A2Z Infra Engineering Ltd Auditors Report.

To The Members of A2Z Infra Engineering Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

1. We have audited the accompanying standalone financial statements of A2Z Infra Engineering Limited (‘the Company), which comprise the Balance Sheet as at 31 March 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information, in which are included the returns for the year ended on that date audited by the branch auditors of the Companys branches located at Zambia, Uganda, Nepal and Tanzania.

2. In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matters described in the Basis for Qualified Opinion section of our report, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (‘Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Indian Accounting Standards (‘Ind AS) specified under section 133 of the Act, of the state of affairs (financial position) of the Company as at 31 March 2019, and its profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Basis for Qualified Opinion

3. As stated in note 18.1 to the accompanying standalone financial statements, where the Companys ‘Non-current Financial Liability -borrowings, ‘Current Financial Liability- borrowings and ‘Other Current Financial Liabilities include balances aggregating to Rs. 216.46 lakhs, Rs. 11,618.85 lakhs and Rs. 538.10 lakhs respectively as at 31 March 2019 pertaining to borrowings from certain banks (‘Lenders) which have been classified as non-performing assets and in respect of which the Company has not recognised interest for the year ended 31 March 2019 aggregating to Rs.1,595.92 lakhs. Such amount is determined by the management, basis terms of the agreements with Lenders, but in the absence of sufficient appropriate evidence to substantiate such estimate of the management, we are unable to comment on the adjustments, that would be required to the carrying value of these balances on account of changes, and its consequential impact, on the standalone financial statements.

4. As stated in note 18.2 to the accompanying standalone financial statements, the Company had entered into settlement agreement(s) (‘Agreements) with certain banks/ asset reconstruction company (‘the Lenders) during the year ended 31 March 2018 and 31 March 2019. As at 31 March 2019, the Company delayed payments in respect of certain deferred instalments which were due and payable pursuant to these settlements. Further, the management is in negotiations/ reconciliations with certain other lenders to settle its existing obligations. Pending confirmations from the Lenders and in the absence of the requisite information, we are unable to comment on the impact of such delays and ongoing negotiations/ reconciliations, if any, on the accompanying standalone financial statements.

5. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditors Responsibilities for the audit of the 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 (‘ICAI) together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Material Uncertainty Related to Going Concern

6. We draw attention to note 31 to the accompanying standalone financial statements, which indicates that the Company has accumulated net losses of Rs. 43,672.11 lakhs as at 31 March 2019 and, as of that date the Company has made defaults in repayment of borrowings from banks as detailed in note 17.5, 18.2 and 20.3 up till 31 March 2019. These conditions along with other matters as set forth in such note, indicate the existence of material uncertainty that may cast significant doubt about the Companys ability to continue as a going concern. However, in view of the ongoing discussions relating to restructuring of its borrowings and other debts with the lenders which includes binding One Time Settlement (OTS) offers made by the Company, better financial performance as a result of favorable business conditions expected in future, and other mitigating factors mentioned in the aforementioned note, the management is of the view that the going concern basis of accounting is appropriate for preparation of the accompanying standalone financial statements. Our report is not modified in respect of this matter.

The above assessment of the Companys ability to continue as going concern is, by its nature, considered as a key audit matter in accordance with SA 701. Our audit work included, but was not limited to, the following procedures:

• Obtained understanding of the managements process for identifying all events or conditions that could impact the Companys ability to continue as a going concern, and the process to assess the corresponding mitigating factors existing against each such event or condition;

• Evaluated the design and tested the operating effectiveness of key controls around aforesaid identification of events or conditions and mitigating factors, and controls around cash flow projections prepared by the management;

• Tested the appropriateness of the key assumptions in the cash flow projections for next 12 months and the aforementioned mitigating factors by considering our understanding of the business, past performance of the Company, external data and market conditions apart from discussing these assumptions with the management;

• Reconciled the cash flow projections to future business plans and restructuring plan of the Company as approved by the management;

• Tested the arithmetical accuracy of the calculations including those related to sensitivity analysis performed by the management;

• Reviewed communications with the lenders for the settlement, the minutes of meetings of lenders, etc. with respect to the status of OTS offer; and

• Evaluated the appropriateness of the disclosures made in the standalone financial statements in respect of going concern basis of accounting in accordance with applicable accounting standards.

Emphasis of Matters

7. We draw attention to note 40 (a) of accompanying standalone financial statements which describes the uncertainty relating to the outcome of litigation pertaining to income-tax matters pursuant to orders received by the Company against which management and the assessing authorities have filed appeals with relevant Income-tax authorities. The final outcome of these matters is presently unascertainable. Our opinion is not modified in respect of this matter.

