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Patel Engineering Ltd.

BSE: 531120 Sector: Infrastructure
NSE: PATELENG ISIN Code: INE244B01030
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OPEN 37.75
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VOLUME 20666
52-Week high 96.05
52-Week low 36.60
P/E 2.23
Mkt Cap.(Rs cr) 588
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 37.75
CLOSE 37.50
VOLUME 20666
52-Week high 96.05
52-Week low 36.60
P/E 2.23
Mkt Cap.(Rs cr) 588
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Patel Engineering Ltd. (PATELENG) - Auditors Report

Company auditors report

TO

THE MEMBERS OF

PATEL ENGINEERING LIMITED

REPORT ON THE STANDALONE IND AS FINANCIAL STATEMENTS

We have audited the accompanying Standalone Ind AS financial statements of PatelEngineering Limited ("the Company") which comprise the Balance Sheet as atMarch 31 2017 the Statement of Profit and Loss (including Other Comprehensive Income)the Cash Flow Statement and the Statement of Change in Equity for the year ended and asummary of the significant accounting policies and other explanatory information andwhich includes merged entity Patel Realty (India) Ltd and Joint operations (hereinafterreferred to as "the Standalone Ind AS financial statements").

Management's Responsibility for the Standalone Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese Standalone Ind AS financial statements that give a true and fair view of the stateof affairs (financial position) Profit and Loss(financial performance including othercomprehensive income)cash flows and change in equity 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 also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand 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 Standalone Ind AS financial statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these Standalone Ind AS financialstatements based on our audit.

We have taken into account the provisions of the Act the Accounting and AuditingStandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under.

We conducted our audit of the Standalone Ind AS financial statements in accordance withthe Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the Standalone Ind AS financial statements are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Standalone Ind AS financial statements. The procedures selecteddepend on the auditors' judgement including the assessment of the risks of materialmisstatement of the Standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the Standalone Ind AS financial statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the Standalone Ind ASfinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Standalone Ind AS financial statements.

Basis of Qualified Opinion:

The independent Auditors of Patel Realty (India) Ltd ("PRIL") the erstwhilesubsidiary company have qualified in their audit report on the standalone Ind ASfinancial statement for the year ended 31st March 2017 with respect to:

The company is in process of being compliant with provisions of Section 203 of theCompanies Act 2013 which pertains to appointment of Key Managerial Person. (PRIL)

Qualified Opinion:

In our opinion and to the best of our information and according to the explanationsgiven to us except for matter described in paragraph "Basis of qualifiedOpinion" the aforesaid Standalone Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India including Ind AS of the stateof affairs (financial position) of the Company as at March 31 2017 and its Profit(financial performance including other comprehensive income) its cash flows and thechanges in equity for the year ended on that date.

Emphasis of Matter

We invite attention to:

a) The independent Auditors of Patel Realty (India) Ltd. ("PRIL") anerstwhile Subsidiary company have without qualifying their audit report on the StandaloneInd AS financial statement for the year ended March 31 2017 have drawn attention withrespect to:

i. Note No. 44 detailing about the Company Bellona Estate Developers Limited whichceased to be a subsidiary of the company from March 30 2016 after invoking of StrategicDebt Restructuring (SDR). The Company has written off Rs.398.50 million as irrecoverablein the current Financial Year. The management has decided to write off its investmentsalong with the outstanding loans after adjusting any dues against the same.

ii. Note No. 45 regarding Company's investment and loans and advances in WaterfrontDevelopers Limited where notice dated June 04 2015 was received from Government ofMauritius for the termination of Lease Agreement entered on December 11 2009 with LesSalines Development Limited (a step down subsidiary of Waterfront). In this case theprocess of arbitration has been initiated with the Government of Mauritius.

Our report is not modified with respect to above matter.

