To the Members of Petronet LNG Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying Standalone Financial Statements ofPetronet LNG Limited (the "Company") which comprise the balance sheet as atMarch 31 2020 and the statement of profit and loss (including Other ComprehensiveIncome) statement of changes in equity and statement of cash flows for the year thenended and notes to the standalone financial statements including a summary ofsignificant accounting policies and other explanatory information prepared based onrelevant records (hereinafter referred to as the "Standalone FinancialStatement").
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 accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020and its total comprehensive income its changes in equity and its cash flows for the yearthen ended.
Basis for opinion
We conducted our audit in accordance with the Standards on Auditing(SAs) specified under Section 143(10) of the Act. Our responsibilities under thoseStandards are further described in the Auditor's responsibilities for the audit ofthe standalone financial statements section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India together with the ethical requirements that are relevant to our auditof the standalone financial statements under the provisions of the Act and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone financial statements of thecurrent period. These matters were addressedin the context of our audit of the standalonefinancial statements as a whole and in forming ouropinion thereon and we do not providea separate opinion on these matters.
|S. No. Description of Key Audit Matter ||Audit Procedures Undertaken to address the Key Audit Matter & conclusions thereon |
|1. Impairment testing of Kochi Plant || |
|The recoverable value of the property plant and Equipment's capitalized under Kochi Plant of the Company are dependent on the operationalization of Kochi-Mangalore-Bangalore pipeline. ||We assessed the Company's process of assessing the impairment requirement for Kochi Plant by reviewing the Impairment Study Report carried out by an outside consultant appointed by the Company and for verification of the same following tests were performed: |
|The determination of recoverable amount for Kochi Plant is based on the value-in use derived from future free net cash flow based on management assumptions of operations for the coming years and from the terminal period. Significant judgement is required by the Management in determining value-in-use including discount rate to be applied and cash flow projections based on availability of pipeline demand of gas etc. ||Considered if the discounted cash flow models used to estimate the recoverable amount of Kochi Plant based on "Value in Use" (VIU) were in consistent with Indian Accounting Standard. |
| ||Considered whether the forecasted cash flows in the impairment model were reasonable and based upon supportable assumptions |
| ||Performed tests of the mathematical accuracy of the impairment model calculations. |
|Accordingly the impairment evaluation of Kochi Plant is considered to be a key audit matter. ||We found management's assessment that there is no immediate case of impairment of Kochi Plant based on VIU is reasonable. |
|2. Accuracy of recognition measurement presentation and disclosures of revenues and other related balances in view of Ind AS 115 "Revenue from Contracts with Customers". ||We assessed the Company's process of identification of distinct performance obligations and transaction price and for the same we selected a sample of contracts covering all type of revenue recognized by the Company and performed the following procedures: |
|Ind AS 115 requires certain key judgements including identification of distinct performance obligations and transaction price. ||Considered the terms of the contracts to determine the transaction price specially to ascertain if there is any financing component in the arrangement where advances have been received from the customers. |
| ||Read analysed and identified the distinct performance obligations in these contracts. Compared these performance obligations with that identified and recorded by the Company. |
| ||Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings. Based on the work performed we found the management's assessment of determination of transaction price and identification of distinct performance obligation is reasonable. |
|3. Adoption of Ind AS 116 Leases: ||Our procedures included the following: |
|Effective 1st April 2019 Ind AS 116 replaces the existing standard Ind AS 17 and specifies howan entity will recognise measure present and disclose leases. ||Assessing the accounting regarding leases with reference to consistency with the definitions of Ind AS 116. This includesfactors such as lease term discount rate and measurement principles; |
|The standard provides a single lease accounting model requiring lessees to recognise a right to use asset ("RTU asset") and a corresponding liability on the lease commencement date. It provides exemption for leases with lease term of 12 months or less or the underlying asset has a low value. ||Testing completeness of the lease data as at 31st March 2019 by reconciling the Company's operating lease commitments tothe underlying data used in computing the ROU asset and Lease liability; |
|We considered the first-time application of Ind AS 116 as a key audit matter due materiality of RTU assets and the judgements needed in establishing the underlying key assumptions. ||Assessing the transition to Ind AS 116 by verifying consistency with the definitions and practical expedients of Ind AS 116; |
| ||Examining the Company's judgement in establishing the underlying assumptions. This includes assessing the discountrate used in determining the lease liability. |
|4. Contingent liabilities; || |
|There are various pending cases against which demands have been raised by different authority/parties. ||For legal and regulatory matters our procedures included following: |
| ||Assessing the processes and control over legal matters; |