Key Audit Matters

8. 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.

9. In addition to the matters described in the Basis for Qualified Opinion and Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matter How our audit addressed the key audit matter
Valuation of investment in and other dues from the associate company Our audit procedures were focused on obtaining sufficient appropriate audit evidence that the carrying value of investment in associate company is not materially misstated. These procedures included, but were not limited to, the following:
As disclosed in note 5.2 to the accompanying standalone financial statements, the Company has investment in equity shares and preference shares of A2Z Green Waste Management Limited, its associate company, amounting to Rs. 983.14 lakhs and Rs. 19,883.11 lakhs respectively. Such investment in the aforesaid associate company is accounted for at cost in accordance with Ind AS 27, Separate Financial Statements. The Company also has other current financial assets (net of impairment) and current financial assets loan receivable aggregating to Rs.411.51 lakhs and Rs. 372.63 lakhs as at 31 March 2019, from the aforesaid associate company. The Company assesses the recoverable amount of the investment when impairment indicators exist by comparing the fair value (less costs of disposal) and carrying amount of the investment as on the reporting date. We obtained an understanding of the managements processes and controls for determining the fair valuation of investment. We performed the following procedures:
• Assessed the qualification and objectivity of the management appointed independent valuation specialist to determine the fair value of investment;
• Assessed the appropriateness of valuation methodology used for the fair valuation computation with the help of an auditors expert, and tested the mathematical accuracy of managements model;
• Reconciled the cash flow projections to the business plans approved by the Companys management;
The aforesaid associate has incurred loss during the year ended 31 March 2019, and as at the year end, the consolidated net worth of such company is fully eroded, which indicates potential impairment of the investment in the associate. • Evaluated managements assessment of underlying assumptions used for the cash flow projections including the implied growth rates, considering evidence available to support these assumptions and our understanding of the business;
The aforesaid investment is not traded in the market and its fair value has been determined by a management appointed independent valuation specialist using discounted cash flow (‘DCF) method. The process of computation of fair valuation for investment in associate company using DCF method is complex and requires estimation and judgement around assumptions used therein. The key assumptions underpinning managements assessment of the fair valuation include, but are not limited to, projections of future cash flows, growth rates, discount rates, estimated future operating and capital expenditure. • Tested the discount rate and long-term growth rates used in the forecast including comparison to economic and industry forecasts where appropriate;
• Evaluated the sensitivity analysis performed by management in respect of the key assumptions such as discount and growth rates to ensure there was sufficient headroom with respect to the estimation uncertainty impact of such assumptions on the fair value calculation;
During the year ended 31 March 2019, pursuant to a share purchase agreement the Company has transferred certain equity shares of the investee company to an external buyer (refer note 5.1.4 for details). Based on the aforementioned sale transaction, the Company has recognised an impairment charge of Rs. 929.01 lakhs on the remaining investment during the year ended 31 March 2019. • Tested the impairment made during the year by inspecting the equity share sale agreement for transfer of part shareholding during the year; and
• Evaluated the appropriateness of disclosures in relation to investment in associate company and related impairment indicators.
Considering the materiality of the amounts involved, complexity, and management judgement involved in assessment of impairment losses to be recognised, if any, on the carrying value of investment in, and loan receivable from, the associate company, this matter has been considered to be a key audit matter for current years audit. We also obtained written representations from management and those charged with governance on whether the significant assumptions used in valuation of the investment in the associate company are considered reasonable.
Emphasis of Matter
Considering this matter is fundamental to the understanding of the users of standalone financial statements, we draw attention to note 5.2 of the accompanying standalone financial statement, regarding the Companys investment in and dues receivable from the associate company.
Utilisation of input tax credit and levy of interest on service tax: Our audit in relation to assessment of input tax credit and levy of interest on service tax as at reporting date included, but were not limited to, the following procedures:
As disclosed in note 22.1 to the accompanying standalone financial statements, the Company has non-current assets in respect of input tax credit amounting to Rs. 1,144.62 lakhs as at 31 March 2019. There exists uncertainty relating to utilisation of such input tax credit and levy of interest on service tax with respect to service tax liability determined by the Company as described in note 22.1 to the accompanying standalone financial statements. Based on the terms of the contract with the customers/vendors and independent legal opinion, the management believes that the service tax liability outstanding, including interest thereon, if any, is recoverable from the customer of the Company, and further that the Company would be able to avail the existing input tax credit recognized on services received by the Company from the sub-contractors, for settlement of such service tax liability. • Evaluated the design, and tested the operating effectiveness of the controls that the Company has established in relation to assessing recoverability of amounts of service tax from the customers including interest thereon and utilisation of input tax credit;
• Obtained an understanding of the current period developments in the matter from the management and corroborated such understanding from relevant underlying documents;
• Tested the appropriateness and mathematical accuracy of the underlying calculations for the input tax credit and indirect tax receivables recognised by the management with respect to services received from sub-contractors;