Other Matters

a) The comparative financial information of the Company for the year ended March 312016 and the transition date opening balance sheet as at April 1 2015 included in theseStandalone Ind AS financial statements are based on the previously issued statutoryfinancial statements prepared in accordance with the Companies (Accounting Standard)Rules 2006 on which we issued auditor's reports to the shareholder of the company datedMay 30 2016 and June 15 2015 respectively. Those Standalone financial statements asadjusted for the differences in the accounting principles adopted by the Company ontransition of Ind AS which have also been audited by us.

b) The Standalone Ind AS financial statements includes the financial statements of 3joint operations which have not been audited by their auditors whose financial statementshave been prepared and certified by the Management.

These financial statements reflect the Net Total Assets of Rs.251.38 million as atMarch 31 2017 Company's share in total revenue after elimination is Rs.471.76 milliontotal loss (net) after tax of Rs.28.95 million total comprehensive income (net) of Rs.Niland Net cash outflow amounting to Rs.21.13 million for the year ended on that date asconsidered in these Standalone Ind AS financial statements. The separate set of financialsof these joint operations for the year ended March 31 2017 March 31 2016 and thetransition date opening Balance sheet as at April 1 2015 is in accordance with accountingprinciples generally accepted in India including Ind AS. The consequential effects ifany arising out of the audit of those entities are not ascertainable presently.

c) The Standalone Ind AS financial statement also includes the financial statement of 9joint operations which have been audited by other auditors whose financial statementreflect the net total assets of Rs.596.33 million as at March 31 2017 Company's share intotal revenue after elimination is Rs.745.68 million total loss (net) after tax ofRs.0.64 million total comprehensive income (net) of Rs.Nil and Net cash inflow amountingto Rs.53.59 million for the year ended on that date as considered in these Standalone IndAS financial statements. The Company had prepared separate set of financials of thesejoint operations for the year ended March 312017 March 31 2016 and the transition dateopening balance sheet as at April 1 2015 in accordance with accounting principlesgenerally accepted in India including Indian Accounting Standards (Ind AS) and which havebeen audited for the year by the other auditors under generally accepted auditingstandards applicable in

India. These financial statements have been adjusted for the differences in theaccounting principles adopted by the Company on transition to Ind AS. Our opinion in sofar it relates to the amounts and disclosure in respect of these joint operations issolely based on the report of the other auditors.

d) Note No 35 with respect to merger of Patel Realty (India) Ltd the erstwhilesubsidiary as per the order of National Company Law Tribunal (NCLT) dated July 6 2017with effect from April 1 2016. Accordingly the financial statements of the merged entityhave been included as per the Ind AS 103 -Business Combination under "Pooling ofInterest Method" for the year ended March 31 2017 and March 31 2016 respectively.The Standalone Ind AS financials statements of the erstwhile subsidiary has been auditedby the other auditors whose report has been furnished to us.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1) As required by 'the Companies (Auditor's Report) Order

2016 issued by the Central Government of India in terms of sub-section (11) of section143 of the Act (hereinafter referred to as the "Order") and on the basis ofsuch checks of the books and records of the Company as we considered appropriate andaccording to the information and explanations given to us we give in the Annexure A astatement on the matters specified in paragraphs 3 and 4 of the Order.

2) 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) except for the matter described in the paragraph of "Basis of qualifiedopinion" in our opinion proper books of account as required by law have been keptby 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 cash flow statement and statement of change in equity dealt with by thisreport are in agreement with the books of account;

d) in our opinion the aforesaid standalone Ind AS financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act.

e) on the basis of the written representations received from the directors as on March31 2017 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2017 from being appointed as a director in terms of Section 164 (2) of theAct;

f) with respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure B"; and

g) 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 knowledge and belief and according to the information andexplanations given to us:

i. the Company has disclosed the impact of pending litigations as at March 31 2017 onits financial position in its Standalone Ind AS financial statements to the extentdeterminable/ascertainable.-Refer Note 46 to the Standalone Ind AS financial statements;

ii. the Company has made provision as at March 312017 as required under theapplicable law or accounting standard for material foreseeable losses if any on longterm contract.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended March 312017.

iv. The Company has provided requisite disclosures in the standalone Ind AS financialstatements as to holding as well as dealing in Specified Bank Note during the period fromNovember 8 2016 to December 30 2016. Based on the audit procedure and relying on themanagement representation we report that the disclosures are in accordance with books ofaccount maintained by the Company and as produced to us by the management. Refer Note10A(i) to the Standalone Ind AS financial statements.

