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Hindustan Petroleum Corporation Ltd.

BSE: 500104 | NSE: HINDPETRO |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE094A01015 | SECTOR: Refineries

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Annual Report

For Year :
2019 2018 2017 2016 2015 2014 2013 2012 2011

Auditor's Report

Independent Auditors'' Report

TO THE MEMBERS OF HINDUSTAN PETROLEUM CORPORATION LIMITED Report on the Audit of the Standalone Ind AS Financial Statements Opinion

We have audited the accompanying standalone Ind AS financial statements of Hindustan Petroleum Corporation Limited (the Company), which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and notes to the financial statements including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as the standalone financial statements), in which are included the Ind-AS financial statements for the year ended on that date audited by the branch auditor of the Visakh Refinery Located at Visakhapatnam.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (the Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under section 143(10) of the Act ( the SAs). Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (the ICAI) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI''s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Emphasis of Matter

We invite attention to Note No. 62 regarding provision for impairment made to the extent of Rs,95.70 crores towards loans given to consumers under Prime Minister Ujjwala Yojana (PMUY) out of the total outstanding loans of Rs,1,93742 crores, the above impairment has been computed based on the estimates of default as assessed by the management.

Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report:

1. Evaluation of uncertain direct and indirect tax positions

The Company has material uncertain direct and indirect tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. The Company has disputes pending at various levels of tax authorities over the past several years. As on March 31,2019, the company has total such disputed demands amounting to Rs,8,820.35 crores ( Refer Note No. 2.16 and para (vii) (b) Annexure I of this report.)

Auditors'' Responses

Principal Audit Procedures

- We have evaluated the appropriateness of the design and tested the operating effectiveness of the management''s controls over the tax litigation matters.

- Obtained details of completed tax assessments and demands for the year ended March 31, 2019 from management.

- We reviewed the management''s underlying assumptions in estimating the tax provision and the possible outcome of the disputes. The legal precedences and other rulings were considered in evaluating management''s position on these uncertain tax positions.

- Additionally, we considered the effect of the outcomes of the Appellate Orders received during the year in respect of uncertain tax positions as at April 1, 2018 to evaluate whether any change was required to management''s position on these uncertainties.

- We have verified the orders from tax and appellate authorities for the previous years and relied on management judgments in evaluating the tax provisions for the Current Financial Year.

- Further we have relied upon the management judgments and estimates for possible outflow and opinion of internal experts of the company in relations to such disputed tax positions.

2. Recoverability of pre-deposits relating to tax and non tax matters

As at March 31, 2019, the Company has non-current assets i.e. pre-deposits pertaining to various tax and non-tax matters namely VAT ,excise duty, custom duty etc. with adjudicating authorities amounting to Rs,596.40 crores that are pending for/relating to cases pending for more than 3 years and for which there are no balance confirmations from the respective authorities available on records.

Auditors'' Responses

Principal Audit Procedures

- We have evaluated the appropriateness of the design for recording and tracking the recoverability of pre-deposits pertaining to the old tax and non- tax cases.

- We have discussed and reviewed the nature of the amounts recoverable vis a vis the underlying cases. We further discussed the sustainability of the cases on a sample basis and the likelihood of recoverability or otherwise upon final resolution from the respective authorities.

- We enquired with the management about these cases vis a vis the current position and the efforts taken by the management to recover the deposits placed or obtaining the balance confirmations from the respective authorities

- Further, we have relied on the management estimations and judgments’ with reference to inherent uncertainties involved while determining the outcome of these cases.

3. Evaluation of disputed claims against the company under various non-tax matters

The company has disputed claims against it which are pending at various courts/forums and are various stages in the judicial process. The management has exercised significant judgment in assessing the possible outflow in such matters and accordingly an amount of Rs,581.67 crores has been disclosed for which the company is contingently liable while possibility of any outflow in matters having claims amounting to Rs,430.33 crores has been considered remote.

Auditors'' Responses

Principal Audit Procedures

- Read and analysed select key correspondences, internal/external legal opinions/ consultations by management for key disputed non tax matters;

- Reviewed and verified other legal pronouncements wherever available in similar matters in the case of the company/other corporates

- Discussed with appropriate senior management and evaluated management''s underlying key assumptions in estimating the provisions; and

- Assessed management''s estimate of the possible outcome of the disputed cases and relied on the management judgments’ in such cases.

