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Auditor Report of Power Grid Corporation of India Ltd.

Mar 31, 2016

We have audited the accompanying standalone financial statements of Power Grid Corporation of India Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information,

Management''s Responsibility for the 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 of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' 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. 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:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2016;

(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date;

(c) in the case of the Cash Flow Statement, of the cash lows for the year ended on that date.

Emphasis of Matter

We draw attention to the following matters in the Notes to the Financial Statements:

(a) Note No. 2.25(b) in respect of provisional recognition of revenue from transmission charges.

(b) Note No. 2.34(a) in respect of Balance confirmation, reconciliation and consequential adjustments, if any, of Trade Receivable and Recoverable and Trade and Other Payables.

Our opinion is not modified in respect of these matters. Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order"), issued by the Central Government of India in terms of sub- section (11) of Section 143 of the Act, we give in the Annexure ''1'' a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. In terms of sub section (5) of section 143 of the Companies Act, 2013, we give in the Annexure''2'' a statement on the directions issued under the aforesaid section by the Comptroller and Auditor General of India.

3. 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 and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

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

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

f. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure ''3''.

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 2.38 and 2.52 to the financial statements;

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

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

Annexure to the Independent Auditors'' Report

Annexure 1''

As referred to in our Independent Auditors'' Report to the members of the Power Grid Corporation of India Limited (''the Company''), on the standalone financial statements for the year ended 31st March, 2016, we report that:

(i) a) The Company has generally maintained records, showing full particulars including quantitative details and situation of Fixed Assets.

b)The fixed assets have been physically verified by external agencies during the year. In our opinion, frequency of verification is reasonable having regard to the size of the Company and nature of its business. No material discrepancies were noticed on such verification.

c) In our opinion and according to information and explanations given to us and on the basis of an examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company except:

No. of Cases Gross Block Net Block Remarks

Leasehold Land 12 49.57 42.39 -

Freehold Land 36 212.60 212.60 -

Buildings 28 7.27 2.64 Flats in Mumbai

(ii) The inventories have been physically verified by external agencies during the year. In our opinion, frequency of verification is reasonable having regard to the size of the Company and nature of its business. No material discrepancies were noticed on such verification.

(iii) According to the information and explanations given to us, the Company has granted unsecured loans to wholly owned subsidiaries covered in the register maintained under section 189 of the Companies Act, 2013 (''the Act'').

a) The terms and conditions on which loans have been granted to the borrower companies covered under section 189 of the Act are not, prima facie, prejudicial to the interest of the company.

b) The schedule of repayment of principal and payment of interest has been stipulated and the repayments and receipts are regular.

c) There are no overdue amounts of more than 90 days in respect of loans granted to the companies listed in the register maintained under section 189 of the Act.

(iv) In our opinion and according to information and explanation given to us, the company has complied with provisions of section 185 and 186 of the Act in respect of loans, investments, guarantees and security.

(v) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposit from the public in accordance with the provisions of the sections 73 to 76 or any other relevant provisions of the Act, and the rules framed thereunder. Accordingly, paragraph 3(v) of the order is not applicable to the Company.

(vi) We have broadly reviewed the cost records maintained by the Company specified by the Central Government under sub section (1) of section 148 of the Companies Act, 2013, in respect of Transmission & Telecom Operations of the Company and we are of the opinion that prima facie the prescribed records have been made and maintained. We have, however, not made detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) a) According to the information and explanations given to us, the Company is generally regular in depositing undisputed statutory dues with appropriate authorities including Provident Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Duty of Custom, Duty of Excise, Value Added Tax, Cess and other statutory dues applicable to the Company and that there are no undisputed statutory dues outstanding as at 31st March, 2016 for a period of more than six months from the date they became payable. As informed, provisions of the Employees State Insurance Act are not applicable to the Company.

b) According to information and explanations given to us, there are no disputed dues of Duty of Customs or Duty of Excise which have not been deposited. However, following disputed demands of Income Tax or Sales Tax or Service Tax or Value Added Tax or Cess dues have not been deposited:

