GVK Power & Infrastructure

1.  We have audited the attached Balance Sheet of GVK Power &
 Infrastructure Limited (the Company) as at March 31, 2009 and also
 the Profit and Loss account and the Cash flow statement for the year
 ended on that date annexed thereto. These financial statements are the
 responsibility of the Companys management.  Our responsibility is to
 express an opinion on these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation.  We believe that our audit provides a reasonable basis
 for our opinion.
 
 3.  As required by the Companies (Auditors Report) Order, 2003 (as
 amended) issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose
 in the Annexure a statement on the matters specified in paragraphs 4
 and 5 of the said Order.
 
 4.  Without qualifying our opinion, we draw attention to note 15 of
 Schedule 17, regarding certain transactions for the period from April
 1, 2008 to December 31, 2008 with Mumbai International Airport Private
 Limited aggregating to Rs. 103,570 thousands, GVK Technical &
 Consultancy Services Pvt. Ltd. aggregating to Rs. 3,250 thousands and
 Orbit Travels & Tours Pvt. Ltd. aggregating to Rs. 2,368 thousands
 which require prior approval of the Central Government as required
 under the provisions of Section 297 of the Companies Act, 1956. The
 Company has however, filed an application on February 9, 2009 with the
 Company Law Board for compounding of the said matter.
 
 5.  Further to our comments in the Annexure referred to above, we
 report that:
 
 i. We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 ii. 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;
 
 iii. The Balance Sheet, Profit and Loss account and Cash flow statement
 dealt with by this report are in agreement with the books of account;
 
 iv. In our opinion, the Balance Sheet, Profit and Loss account and Cash
 flow statement dealt with by this report comply with the accounting
 standards referred to in sub-section (3C) of section 211 of the
 Companies Act, 1956;
 
 v. On the basis of the written representations received from the
 directors, as on March 31, 2009, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2009 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956;
 
 vi. In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts give the information
 required by the Companies Act, 1956, 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 March 31, 2009;
 
 b) in the case of the Profit and Loss account, of the profit for the
 year ended on that date; and
 
 c) in the case of Cash flow statement, of the cash flows for the year
 ended on that date.
 
 Annexure referred to in paragraph 3 of our report of even date
 
 Re: GVK Power & Infrastructure Limited (‘the Company)
 
 (i) (a) The Company has maintained proper records showing
 
 full particulars, including quantitative details and situation
 
 of fixed assets.
 
 (b) Fixed assets have been physically verified by the management during
 the year and no material discrepancies were identified on such
 verification.
 
 (c) There was no disposal of fixed assets during the year.
 
 (ii) In view of the nature of operations carried out by the Company, it
 has no inventory. Accordingly, the provisions of clause (ii) of
 paragraph 4 of the Companies (Auditors Report) Order, 2003 (as
 amended) in respect of inventories are not applicable.
 
 (iii)(a) The Company has granted loan and advances to two companies
 covered in the register maintained under section 301 of the Companies
 Act, 1956. The maximum amount involved during the year was Rs. 368,500
 thousands and the year- end balance of loans granted to such company
 was Rs. nil.
 
 (b) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (c) In respect of loans granted, repayment of the principal amount is
 as stipulated and payment of interest have been regular.
 
 (d) There is no overdue amount of loans granted to companies, firms or
 other parties listed in the register maintained under section 301 of
 the Companies Act, 1956.
 
 (e) As informed, the Company has not taken any loans, secured or
 unsecured from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 Accordingly, the provisions of the clauses (iii) (e) to (iii) (g) of
 paragraph 4 of the Companies (Auditors Report) Order, 2003 (as
 amended) are not applicable.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business, for the
 purchase of fixed assets and for the sale of services. Due to the
 nature of its business, the Company does not purchase any inventory or
 sell goods. During the course of our audit, no major weakness has been
 noticed in the internal control system in respect of these areas.
 
 (v)(a) According to the information and explanations provided by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in section 301 of the Act that need to be
 entered into the register maintained under section 301 have been so
 entered.
 
 (b) In respect of transactions made in pursuance of such contracts or
 arrangements exceeding value of Rupees five lakhs entered into during
 the financial year, because of the unique and specialized nature of the
 items involved and absence of any comparable prices, we are unable to
 comment whether the transactions were made at prevailing market prices
 at the relevant time.
 
 (vi) The Company has not accepted any deposits from the public.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) To the best of our knowledge and as explained, the Central
 Government has not prescribed maintenance of cost records under clause
 (d) of sub-section (1) of section 209 of the Companies Act, 1956 for
 the services of the Company.
 
 (ix) (a) The Company is regular in depositing with appropriate
 authorities undisputed statutory dues including provident fund,
 investor education and protection fund, employees state insurance,
 income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
 duty, cess and other material statutory dues applicable to it, though
 there have been slight delays in deposit of provident fund in few
 cases.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of provident fund, investor
 education and protection fund, employees state insurance, income-tax,
 wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and
 other undisputed statutory dues were outstanding, at the year end, for
 a period of more than six months from the date they became payable.
 
 (c) According to the information and explanation given to us, the dues
 outstanding of income tax, sales-tax, wealth tax, service tax, customs
 duty, excise duty and cess on account of any dispute are as follows:
 
 Name of the statue        Nature of dues        Amount (Rs.) Thousands
  
 Income Tax Act, 1961       Income Tax                   1,498
 Central Excise and Customs 
 Act, 1944                 Service Tax                  38,635
 
         Period to                     Forum
         which the                     where
         amount                   dispute is
         relates                      pending
 
    Assessment Year 2006-07             CIT
                                   (Appeals)
                                  Rajahmundry
    July 1, 2003 to September         
                                     CESTAT,
                                    Bangalore
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in the current and immediately
 preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, the Company does not have
 outstanding dues payable to any financial
 
 institution, bank or debenture holders, hence clauses (xi) of paragraph
 4 of the Companies (Auditors Report) Order, 2003 (as amended) is not
 applicable.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced to us, the Company has not
 granted loans and advances on the basis of security by way of pledge of
 shares, debentures and other securities.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund/ society. Therefore, the provisions of clause
 4(xiii) of the Companies (Auditors Report) Order, 2003 (as amended)
 are not applicable to the Company.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments.  Accordingly, the
 provisions of clause 4(xiv) of the Companies (Auditors Report) Order,
 2003 (as amended) are not applicable to the Company.
 
 (xv) According to the information and explanations given to us, the
 Company has given guarantee for loans taken by others from bank and
 financial institutions, the terms and conditions whereof in our opinion
 are not prima-facie prejudicial to the interest of the Company.
 
 (xvi) The Company did not have any term loans outstanding during the
 year.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that no funds raised on short- term basis have been used for long-term
 investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties or companies covered in the register maintained under
 section 301 of the Companies Act, 1956.
 
 (xix) The Company did not have any outstanding debentures during the
 year.
 
 (xx) The Company did not raise any money through a public issue during
 the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the course of our audit.
 
                                          For S R Batliboi & Associates 
                                                  Chartered Accountants
 
 Place: Hyderabad                                          per Ali Nyaz
 Date: 29.04.2009                                               Partner
 
                                                 Membership No.: 200427