For Vatsaraj & Co.
Chartered Accountants
Firm Registration Number: 111327W
CA Dr. B. K. Vatsaraj
Partner
Mumbai Membership Number: 39894
July 24 2017

ANNEXURE A TO INDEPENDENT AUDITORS' REPORT

Referred to in paragraph 1 under "Report on Other Legal and Regulatoryrequirement" section of our report of even date to the members of Patel EngineeringLimited on the Standalone Ind AS Financial Statements for the year ended March 31 2017.

i (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) During the year fixed assets have been physically verified by the management atregular intervals and no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable propertiesrecorded as fixed assets in the books of accounts of the Company as on March 31 2017 areheld in the name of the Company except for the details given below:

In respect of freehold lands with gross block and net block of Rs.30.45 million andbuilding with gross block of Rs.5.53 million and net block of Rs.3.87 million in the nameof directors and their relatives.

iiAs explained to us the Inventories were physically verified during the year by theManagement at reasonable intervals and no material discrepancies were noticed on physicalverification.

iii (A) According to the information and explanation given to us the Company'shas not granted any loan secured or unsecured to companies firms limited liabilitypartnership firm or other parties covered in the register maintained under section 189 ofthe Companies Act 2013. Accordingly Paragraph 3 (iii)(a) 3 (iii)(b) and 3(iii)(c) of theorder are not applicable to the Company.

(B) The Independent auditor of Patel Realty (India) Ltd ("PRIL") anerstwhile subsidiary company has reported that the

company has granted loans to 7 subsidiaries and 1 associate covered in the registermaintained under section 189 of the Companies Act 2013:

a) The terms and conditions whereof are prima facie not prejudicial to the interest ofthe company

b) These loans repayable on demand there is no stipulation for repayment of theprincipal and interest. We are informed that the company has not demanded repayment of anysuch loans and interest during the year and thus there has been no default on the partof the parties to whom money has been lent. Also refer (c) below.

c) Except for the sum of Rs.556.60 millions receivable from subsidiaries which arewritten off there is no overdue amount of loans granted to companies listed in theregister maintained under section 189 of the Act.

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 Act2013 to the extent applicable in respect of the loans investments guarantees andsecurity.

v The Company has not accepted any deposits from the public within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly Paragraph 3(v) of the Order is not applicable to the Company.

vi We have broadly reviewed the books of accounts maintained by the company pursuant tothe Rules made by the Central Government for the maintenance of cost record under subsection (1) of section 148 of the Companies Act in respect to company's products/ servicesand are of the opinion that prima facie the prescribed accounts and records have beenmade and maintained. However we have not made a detailed examination of the cost recordswith a view to determine whether they are accurate or complete.

vii (a) According to the information and explanations given to us and for the recordsof the Company examined by us undisputed statutory dues including Provident FundEmployees' State Insurance Income Tax Sales tax Service Tax Custom Duty Excise DutyValue Added Tax Cess and other material statutory dues as applicable have beengenerally regularly deposited with the appropriate authorities except for the Sales TaxEntry Tax Service Tax Municipality Tax Income Tax and Professional Tax totaling toRs.416.50 million outstanding as at March 31 2017 for a period of more than six monthsfrom the date they become payable.