Evaluation of managements assessment of payment of interest on the service tax liability and utilization of service tax input, required a detailed analysis of the appropriate statutory provisions and required application of material judgement in interpretation of law. • Inspected the correspondence between the Company and the customer, for reimbursement to the Company for any possible cash outflow that arise on account of the service tax liability;
• Obtained an independent legal opinion from the managements external tax experts on the likely outcome of the case, the status of the matter and the magnitude of the potential exposure involved;
Accordingly, considering the materiality of amounts and significance of management judgement involved, this matter was also identified as one of the areas which required significant auditor attention and a matter which was of most significance in the current year audit.
• Evaluated managements assessment on the likely outcome and potential magnitude of the aforementioned matter; and
Emphasis of Matter • Evaluated that the disclosures made by the management are in accordance with applicable accounting standards.
Considering this matter is fundamental to the understanding of the users of standalone financial statements, we draw attention to note 22.1 of the accompanying standalone financial statement, regarding uncertainties relating to utilization of input tax credit and levy of interest on service tax.
Impairment assessment of carrying value of certain power generation plants of the Company classified as property, plant and equipment and Capital Work in Progress (CWIP): Our audit procedures included, but were not limited to, the following:
As at 31 March 2019, the Company has power generation plants and CWIP relating to such plants, with carrying values of Rs 8,550.81 lakhs and Rs. 14,156.80 lakhs, respectively, as disclosed in note 3 of the accompanying standalone financial statements. • Obtained an understanding of the management process for identifying impairment indicators as well as determining the appropriate methodology to carry out impairment testing for the carrying value of the cogeneration power plants;
• Assessed the experience, professional competence and objectivity of the management expert involved for carrying out the valuation of the said assets;
In accordance with Ind AS 36, Impairment of assets, such property plant and equipment and CWIP balances are tested for impairment when impairment indicators exist at the cash generating unit level, whereby the carrying amount of the cash generating unit (including goodwill) is compared with the recoverable amount of the cash generating unit. • Reconciled the cash flow projections to the business plans approved by the Companys management;
• Assessed the appropriateness of the significant underlying assumptions used for cash flow projections including extension of the concession period, plant operating levels, implied growth rates etc. considering the evidence available to support these assumptions and our understanding of the business and industry including comparison to economic and industry forecasts, where appropriate;
The recoverable amount is determined on the basis of the value in use which is the present value of future cash flows of the cash generating unit. The present value is determined using discounted cash flow model. In the current year, the management identified that impairment indicators existed for the power plants owing to significant delay in commencement of commercial production. Accordingly, the management performed a fair valuation of such assets with the help of an external valuation expert, and based on such valuation, recognised an impairment charge of Rs. 4,200 lakhs during the year ended 31 March 2019.
• Evaluated the discount rate used with the help of an auditors valuation expert, including the underlying parameters such as risk free rate, market risk premium and the beta factor) basis the publicly available information;
• Performed a sensitivity analysis for reasonably possible changes in the sales growth, discount rate applied and the long-term growth rate;
The aforesaid assessment of the fair valuation and determination of the impairment charge required management to exercise significant judgement in respect of assumptions and estimates involved in forecasting future cash flows, including extension of the concession period of such power generation plants. These assumptions also include useful life of assets, achievement of certain operating capacity, discount rates, implied growth rates, etc. Changes in the management forecasts or assumptions can impact the assessment of the discounted cash flows and consequently, the valuation of such power plants and impairment charge determined by the management. • Tested the mathematical accuracy of the managements working; and
• Assessed the appropriateness of the Companys description of the accounting policy as stated in note 2.3, and the disclosures related to property, plant and equipment, in accordance with the applicable accounting standards.
A significant amount of audit effort was also required in this matter, particularly as some of these assumptions are dependent on the economic factors and trading conditions in the markets in which the Company operates which involves high estimation uncertainty. Considering the significance of the amounts involved, degree of judgement and subjectivity involved in the estimates and key assumptions used in determining the cash flows used in the impairment evaluation, we have determined impairment of power generating plants as a key audit matter.
Emphasis of Matter
Considering this matter is fundamental to the understanding of the users of standalone financial statements, we draw attention to note 3.1 of the accompanying standalone financial statements, which describes the aforesaid significant estimates and assumptions, used by the management for determining recoverable amount of the aforesaid cogeneration power plants, with respect to the impairment assessment in accordance with the requirements of Ind AS 36.
Uncertainties relating to recoverability of contract revenue in excess of billing (other financial assets), and trade receivables Our audit work included, but was not limited to, the following:
• Obtained an understanding of the managements process for assessing the recoverability of contract revenue in excess of billing (other current assets), and trade
The Company, as at 31 March 2019, has contract revenue in
