To the Members of InterGlobe Aviation Limited

Report on the Financial Statements

We have audited the accompanying financial statements of InterGlobe Aviation Limited (“the Company”), which comprise the Balance Sheet as at 31 March 2016, 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 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 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 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these 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 and required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

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. 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 audit opinion on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid 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, of the state of affairs of the Company as at 31 March 2016, and its profit and its cash flows for the year ended on that date.

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 sub-section (11) of Section 143 of the Act, we enclose in the Annexure A, a statement on the matters specified in paragraphs 3 and 4 of said the Order.

2. 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 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;

c) The Balance Sheet, the Statement of Profit and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

d) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e) On the basis of written representations received from the directors as on 31 March 2016, and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2016 from being appointed as a director in terms of Section 164 (2) of the Act;

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure B; and

g) 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 2.28 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; and

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

For B S R & Co. LLP
Chartered Accountants
Firm registration number: 101248W / W-100022
Jiten Chopra
Place: Gurgaon Partner
Date: 29 April 2016 Membership number: 092894

Annexure A referred to in our Independent Auditor’s Report to the members of InterGlobe Aviation Limited on the financial statements for the year ended 31 March 2016

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

(b) The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of two years except for aircraft and spare engines, which are verified on an annual basis.

In our opinion, this periodicity of physical verification by management is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this programme, certain fixed assets were physically verified during the year. As informed to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us, the Company does not have any immovable properties. Accordingly, paragraph 3(i)(c) of the Order is not applicable.

(ii) Inventories, except for goods-in-transit and stocks lying with third parties have been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. For stocks lying with third parties at the year-end, written confirmations have been obtained. According to the information and explanations given to us, the procedures for physical verification of inventories followed by the management during the year are reasonable and adequate in relation to the size of the Company and the nature of its business. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly adjusted in the books of account.

(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of paragraph 3 (iii) of the Order are not applicable to the Company.

(iv) According to the information and explanations given to us, the Company has not given any loan, or provided any guarantee or security as specified under section 185 and 186 of the Companies Act, 2013. Moreover, in respect of the investments made by the Company, requirements of section 186 of the Companies Act, 2013 have been complied with.

(v) As per the information and explanations given to us, the Company has not accepted any deposits as mentioned in the directives issued by the Reserve Bank of India and the provisions of section 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed there under. Accordingly, para 3(v) of the Order is not applicable.

(vi) According to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under sub-section (1) of section 148 of the Companies Act, 2013, for any of the services rendered by the Company. Accordingly, para 3(vi) of the Order is not applicable.

(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including provident fund, employees’ state insurance, income tax, sales tax, service tax, duty of customs, value added taxes, cess and other statutory dues have been regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of duty of excise.

According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees’ state insurance, income tax, sales tax, service tax, duty of customs, value added taxes, cess and other statutory dues were in arrears as at 31 March 2016 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of income tax, service tax, sales tax, value added tax and duty of customs which have not been deposited by the Company with the appropriate authorities on account of any dispute as at 31 March 2016, other than those mentioned as follows:

Statement of Disputed Tax Dues

Name of the Statute Nature of the dues Amount (Rs. in million) Period to which the amount relates Forum where dispute is pending
Income-tax Act, 1961 Revision to the taxable income on account of: 1,180.34 A.Y 2007-08 1 Income Tax Appellate Tribunal (ITAT), Commissioner of Income Tax, Appeals [CIT(A)]
AY 2009-10 2
a) Tax treatment of certain incentives received by the Company from manufacturers with the acquisition of aircraft and engine. AY 2010-11 3
b) Disallowance of certain expenses / adjustments.
Income-tax Act, 1961 Revision to taxable income on account of : 993.21 AY 2008-09 4 ITAT
a) Disallowances of certain expenses / adjustments; and
b) Tax treatment of certain incentives received by the Company from the manufacturers with the acquisition of aircraft and engine.
Income-tax Act, 1961 Revision to taxable income on account of : - AY 2012-13 5 CIT(A)
a) Disallowances of certain expenses; and
b) Tax treatment of certain incentives received by the Company from the manufacturers with the acquisition of aircraft and engine.
Income-tax Act, 1961 Tax deducted at source 1.02 AY 2007-08 Assessing officer
Income-tax Act, 1961 Tax deducted at source (Rs. 7.84 million deposited under dispute) 142.48 AY 2010-11 ITAT, CIT(A)
Income-tax Act, 1961 Tax deducted at source (Rs. 5.07 million deposited under dispute) 20.99 AY 2011-12 ITAT
Income-tax Act, 1961 Tax deducted at source (Rs. 4.20 million deposited under dispute for AY 2013-14) 0.19 AY 2013-14 CIT(A), AO
Income-tax Act, 1961 Tax deducted at source (Rs. 11.41 million deposited under dispute) 22.78 AY 2012-13 CIT(A)
Income-tax Act, 1961 Tax deducted at source 12.00 AY 2013-14, AY 2014-15, AY 2015-16 ITAT, CIT(A), AO
Finance Act, 1994 (Service tax) Service tax and penalty on excess baggage charges, services received from overseas vendors and denial of CENVAT Credit 111.21 FY 2006-07 to FY 2010-11 Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh
Finance Act, 1994 (Service tax) Service tax and penalty on services received from overseas vendors 2.96 FY 2005-06 to FY 2009-10 and FY 2010-11 CESTAT, Chandigarh
Finance Act, 1994 (Service tax) Penalty for late payment of Service tax on various expenses incurred on ECB (Rs. 89.64 million deposited under protest) 358.56 FY 2012-13 to FY 2013-14 CESTAT, Chandigarh
The Customs Act, 1962 Customs duty and penalty on import of aircraft engines 531.20 FY 2011-12 and FY 2012-13 CESTAT, Bangalore
The Customs Act, 1962 Custom duty and penalty demanded on notional freight charges added to the value of Aviation turbine fuel left in the tank of an aircraft 6.78 August 2012 to May 2015 CESTAT, Chennai
Kerala Value Added Tax Act, 2003 Value Added Tax on sale of goods in International flights 3.07 FY 2012-13 to FY 2013-14 Assistant Commissioner (Appeals), Kerala

