Gujarat Gas Ltd Directors Report.

To

The Members of

Gujarat Gas Limited

(Formerly Known as GSPC Distribution Networks Limited)

Gandhinagar

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statements of Gujarat Gas Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and notes to the financial statements, including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "the standalone Ind AS financial statements").

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, of the state of affairs (financial position) of the Company as at March 31, 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 Opinion

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs) 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 Standalone Ind AS 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 standalone Ind AS financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Key Audit Matters

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

Sr. No. Key Audit Matter Auditors Response
1 Accuracy of Recognition, measurement, presentation and disclosure of revenues and other related balance in view of adoption of Ind AS 115 “Revenue from Contracts with Customers” (new revenue accounting standard) Principal Audit Procedures
We assessed the Companys process to identify the impact of adoption of the new revenue accounting standard.
We evaluated the accounting policy and internal controls followed by the Company while accounting of connection charges from customers, which is deferred over the period when the performance obligation is satisfied, as per the new accounting standard.
Refer note 49 of the Standalone Ind AS Financial Statements. Further, we test checked some of the contracts and carried out a combination of procedures involving enquiry and observation, and inspection of evidence in respect of operation of these controls.
We also performed analytical procedures for reasonableness of revenues disclosed as per the new accounting standard.
2. Evaluation of material claims against the company not acknowledge as debt. Principal Audit Procedures
There are various claims disputed by the Company including matters under dispute with one of the suppliers in respect of use of domestic allocated gas other than specified purpose which involves significant judgment to determine the possible outcome and Future Cash outflow of these disputes. Obtained details of all the claims disputed by the company as on 31st March 2019 from the management. We have discussed the managements underlying assumptions in estimating that the claims are erroneous and the possible outcome of the disputes. We have also evaluated these underlying assumptions to determine the Legal Liability / Obligation of the company as defined in applicable Indian Accounting Standards (Ind AS 37) and also evaluated whether any change was required to managements position on these uncertainties vis a vis past year with reference to new claims disputed by the company.
Refer note 42.2 (iii) of the Standalone Ind AS Financial Statements.

Information Other than the Standalone Ind AS Financial Statements and Auditors Report Thereon

The Companys Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexures to Boards Report, Business Responsibility Report, Corporate Governance and Shareholders Information, but does not include the standalone Ind AS financial statements and our auditors report thereon.

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

In connection with our audit of the standalone Ind AS financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone Ind AS financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the Final Annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take necessary actions as per applicable laws and regulations.

Responsibilities of Management and those charged with Governance for the Standalone Ind AS Financial Statements

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 Ind AS financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS 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 Ind AS 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.

The Board of Directors are responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind AS 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 SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone Ind AS financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

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

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

• Conclude on the appropriateness of 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 Ind AS 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 Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone Ind AS financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone Ind AS 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.

Report on Other Legal and Regulatory Requirements

1) As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of 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 Loss, the Cash Flow Statement and the Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Ind AS specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e) As the company is a Government Company, in terms of notification no. G.S.R. 463(E) dated 5th June 2015, issued by the Ministry of Corporate Affairs, the sub-section (2) of section 164 of the Act is not applicable to the company.

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". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting.

g) As the company is a Government Company, in terms of notification no. G.S.R. 463(E) dated 5th June 2015, issued by the Ministry of Corporate Affairs, the sub-section (16) of section 197 of the Act is not applicable to the company.

h) 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 has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements. Refer Note 42 to the standalone Ind AS financial statements.

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

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

3) In terms of section 143(5) of the Act, we give our report in "Annexure C" by taking into consideration the information, explanations and written representations received from the management on the matters specified in the directions and sub directions issued under the aforesaid section by the Comptroller and Auditor General of India.

For, S. R. Goyal & Co.
Chartered Accountants
FRN No. 001537C
Anurag Goyal
Place: Gandhinagar (Partner)
Date: 6 th May 2019 M. No.: 412538

ANNEXURE- A

TO INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 1 under Report on Other Legal and Regulatory Requirements section of our Independent Auditors Report, of even date, to the Members of Gujarat Gas Limited (Formerly known as GSPC Distribution Networks Limited) on Standalone Ind AS Financial Statements for the year ended 31st March 2019)

i. In respect of the Companys fixed assets:

a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items, other than underground gas pipelines which are not physically verifiable, over a period of 3 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification.

c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company except in respect of the following freehold land as on 31st March 2019.

Sr. No. Asset description Book value (Amount in Rs)
1 Survey No. 306-A-/1 paiki 3, Post-Hazira, Taluka Choryasi, District-Surat. 13,057 Sq. Mtrs Rs 15.88 Crores
2 Survey No. 150 Mora village District-Surat. 13,557 Sq. Mtrs Rs 1.00

ii. The inventory has been physically verified by the Management during the year. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

iii. The Company has not granted any loans, secured or unsecured, to companies, firms, Limited Liabilities Partnerships or other parties covered in the register maintained under Section 189 of the Act. Therefore, the provisions of Clause 3 (iii) [(a) to (c)] of the said Order are not applicable to the Company.

iv. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act, with respect to the loans and investments made.

v. In our opinion and according to the information and explanations given to us, the Company has not accepted deposits within the meaning of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under. According to the information and explanations given to us, no order has been passed by the Company Law Board or the National Company Law Tribunal or the Reserve Bank of India or any Court or any other Tribunal.