excess of billing (other financial assets) and trade receivable of Rs. 13,499.08 lakhs and Rs. 89,474.71 lakhs, respectively, and has written off contract revenue in excess of billing and trade receivables of Rs. 8,959.11 lakhs and Rs 18,922.59 lakhs respectively during the current year, as detailed in note 42 to the accompanying standalone financial statements. receivables, the computation of provisioning and write-offs against these receivables, and related accounting policies adopted by the management;
• Discussed with the management regarding steps taken for recovering the amounts and tested the design, implementation and operating effectiveness of the controls that the Company has established in relation to revenue recognition and allowance for contract revenue in excess of billing and trade receivables;
Owing to the nature of operations of the Company and related customer profiles, the Company has significant receivable balances and contract revenue in excess of billing, that are long outstanding since the performance of the contract work by the Company. There are risks that not all these receivable balances will be recovered in full.
• Assessed the reasonability of judgements exercised and estimates made by the management in recognition of the contract revenue in excess of billing validating them with corroborating evidence;
The management assesses recoverability of these balances through evaluation of the ageing of accounts receivable and unbilled revenue, prior collection experience, and customers financial conditions, to ascertain the ultimate collectability of these receivables, which involves significant management judgements and estimates.
• Tested the accuracy of ageing of contract revenue in excess of billing and trade receivables at year end on a sample basis;
• Enquired about the ongoing reconciliations with the customers for conversion of contract revenue in excess of billing into trade receivables for the balance receivables not written off;
Considering the materiality of the amounts involved, uncertainty associated with the outcome of the negotiations/ discussions/ arbitration/ litigation, and significant management judgements involved in the assessment of recoverability of long outstanding dues, this area is considered as a key audit matter for the current year audit.
• Verified contractual arrangements to support managements position on the tenability of the receivables and recoverability of the balance receivables not written off;
• Evaluated the managements assessment of credit risk with respect to such receivables basis the past trends for significant long outstanding receivables; and
• Ensured appropriateness of disclosures made in the standalone financial statements with respect to the contract revenue in excess of billing, trade receivables and provisioning thereof.
Recognition of contract revenue, margin and contract costs Our audit of the recognition of contract revenue, margin and contract costs, and related receivables and liabilities included, but were not limited to, the following:
Refer note 23 for details of revenue recognized during the year. The Companys revenue primarily arises from construction contracts, which is recognised as per the accounting policy described in note 2.3 to the accompanying standalone financial statements, and which, by its nature, is complex given the significant judgements involved in the assessment of current and future contractual performance obligations.
• Evaluated the appropriateness of the Companys accounting policy for revenue recognition from construction contracts in accordance with Ind AS 115, ‘Revenue from Contracts with Customers;
• Assessed the design and implementation of key controls, over the recognition of contract revenue and margins, and tested the operating effectiveness of these controls;
Effective 1 April 2018, the Company has adopted Ind AS 115 Revenue from Contracts with Customers using the cumulative catch-up transition method. Accordingly, the Company recognises revenue and margins based on the stage of completion which is determined on the basis of the proportion of value of goods or services transferred as at the Balance Sheet date, relative to the value of goods or services promised under the contract. All the projects of the Company satisfy the criteria for recognition of revenue over time (using the percentage of completion method) since the control of the overall asset (property/ site / project) lies with the customer who directs the Company. Further, the Company has assessed that it does not have any alternate use of these assets. • For a sample of contracts, tested the appropriateness of amount recognized as revenue by evaluating key management judgements inherent in the determining forecasted contract revenue and costs to complete that drive the accounting under the percentage of completion method by performing following procedures:
- reviewed the contract terms and conditions;
- evaluated the identification of performance obligation of the contract;
The recognition of contract revenue, contract costs and the resultant profit/loss therefore rely on the estimates in relation - evaluated the appropriateness of managements assessment that performance obligation was satisfied over time and consequent recognition of revenue using percentage of completion method;
to forecast contract revenue and the total cost. These contract estimates are reviewed by the management on a periodic basis. In doing so, the management is required to exercise judgement in its assessment of the valuation of contract variations and claims and liquidated damages as well as the completeness and accuracy of forecast costs to complete and the ability to deliver contracts within contractually determined timelines. The final contract values can potentially be impacted on account of various factors and are expected to result in varied outcomes. - obtained an understanding of the assumptions applied in determining the forecasted revenue and cost to complete; and
- assessed the ability of the Company to deliver contracts within budgeted timelines and exposures, if any, to liquidated damages for late delivery.
Changes in these judgements, and the related estimates as contracts progress can result in material adjustments to revenue and margins. As a result of the above judgments, complexities involved and material impact on the related financial statement elements, this area has been considered a key audit matter in the audit of the standalone financial statements. • Assessed that the disclosures made by the management with respect to revenue recognised during the year and adoption of new accounting standard for revenue recognition, are in accordance with applicable accounting standards.