Name of the Nature of Amount* Period to which the Statute dues (Rs.in Crore) amount relates

Income Tax Act, 1961 Income Tax 10.23 2004-05, 2005-06, 2008-09,2009-10, 2010-11

Income Tax Act, 1961 Income Tax 10.86 2008-09, 2009-10, 2011-12,2012-13

Income Tax Act, 1961 Income Tax 8.74 2007-08 to 2014-15

Income Tax Act, 1961 Income Tax 1.15 2006-07,2007-08, 2008-09,2012-13, 2015-16

Finance Act, 1994 Service Tax 1.57 2003-04

Finance Act, 1994 Service Tax 1.89 2007-08,2008-09

J&K GST Act, 1962 Sales Tax 50.88 1995-96 to 2001-02

J&KGSTAct, 1962 Sales Tax 72.99 2002-03 to 2010-11

Punjab Vat Act, 2005 Entry Tax 9.64 2011-12 to 2013-14

Building and Other Construction Workers Cess 3.85 2007-08 Welfare Cess Act, 1996

Total 171.80

Name of the Statute Forum where dispute is pending

Income Tax Act, 1961 ITAT, Delhi

Income Tax Act, 1961 CIT(A)Delhi

Income Tax Act, 1961 Jurisdictional Assessing Officers of TANs

Income Tax Act, 1961 Jurisdictional Assessing Officer, Delhi

Finance Act, 1994 CESTAT, Kolkata

Finance Act, 1994 Commissioner (Central Excise), Bhubaneswar

J&K GST Act, 1962 Sales Tax Appellate Tribunal, J&K

J&K GST Act, 1962 Dy. Commissioner of Sales Tax (appeals) Jammu, J&K

Punjab Vat Act, 2005 Hon''able High Court Punjab & Haryana,

Building and other Construction Workers Hon''able High Court, Himachal Pradesh, Welfare Cess Act, 1996 Shimla

* Demand amount including interest, net of amount paid under protest.

(viii) In our opinion and according to the information and explanations given to us the Company has not defaulted during the year in repayment of loans to its financial institutions, bankers and dues to the Bond holders.

(ix) In our opinion on an overall basis and according to the information and explanations given to us, the Company has applied the term loans including funds raised through bonds for the purpose they were obtained. The Company has raised funds by issuance of debt instruments (bonds) during the year. The Company has not raised money by way of initial public offer or further public offer during the year.

(x) According to the information and explanations given to us and as represented by the management, we have been informed that no case of frauds has been committed on or by the Company during the year.

(xi) According to the information and explanations given to us managerial remuneration has been paid or provided in accordance with the requisite approval mandated by the provisions of section 197 read with schedule V to the Act.

(xii) The Company is not a Nidhi Company as prescribed under section 406 of the Act. Accordingly, paragraph 3(xii) of the order is not applicable to the Company.

(xiii) According to the information and explanations given to us and as represented by the management, all transactions with the related parties are in compliance with sections 177 and 188 of the Act, where applicable and the details have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given 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 party 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.

(xvi) According to the information and explanations given to us the Company is not required to be registered under section 45 IA of the Reserve Bank of India Act, 1934. Accordingly, paragraph 3(xvi) is not applicable to the Company.

For S.K. Mittal & Co. For Parakh & Co. For Kothari & Co. For R.G.N.Price & Co.

Chartered Accountants Chartered Accountants Chartered Accountants Chartered Accountants

Firm Regn No. 001135N Firm Regn No. 001475C Firm Regn No. 301178E Firm Regn No. 002785S

(CA. M.K. Juneja) (CA Indra Pal Singh) (CA.Manaswy Kothari) (CA. R.Rangarajan)

Partner Partner Partner Partner

M.No. 013117 M.No. 410433 M.No. 064601 M.No. 041883

Place: New Delhi

Date: 26th May, 2016


Mar 31, 2015

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Power Grid Corporation of India Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the 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.

Auditors'' 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 qualified audit opinion.