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

vii. According to the information and explanations given to us, in respect of statutory dues:

a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing the undisputed statutory dues, including provident fund, income tax, goods and services tax (GST), sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, have generally been regularly deposited with the appropriate authorities though there has been slight delay in few cases.

According to the information and explanations given to us and the records of the Company examined by us, in our opinion, no undisputed amounts payable were in arrears as at 31stMarch 2019 for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of provident fund, goods and services tax (GST), sales tax, wealth tax, duty of customs, value added tax, cess and other material statutory dues, as applicable which have not been deposited on account of any dispute.

The particulars of dues of service tax, duty of excise and income tax as at 31st March 2019 which have not been deposited on account of a dispute, are as follows:

Sr. No. Name of statute Nature of dues Amount (Rs in Crs.) Period to which the amount relates Forum where the dispute is pending
1 Income Tax Act, 1961 Income Tax & Interest thereon 0.51 Assessment Year 2016-17 Commissioner of Income Tax (Appeals)
2 Income Tax Act, 1961 Income Tax & Interest thereon 0.15 Assessment Year 2013-14 Commissioner of Income Tax (Appeals)
3 Income Tax Act, 1961 Income Tax & Interest thereon 0.003 Assessment Year 2012-13 Assessing Officer
4 Income Tax Act, 1961 Income Tax & Interest thereon 0.03 Assessment Year 2012-13 Income Tax Appellate Tribunal
5 Income Tax Act, 1961 Income Tax & Interest thereon 0.05 Assessment Year 2011-12 Assessing Officer
6 Income Tax Act, 1961 Income Tax & Interest thereon 0.01 Assessment Year 2010-11 Income Tax Appellate Tribunal
7 Income Tax Act, 1961 Income Tax & Interest thereon 0.04 Assessment Year 2008-09 High Court of Gujarat
8 Income Tax Act, 1961 Income Tax & Interest thereon 0.03 Assessment Year 2007-08 High Court of Gujarat
9 Central Excise Act, 1944 Service Tax and Duty of Excise 11.86 April-2010 to March-2015 The Customs, Excise and Service Tax Appellate Tribunal
10 Central Excise Act, 1944 Service Tax and Duty of Excise 1.03 April-2015 to Nov-2015 The Customs, Excise and Service Tax Appellate Tribunal
11 Central Excise Act, 1944 Service Tax and Duty of Excise 2.84 2009-10 to 2014-15 (up to Aug-2014) The Customs, Excise and Service Tax Appellate Tribunal
12 Central Excise Act, 1944 Service Tax and Duty of Excise 0.71 Sept-2014 to 14th May-2015 The Customs, Excise and Service Tax Appellate Tribunal
13 Central Excise Act, 1944 Service Tax and Duty of Excise 1.29 May10 (2010-11) to Feb-2016 (up to 02.02.2016) Excise & Service Tax Commissioner
14 Central Excise Act, 1944 Service Tax and Duty of Excise 0.18 2006- 07 & 2007- 08 The Customs, Excise and Service Tax Appellate Tribunal
15 Finance Act, 1994 Service Tax and Duty of Excise 0.10 2006-07 to 2009-10 The Customs, Excise and Service Tax Appellate Tribunal
16 Finance Act, 1994 Service Tax and Duty of Excise 37.66 2005-06 to 2012-13 The Customs, Excise and Service Tax Appellate Tribunal
17 Finance Act, 1994 Service Tax and Duty of Excise 2.38 2013-14 The Customs, Excise and Service Tax Appellate Tribunal
18 Finance Act, 1994 Service Tax and Duty of Excise 0.59 2006-07 to 2011-12 The Customs, Excise and Service Tax Appellate Tribunal

viii. The Company has not defaulted in repayment of loans or borrowing dues to financial institution or bank or dues to debenture holders.

ix. The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) during the year. During the year money raised from term loans were applied for the purpose for which they were raised.

x. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud by the Company or on the Company by its officers or employees has been, noticed or reported during the year, nor we have been informed of any such case by the Management.

xi. As the company is a Government Company, in terms of notification no. G.S.R. 463(E) dated 5th June 2015, issued by the Ministry of Corporate Affairs, section 197 of the Act is not applicable to the company. Therefore, the provisions of Clause 3 (xi) of the said Order are not applicable to the Company.

xii. In our opinion and 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. According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 of the Act and Company being a government company, transactions with other government companies are exempt for the compliance of Section 188 of the Act, in terms of notification no. G.S.R 463(E) dated 5th June 2015, issued by Ministry of Corporate Affairs. Details of such transactions have been disclosed in the financial statements as required by the applicable Indian Accounting Standards.

xiv. According to the information and explanations give to us and based on 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.

xv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into 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 and based on our examination of the records of the Company, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For, S. R. Goyal & Co.
Chartered Accountants
FRN No. 001537C
Anurag Goyal
Place: Gandhinagar (Partner)
Date: 6th May 2019 M. No.: 412538