(b) According to the information and explanations given to us and the records of theCompany examined by us the disputed statutory dues that have not been deposited onaccount of disputed matters pending before appropriate authorities are as under:

Particulars Nature of the Dues Financial Year to which amount relates Amounts in million (Rs.) Forum where dispute is pending
The Sales Tax Act Sales Tax 2001-2002 to 2003-2004 2005-2006 2006-2007 2009-2010 and 2011-2012 2007-2008 14.99 Appellate Tribunal
47.88 Appellate Tribunal Kolkata
10.69 Deputy Commissioner Appellate -III Mumbai
2007-2008 2008-20092010-2011 and 2012-2013 2015-2016 13.16 Senior Joint Commissioner Siliguri
Entry Tax Entry Tax 6.95 Joint Commissioner of Commercial Tax
The Finance Act 1994 Service Tax 2007-2008 to 2012-2013 323.20
April 2003 to July 2006 2.54 Custom Excise and
October 2009 to September 2010 108.31 Service Tax Appellate Tribunal (CESTAT)
June 2007 to September 2009 651.88
April 2010-March 2013 623.22
April 2013 to March 2016 17.96 Appeal is yet to be filed to CESTAT.
The Income Tax Act 1961 Income Tax 2010-2011 2011-2012 and 2013-2014 997.50 Commissioner of Income Tax (Appeals)
2009-2010 and 2012-2013 391.30 Income Tax Appellate Tribunal
With respect to merged Company (Patel Realty (I) Ltd).
The Finance Act 1994 Service Tax November 2009 to June 2012 404.69 Custom Excise and
July 2012 to March 2014 41.49 Service Tax Appellate Tribunal
April 2014 to March 2015 65.58 Commissioner of Service Tax
Income Tax Act 1961 Income Tax 2008-2009 to 2010-2011 Amount not quantified
2011-2012 1.22 Commissioner of
2012-2013 1.12 Income Tax (Appeals)
2013-2014 120.06
3843.74

viii There are no loans or borrowings payable to government. The Company has defaultedin repayment of following dues to the financial institution banks and debenture holdersduring the year which were paid on before the balance sheet date.

Debenture Holders

Amounts in million ( Rs.)

Particular Days Principal Interest
Axis Bank Limited- Non-Convertible 61-90 100.00 -
GIC- Non-Convertible 1-30 2.71
>90 - 5.39
LIC- Non-Convertible >90 - 42.50
Syndicate Bank-Non Convertible >90 - 6.69
UCO Bank-Non Convertible >90 - 10.03

Banks

Amounts in million ( Rs.)
Particular Days Principal Letter of Credit/Bank Guarantees Interest
Axis Bank Limited 1-30 - 246.23 7.47
31-60 - 25.47 32.13
61-90 - - 78.72
>90 - 139.09 41.25
Bank of Baroda 1-30 - 77.44 12.92
31-60 - 61.98 273.18
61-90 - - 8.11
>90 - 115.37 20.59
Bank of India 1-30 - 19.97 35.56
31-60 - - 45.81
61-90 - - 46.14
>90 - - 255.85
Bank of Maharashtra 1-30 - - 2.06
31-60 14.36 - 2.04
61-90 - - 14.84
>90 56.25 198.89 106.46
Canara Bank 1-30 - - 65.03
31-60 - - 43.17
61-90 - - 25.82
>90 - - 75.02
Corporation Bank 1-30 - - 17.29
31-60 - - 18.23
61-90 - - 16.33
>90 - - 94.86
DBS Bank Limited 1-30 15.08 - 1.05
61-90 - - 0.60
>90 60.25 - 183.63
Dena Bank 1-30 - - 11.21
31-60 - - 11.90
61-90 - - 23.62
>90 - 49.97 251.11

 