| ||Reviewing the Group's significant legal matters and other contractual claims; |
| ||Performing substantive procedures on the underlying calculations of potential liability; |
| ||Where relevant reading external legal opinions obtained by management; |
| ||Where relevant obtaining written confirmation from external legal counsels on the status of the cases |
| ||Reviewing the adequacy and completeness of the company's disclosures. |
| ||Based on the work performed we found the disclosures made by the management in note 38(B) of the financial statements are sufficient |
The Company's Board of Directors is responsible for the otherinformation. The other information comprises the information included in theCompany's annual report (mainly Director's Report Corporate Governance ReportBusiness Responsibility Report and Management Discussion and Analysis of annual report)but does not include the standalone financial statements and our auditor's reportthereon. The other information in annual report except Corporate Governance Report i.e.Directors report Business Responsibility report and Management Discussion and Analysis ofAnnual report is expected to be made available to us after the date of this auditors'report. Our opinion on the standalone financial statements does not cover the otherinformation and we do not and will not express any form of assurance conclusion thereon.In connection with our audit of the standalone financial statements our responsibility isto read the other information and in doing so consider whether the other information ismaterially inconsistent with the standalone financial statements or our knowledge obtainedin the audit or otherwise appears to be materially misstated. If based on the work wehave performed on the other information that we have obtained prior to the date of thisauditor's report we conclude that there is a material misstatement of this otherinformation we are required to report that fact. We have nothing to report in thisregard.
When we read the information included in Management Discussion andAnalysis Directors' Report and Business Responsibility Report and Other Informationin Annual Report if we conclude that there is material misstatement therein we arerequired to communicate the matter to those charged with the governance and otherappropriate action as may be required.
Responsibilities of management and those charged with governance forthe standalone financial statements
The Company's Board of Directors is responsible for thepreparation and presentation of these standalone financial statements that give a true andfair view of the Standalone financial position Standalone financial performanceStandalone cash flows and changes in equity of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsspecified under section 133 of the Act. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingof the assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error whichhave been used for the purpose of preparation of standalone financial statement by thedirectors of the Company as aforesaid.
In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable mailers 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. The Board of Directors are alsoresponsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.As part of an audit in accordance with SAs we exercise professional judgment and maintainprofessional scepticism 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 control 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 expression our opinion onwhether the company has adequate internal financial controls with reference to financialstatements in place and the operating 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.
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 communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditor's report unless law or regulation precludespublic disclosures about the matters or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government of India in terms of sub-section(11) of Section 143 of the Act we give in the "Annexure A" a statement on thematters 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 explanationswhich to the best of our knowledge and belief were necessary for the purposes of our auditof the aforesaid Standalone financial statement.
(b) In our opinion proper books of account as required by law relatingto preparation of the aforesaid Standalone financial statement have been kept so far as itappears from our examination of those books.
(c) The Standalone Balance Sheet the Standalone Statement of Profitand Loss (including Other Comprehensive income) the Standalone Statement of Changes inEquity and the Standalone Cash Flow Statement dealt with by this report are in agreementwith the books of account and the records maintained for the purpose of preparation ofStandalone financial statements.
(d) In our opinion the aforesaid Standalone financial statementscomply with the Accounting Standards specified under Section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014.
(e) On the basis of the written representations received from thedirectors as on 31st March 2020 taken on record by the Board of Directors none of thedirectors is disqualified as on 31st March 2020 from being appointed as a director interms of Section 164 (2) of the Act. (f) With respect to the adequacy of the internalfinancial controls over financial reporting of the Company and the operating effectivenessof such controls refer to our separate report in Annexure B.
(g) With respect to the other matters to be included in theAuditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according to theexplanations given to us:
a. The Company has disclosed the impact of pending litigations on itsfinancial position in the standalone financial statement (Refer Note 38B to the standaloneInd AS financial statements).
b. The Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses on. Refer Note38 A (b) to the financial statements
c. There has been no delay in transferring the amounts required to betransferred to the Investor Education and Protection Fund by the Company.
