels of management; |
| These contracts may involve onerous obligations on the Company that require critical estimates to be made by management; and ||- Performed a retrospective review of costs incurred with estimated costs to identify significant variations and verify whether those variations have been considered in estimating the remaining costs to complete the contract; |
| At year-end a significant amount of work in progress (Contract assets and liabilities) related to these contracts is recognized on the balance sheet. || |
|Key Audit Matter ||Auditor's Response |
| ||- Assessed the appropriateness of work in progress (contract assets) on balance sheet by evaluating the underlying documentation to identify possible delays in achieving milestones which may require change in estimated costs to complete the remaining performance obligations; |
| ||- Verified the budget by technical experts of the management to review estimates of costs to complete for sample contracts; and |
| ||- Performed test of details including analytics to determine reasonableness of contract costs. |
|3. Recoverability of claim receivables from Government Authorities: ||We assessed management's estimate regarding recoverability of the claim receivables from authorities. Our work included but was not limited to the following procedures: |
|As a part of concession agreement with authority for Operate- Maintain-Transfer ("OMT") project the company is entitled to claim revenue loss or operating cost due to closure of tolls for various reasons as per terms of agreement during the entire tenure. Consequently the company has recorded claim receivables from authority amounting to Rs. 3407.83 lakhs as at March 2019. || Verified the concession agreement with respect to nature of force majeure event and obligation of authority to reimburse the claims made by the company. |
|The assessment of recoverability of the receivables requires management to make judgement and estimate to assess the uncertainty regarding claims recoverable from authority. The assessment process is considering inter alia history of amounts claimed documentation process and requirements potential litigation or arbitration proceedings. || Reviewed management's assessment of the recoverability of the claims including the history of amounts claimed vs. amounts accepted and reimbursed form various contracts at the group level. |
|The company's disclosure about claim receivables are included in Note No 14 (Other Current Financial Assets). || Discussed with management with respect to the estimates of timing of collection from the authorities; and relied on the workings prepared by the company forming basis for the claims filed with the authority. |
| || Although the management is making reasonable efforts to recover the claims given the nature of the receivables the delay in the settlement of claims receivables is inevitable. |
INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS ANDAUDITOR'S REPORT THEREON
The Company's Board of Directors is responsible for thepreparation of the other information. The other information comprises the informationincluded in the Management Discussion and Analysis Board's Report includingAnnexures to Board's Report Business Responsibility Report Corporate Governance andShareholder's Information but does not include the standalone financial statementsand our auditor's report thereon. Our opinion on the standalone financial statementsdoes not cover the other information and we do not express any form of assuranceconclusion thereon.
In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated.
If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.
MANAGEMENT'S RESPONSIBILITY FOR THE STANDALONE FINANCIALSTATEMENTS
The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Companies Act 2013 ("the Act") with respect tothe preparation of these standalone financial statements that give a true and fair view ofthe financial position financial performance (changes in equity and cash flows of theCompany in accordance with IND AS and the accounting principles generally accepted inIndia including the accounting Standards specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateimplementation and maintenance of accounting policies; making judgments and estimates thatare reasonable and prudent; and design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statement that give a true and fair view and are free from materialmisstatement whether due to fraud or error. In preparing the financial statementsmanagement is responsible for assessing the Company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless management either intends to liquidate the Company orto cease operations or has no realistic alternative but to do so. Those Board ofDirectors are also responsible for overseeing the Company's financial reportingprocess.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIALSTATEMENTS
Our objectives are to obtain reasonable assurance about whether thefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal financial controls relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls system in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditionsmay cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.
COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit. 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. From the matters communicatedwith those charged with governance we determine those matters that were of mostsignificance in the audit of the standalone financial statements of the current period andare therefore the key audit matters. We describe these matters in our auditor'sreport unless law or regulation precludes public disclosure about the matter or when inextremely rare circumstances we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government of India in terms of subsection(11) of section 143 of the Companies Act 2013 we give in the Annexure a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.
As required by Section 143(3) of the Act we report that:
a) W e have sought and obtained all the information explanations whichto the best of our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have beenkept 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 OtherComprehensive Income Statement of Changes in
Equity and the Statement of Cash Flow dealt with by this
Report are in agreement with the relevant books of account.
d) In our opinion the aforesaid standalone financial statements complywith the Accounting Standards specified under Section 133 of the Act read with Rule 7 ofthe Companies (Accounts) Rules 2014.
e) On the basis of the written representations received from thedirectors as on 31st March 2019 taken on record by the Board of Directorsnone of the directors is disqualified as on
31st March 2019 from being appointed as a director in termsof Section 164 (2) of the Act. f) With respect to the adequacy of the internal financialcontrols over financial reporting of the Company and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure A". Our report expresses anunmodified opinion on the adequacy and operating effectiveness of the Company'sinternal financial controls over financial reporting.
g) With respect to the other matters to be included the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 inour opinion and to the best of our information and according to the explanations given tous:
i. The Company does not have any pending litigations which would impacton its financial position as per information and explanation provided by Company'sManagement. ii. The Company does not have any long-term contracts including derivativecontracts for which there are any material foreseeable losses.
iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.
| ||For G. D. Apte & Co. |
| ||Chartered Accountants |
| ||Firm Registration Number: 100515W |
| ||Chetan R. Sapre |
|Place : Mumbai ||Partner |
|Date : May 23 2019 ||Membership No: 116952 |