Basis for Qualified Opinion

i) The company has not made any adjustment in respect of revenue of Rs. 144.91 crore recognized for the period 01.07.2010 to 31.08.2011 in respect of Barh-Balia Transmission line, wherein company appeal is pending with Hon''ble Supreme Court against the order of Appellate Tribunal for Electricity (ATE) to re-determine the Date of Commercial Operation (DOCO) refer note 2.38. Pending decision of Hon''ble Supreme Court, and determination of DOCO by CERC and in view of uncertainty involved, in our opinion, provision should have been made for the revenue recognized for the period under dispute. This has resulted in increase of Profit before tax for the year by Rs. 109.70 crore and increase in Current Assets by Rs. 109.70 crore.

ii) The Company has not made any provision in respect of outstanding dues of Rs. 15.64 crore from one of the medium term open access customers, which is under liquidation, under an order of the Hon''ble High Court at Calcutta, refer note 2.39. Moreover, no favourable order has been received in respect of Company''s petition before the Central Electricity Regulatory Commission for allowing the recovery of such dues from other beneficiaries. As the recovery of such dues is doubtful,in our opinion, the provision should have been made in the accounts. This has resulted in increase of Profit before tax for the year by Rs. 11.84 crore and increase in Current Assets by Rs. 11.84 crore.

iii) Furthermore, as a result of non-provisions mentioned in our qualification Nos. i) and ii) stated above, there are impact on various heads in the financial statements, the aggregate impact of all the above is as under:

Sl. Particulars Increase Decrease (Rs. Crore) (Rs. Crore)

1 Revenue from operation 37.45

2 Employee Benefit Expenses 1.56

3 Transmission, administration and other expenses 160.55

4 Profit Before Tax 121.54

5 Tax Expenses 8.15

6 Profit After Tax 129.69

7 Reserves & Surplus and Shareholders'' Fund 129.69

8 Short-term Provisions 5.75

9 Capital work in progress 0.84

10 Trade Receivable 160.55

11 Other Current Assets 37.45

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the 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:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2015;

(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date;

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Emphasis of Matter

We draw attention to Note No. 2.25(b) to the financial statements, in respect of provisional recognition of revenue from transmission charges. 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''l''a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. In terms of sub section (5) of section 143 of the Companies Act, 2013, we give in the Annexure ''2'' a statement on the directions issued under the aforesaid section by the Comptroller and Auditor General of India.

3. 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 purpose of our audit;

b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books

c. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement 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 Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e. The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may not have an adverse effect on the functioning of the Company.

f. On the basis of written representations received from the directors as on 31st March, 2015, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015, from being appointed as a director in terms of Section 164(2) of the Act.

g. The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above.

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

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 2.38, 2.39 and 2.52 to the financial statements.

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

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

Annexure ''1'' referred to in our Independent Auditors'' Report to the members of the Power Grid Corporation of India Limited, on the standalone financial statements for the year ended 31st March, 2015, we report that:

(i) a) The Company has generally maintained records, showing full particulars including quantitative details and situation of Fixed Assets.

b) The fixed assets have been physically verified by external agencies during the year and discrepancies, though not material, noticed on such verification have been reconciled/ adjusted in the books of account. In our opinion, frequency of verification is reasonable having regard to the size of the Company and nature of its assets.

(ii) a) Physical verification of inventories has generally been conducted on periodic intervals. In our opinion system and frequency of verification is reasonable.

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

c) In our opinion, the Company has maintained proper records of its inventory. The discrepancies noticed on physical verification of the inventories, though not material, have been properly dealt with in the books of account.

(iii) During the year the Company has granted unsecured loans amounting to Rs. 229.70 crore to two wholly owned subsidiaries covered in the register maintained under section 189 of the Companies Act, 2013 (''the Act''). Outstanding balance as on 31st March 2015 is Rs. 229.70 crore.

a) Principal amount and interest are not yet due as per the terms of the loans.

b) Since receipt of principal amount and interest are not due, question of overdue amount of more than rupee one lakh does not arise.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems, commensurate with the size of the Company and the nature of its business, with regard to purchase of inventory and fixed assets and income from sales of goods and services. During the course of our audit we have not observed any continuing failure to correct major weaknesses in the underlying internal control systems. However process of contract closing work needs to be expedited.