4. Assessment for impairment of Investment in Wholly Owned Subsidiaries and various financial assistance provided to them

The Company has wholly owned subsidiaries named ''HPCL Biofuels Ltd'' (HBL) and Prize Petroleum Corporation Ltd (PPCL). PPCL has a wholly owned subsidiary namely Prize Petroleum International Pte Ltd. (the Step-Down Subsidiary / PPIPL), incorporated in Singapore.

(i) HPCL Biofuels Ltd. (HBL)

Since its inception, HBL has not been able to break-even based on which this project was approved. There has been a significant erosion in the net worth of the subsidiary.

Based on this, management assessed that the recoverable amount of the Company''s investment exceeded its carrying value.

The above assessment includes significant estimations pertaining to projections of cash flows arising from sale of sugar, ethanol and co-gen and to make several estimates and assumptions such as Minimum Sales Price, Capability of Repayment of Loans, escalation factors, interest cost, reserves and other operating costs.

(Refer Note no. 60 of the Ind AS Standalone Financial Statements)

Auditors'' Responses

Principal Audit Procedures

- We reviewed the process followed by the Company to assess the valuation of investments with respect to the transactions that took place during the year.

- We analysed impairment tests performed by the management, and verified that the criteria used to perform these tests are consistent with those established in applicable reporting regulations.

- In estimating the impairment of investments, we have reviewed that management has followed the discounting of future cash flows of the revenue streams of HBL from its Cash Generating Unit using a pretax discount rate.

- Further, we have studied the industry specific data pertaining to the products dealt by HBL (Sugar and Ethanol) available in the public domain including the industry outlook published by the credit rating agencies. This data includes Minimum Selling Prices of the sugar, estimated sugar recovery etc.

- We considered the adequacy of the disclosures in the financial statements in respect of this matter.

(ii) Prize Petroleum International Pvt Ltd.

HPCL has given corporate guarantee on behalf of PPIPL for obtaining borrowings from a consortium of banks. Due to uncertainty in the exploration and production of oil and gas with reference to its reserves and gas prices, there is a possibility of the corporate guarantee being invoked.

(Refer Note no. 61 of the Ind AS Standalone Financial Statements)

Auditors'' Responses

Principal Audit Procedures

- We reviewed the management estimates and assumptions, especially on Production Profile Scenarios and Gas Prices, in respect of impairment of the Corporate Guarantee, in case of Prize Petroleum International Pte Ltd

- Further, we made enquiries with the technical expert (petroleum engineer) of the subsidiary to substantiate the production profiles of the production blocks running over the future periods

- Further, this assessment exercise was audited by the independent auditor of PPIPL.

- We considered the adequacy of the disclosures in the financial statements in respect of this matter.

Information Other than the Standalone Financial Statements and Auditors'' Report Thereon

The Company''s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Directors'' Report including Annexures to Directors'' Report, , Corporate Governance and Shareholder''s Information, but does not include the standalone financial statements and our auditor''s report thereon. The Other information is expected to to be made available to us after the date of this Auditors'' report.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

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 Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due 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 audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic 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 maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

- Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

- Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

- Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matter

a) We did not audit the financial statements of 1 branch viz Visakh Refinery included in the stand alone financial statements of the Company whose financial statements reflect total assets of Rs,14,350.38 crores as at 31st March 2019 and the total revenue of Rs,50,718.87 crores for the year ended on that date, as considered in the standalone financial statements of this branch have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the report of such branch auditors.

b) We refer to note no. 49 in connection with 21 Un-incorporated Jointly Controlled Entities (''UJCEs'') involved in exploration activities, of which majority of UJCEs are under relinquishment. The standalone Ind AS financial statements include Company''s proportionate share in Assets and Liabilities as on March 31, 2019 and Income and Expenditure for the year ended on March 31, 2019 amounting to Rs,3.13 crores and Rs,14.89 crores, Rs,1.44 crores and Rs,3.78 crores respectively. In respect of these UJCEs, the audited accounts are not available with the Company. The financial information has been incorporated based on data received from the respective operators.

c) The standalone Ind AS financial statements of the Company for the year ended March 31, 2018 were audited by the joint auditors of the Company, one of which is the predecessor audit firm, and have expressed an unmodified opinion dated May 22, 2018 on such financial statements.