Information other than the Standalone Financial Statements and Auditors Report thereon

10. The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditors report thereon. The Annual Report is expected 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 will not express any form of assurance conclusion thereon.

In connection with our audit of the standalone 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 standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with

Governance for the Standalone Financial Statements

11. The Companys 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 state of affairs (financial position), profit or loss (financial performance including other comprehensive income), changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the 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.

12. In preparing the standalone financial statements, management is responsible for assessing the Companys 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.

13. Those Board of Directors are also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone

Financial Statements

14. 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 auditors 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 Standards on Auditing 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.

15. As part of an audit in accordance with Standards on Auditing, 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 control 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 explaining 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 managements 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 Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors 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 auditors 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.

16. 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.

17. 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.

18. 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 auditors 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

19. We did not audit the financial statements of four branches included in the standalone financial statements of the Company whose financial statements reflects total assets and net assets of Rs. 10,042.39 lakhs and Rs. 951.50 lakhs respectively as at 31 March 2019, and the total revenue and net cash inflows of Rs. 13,811.41 lakhs and Rs.419.15 lakhs respectively for the year ended on that date, as considered in the standalone financial statements. These financial statements have been audited by the branch auditors whose reports 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 branches, is based solely on the report of such branch auditors.

Further all, of these branches, are located outside India whose financial statements and other financial information have been prepared in accordance with accounting principles generally accepted in their respective countries and which have been audited by branch auditors under generally accepted auditing standards applicable in their respective countries. The Companys management has converted the financial statements of such branches from accounting principles generally accepted in their respective countries to accounting principles generally accepted in India. We have audited these conversion adjustments made by the Companys management. Our opinion in so far as it relates to the amounts and disclosures of such branches is based on the report of branch auditors and the conversion adjustments prepared by the management of the Company and audited by us.

Our opinion on the standalone financial statements, and our report on Other Legal and Regulatory Requirements below, is not modified in respect of the above matter.

Report on Other Legal and Regulatory Requirements

20. As required by section 197(16) of the Act, we report that the Company has not paid the managerial remuneration to its directors in accordance with the provisions and limits laid down under section 197 read with Schedule V of the Act. Also, refer paragraph XI of Annexure A.

21. As required by the Companies (Auditors 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 A statement on the matters specified in paragraphs 3 and 4 of the Order.

22. Further to our comments in Annexure A, as required by section 143(3) of the Act, we report that:

a) we have sought and except for the possible effects of the matters described in the Basis for Qualified Opinion section, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b) except for the effects/possible effects of the matters described in the Basis for Qualified Opinion section, 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 the branches not visited by us;

c) the reports on the accounts of the branch offices of the Company audited under section 143(8) of the Act by the branch auditors have been sent to us and have been properly dealt with by us in preparing this report;

d) the standalone financial statements dealt with by this report are in agreement with the books of account and with the returns received from the branches not visited by us;

e) except for the effects/possible effects of the matters described in the Basis for Qualified Opinion section in our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;

f) the six matters described in paragraph 3, 4, 7 and 9 under the Emphasis of Matters/Basis for Qualified Opinion paragraph, in our opinion, may have an adverse effect on the functioning of the Company;

g) on the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2019 from being appointed as a director in terms of section 164(2) of the Act;

h) the qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph;

i) we have also audited the internal financial controls over financial reporting (IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated 23 May 2019 as per Annexure B expressed unmodified opinion;

j) 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 (as amended), in our opinion and to the best of our information and according to the explanations given to us:

i. the Company, as detailed in note 40(a) to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2019;

ii. except for the effect/possible effects of the matters described in the Basis for Qualified Opinion section, the Company as detailed in note 41(h) to the standalone financial statements, has made provision as at 31 March 2019, as required under the applicable law or Ind AS, for material foreseeable losses, if any, on long-term contracts. The Company does not have any 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 during the year ended 31 March 2019; and

iv. the disclosure requirements relating to holdings as well as dealings in specified bank notes were applicable for the period from 8 November 2016 to 30 December 2016, which are not relevant to these standalone financial statements. Hence, reporting under this clause is not applicable.