1 The proposed addition to taxable income amounting to Rs. 1,874.63 million for AY 2007-08, will result in reduction of business loss and depreciation of the respective assessment year.

2 The proposed revision to taxable income resulted in additional taxable income amounting to Rs. 3,830.83 million for AY 2009-10. This resulted in reduction of the returned business loss and depreciation. During the current year, CIT (A) has passed an order dated 20 January 2016 which further proposed additional taxable income amounting of Rs. 333.71 million and raised the aforesaid demand. The ITAT has granted stay against the outstanding demand.

3 The additional taxable income amounting to Rs.3,569.11 million for AY 2010-11 was proposed vide order dated 15 March 2013 and during the current year, CIT(A) has passed an order dated 20 January 2016 proposing additions to the tune of Rs. 726.60 million. However, the Company is in appeal before the ITAT against the additions made by CIT(A). Further, addition of Rs. 50.97 million was proposed vide re-assessment order dated 27 January 2016 and accordingly, above mentioned demand has arisen.

4 The additional taxable income amounting to Rs. 1,655.78 million for AY 2008-09 was proposed, which reduced the returned business loss and depreciation. During the current year, CIT(A) has passed an order dated 8 January 2016 which further proposed additional taxable income amounting of Rs. 3,033.94 million. Due to this addition, above mentioned demand has arisen. The ITAT has granted stay against the outstanding demand.

5 The tax liability on the revised taxable income, after the adjustments/disallowances by the tax authority of Rs. 6,070.11 million, was more than the minimum alternate tax paid by the Company on book profits as assessed under section 115 JB of Income Tax Act, 1961. Accordingly, an assessed tax demand of Rs. 1,543.30 million was raised on the Company. During the current year, the entire tax demand has been deleted vide order u/s 154 dated 08 June 2015 on account of MAT credit adjusted against the total tax payable as per normal provisions of the Act.

(viii) In our opinion and according to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not defaulted in repayment of loans or borrowings to banks or financial institutions. Further, no loans or borrowings were taken from government and there were no debentures issued during the year or outstanding as at 31 March 2016.

(ix) In our opinion and according to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has utilized the money raised by way of initial public offer during the year, for the purposes for which they were raised, except for delay in utilisation of Rs. 4,925.31 million due to obtaining requisite approvals, which as informed to us by management will be received in the first quarter of the next financial year. Moreover, the term loans taken by the Company have been applied for the purposes for which they were raised.

(x) According to the information and explanations given to us, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.

(xi) According to information and explanations given to us and on the basis of our examination of the records of the Company, the managerial remuneration has been provided and paid by the Company in accordance with the provisions of section 197 read with Schedule V to the Companies Act, 2013.

(xii) According to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) In our opinion and according to the information and explanations given to us and on the basis of our examination of the records of the Company, the transactions with the related parties are in compliance with sections 177 and 188 of the Companies Act, 2013 where applicable and the details have been disclosed in the financial statements as required by the accounting standards.

(xiv) According to the information and explanation given to us and on the basis of our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, paragraph 3(xiv) of the Order is not applicable.

(xv) According to information and explanations given to us, the Company has not entered into any non-cash transactions with directors or persons connected with them. Accordingly, paragraph 3(xv) of the Order is not applicable.

(xvi) According to the information and explanations given to us, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For B S R & Co. LLP
Chartered Accountants
Firm registration number: 101248W / W-100022
Jiten Chopra
Place: Gurgaon Partner
Date: 29 April 2016 Membership number: 092894

Annexure B to the Independent Auditor’s Report of even date on the financial statements of InterGlobe Aviation Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of InterGlobe Aviation Limited (“the Company”) as of 31 March 2016 in conjunction with our audit of the 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 based on the internal control over financial reporting 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 (the “Guidance Note”) 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 Companies Act, 2013.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the ICAI.

Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, 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 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 system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of 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 reflectthe transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, 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 over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting 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 system over reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2016, based on the internal control over financial reporting 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.

For B S R & Co. LLP
Chartered Accountants
Firm registration number: 101248W / W-100022
Jiten Chopra
Place: Gurgaon Partner
Date: 29 April 2016 Membership number: 092894