3. With respect to the other matters to be included in theAuditor's Report in accordance with the requirements of section 197(16) of the Actas amended: In our opinion and to the best of our information and according to theexplanations given to us by the Company the remuneration paid by the Company to itsdirectors during the year is in accordance with the provisions of section 197 of the Act.
For T R Chadha & Co LLP
Firm Registration No.: 006711N/N500028
Membership No: 502955
Place: New Delhi
Date: 29th June 2020
"Annexure A" referred to in our report of even date
1. (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of itsfixed assets by which fixed assets are verified in a phased manner over a period of twoyears. In accordance with this program fixed assets were verified during the year and nomaterial discrepancies were noticed on such verification. In our opinion the periodicityof physical verification is reasonable having regard to the size of the Company and thenature of its assets.
(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties are held in the name of the Company.
2. The inventory has been physically verified by the management atreasonable intervals. No material discrepancies were noticed on such physicalverification.
3. The Company has not granted any loans secured or unsecured tocompanies firm Limited Liability Partnerships or other parties in the registermaintained under Section 189 of the Companies Act 2013. Therefore the provisions ofclause 3(iii) (a) (b) and (c) of the Companies (Auditors Report) Order 2016 are notapplicable.
4. In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of Sections 185 and 186 of theCompanies Act 2013 in respect of grant of loans making investments and providingguarantees and securities as applicable.
5. The Company has not accepted any deposits from the public within theprovisions of Sections 73 to 76 or any other relevant provisions and the rules framedthereunder. Accordingly the provisions of Clause 3 (v) of the Order are not applicable tothe Company.
6. We have broadly reviewed the books of accounts maintained by theCompany pursuant to Rules made by the Central Government for the maintenance of costrecords under Section 148(1) of the Companies Act 2013 and are of the opinion that primafacie the prescribed accounts and records have been maintained.
7. (a) The Company is generally regular in depositing with appropriateauthorities undisputed statutory dues including Provident Fund Income Tax Sales TaxService Tax Custom Duty Value Added Tax Cess Goods and Service Tax and other materialstatutory dues applicable to it. There were no arrears of undisputed statutory dues as at31st March 2020 which were outstanding for a period of more than six months from the datethey became payable. We are informed that there is no liability towards Employees StateInsurance and Excise Duty for the year under audit.
(b) According to the information and explanations given to us and asper the records of the Company the dues of service tax custom duty and income tax whichhave not been deposited/deposited under protest with the appropriate authorities onaccount of any dispute are given below:
| || || || || || ||Amount in Rs. Lac |
|Name of the Statute ||Nature of the dues ||Disputed Amount ||Deposited under Protest ||Not deposited ||Period to which the amount relates ||Forum where dispute is pending |
| ||Service Tax & Interest ||4005 ||- ||4005 ||FY 2008-09 to 2009-2010 ||Hon'ble Supreme Court of India |
| ||Service Tax Interest & Penalty ||2728 ||2728 ||- ||FY 2008-09 to 2009-2010 ||CESTAT Delhi |
| ||Service Tax & Interest ||57 ||- ||57 ||FY 2014-15 ||Principal Commissioner Service Tax Delhi |
|Finance Act 1994 ||Service Tax & Interest ||19 ||- ||19 ||FY 2015-16 ||Assistant Commissioner Service Tax Delhi |
| ||Service Tax ||774 ||774 ||- ||FY 2008-10 ||Assistant Commissioner |
| ||Service Tax ||753 ||753 ||- ||FY 2008-11 ||Delhi |
| ||Service Tax ||125 ||125 ||- ||2013-16 || |
| ||Custom Duty & Interest ||346 ||- ||346 ||FY 2004-07 || |
|Custom Act 1962 ||Custom Duty & Interest ||112 ||- ||112 ||FY 2009-10 ||Hon'ble High Court Gujarat |
| ||Custom Duty & Interest ||284 ||- ||284 ||FY 2005-08 || |
| ||Income Tax and Interest ||70 ||- ||70 ||FY 2007-08 ||ITAT Delhi |
| ||Income Tax and Interest ||7237 ||- ||7237 ||FY 2008-09 to 2010-11 ||ITAT Delhi |
| ||Income Tax and Interest ||394 ||- ||394 ||FY 2012-13 ||ITAT Delhi |
|Income Tax Act1961 ||Income Tax and Interest ||744 ||- ||744 ||FY 2011-12 ||ITAT Delhi |
| ||Income Tax Penalty ||148 ||- ||148 ||FY 2011-12 ||CIT(A) Delhi |
| ||Income Tax Penalty ||78 ||- ||78 ||FY 2012-13 ||CIT(A) Delhi |
| ||Income Tax and Interest ||107 ||- ||107 ||FY 2013-14 ||ITAT Delhi |
| ||Income Tax and Interest ||10 ||- ||10 ||FY 2014-15 ||ITAT Delhi |
| ||Income Tax and Interest ||10 ||- ||10 ||FY 2015-16 ||CIT(A) Delhi |
8. The Company has not defaulted in the repayment of dues to financialinstitutions banks Government or debenture holders.