For Walker Chandiok & Co LLP
Chartered Accountants
Firms Registration No.: 001076N/N500013
Neeraj Sharma
Place : Gurugram Partner
Date : 23 May 2019 Membership No.:502103

Annexure A to the Independent Auditors Report of even date to the members of A2Z Infra Engineering Limited, on the standalone financial statements for the year ended 31 March 2019

Annexure A

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, and to the best of our knowledge and belief, we report that:

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets comprising of ‘property, plant and equipment, ‘capital work-in-progress and ‘other intangible assets.

(b) The Company has a regular program of physical verification of its property, plant and equipment and capital work-in-progress under which property, plant and equipment and capital work-in-progress are verified in a phased manner over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this program, certain Property, plant and equipment and capital work-inprogress were verified during the year and no material discrepancies were noticed on such verification.

(c) The title deeds of all the immovable properties (which are included under the head ‘Property, plant and equipment are held in the name of the Company.

(ii) In our opinion, the management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies between physical inventory and book records were noticed on physical verification.

(iii) The Company has granted unsecured loans to companies covered in the register maintained under Section 189 of the Act; and with respect to the same:

(a) in our opinion the terms and conditions of grant of such loans are not, prima facie, prejudicial to the Companys interest.

(b) the schedule of repayment of the principal and the payment of the interest has not been stipulated and hence we are unable to comment as to whether repayments/receipts of the principal amount and the interest are regular;

(c) in the absence of stipulated schedule of repayment of principal and payment of interest, we are unable to comment as to whether there is any amount which is overdue for more than 90 days and whether reasonable steps have been taken by the Company for recovery of the principal amount and interest.

(iv) In our opinion, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of loans, investments, guarantees and security.

(v) In our opinion, the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, the provisions of clause 3(v) of the Order are not applicable.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act in respect of Companys products/services and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) (a) Undisputed statutory dues including provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, goods and services tax, cess and other material statutory dues, as applicable, have not been regularly deposited to the appropriate authorities and there have been significant delays in a large number of cases. Undisputed amounts payable in respect thereof, which were outstanding at the year-end for a period of more than six months from the date they became payable are as follows:

Statement of arrears of statutory dues outstanding for more than six months

Name of the statute Nature of the dues Amount (Rs. in lakhs) Period to which the amount relates Due Date Date of payment
Income Tax Act, 1961 Tax deducted at source 909.13 March 2016 to August 2018 7th day of subsequent month Not paid yet
Chapter V of Finance Act,1994 Service tax 5,513.25 March 2016 to June 2017 5th of subsequent month (6th for online payment) Not paid yet
Central Goods and Services Tax Act, 2017 Goods and services tax 1,817.21 February 2018 to August 2018 20th of subsequent month Not paid yet
The Chhattisgarh Value Added Sales Tax Act, 2003 VAT 15.02 June, 2017 15th day of subsequent month Not paid yet
Employees Provident Fund and Miscellaneous Provisions Act, 1952 Employee Provident fund 97.20 November 2015 to August 2018 15th day of subsequent month Not paid yet
Employee State Insurance Act, 1948 Employee State Insurance 29.94 June 2016 to August 2018 21st day of subsequent month Not paid yet
Employee Welfare Fund Employee welfare fund 0.49 November 2016 to August 2018 25th day of subsequent month Not paid yet
Madhya Pradesh State Tax on Professions, Trades, Callings and Employment Act, 1995 Professional Tax 11.78 July 2012 to August 2018 10th of subsequent month Not paid yet
West Bengal State Tax on Professions, Trades, Callings and Employment Act, 1979 Professional Tax 0.97 April 2015 to August 2018 21st of subsequent month Not paid yet
Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 Professional Tax 0.25 January 2017 to August 2018 30th of subsequent month Not paid yet
The Gujarat Panchayats, Municipalities, Municipal Corporation and State tax on Professions, Traders, Callings and Employments Act, 1976 Professional Tax 0.03 May 2017 to August 2018 15th of subsequent month Not paid yet
The Karnataka Tax on Professions, Trades, Callings And Employment Act, 1976 Professional Tax 0.03 May 2017 to August 2018 20th of subsequent month Not paid yet