(v) Since the Company has not accepted any deposit from public, the question of compliance with the directives issued by the Reserve Bank of India and the provisions of Section 73 to 76 or other relevant provisions of the Companies Act, 2013, and rules framed there under, does not arise.

(vi) We have broadly reviewed the cost records maintained by the company specified by the Central Government under sub section (1) of Section 148 of the Companies Act, 2013, in respect of Transmission & Telecom Operations of the Company and we are of the opinion that prima facie the prescribed records have been made and maintained. We have, however, not made detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) a) According to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues with appropriate authorities including Provident Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Duty of Custom, Duty of Excise, Value Added Tax, Cess and other statutory dues applicable to the Company and that there are no undisputed statutory dues outstanding as at 31st March, 2015 for a period of more than six months from the date they became payable. As informed, provisions of the Employees State Insurance Act are not applicable to the Company.

b) According to information and explanations given to us, there are no disputed dues of Wealth Tax or Duty of Customs or Duty of Excise which have not been deposited. However, following disputed demands of Income Tax or Sales Tax or Service Tax or Value Added Tax or Cess dues have not been deposited:

Name of the Statute Nature of Amount* Period to which the amount dues (Rs. in Crore) relates

Income Tax Act, 1961 Income Tax 15.49 2004-05, 2005-06, 2007-08, 2008-09, 2009-10, 2010-11

Income Tax Act, 1961 Income Tax 0.08 2005-06, 2007-08

Income Tax Act, 1961 Income Tax 9.49 2008-09, 2009-10, 2011-12

Finance Act, 1994 Service Tax 1.57 2003-04

Finance Act, 1994 Service Tax 1.89 2007-08, 2008-09

J&K GST Act, 1962 Sales Tax 50.71 1995-96 to 2001-02

J&K GST Act, 1962 Sales Tax 57.75 2002-03 to 2009-10

Punjab Vat Act, 2005 Entry Tax 9.64 2011-12 to 2013-14

MP Entry Tax Act, 1976 Entry Tax 20.67 2011-12, 2014-15

Building and Other Cess 3.46 2007-08 Construction Workers Welfare Cess Act, 1996

Total 170.75

Name of the Statute Forum where dispute is pending

Income Tax Act, 1961 ITAT, Delhi

Income Tax Act, 1961 DCIT, Delhi

Income Tax Act, 1961 CIT (A) Delhi

Finance Act, 1994 CESTAT, Kolkata

Finance Act, 1994 Commissioner (Central Excise), Bhubaneswar

J&K GST Act, 1962 Sales Tax Appellate Tribunal, J&K

J&K GST Act, 1962 Dy. Commissioner of Sales Tax (appeals) Jammu, J&K

Punjab Vat Act, 2005 Hon''ble High Court Punjab & Haryana

MP Entry Tax Act, 1976 Hon''ble High Court M.P., Jabalpur

Building and other Construction workers welfare Cess Act, 1996 Hon''ble High Court, Himachal Pradesh, Shimla

* Demand amount including interest, net of amount paid under protest.

c) According to the information and explanations given to us, the amount which was required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under has been transferred to such fund within time.

(viii) The Company does not have accumulated losses at the end of financial year and has not incurred any cash loss in the financial year under audit, and also in the immediately preceding financial year.

(ix) On the basis of audit procedures adopted by us and according to the records, the Company has not defaulted in repayment of dues to any financial institution or bank or bondholders.

(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.

(xi) In our opinion on an overall basis and according to the information and explanations given to us, the company has applied the term loans for the purpose they were obtained.

(xii) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

Annexure ''2'' referred to in our Independent Auditors'' Report to the members of Power Grid Corporation of India Limited, on the standalone financial statements for the year ended 31st March, 2015.

