KSK Energy Ventures Ltd Auditor Reports

To

The Members of

KSK Energy Ventures Limited

Qualified Opinion

We have audited the accompanying Consolidated Ind AS financial statements of KSK Energy Ventures Limited ("the Holding Company") and its subsidiaries (the Holding Company and its subsidiaries together referred to as the "Group"), which comprises of the Consolidated Balance Sheet as at March 31, 2019, the Consolidated Statement of Profit and Loss (including other Comprehensive income), the Consolidated statement of Cash Flows and the Consolidated Statement of Changes in Equity for the year then ended and a summary of significant accounting policies and other explanatory information (hereinafter referred to as Consolidated Ind AS financial statements).

In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of reports of the other auditors on separate financial statements of subsidiaries and associates referred to in the Other Matters section below, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the aforesaid consolidated 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 Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended (Ind AS), and other accounting principles generally accepted in India, of the consolidated state of a airs of the Group as at 31st March, 2019, and their consolidated loss, their consolidated total comprehensive income, their consolidated changes in equity and their consolidated cash flows for the year ended on that date.

Basis for Qualified Opinion:

We draw your attention towards a. Note no.31(ii) of the Consolidated Ind AS Financial Statements regarding non-accrual of interest by the parent along with its subsidiaries on various credit facilities from bank & Financial Institutions subsequent to accounts becoming NPA which is not in accordance with generally accepted Accounting principles.

The Estimated interest not provided for from 1st April, 2018 to 31st March,2019 worked out to an amount of Rs. 2,233.81 Million. Due to non-recognition of interest as expenditure, loss for the current financial year and the other current financial liabilities are understated by Rs Rs. 2,233.81 million.

b. Note no. 43 of the Consolidated Ind AS Financial Statements regarding invocation of the pledged shares of KSK Mahanadi Power Company Limited (KMPCL), an associate of the Parent, pledged by the Group with Consortium lenders as Security Trustee for the financial assistance granted by lenders to KMPCL.

Consequent to the above, the Group has derecognised the related carrying values of assets and liabilities of KMPCL along with its subsidiaries i.e. KSK Water Infrastructures Private Limited (KWIPL), Sai Power Pte Ltd (SPPL) and associate i.e. Raigarh Champa Rail Infrastructure Private Limited (RCRIPL) with effect from 27th March 2018. Pursuant to this, the residual investments retained in KMPCL are recognised in accordance with IND AS 28 - Investments in Associates and Joint Ventures. The Group continue to carry remaining advances and amount receivable amounting to Rs. 26,881.65 million pursuant to the invocation at carrying value and no provision has been considered in these financial statements by the management, as impact, if any, is currently unascertainable.

c. Note no.45 of the Consolidated Ind AS Financial Statements regarding implementation of change in Management and restructure the debt under Outside Strategic Debt Restructuring Scheme ("OSDR") by lenders of VS Lignite Power Private Limited (VSLPPL) as per the RBI guidelines. However, RBI notification dated 12th February, 2018 repealed all debt restructuring schemes (including OSDR) and directed lenders to implement any debt structuring as per the revised guidelines. VSLPPL is in active discussion with lenders to work out resolution plan by way of change of control.

The Group continues to carry remaining Investment of Rs. 816 million and no provision has been considered in these financial statements by the management, as impact, if any, is currently unascertainable.

d. Note no. 2.4 of the Consolidated Ind AS Financial Statements wherein the Group has incurred net loss during the current year as well in the previous years with resultant defaults in payment of interest and instalment dues to banks and financial institutions. Further as discussed at notes no. 43 and 45 of the Statement, the Group has residual investments and receivables pursuant to invocation of shares. Further, the underlying power generation assets also continue to face significant headwinds with resultant losses and defaulted in payment of interest and instalments dues to banks and financial institutions, thereby materially a ecting the downstream investments and recoveries thereto.

These conditions along with matters set forth in clauses (a), (b) and (c) above, indicate the existence of material uncertainties which may cast significant doubt on the Parents ability to continue as going concern. However, the statement has not been prepared with such adjustments and management continues to prepare the financial statements as going-concern.

Emphasis of Matter paragraph:

We draw your attention towards:

a. Note no. 44 of the Statement regarding invocation of the pledged shares of Sai Wardha Power Generation Limited ("SWPGL") pledged by the Group in favour of the lenders of SWPGL. Subsequent to invocation of pledged shares, financial creditor of SWPGL have led the petition for a Corporate Insolvency Resolution process ("CIRP") under the Insolvency and Bankruptcy Code, 2016 at National Company Law Tribunal, Hyderabad ("NCLT") and same has been admitted by NCLT on 9th November 2018.

Pursuant to this Group has lost significant influence over SWPGL and consequently the Group has impaired remaining amount receivable of Rs. 2,163.72 million and disclosed under exceptional item.

b. Note no.8 of the Statement regarding filing of petition for a Corporate Insolvency Resolution Process ("CIRP") by the financial creditors of Sai Regency Power Corporation Private Limited ("SRPCPL") and the same has been admitted by NCLT on 27th March, 2019. Consequent to this, the Group has lost control over the subsidiary and has derecognised the related carrying values of assets and liabilities of SRPCPL, resulting in Group recording a net loss of Rs. 675.83 million, which has been included as an exceptional item in the consolidated financial statements.

Our opinion is not modified in respect of above matters.

Key Audit Matters:

Key Audit Matters (KAM) are those matters that, in our professional judgment, were of most Significance in our audit of the Consolidated Ind AS financial statements of the current period. These matters were addressed in the context of our audit of the Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Except for those matters described in the Basis for Qualified Opinion section, we have determined that there are no other key audit matters to communicate in our report.

