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Auditor Report of Gujarat Gas Ltd.

Mar 31, 2015

We have audited the accompanying standalone financial statements of GUJARAT GAS LIMITED (Formerly known as GSPC Distribution Networks Limited) ("the Company"), which comprise the Balance Sheet as at 31 st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended on that date and a summary of the significant accounting policies and other explanatory information, in which are incorporated the returns of four branches [erstwhile GSPC Gas Company Limited, Gujarat Gas Financial Services Limited, Gujarat gas Trading Company Limited and GSPC Distribution Networks Limited (without considering any impact of Scheme of Amalgamation and Arrangement effected from dated April 01, 2013)] audited by branch auditors of the Company's branches and the return of one branch (erstwhile Gujarat Gas Company Limited) audited by us, for the year ended on that date.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 st March, 2015, and its profit and its cash flows for the year ended on that date.

Other Matters

We did not audit the financial statements of four branches included in the standalone financial statements of the Company whose financial statements reflect total assets of Rs. 5,931.03 Crores as at 31st March, 2015 and total revenues of Rs. 6,553.09 Crore for the year ended on that date, as considered in the standalone financial statements. The financial statements of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure - I a statement on the matters specified in paragraphs 3 and 4 of the Order, in which the comments in the branch auditors' reports are also incorporated.

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 and proper returns adequate for the purpose of our audit have been received from the branches not audited by us.

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

(d) The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from branches not visited by us.

(e) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 13 3 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

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

(g) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us :

(i) The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Notes 35 and 48 to the financial statements;

(ii) The Company has made provisions, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long term contracts including 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.

3. As required by section 143 (5) of the Act, we give in Annexure - II a report on the directions and sub directions issued by the Comptroller and Auditor General of India, in which the comments in the branch auditors' reports are also incorporated.

ANNEXURE - I TO INDEPENDENT AUDITOR'S REPORT

(Referred to in paragraph 1 under "Report on Other Legal and Regulatory Requirements" section of our report on Standalone Financial Statements of Gujarat Gas Limited (Formerly known as GSPC Distribution Networks Limited) of even date)

(i) (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.

(ii) (a) The inventory, excluding stocks with third parties, has been physically verified by the Management during the year. In respect of inventory lying with third parties, these have substantially been confirmed by them. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. 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 or other parties covered in the register maintained under Section 189 of the Act. Therefore, the provisions of Clause 3 (iii) [(a) and (b)] of the said Order are not applicable to the Company.

(iv) In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.

However as reported by Branch Auditor of erstwhile GSPC Gas Company Limited, internal control as regards inventory with contractors and physical verification of fixed assets needs to be strengthened in order to avoid encroachments by third parties in ROU / ROW.

(v) 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 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) (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, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, with appropriate authorities.

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 March 31, 2015 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 sales tax, wealth tax and customs duty which have not been deposited on account of any dispute.

The particulars of dues of service tax, excise and income tax as at March 31, 2015 which have not been deposited on account of a dispute, are as follows:

Name of Nature of dues Amount the Statute (Rs. in Crores)

Finance Act, 1994 Service Tax 24.30 (including interest and penalty)

Central Excise Act, Excise Exemption 0.24 1944 related to SSI Unit

Central Excise Act , Excise Duty (including 0.12 1944 interest and penalty)

Central Excise Act, CENVAT Credit of 1.07 1944 service tax paid on Franchisee Commission

Central Excise Act, CENVAT Credit of 3.53 1944 service tax paid on outward freight transfer

Income Tax Act,1961 Income Tax and 0.19 Interest thereon.

Income Tax Act,1961 Income Tax and 0.35 Interest thereon

Income Tax Act,1961 Income Tax 12.22

Assessment order u/s 143(3) of the Income Tax Act,1961

Income Tax Act,1961 Income Tax and 0.31 Interest thereon.

Income Tax Act,1961 Income Tax and 2.19 Interest thereon

Income Tax Act,1961 Income Tax 60.80 Assessment order u/s 143(3) of the Income Tax Act,1961

Income Tax Act,1961 Income Tax and 0.06 Interest thereon.

Income Tax Act,1961 Income Tax and 4.77 Interest thereon.

Name of the Statute Period to which Forum where the the amount relates dispute is pending

Finance Act,1994 Financial Years Customs, Excise & Service Tax 2005-06 to 2012-13 Appellate Tribunal, Ahmedabad

Central Excise Financial Year Customs, Excise & Act,1944 Service Tax 2003-04 Appellate Tribunal, Ahmedabad

Central Excise Act,1944 October 2006 Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad

Central Excise Act,1944 April 2009 to Commissioner of August 2014 Central Excise Department

Central Excise April 2010 to Commissioner of Act,1944 Central August 2014 Excise Department

Income Tax Act,1961 Assessment Year Assessing Officer 1996-97

Income Tax Act,1961 Assessment Year Commissioner of Income Tax 1996-97 (Appeals), Ahmadabad

Income Tax Act,1961 Assessment Year Commissioner of Income Tax 2010-11 (Appeals), Gandhinagar

Income Tax Act,1961 Assessment Year Commissioner of Income Tax 2010-11 (Appeals) ruled in favour of Gujarat Gas Financial Services Limited. Appeal Effect awaited.

Income Tax Act,1961 Assessment Year Commissioner of Income Tax 2011-12 (Appeals), Ahmadabad

Income Tax Act,1961 Assessment Year Income Tax Assessment order u/s 2011-12 143(3) of the Income Tax Act, 1961

Income Tax Act,1961 Assessment Year Commissioner of Income Tax 2011-12 (Appeals) ruled in favour of Gujarat Gas Financial Services Limited. Appeal Effect awaited.

Income Tax Act,1961 Assessment Year Commissioner of Income Tax 2012-13 (Appeals), Ahmadabad (c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, Company has transferred the amount required to be transferred to Investor Education and Protection Fund within the time in accordance with the provisions of the Companies Act, 1956 and rules made there under.

(viii) Since the company has been incorporated on February 21, 2012 and not more than five years has been elapsed at the end of the current financial year, the provisions of Clause 3 (VIII) of the Order are not applicable to the Company.

(ix) The Company has not defaulted in repayment of dues to financial institution or bank or debenture holders.

(x) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year. Therefore, the provisions of Clause 3 (X) of the Order are not applicable to the Company.

(xi) In our opinion, and according to the information and explanations given to us, terms loans have been applied for the purpose for which they were raised.

(xii) 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, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.

For, Manubhai & Shah

Chartered Accountants

Firm Regn. No.: 106041W

(G. R. Parmar) Place: Ahmedabad Partner

Date:13/08/2015 Membership No. 121462

 
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