Reliance Infrastructure Limited
Report on the Audit of the Standalone Financial Statements Disclaimer of
Opinion
We were engaged to audit the accompanying standalone financial statements of Reliance Infrastructure Limited ("the Company"), which comprise the standalone balance sheet as at March 31, 2024, the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of the material accounting policies and other explanatory information (hereinafter referred to as "the standalone financial statements"), which includes 3 Joint Operations accounted on proportionate basis.
We do not express an opinion on the accompanying standalone financial statements of the Company. Because of the significance of the matter described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements.
Basis for Disclaimer of Opinion
1. We refer to Note 37 and 38 to the standalone financial statements regarding the Company's exposure to an EPC Company as on March 31, 2024 aggregating to ' 6,503.21 Crore (net of provision of ' 3,972.1 7 Crore). The Company has also provided corporate guarantees aggregating to ' 1,216 Crore (net of Corporate Guarantee given of Rs. 384 Crore settled at Rs. 76.80 Crore) on behalf of the aforesaid EPC Company towards its borrowings.
According to the Management of the Company, these amounts have been provided mainly for general corporate purposes and towards funding of working capital requirements of the EPC Company which has been engaged in providing Engineering, Procurement and Construction (EPC) services primarily to the Company, its subsidiaries and its associates. Further during the year, the Company has initiated pre-institution mediation proceeding against EPC Company, for recovery before the concerned authority of the Hon'ble Bombay High Court.
As referred in the above note, the Company had also provided Corporate Guarantees of Rs. 285 Crore (net of Corporate Guarantee given of Rs. 4072.29 Crore settled at Rs. 814.46 Crore) in favour of a company towards its borrowings. According to the Management of the Company these amounts have been given for general corporate purposes.
We were unable to obtain sufficient and appropriate audit evidence about the relationship, recoverability and possible obligation towards the Corporate Guarantees given. Accordingly, we are unable to determine the consequential implications arising therefrom in the standalone financial statements of the Company.
2. We refer to Statement of Changes in Equity of the Standalone financial statements wherein the loss on invocation of shares and/or fair valuation of shares held
as investments in Reliance Power Limited (RPower) aggregating to Rs. 5,024.88 Crore for year ended March 31, 2020 was adjusted against the capital reserve instead of charging the same in the Statement of Profit and Loss. The said treatment of loss on invocation and fair valuation of investments was not in accordance with the Ind AS 28 "Investment in Associates and Joint Venture", Ind AS 1 "Presentation of Financial Statements" and Ind AS 109 "Financial Instruments". Had the Company followed the above Ind AS's the Retained earnings as at March 31, 2023 and March 31, 2024 would have been lower by Rs. 5,024.88 Crore and Capital Reserve of the Company as at March 31, 2023 and March 31, 2024 would have been higher by Rs. 5,024.88 Crore.
Material Uncertainty Related to Going Concern
We draw attention to Note 45 to the standalone financial statements, wherein the Company has outstanding obligations to lenders and the Company is also a guarantor for its subsidiaries whose loans have also fallen due which indicate that material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. However, for the reasons more fully described in the aforesaid note, the accounts of the Company have been prepared as a Going Concern.
Our opinion on the standalone financial statements is not modified in respect of this matter.
Emphasis of matter
1. We draw attention to Note 38 to the standalone financial statement, regarding the exceptional item aggregating to '11 33.91 crore (net), for the year ended March 31, 2024, with respect to certain provisions, charge for interest expense, accrued interest income and income for arbitration claims.
2. We draw attention to Note no. 40 and 41 to the standalone financial statements which describes the impairment assessment performed by the Company in respect of its net receivables of Rs. 2,884.70 Crore ("total exposure") in eight subsidiaries i.e. Toll Road SPV's Companies in accordance with Ind AS 36 "Impairment of assets"/Ind AS 109 "Financial Instruments". This assessment involves significant management judgment and estimates on the valuation methodology and various assumptions used by independent valuation experts/management as more fully described in the aforesaid note. Based on management's assessment and independent valuation reports, no impairment is considered necessary on the total exposure, by the management.
Our opinion on the standalone financial statements is not modified in respect of the above matters.
Responsibility of Management for the Standalone Financial Statements
The Company's Board of Directors are responsible for the matters stated in section 134(5) of the Companies Act 2013 ("Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial
position, financial performance including other comprehensive loss, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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 and Board of Directors are 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 the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our responsibility is to conduct an audit of the standalone financial statements in accordance with Standards on Auditing and to issue an auditor's report. However, because of the matter described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone financial statements.
We are independent of the Company in accordance with the Code of Ethics and provisions of the Act that are relevant to our audit of the standalone financial statements in India under the Act, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics and the requirements under the Act.