Amounts in million ( Rs.)
Particular Days Principal Letter of Credit/Bank Guarantees Interest
Exim Bank 1-30 83.57 - 60.95
31-60 - - 23.66
61-90 - - 12.06
>90 - - 11.72
HDFC Bank Limited 61-90 4.34 - 1.10
>90 31.46 - 6.64
ICICI Bank Limited 1-30 - 29.83 40.41
31-60 - 1105.04 65.96
61-90 - - 13.96
>90 90 -
IDBI Bank Limited 1-30 - 53.96 196.66
31-60 - - 6.44
61-90 - 12.24
>90 - - 6.44
Indusind Bank limited 1-30 - - 15.54
31-60 - - 15.34
61-90 - - 7.60
>90 - - 23.10
Ratnakar Bank Limited 1-30 - - 7.07
31-60 - - 5.84
61-90 - - 2.53
>90 - - 5.71
Society General Bank 31-60 - - 11.73
>90 - - 28.28
Standard Chartered Bank 1-30 - - 5.87
31-60 - - 15.74
61-90 - - 15.43
>90 - - 100.28
State Bank of Patiala 1-30 252.80 - 118.69
61-90 20.58 - 20.74
Union Bank of India 30-Jan - - 0.84
31-60 - - 0.86
>90 - - 0.33

Financial Institutions

Amounts in million ( Rs.)
Particular Days Principal Interest
KIC Food Product P Ltd. 1-30 - 5.39
Viniyog Investment and Trade 1-30 50.42 8.95
Srei Equipment Finance Ltd. 1-30 8.13 7.17
31-60 8.13 7.42
61-90 8.13 1.34
>90 8.13 6.46
Tata Motors Finance Ltd 1-30 2.26 0.07
>90 0.39

-

The Company has defaulted in repayment of following dues to the financial institutionbanks and debenture holders during the year which were not paid as at the balance sheetdate:

Debenture Holders

Amounts in million ( Rs.)
Particular Days Principal Interest
Axis Bank limited- Non-Convertible 61-90 - 15.36
>90 500.00 58.68
IDBI Bank Limited- Non-Convertible >90 150.00 38.10
LIC- Non-Convertible 1-30 - 41.79
>90 - 124.30
UCO Bank- Non-Convertible >90 150.00 18.71
Corporation Bank- Non-Convertible >90 150.00 19.02
GIC- Non-Convertible >90 100.00 -
Syndicate Bank- Non-Convertible >90 100.00 12.31

Banks

Amounts in million ( Rs.)
Particular Days Principal Letter of Credit/Bank Guarantees Interest
Axis Bank Limited 1-30 43.13 - -
31-60 - 342.05 68.84
61-90 - - 33.72
>90 31.88 184.12 145.16
Bank of Baroda 31-60 - 57.51 -
61-90 - 14.43 -
>90 - 597.82 -
Bank of India 31-60 - - 91.85
61-90 56.25 - 25.90
>90 - 769.96 1.86
Bank of Maharashtra 1-30 - - 5.81
31-60 - - 55.65
61-90 56.25 - 29.94
>90 41.89 - 129.00
Canara Bank 1-30 - - 6.26
Corporation Bank 31-60 - 627.37 10.05
DBS Bank Limited 31-60 - - 50.22
61-90 - - 24.44
>90 - - 49.41
Dena Bank 31-60 - - 57.90
61-90 500.00 - 37.98
>90 750.00 - 31.57
Exim Bank 1-30 112.50 - -
31-60 150.00 - 10.99
61-90 150.00 - -
>90 66.43 - -
HDFC Bank Limited 1-30 4.90 - 0.96
31-60 4.86 - 0.58
61-90 4.82 - 0.63
>90 18.86 - 2.91
ICICI Bank Limited 31-60 - - 64.36
61-90 30.00 424.95 32.18
>90 - 524.94 41.37

 

Amounts in million ( Rs.)
Particular Days Principal Letter of Credit/Bank Guarantees Interest
IDBI Bank Limited 1-30 - - 16.91
31-60 - 339.22 19.70
61-90 - - 29.68
>90 - - 148.06
Indusind Bank Limited 31-60 29.88 - 14.13
61-90 45.97 - 7.17
Ratnakar Bank Limited 31-60 - - 9.35
61-90 - - 5.51
>90 - - 33.76
Society General Bank 31-60 - - 17.77
61-90 - - 9.21
>90 - - 71.77
Standard Chartered Bank 1-30 - - 12.35
31-60 - - 38.28
61-90 - - 24.31
>90 93.04 - 171.30
State Bank of Patiala 1-30 - - 3.32

ix According to the information and explanations given to us the term loans have beenapplied for the purposes for which they were obtained. The Company did not raise any moneyby way of initial public offer or further public offer (including debt instruments).