9. The Company did not raise any money by way of initial public offeror further public offer (including debt instruments) and term loans during the year.Accordingly paragraph 3 (ix) of the Order is not applicable.
10. Based upon the audit procedures performed and information andexplanations given by the management we report that no fraud on or by the Company hasbeen noticed or reported during the course of our audit.
11. According to the information and explanations give to us and basedon our examination of the records the Company has paid/ provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofSection 197 read with Schedule V to the Act.
12. In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi company. Accordingly paragraph 3(xii) of theOrder is not applicable.
13. According to the information and explanations given to us and basedon our examination of the records of the Company transactions with the related partiesare in compliance with Sections 177 and 188 of the Companies Act 2013 where applicable anddetails of such transactions have been disclosed in the financial statements as requiredby the applicable Accounting Standards.
14. According to the information and explanations given to us and basedon our examination of the records the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the year.
15. According to the information and explanations given to us and basedon our examination of the records of the Company the Company has not entered into anynon-cash transactions with directors or persons connected with him. Accordingly paragraph3(xv) of the Order is not applicable.
16. In our opinion and according to the information and explanationgiven to us the company is not required to be registered under Section 45-IA of theReserve Bank of India Act 1934.
For T R Chadha & Co LLP
Firm Registration No.: 006711N/N500028
Membership No: 502955
Place: New Delhi
Date: 29th June 2020
"Annexure B"as referred to in paragraph 2(f) of our report ofeven date
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls with reference to IndAS financial statements of Petronet LNG Limited ("the Company") as of 31 March2020 in conjunction with our audit of the Standalone Ind AS financial statements of theCompany for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing andmaintaining internal financial controls with reference to Ind AS financial statementsbased on the internal controls over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls over Financial Reporting issued by TheInstitute of Chartered Accountants of India (ICAI). These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
Our responsibility is to express an opinion on the Company's internalfinancial controls with reference to Ind AS financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls over Financial Reporting (the "Guidance Note") and the Standards onAuditing issued by ICAI and deemed to be prescribed under section 143(10) of the Act tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the ICAI. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlswith reference to financial statements was established and maintained and if such controlsoperated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial control system with reference to Ind AS financialstatements and their operating effectiveness.Our audit of internal financial control withreference to Ind AS financial statements included obtaining an understanding of internalfinancial control with reference to Ind AS financial statements assessing the risk that amaterial weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system with reference to Ind AS financial statements.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control with reference to Ind ASfinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company'sinternal financial control with reference to Ind AS financial statements includes thosepolicies and procedures that:
a) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
b) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of 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
c) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference tofinancial statements
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to Ind AS financial statements to future periods are subject to the risk thatthe internal financial control with reference to Ind AS financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.
In our opinion to the best of our information and according to theexplanations given to usthe Company has in all material respects an adequate internalfinancial controls system with reference to Ind AS financial statements and such internalfinancial controls with respect to financial statements were operating effectively as at31 March 2020 based on the internal controls over financial reporting criteriaestablished by the Company considering the essential components of internal controlsstated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Instituteof Chartered Accountants of India.
For T R Chadha & Co LLP
Firm Registration No.: 006711N/N500028
Membership No: 502955
Place: New Delhi
Date: 29th June 2020