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INDEPENDENT AUDITORS' REPORT
To the Members of Power Grid Corporation of India Limited
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Power Grid Corporation of India Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these standalone financial statements based on our audit.
We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
i) The company has not made any adjustment in respect of revenue of Rs. 144.91 crore recognized for the period 01.07.2010 to 31.08.2011 in respect of Barh–Balia Transmission line, wherein company appeal is pending with Hon'ble Supreme Court against the order of Appellate Tribunal for Electricity (ATE) to re–determine the Date of Commercial Operation (DOCO) refer note 2.38. Pending decision of Hon'ble Supreme Court, and determination of DOCO by CERC and in view of uncertainty involved, in our opinion, provision should have been made for the revenue recognized for the period under dispute. This has resulted in increase of Profit before tax for the year by Rs. 109.70 crore and increase in Current Assets by Rs. 109.70 crore.
ii) The Company has not made any provision in respect of outstanding dues of Rs. 15.64 crore from one of the medium term open access customers, which is under liquidation, under an order of the Hon'ble High Court at Calcutta, refer note 2.39. Moreover, no favourable order has been received in respect of Company's petition before the Central Electricity Regulatory Commission for allowing the recovery of such dues from other beneficiaries. As the recovery of such dues is doubtful,in our opinion, the provision should have been made in the accounts. This has resulted in increase of Profit before tax for the year by v 11.84 crore and increase in Current Assets by Rs. 11.84 crore.
In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2015;
(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date;
(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.
Emphasis of Matter
We draw attention to Note No. 2.25(b) to the financial statements, in respect of provisional recognition of revenue from transmission charges. Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order"), issued by the Central Government of India in terms of subsection (11) of Section 143 ofthe Act, we give in the Annexure'l'a statement on the matters specified in paragraphs 3 and 4 ofthe Order, to the extent applicable.
2. In terms of sub section (5) of section 143 of the Companies Act, 2013, we give in the Annexure '2' a statement on the directions issued under the aforesaid section by the Comptroller and Auditor General of India.
3. 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 best of our knowledge and belief were necessary for the purpose of our audit;
b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books
c. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account;
d. Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards specified under Section 133 ofthe Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;
e. The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may not have an adverse effect on the functioning of the Company.
f. On the basis of written representations received from the directors as on 31st March, 2015, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015, from being appointed as a director in terms of Section 164(2) of the Act.
g. The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.
h. With respect to the other matters to be included in the Auditor'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 the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 2.38, 2.39 and 2.52 to the financial statements.
ii. The Company did not have any long–term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
Annexure to the Independent Auditors' Report
Annexure '1' referred to in our Independent Auditors' Report to the members of the Power Grid Corporation of India Limited, on the
standalone financial statements for the year ended 31st March, 2015, we report that:
(i) a) The Company has generally maintained records, showing full particulars including quantitative details and situation of Fixed Assets.
b) The fixed assets have been physically verified by external agencies during the year and discrepancies, though not material, noticed on such verification have been reconciled/ adjusted in the books of account. In our opinion, frequency of verification is reasonable having regard to the size of the Company and nature of its assets.
(ii) a) Physical verification of inventories has generally been conducted on periodic intervals. In our opinion system and frequency of verification is reasonable.
b) In our opinion, the procedures of physical verification of inventories, followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.
c) In our opinion, the Company has maintained proper records of its inventory. The discrepancies noticed on physical verification of the inventories, though not material, have been properly dealt with in the books of account.
(iii) During the year the Company has granted unsecured loans amounting to X 229.70 crore to two wholly owned subsidiaries covered in the register maintained under section 189 of the Companies Act, 2013 ("the Acf). Outstanding balance as on 31st March 2015 is X 229.70 crore.
a) Principal amount and interest are not yet due as per the terms of the loans.
b) Since receipt of principal amount and interest are not due, question of overdue amount of more than rupee one lakh does not arise.
(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems, commensurate with the size of the Company and the nature of its business, with regard to purchase of inventory and fixed assets and income from sales of goods and services. During the course of our audit we have not observed any continuing failure to correct major weaknesses in the underlying internal control systems. However process of contract closing work needs to be expedited.
(v) Since the Company has not accepted any deposit from public, the question of compliance with the directives issued by the Reserve Bank of India and the provisions of Section 73 to 76 or other relevant provisions of the Companies Act, 2013, and rules framed there under, does not arise.
(vi) We have broadly reviewed the cost records maintained by the company specified by the Central Government under sub section (1) of Section 148 of the Companies Act, 2013, in respect of Transmission & Telecom Operations of the Company and we are of the opinion that prima facie the prescribed records have been made and maintained. We have, however, not made detailed examination ofthe cost records with a view to determine whether they are accurate or complete.
(vii) a) According to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues with
appropriate authorities including Provident Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Duty of Custom, Duty of Excise, Value Added Tax, Cess and other statutory dues applicable to the Company and that there are no undisputed statutory dues outstanding as at 31st March, 2015 for a period of more than six months from the date they became payable. As informed, provisions of the Employees State Insurance Act are not applicable to the Company.
b) According to information and explanations given to us, there are no disputed dues of Wealth Tax or Duty of Customs or Duty of Excise which have not been deposited. However, following disputed demands of Income Tax or Sales Tax or Service Tax or Value Added Tax or Cess dues have not been deposited:
c) According to the information and explanations given to us, the amount which was required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under has been transferred to such fund within time.
(viii) The Company does not have accumulated losses at the end of financial year and has not incurred any cash loss in the financial year under audit, and also in the immediately preceding financial year.
(ix) On the basis of audit procedures adopted by us and according to the records, the Company has not defaulted in repayment of dues to any financial institution or bank or bondholders.
(x) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.
(xi) In our opinion on an overall basis and according to the information and explanations given to us, the company has applied the term loans for the purpose they were obtained.
(xii) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.
For S.K.MEHTA & CO.
Firm Registration No.000478N
(CA Puneet Harjai)
For CHATTERJEE & CO.
Firm Registration No. 302114E
For SAGAR & ASSOCIATES
Firm Registration No. 003510S
(CA D. Manohar)
Place of Signature: New Delhi
Date: 30th May, 2015