Other Matters
1. i. The standalone financial Statement include the audited financial statement and other financial information of 2 joint operations, whose financial statement reflect total assets of Rs. 106.02 Crore as at March 31, 2024, total revenues of Rs. 50.19 Crore, total net profit/(loss) after tax of Rs. (1.73) Crore and total comprehensive income/(loss) of Rs. (1.73) Crore for the year ended March 31, 2024 as considered in this standalone financial Statement. These financial statement and other financial information have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on the standalone financial statement, in so far it relates to amounts and disclosures included in respect
of these joint operations, is solely based on the reports of the other auditors and the procedures performed by us are as stated in paragraph above.
ii. The standalone financial statement includes the unaudited financial statements and other unaudited financial information of 1 Joint Operations, whose financial statements and other financial information reflect total assets of Rs. 0.03 Crore as at March 31, 2024, total revenue of Rs. Nil, total net loss after tax and total comprehensive loss of Rs. Nil for the year ended March 31, 2024 for the year ended March 31, 2024, as considered in the standalone financial statements. These unaudited financial statements and other unaudited financial information have been furnished to us by the management and our opinion on the standalone financial statements, in so far as it relates to the amounts and disclosures included in respect of these joint operations is based solely on such unaudited financial statements and other unaudited financial information. In our opinion and according to the information and explanations given to us by the management, these financial statements and other financial information are not material.
Our opinion on the standalone financial statements is not modified in respect of the above matters with respect to our reliance on the work done and the reports of the other auditors and the financial statements/ financial information certified by the management.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) Order, 2020 ("the Order") issued by the Central Government in terms of section 143 (11) of the Act, and except for the possible effects, of the matter described in the Basis for Disclaimer of Opinion section, we give in the "Annexure A", a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. (A) As required by section 143(3) of the Act, we report that:
a) As described in the Basis for Disclaimer of Opinion section, we were unable to obtain all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
b) Due to the effects/possible effects of the matter described in the Basis for Disclaimer of Opinion section and for the matters stated in the paragraph 2(B) (vi) below on reporting under Rule 11(g), we are unable to state whether 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.
c) The standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows dealt with by this Report are in agreement with the books of account.
d) Due to the effects/possible effects of the matter described in the Basis for Disclaimer of Opinion section, we are unable to state whether the financial statements comply with the Indian Accounting Standards specified under section 133 of the Act.
e) The matter described in the Basis for Disclaimer of Opinion section and going concern matter described in the Material Uncertainty related to Going Concern may have an adverse effect on the functioning of the Company.
f) The Company has defaulted in repayment of the obligations to its lenders and debenture holders which is outstanding as at March 31, 2024. Based on the legal opinion obtained by the Company and based on the written representations received from the directors as on March 31, 2024 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2024 from being appointed as a director in terms of section 164(2) of the Act
g) The reservation relating to maintenance of accounts and other matters connected therewith are as stated in the Basis for Disclaimer Opinion section, in the paragraph (b) above on reporting under Section 143(3)(b) and paragraph 2(B)(vi) below on reporting under Rule 11(g).
h) With respect to the matter to be included in the Auditors' Report under section 197(16) of the Act:
According to the information and explanations provided to us, the Company has not paid any managerial remuneration during the year.
i) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".
(B) With respect to the other matters to be included in the Auditors' 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. Except for the possible effects of the matter described in the Basis for Disclaimer of Opinion section, the Company has disclosed the impact of pending litigations as at March 31, 2024 on its financial position in its standalone financial statements - Refer Note 31 to the standalone financial statements.
ii. Except for the possible effects of the matter described in the Basis for Disclaimer of Opinion section, 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.
iv. (a) Management has represented to us that, to the best of it's knowledge and belief, as disclosed in the notes to the accounts no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company
to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(b) Management has represented to us that, to the best of
it's knowledge and belief, as disclosed in the notes to the accounts no funds have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(c) Based on our audit procedure conducted that are considered reasonable and appropriate in the circumstances, nothing has come to our attention that cause us to believe that the representation given by the management under paragraph (2) (B) (iv) (a) & (b) contain any material misstatement.
v. The Company has not declared or paid any dividend during the current year. .
vi. Based on our examination, which included test check, the company has used an accounting Software for maintaining its books of account for the year ended March 31, 2024 which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in software, except that audit trail has not been enabled at the database level for any direct changes in database and database table in accounting software SAP for the year ended March 31, 2024.
Further, during the course of audit, where audit trail (edit log) facility was enabled and operated for the accounting software, we did not come across any instance of the audit trail feature being tampered with.
vii. As Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from April 01, 2023, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per statutory requirements for record retention is not applicable for the financial year ended March 31, 2024.
For Chaturvedi & Shah LLP
Chartered Accountants
Firm's Registration No:101 720W/W100355
Parag D. Mehta
Partner
Membership No: 1 13904
UDIN:24113904BKFNTQ3880
Place: Mumbai
Date: May 30, 2024
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