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 (''the Order''), issued by the Central Government of India in terms of section 143(11) of the Act, we give in the Annexure- I, a statement on the matters specified in paragraph 3 and 4 of the Order, to the extent applicable.

2. As required by the section 143(5) of the Act, we give in the Annexure II, a statement on the directions / sub-directions issued by the Comptroller and Auditor-General of India.

3. As required by Section 143(3) of the Act, based on our audit 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 purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us.

c) The report on the accounts, dated May 17, 2019 of the Visakh refinery of the company audited under section 143(8) of the Act by the branch auditors has been provided to us and has been properly dealt with by us in preparing this report.

d) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books of account.

e) In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2015 as amended.

f) As per notification no. G.S.R 463(E) dated June 5, 2015, the Government companies are exempted from the provisions of section 164(2) of the Act, accordingly, we are not required to report whether any of the directors of the Company are disqualified in terms of provisions contained in the said section;

g) With respect to the adequacy of the internal financial controls with reference to financial statements and the operating effectiveness of such controls, refer to our separate Report in Annexure III

h) With respect to the other matters to be included in the Auditor''s Report in accordance with the requirements of section 197(16) of the Act, as amended. As per notification no. G.S.R 463(E) dated June 5, 2015, the Government companies are exempted from the provisions of section 197 of the Act and hence we are not required to report as to whether the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

i) 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, as amended 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 standalone financial statements-Refer Note No.55 to the standalone Ind-AS Financial Statements read with Para 1 and 3 of Key Audit Matters here in above.

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

i. In respect of the Company''s fixed assets :

a) The Company has maintained proper records showing full particulars, including quantitative details and situation of Property Plant and Equipment (fixed assets).

b) The Property Plant and Equipment (PPE) of the Company, other than LPG cylinders and pressure regulators with customers are physically verified by the Management in a phased program of three years cycle. In our opinion, the programme is reasonable having regard to the size of the Company and the nature of its assets. In our opinion and as per the information given by the management the discrepancies observed were not material and have been appropriately accounted in the books of account.

c) On the basis of the information to the extent compiled by the Company pending the reconciliation of the available records , title deeds/Lease deeds for immovable properties held as Property Plant & Equipment are not available with the Company in the case of 6 properties with Gross block Rs,0.30 crores and in the case of 19 properties with Gross block Rs,2.49 crores where property tax receipts are held by the Corporation to substantiate the title to such properties. In other cases, based on verification of records on random basis, the title deeds are held in the name of the company. For the purpose of reporting under this clause, where ever title deeds of immovable properties were not available, we have relied on other substantive evidences like allotment letters, noting in municipal / revenue records conveying title to the Company over the property.

ii. During the year, the inventories have been physically verified at reasonable intervals by the management. The discrepancies noticed on physical verification, as compared to the book records, were not material having regards to size and nature of operations and have been properly dealt with in the books of account.

iii. As per notification no. G.S.R 463(E) dated June 5, 2015, the Government companies are exempted from the provisions of section 188 of the Act in respect of contracts or arrangements entered into between the Government companies. The Company has not granted loans, secured or unsecured, to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Act. Hence, the question of reporting under sub clauses (a), (b) & (c) of the clause 3(iii) of the Order does not arise.

iv. The Company has not granted any loans or provided any guarantees or security to the parties covered under section 185 of the Act. The Company has complied with the provisions of section 186 of the Act in respect of investments made or loans or guarantee or security provided to the parties covered under section 186 of the Act.

v. The Company has not accepted any deposits from the public, within the meaning of sections 73 to 76 of the Act and the rules framed there under. We are informed by the Management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal in this regard.

vi. We have broadly reviewed accounts and records maintained by the Company pursuant to rules made by the Central Government for the maintenance of cost records under section 148(1) of the Act, in respect of Company''s products to which the said rules are made applicable and are of the opinion that, prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate.

vii. (a) According to the information and explanations given to us and according to the records of the Company examined

by us, in our opinion, the Company is generally regular in depositing with the appropriate authorities undisputed statutory dues including Provident Fund, Employees'' State Insurance, Income-tax, Sales Tax, Service Tax, Goods

& Service Tax, duty of Custom, duty of Excise, Value Added Tax, Cess and any other statutory dues, wherever applicable.