x During the course of our examination of the books and records of the Company carriedout in accordance with the generally accepted auditing practice in India and according toinformation and explanation given to us we have neither come across any instance of fraudon or by the Company its officers or employees noticed or reported during the periodnor have we been informed of such case by the management.

xi According to the information and explanations given to us the Company has paid orprovided for managerial remuneration in accordance with the requisite approvals mandatedby the provisions of Section 197 read with Schedule V to the Act.

xii In our opinion and according the information and explanation given to us theCompany is not a Nidhi Company. Accordingly paragraph 3(xii) of the Order is notapplicable to the Company.

xiii According to the information and explanation given to us and based on ourverification of the records of the Company and on the basis of review and approval by theBoard and Audit Committee the transactions with related parties are in compliance withSection 177 and 188 of the Act where applicable and the details of such transactions havebeen disclosed in the Standalone Ind AS financial statements as required by the applicableaccounting standards.

xiv According to the information and explanation given to us and based on ourexamination of the records of the Company the Company has made preferential allotment ofequity share during the year to the lenders as per Strategic Debt Restructuring Scheme(SDR) as stated in note no 34 of the Standalone Ind AS financial statements. In ouropinion the Company has complied with the requirements of section 42 of the Act and Rulesframed there under. The amounts so raised have been used for the purposes for which thefunds were raised. However the Company has not made any private placement of shares orfully or partly convertible debentures during the year under review.

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 any non-cashtransactions with its directors or persons connected with them during the year.Accordingly paragraph 3(xv) of the Order is not 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 paragraph 3(xvi) of the Order is not applicable tothe Company.

For Vatsaraj & Co.
Chartered Accountants
Firm Registration Number: 111327W
CA Dr. B.K. Vatsaraj
Partner
Membership Number: 39894
Mumbai
July 24 2017

ANNEXURE B TO INDEPENDENT AUDITORS' REPORT

Referred to in paragraph 2(f) under "Report on other legal and regulatoryrequirement" section of our report of even date to the members of Patel EngineeringLimited on the standalone Ind AS financial statements for the year ended March 31 2017.

Report on the internal financial controls over financial reporting under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013.

1. We have audited the internal financial controls over financial reporting of PatelEngineering Limited ("the Company") as of March 31 2017 in conjunction with ouraudit of the Standalone Ind AS financial statements of the Company for the year ended onthat 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 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). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to respective company's policies the safeguarding of itsassets the prevention and detection of frauds and errors the accuracy and completenessof the accounting records and the timely preparation of reliable financial informationas required under the Companies Act 2013.

Auditors' Responsibility

3. 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 deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls over financial reporting both issued by the ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the 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 Ind AS financial statements whether due to fraudor error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

6. A company's internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of standalone Ind AS financial statements for external purposes inaccordance with generally accepted accounting principles. A company's internal financialcontrol over financial reporting includes those policies and procedures that

i. Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

ii. Provide reasonable assurance that transactions are recorded as necessary to permitpreparation of standalone Ind AS financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directors of thecompany; and

iii. Provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the standalone Ind AS financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

7. Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2017 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

Other Matter

9. We did not audit the internal financial controls over financial reporting of PatelRealty (India) Limited (Merged Company). The internal financial control over financialreporting of this Merged Company has been audited by their independent auditor whosereport has been furnished to us and our opinion in so far as it relates to the internalfinancial control over financial reporting included in respect to merged Company is basedsolely on the report of their auditor.

Our opinion is not modified in respect of this matter.

For Vatsaraj & Co.
Chartered Accountants
Firm Registration Number: 111327W
CA Dr. B.K. Vatsaraj
Partner
Membership Number: 39894
Mumbai
July 24 2017