(b) The dues outstanding in respect of income-tax, sales-tax, service-tax, duty of customs, duty of excise and value added tax on account of any dispute, are as follows:

Statement of Disputed Dues

Name of the statute Nature of the dues Amount (Rs. in lakhs) Amount Paid Under Protest (Rs. in lakhs) Period to which the amount relates Forum where dispute is pending
Income Tax Act, 1961 Demand made under section 153A and 153B 3,269.81 Assessment years 2009-10 to 2013-14 Income Tax Appellate Tribunal, Delhi
The Maharashtra Value Added Tax, 2002 Value Added Tax 1,801.79 - 2008-09 Maharashtra Sales Tax Tribunal
Value Added Tax 15.52 - 2009-10 Joint Commissioner (Appeal), Mumbai, Maharashtra
Central Sales Tax 154.06 - 2009-10 Joint Commissioner (Appeal), Mumbai, Maharashtra
Value Added Tax 22.88 - 2010-11 Joint Commissioner (Appeal), Mumbai, Maharashtra
Central Sales Tax 225.99 - 2010-11 Joint Commissioner (Appeal), Mumbai, Maharashtra
Central Sales Tax 17.92 - 2011-12 Joint Commissioner (Appeal), Mumbai, Maharashtra
Central Sales Tax 19.88 - 2012-13 Sales Tax Tribunal, Mumbai, Maharashtra- Appeal
Value Added Tax 29.10 - 2012-13 Sales Tax Tribunal, Mumbai, Maharashtra- Appeal
Bihar Value Added Tax, 2005 Value Added Tax 203.61 61.08 2012-13 Commissioner, Commercial Tax, Bihar
Value Added Tax 1,644.31 125.00 2013-14 Commissioner, Commercial Tax Bihar
Value Added Tax 83.55 - 2010-11 Assessing Officer Commercial Tax, Bihar
Jharkhand Value Added Tax, 2005 Value Added Tax 138.46 58.24 2008-09 to 2011-12 Commissioner, Commercial Tax Ranchi, Jharkhand
The West Bengal Value Added Tax, 2003 Value Added Tax 653.11 50.00 2009-10 West Bengal Commercial Taxes Appellate & Revisional Board Kolkata
Value Added Tax 1,019.00 175.00 2010-11 West Bengal Commercial Taxes Appellate & Revisional Board, Kolkata
Central Sales Tax 54.13 2010-11 West Bengal Commercial Taxes Appellate & Revisional Board Kolkata
Central Sales Tax 229.16 - 2011-12 Additional Commissioner (Appeal) Sales Tax
Central Sales Tax 2.07 - 2014-15 Joint Commissioner (Appeals) Sales tax
Value Added Tax 192.72 - 2014-15 Joint Commissioner (Appeals) Sales tax
Andhra Pradesh Value Added Tax Act, 2005 Value Added Tax 62.95 31.25 2010-11 Andhra Pradesh Sales Tax and VAT Appellate Tribunal, Hyderabad
Haryana VAT Act, 2003 Central Sales Tax 1,930.50 - 2009-10 Sales tax Revisional Authority, Gurgaon
The Madhya Pradesh VAT Act, 2002 Central Sales Tax 103.25 45.34 2011-12 Sales tax Tribunal - Madhya Pradesh
Central Sales Tax 3.25 - 2013-14 Joint Commissioner, Indore, Madhya Pradesh
Central Sales Tax 11.84 1.19 2015-16 Assistant commissioner (Sales tax)
Jammu and Kashmir Value Added Tax Act, 2005 Central Sales Tax 86.02 2012-13 Deputy Commissioner (Appeals) Sales tax
Central Sales Tax 64.66 - 2013-14 Deputy Commissioner (Appeals) Sales tax
Kerala VAT Act, 2003 Central Sales Tax 219.38 - 2011-12 Honble High Court of Kerala, Ernakulam
The Karnataka Value Added Tax Act, 2003 Value Added tax 4.46 - 2012-13 Deputy Commissioner- Audit, Bangalore, Karnataka

(viii)There are no dues payable to debenture-holders or government. The Company has defaulted in repayment of loans and borrowings to the following banks and financial institutions during the year, which is detailed below:

Particulars

Default (in months)