According to the information and explanations given to us, no undisputed amounts payable in respect of aforesaid dues were outstanding as on March 31, 2019 for a period of more than 6 months from the date they became payable.

(b) According to the information and explanations given to us, the particulars of statutory dues that have not been deposited on account of disputes are as under:

Statute

Forum pending i.e. STAT/High Court etc.

Period to which the amount relates

Amount (Rs, in Crores)

Customs

Appellate Authority*

2007-2013

4.56

Tribunal**

1998-2013

763

Customs Total

12.19

Central Excise

Appellate Authority*

1994-2018

1736

Tribunal**

1994-2018

522.41

High Court

1994-2017

6.11

Board of Revenue

1999-2013

0.05

Adjudicating Authority***

2004-2014

0.81

Central Excise Total

546.75

Sales Tax/Entry Tax

Appellate Authority*

1976-2017

2,059.32

Tribunal**

1976-2016

4,969.63

High Court

1979-2017

1,015.13

Board of Revenue

1999-2014

2.75

Adjudicating Authority***

1976-2016

18.92

Supreme Court

2002-2004

6.68

Sales Tax/Entry Tax Total

8,072.44

Service Tax

Appellate Authority*

2005-2018

1.38

Tribunal**

2002-2015

92.66

High Court

1981-2013

3.75

Supreme Court

2004-2012

3.25

Service Tax Total

101.04

Income tax

Tribunal**

2006-11

8793

Income tax Total

8793

Grand Total

8,820.35

* Appellate Authority represents Assistant Commissioner (A), Deputy Commissioner (A), Joint Commissioner (A), Additional Commissioner (A)

** Tribunal represents Sales Tax Appellate Tribunal, Central Excise and Service tax Appellate Tribunal (CESTAT), Income Tax Appellate Tribunal (ITAT)

*** Adjudicating authority represents Assessing Officer, Additional Commissioner, Deputy Commissioner, Joint Commissioner, Additional Commissioner, Chief Commissioner

viii. According to the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowing to financial institutions, banks, government or dues to debenture holders.

ix. The Company has not raised money by way of Initial Public Offer or Further Public Offer (including debt instruments). According to the information and explanations given to us and on the basis of the records examined by us, the Company has prima facie applied the term loan for the purpose for which it was obtained.

x. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us, no instances of material fraud by the Company or on the Company by its officers and employees have been noticed or reported during the year.

xi. As per notification no. G.S.R 463(E) dated June 5, 2015, the Government companies are exempted from the provisions of section 197 of the Act, accordingly, the question of reporting whether the payment of managerial remuneration by the Company is in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act does not arise.

xii. The Company is not a chit fund or a Nidhi company. Hence, the question of reporting under clause 3(xii) of the Order does not arise.

xiii. As per notification no. G.S.R 463(E) dated June 5, 2015, the Government companies are exempted from the provisions of section 188 of the Act in respect of contracts or arrangements entered into between the Government companies. The Company has complied with the provisions of section 177 and section 188 of the Act in respect of transactions with the related parties and the details have been disclosed in the standalone Ind AS financial statements as required by the applicable Indian Accounting Standards.

xiv. The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under audit.

xv. The Company has not entered into any non-cash transactions with directors or persons connected with him covered under the provisions of section 192 of the Act.

xvi. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

Based on the verification of records of the Company and based on information and explanations given to us, we give below a report on the directions issued by the Comptroller and Auditor General of India in terms of the section 143(5) of the Act.

Sr.

No.

Areas to be examined

Observations/findings

1.

Whether the Company has system in place to process all the accounting transactions through IT systemRs, If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated.

As per the information and explanations furnished to us, the company has an Enterprise Resource Planning ERP system in the name of JD Edwards (JDE) to process the accounting transactions. There are large number of other applications including workflow applications and portals to address specific requirements. Most of these applications/modules have real time integration with ERP (JDE) system for smooth accounting / recording of transactions. As a part of our general review of IT controls we have carried out the review of major controls in existence in the applications with regard to integrity of data flowing to JDE. Basis our sample verification nothing significant has come to our attention that causes us to believe that there are material gaps pertaining to IT controls.

