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Power Grid Corporation of India
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« Mar 14
Auditor's Report (Power Grid Corporation of India) Year End : Mar '15
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.
 
 Auditors'' Responsibility
 
 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 Rs. 11.84 crore and increase in Current Assets by Rs. 11.84
 crore.
 
 iii) Furthermore, as a result of non-provisions mentioned in our
 qualification Nos. i) and ii) stated above, there are impact on various
 heads in the financial statements, the aggregate impact of all the
 above is as under:
 
 Sl.  Particulars                              Increase      Decrease
                                              (Rs. Crore)   (Rs. Crore)
 
 1    Revenue from operation                                   37.45
 
 2    Employee Benefit Expenses                    1.56
 
 3    Transmission, administration and 
      other expenses                                          160.55
 
 4    Profit Before Tax                          121.54
 
 5    Tax Expenses                                              8.15
 
 6    Profit After Tax                           129.69
 
 7    Reserves & Surplus and Shareholders''
      Fund                                       129.69
 
 8    Short-term Provisions                                     5.75
 
 9    Capital work in progress                     0.84
 
 10   Trade Receivable                           160.55
 
 11   Other Current Assets                                     37.45
 
 Qualified Opinion
 
 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 sub-
 section (11) of Section 143 of the Act, we give in the Annexure''l''a
 statement on the matters specified in paragraphs 3 and 4 of the 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 of the 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 ''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 Rs. 229.70 crore to two wholly owned subsidiaries covered in the
 register maintained under section 189 of the Companies Act, 2013 (''the
 Act''). Outstanding balance as on 31st March 2015 is Rs. 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 of the 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:
 
 Name of the Statute    Nature of      Amount*     Period to which the
                                                   amount
                        dues          (Rs. in 
                                       Crore)      relates
 
 Income Tax Act, 1961   Income Tax      15.49     2004-05, 2005-06, 
                                                  2007-08, 2008-09, 
                                                  2009-10, 2010-11
 
 Income Tax Act, 1961   Income Tax       0.08     2005-06, 2007-08
 
 Income Tax Act, 1961   Income Tax       9.49     2008-09, 2009-10, 
                                                  2011-12
 
 Finance Act, 1994      Service Tax      1.57     2003-04
 
 Finance Act, 1994      Service Tax      1.89     2007-08, 2008-09
 
 J&K GST Act, 1962      Sales Tax       50.71     1995-96 to 2001-02
 
 J&K GST Act, 1962      Sales Tax       57.75     2002-03 to 2009-10
 
 Punjab Vat Act, 2005   Entry Tax        9.64     2011-12 to 2013-14
 
 MP Entry Tax Act, 1976 Entry Tax       20.67     2011-12, 2014-15
 
 Building and Other     Cess             3.46     2007-08
 Construction Workers
 Welfare Cess Act, 1996
 
 Total                                 170.75
 
 Name of the Statute             Forum where dispute is pending
 
 Income Tax Act, 1961            ITAT, Delhi
 
 Income Tax Act, 1961            DCIT, Delhi
 
 Income Tax Act, 1961            CIT (A) Delhi
 
 Finance Act, 1994               CESTAT, Kolkata
 
 Finance Act, 1994               Commissioner (Central Excise),
                                 Bhubaneswar
 
 J&K GST Act, 1962               Sales Tax Appellate Tribunal, J&K
 
 J&K GST Act, 1962               Dy. Commissioner of Sales Tax
                                (appeals) Jammu, J&K
 
 Punjab Vat Act, 2005            Hon''ble High Court Punjab & Haryana
 
 MP Entry Tax Act, 1976          Hon''ble High Court M.P., Jabalpur 
 
 Building and other 
 Construction workers welfare
 Cess Act, 1996                  Hon''ble High Court, Himachal Pradesh,
                                 Shimla
 
 * Demand amount including interest, net of amount paid under protest.
 
 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.
 
 Annexure ''2'' referred to in our Independent Auditors'' Report to the
 members of Power Grid Corporation of India Limited, on the standalone
 financial statements for the year ended 31st March, 2015.
 
 On the directions issued by the Comptroller and Auditor General of
 India under sub section (5) of Section 143 of the Companies Act, 2013,
 based on the verification of records of the Company and information and
 explanations given to us, we report that:
 
 a) The Company has not been selected for disinvestment during the year.
 
 b) There is no case of waiver/write off of loans/ interest, however non
 recoverable advances of Rs. 0.56 crore and bad debts Rs. 14.06 crore,
 against which provisions were made in earlier years have been written
 off during the year, on account of normal business practice.
 
 c) The Company has maintained adequate records in respect of
 inventories lying with third parties. No assets have been received by
 the Company as gift from Government or other authorities.
 
 d) Age wise analysis of pending legal/arbitration cases as provided by
 the management, are as under:
 
 Sl.  Category                     Number of      Number      Number
 No                                Cases prior    of Cases    of Cases
                                   to year 2000   between     between
                                                  2000-2005   2005-2010
 
 1    Land acquisition                 12              6          26
 
 2    Tree & crop Compensation         56            126        1036
 
 3    Arbitration                       6              7          16
 
 4    Contractual                       0              0           2
 
 5    Tax related                       1              2           2
 
 6    Civil Misc                       10             10          21
 
      Total                            85            151        1103
 
 Category                     Number       Total         Total Amount
                              of Cases     Number of    (Rs. in Crore)
                              between      Cases 
                              2010-2015
 
 Land acquisition                 133         177          1983.10
 
 Tree & Crop Compensation        1494        2712          1311.70
 
 Arbitration                       22          51           267.00
 
 Contractual                        0           2           132.00
 
 Tax related                        3           8           296.60
 
 Civil Misc                       216         257            86.00
 
 Total                           1868        3207          4076.40
 
 As per information and explanations given, in view of the size and
 nature of its business, the company is having large number of legal /
 arbitration cases including Tree & Crop compensation and Land
 Acquisition cases.
 
 Pendency is mainly due to legal process of the Courts/Arbitrators.
 
 In our opinion the Company has in place an adequate monitoring
 mechanism for expenditure on such legal cases.
 
 For S.K.MEHTA & CO.    For CHATTERJEE & CO.    For SAGAR & ASSOCIATES
 
 Chartered Accountants  Chartered Accountants   Chartered Accountants
 
 Firm Registration
 No.000478N             Firm Registration 
                        No. 302114E             Firm Registration 
                                                No. 003510S
 
 (CA Puneet Harjai)    (CA S.K.Chatterjee)     (CA D. Manohar)
 
 Partner                Partner                 Partner
 
 Membership No.095715   Membership No.003124    Membership No.029644
 
 Place of Signature: New Delhi 
 
 Date: 30th May, 2015
Source : Dion Global Solutions Limited
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