Banks (0-3) (3-6) (6-12) (More than 12)
Allahabad Bank 578.32 - - -
Axis Bank 320.91 33.90 - -
DBS - - 81.53 9,585.90
HSBC 161.41 81.15 59.22 427.55
IDBI Bank 46.15 - 140.67 358.70
Indusind Bank 115.15 - - -
Kotak Mahindra Bank 398.27 - - -
SCB 700.00 500.00 2,500.00 -
State Bank of India 3,298.07 445.83 1,427.54 8,443.62
Union Bank of India 244.95 - 0.11 0.07
Financial Institutions:
Edelweiss ARC- Yes Bank 563.28 58.03 230.18 -
Edelweiss ARC-ICICI Bank 1,315.86 335.86 841.04 7,542.92

(ix) The Company did not raise moneys by way of initial public offer or further public offer (including debt instruments). In our opinion, the term loans were applied for the purposes for which the loans were obtained.

(x) No fraud by the Company or on the Company by its officers or employees has been noticed or reported during the period covered by our audit.

(xi) The Company has paid managerial remuneration which is not in accordance with the requisite approval mandated by the provisions of Section 197 of the Act read with Schedule V to the Act. The details of the same are as follows:

Payment made to Financial year Amount Paid/ provided in excess of limits prescribed (Rs. in lakhs) Amount due for Recovery as at March 31,2019 (Rs. in lakhs) Steps taken to secure the recovery of the amount Remarks (if any)
1. Managing Director 2012-13 94.54 The Company has obtained a confirmation from the Managing Director that such amount has been held in trust and will be repaid as per agreed plan. Amount recoverable pertains to non- grant of requisite approval by Central Government under the provision of 198, 309 and 310 of erstwhile Companies Act, 1956.
2013-14 94.94 74.93
2. Whole time Director cum Chief Executive Officer 2017-18 7.50 7.50 The Company has obtained a confirmation from Whole time Director cum CEO that such amount has been held in trust and will be repaid as per agreed plan. Amount recoverable pertains to excess remuneration paid to managerial personnel from the date of re-appointment till the date of abatement letter received from Central Government.
2018-19 9.00 9.00
3. Executive Director 2017-18 3.00 3.00 The Company has obtained a confirmation from Executive Director that such amount has been held in trust and will be repaid as per agreed plan.
2018-19 7.50 7.50

(xii) In our opinion, the Company is not a Nidhi Company. Accordingly, provisions of clause 3(xii) of the Order are not applicable.

(xiii) In our opinion all transactions with the related parties are in compliance with Sections 177 and 188 of Act, where applicable, and the requisite details have been disclosed in the standalone financial statements etc., as required by the applicable Ind AS.

(xiv) During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures.

(xv) In our opinion, the Company has not entered into any noncash transactions with the directors or persons connected with them covered under 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.

For Walker Chandiok & Co LLP
Chartered Accountants
Firms Registration No.: 001076N/N500013
Neeraj Sharma
Place : Gurugram Partner
Date : 23 May 2019 Membership No.:502103

Annexure B to the Independent Auditors Report of even date to the members of A2Z Infra Engineering Limited on the standalone financial statements for the year ended 31 March 2019

Annexure B

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

1. In conjunction with our audit of the standalone financial statements of A2Z Infra Engineering Limited (‘the Company) as of and for the year ended 31 March 2019, we have audited the internal financial controls over financial reporting (‘IFCoFR) of the Company as at that date.

Managements Responsibility for Internal Financial Controls

2. The Companys Board of Directors 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 (‘ ICI A). 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 the Companys business, including adherence to the Companys 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

3. Our responsibility is to express an opinion on the Companys IFCoFR based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India (‘ICAI) and deemed to be prescribed under Section 143(10) of the Act, to the extent applicable to an audit of IFCoFR, and the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (‘the Guidance Note) 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 IFCoFR were established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes obtaining an understanding of IFCoFR, 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 auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys IFCoFR.

Meaning of Internal Financial Controls over Financial Reporting

6. A companys IFCoFR 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 companys IFCoFR include 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 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 companys assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over

Financial Reporting

7. Because of the inherent limitations of IFCoFR, 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 IFCoFR to future periods are subject to the risk that the IFCoFR may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion, the Company has, in all material respects, adequate internal financial controls over financial reporting and such controls were operating effectively as at 31 March 2019, 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 Walker Chandiok & Co LLP
Chartered Accountants
Firms Registration No.: 001076N/N500013
Neeraj Sharma
Place : Gurugram Partner
Date : 23 May 2019 Membership No.:502103