Further, we have also relied on the exercise conducted by the management with the help of consultant to check the design of internal controls, and its operating effectiveness including the IT systems and control.

Further management has conducted the system audit with the help of the consultants which has not reported any significant gaps.

Apart from above there are few other accounting process being undertaken through excel spreadsheet like inventory valuation, interest calculation of treasury funding activities, matching of open credits in the case of Trade accounts receivables, matching of suppliers accounts wherein sufficient controls for data integrity have been observed in our review of general IT controls. There is however a need of automation of such processes to ensure complete data integrity.

2.

Whether there is any restructuring of an existing loan or cases of waiver/ write off of debts/loans/interest etc. made by a lender to the company due to the company''s inability to repay the load’s, If yes, the financial impact may be stated.

No such instances have been noticed during the financial year 2018-19.

3.

Whether funds received/receivable

As per the information and explanations furnished to us, the funds received

for specific schemes from Central/

/receivable by the company for specific schemes from Central/State

State agencies were properly

agencies to the extent these are recorded in the books of accounts and

accounted for/utilized as per its term

records produced before us, were properly accounted. We are informed

and conditioners, List the cases of

that in the case of schemes of Central Government i.e. PMUY,DBTL,

deviation

other subsidies, etc claims for reimbursements duly certified by Chartered Accountants are filed with Petroleum Planning and Analysis cell (PPAC) for reimbursement and hence these are not considered as Grants and no utilization certificates are filed.

In the case of certain state specific scheme, utilization certificates are furnished by the company separately to the respective agencies. During the course of our test checks of the records available at Head Office of the company in respect of such claims for reimbursement recorded in the books which are approved by PPAC, nothing has come to our notice that causes us to believe that there has been any violation of terms and conditions in relation to these claims. The separate audit of these claims filed with PPAC is carried out by separate firms of Chartered Accountants.

Referred to in paragraph 3(g) under Report on Other Legal and Regulatory Requirements of our report of even date

Report on the Internal Financial Controls with reference to Financial Statements under clause (i) of sub-section 3 of section 143 of the Companies Act, 2013 (the Act)

We have audited the Internal Financial Controls with reference to Financial Statements of HINDUSTAN PETROLEUM CORPORATION LIMITED (''the Company'') as of March 31, 2019 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining Internal Financial Controls with reference to Financial Statements established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors'' Responsibility

Our audit of Internal Financial Controls with reference to Financial Statements includes assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s Internal Financial Controls with reference to Financial Statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A Company''s Internal Financial Controls with reference to Financial Statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone Ind AS Financial Statements for external purposes in accordance with generally accepted accounting principles. A company''s Internal Financial Control over Financial Reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone Ind AS Financial Statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the standalone Ind AS Financial Statements.

Inherent Limitations of Internal Financial Controls with reference to Financial Statements

Because of the inherent limitations of Internal Financial Controls with reference to Financial Statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the Internal Financial Controls with reference to Financial Statements to future periods are subject to the risk that the Internal Financial Control with reference to Financial Statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate Internal Financial Controls with reference to Financial Statements and such Internal Financial Controls with reference to Financial Statements were operating effectively as on March 31, 2019, based on the criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

Other Matters

Our aforesaid report under section 143(3)(i) of the Act on the adequacy and operating effectiveness of the Internal Financial Controls with reference to Financial Statements insofar as it relates branch office of the Company viz. Visakh Refinery audited by the branch auditor, appointed under section 143(8) of the Act is based on the report of the branch auditor which has been sent to us and has been properly dealt with by us in preparing this report.

For R. Devendra Kumar & Associates For M.P Chitale & Co.

Chartered Accountants Chartered Accountants

Firm Registration No.:114207W Firm Registration No.:101851W

Sd/- Sd/-

Devendra Kumar Gupta Anagha Thatte

Partner Partner

Membership No.009032 Membership No.: 105525

Place : New Delhi

May 20, 2019