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

? The Holding Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexure to Boards Report, Business responsibility report and Shareholders Information, but does not include the consolidated financial statements, Standalone financial statements and our auditors report thereon.

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

? In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, compare with the financial statements of the subsidiaries, joint ventures and associates audited by the other auditors, to the extent it relates to these entities and, in doing so, place reliance on the work of the other auditors and consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated. Other information so far as it relates to the subsidiaries and associates, is traced from their financial statements audited by the other auditors.

? 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.

Responsibilities of Management and Those Charged with Governance for the Consolidated Ind AS Financial Statements:

The Holding Companys 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 consolidated financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance including other comprehensive income, consolidated changes in equity and consolidated cash flows of the Group including its Associates in accordance with the Ind AS and other accounting principles generally accepted in India. The respective Board of Directors of the companies included in the Group and of its associates are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and its associates and its joint ventures 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, which have been used for the purpose of preparation of the consolidated financial statements by the Directors of the Holding Company, as aforesaid.

In preparing the 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 respective Board of Directors of the companies included in the Group and of its associates are also responsible for overseeing the financial reporting process of the Group and of its associates.

Auditors Responsibilities for the audit of the Consolidated Ind AS Financial Statements:

Our objectives are to obtain reasonable assurance about whether the consolidated 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 consolidated Ind AS financial statements.

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

Identify and assess the risks of material misstatement of the consolidated 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 control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(I) of the Companies Act, 2013, 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 ability of the Group and its associates and joint ventures 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 consolidated 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 Group and its associates to cease to continue as a going concern.

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

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group of which we are the independent auditors and whose financial information we have audited, to express an opinion on the consolidated Ind AS financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the consolidated Ind AS financial statements of which we are the independent auditors. For the other entities included in the consolidated Ind AS financial statements, which have been audited by other auditors, such other auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.

We communicate with those charged with governance of the Holding Company and such other entities included in the consolidated Ind AS financial statements of which we are the independent auditors 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 Consolidated 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.

Other Matters

The consolidated Ind As financial statement includes financial statement of 19 subsidiaries and financial information of 3 associates.

We did not audit the financial statements of 16 subsidiaries whose financial statements reflect total assets of Rs. 14,310.13 million as at 31st March, 2019, total Net assets of Rs. (6,937.26) million as at 31st March 2019, total revenues of Rs.2,322.08 million and total net profit / (loss) after tax of Rs.(5,879.70) million, as considered in the statement. The statement also include the Groups share of total comprehensive income (comprising of loss and other comprehensive income) of Rs.(5,877.38) million for the year ended 31st March, 2019. Those financial Statements have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on statement, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries and associate is based solely on the reports of the other auditors.

The consolidated financial results includes the unaudited financial statements of 3 foreign subsidiaries whose financial statements reflect total assets of Rs. 1189.10 million as at 31st March, 2019, total net assets of Rs. (15.52) million as at 31st March 2019, total revenue of Rs. 3.8 million and total net profit/(loss) after tax of Rs.3.33 million for the year ended on that date and total comprehensive income of Rs.3.33 million, as considered in the consolidated financial results. These financial statements are unaudited and have been furnished to us by the Management and our opinion on the Statement, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries, associates and joint ventures, is based solely on such unaudited financial statements. In our opinion and according to the information and explanations given to us by the Management, these financial statements are not material to the Group.

Our opinion on the consolidated financial statements above and our report on Other Legal and Regulatory Requirements below, is not modified in respect of the above matters with respect to our reliance on the work done and the reports of the other auditors.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit and on the consideration of the reports of the other auditors on the separate financial statements of the subsidiaries, associates and joint ventures referred to in the Other Matters section above we report, to the extent applicable that:

a. Except for the matter described in the Basis for Quali ed Opinion paragraph, we / the other auditors whose reports we have relied upon, have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit of the aforesaid consolidated Ind AS financial statements.

b. Except for the matter described in the Basis for Qualified Opinion paragraph, in our opinion, proper books of account as required by law relating to preparation of the aforesaid consolidated Ind AS financial statements have been kept so far as it appears from our examination of those books and the reports of the other auditors.

c. The consolidated Balance Sheet, consolidated Statement of Profit and Loss including other comprehensive Income, the consolidated statement of Cash Flow and the consolidated Statement of changes in equity dealt with by this Report are in agreement with the books of account.

d. Except for the effects of the matter described in the Basis for Qualified Opinion paragraph, in our opinion, the aforesaid consolidated Ind AS financial statements comply with the Accounting Standards specified under section 133 of the Act, read with the Companies (Indian Accounting Standard) Rules, 2015, as amended.

e. On the basis of written representations received from such directors as on March 31, 2019, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2019 from being appointed as a director in terms of subsection (2) of section 164 of the Companies Act, 2013.

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 A; and

g. With respect to the other matters to be included in the Auditors Report in accordance with the requirements of section 197(16) of the Act, as amended:

In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Holding Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

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 and based on the consideration of the report of the other auditors on separate financial statements as also the other financial information of the subsidiaries, as noted in Other matters paragraph:

i. The consolidated Ind AS financial statements disclosed the impact of pending litigations on its financial position in its consolidated Ind AS financial statements - Refer note 34 to the consolidated Ind AS financial statements.

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivatives contracts. Refer to Note 24 to the Consolidated Ind AS financial statements

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

For Jawahar and Associates.,

Chartered Accountants

Firm Registration No: 001281S

Sd/-

M. Chandramouleswara Rao

Partner

Membership No: 024608

Place: Hyderabad

Date: 30 May, 2019.