On the directions issued by the Comptroller and Auditor General of India under sub section (5) of Section 143 of the Companies Act, 2013, based on the verification of records of the Company and information and explanations given to us, we report that:

a) The Company has not been selected for disinvestment during the year.

b) There is no case of waiver/write off of loans/ interest, however non recoverable advances of Rs. 0.56 crore and bad debts Rs. 14.06 crore, against which provisions were made in earlier years have been written off during the year, on account of normal business practice.

c) The Company has maintained adequate records in respect of inventories lying with third parties. No assets have been received by the Company as gift from Government or other authorities.

d) Age wise analysis of pending legal/arbitration cases as provided by the management, are as under:

Sl. Category Number of Number Number No Cases prior of Cases of Cases to year 2000 between between 2000-2005 2005-2010

1 Land acquisition 12 6 26

2 Tree & crop Compensation 56 126 1036

3 Arbitration 6 7 16

4 Contractual 0 0 2

5 Tax related 1 2 2

6 Civil Misc 10 10 21

Total 85 151 1103

Category Number Total Total Amount of Cases Number of (Rs. in Crore) between Cases 2010-2015

Land acquisition 133 177 1983.10

Tree & Crop Compensation 1494 2712 1311.70

Arbitration 22 51 267.00

Contractual 0 2 132.00

Tax related 3 8 296.60

Civil Misc 216 257 86.00

Total 1868 3207 4076.40

As per information and explanations given, in view of the size and nature of its business, the company is having large number of legal / arbitration cases including Tree & Crop compensation and Land Acquisition cases.

Pendency is mainly due to legal process of the Courts/Arbitrators.

In our opinion the Company has in place an adequate monitoring mechanism for expenditure on such legal cases.

For S.K.MEHTA & CO. For CHATTERJEE & CO. For SAGAR & ASSOCIATES

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Registration No.000478N Firm Registration No. 302114E Firm Registration No. 003510S

(CA Puneet Harjai) (CA S.K.Chatterjee) (CA D. Manohar)

Partner Partner Partner

Membership No.095715 Membership No.003124 Membership No.029644

Place of Signature: New Delhi

Date: 30th May, 2015


Mar 31, 2014

We have audited the accompanying financial statements of Power Grid Corporation of India Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act") read with the general circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control 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.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. we conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. 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 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 control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, 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.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the 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:

(a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2014;

(b) In the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

(c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Emphasis of Matter

We Draw Attention To:

Note 2.25(a) & 2.25(c) of the financial statements, in respect of the provisional recognition of revenue from transmission charges. our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) order, 2003 ("the order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the order.

2. As required by section 227(3) of the Act, we report that:

a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

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

d. In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 read with the General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013; and

e. In pursuance to the notification No. GSR 829(E) dated 21.10.2003, issued by the department of Company Affairs; clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 pertaining to disqualification of directors is not applicable to a Government Company.

Annexure to the Independent Auditors'' Report Re.: Power Grid Corporation of India Limited Annexure referred to in our report of even date for the year ended 31st March, 2014.

(i) a) The Company has generally maintained records, showing full particulars including quantitative details and situation of Fixed Assets.

b) The fixed assets have been physically verified by external agencies during the year and discrepancies, though not material, noticed on such verification have been reconciled/ adjusted in the books of account. In our opinion, frequency of verification is reasonable.

c) During the year the company has not disposed off substantial part of its Fixed Assets.

(ii) a) Physical verification of inventories and construction stores has generally been conducted on periodic intervals. In our opinion system and frequency of verification is reasonable.

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

c) In our opinion, the Company has maintained proper records of its inventory. The discrepancies noticed on physical verification of the inventories have been properly dealt with in the books of account.

(iii) According to the information and explanations given to us, the Company has neither granted nor taken any loans, secured or unsecured to / from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

In view of above, other paragraphs of clause (iii) of paragraph 4 of the order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems, commensurate with the size of the Company and the nature of its business, with regard to purchase of inventory and fixed assets and income from sales of services and goods. during the course of our audit we have not observed any continuing failure to correct major weaknesses in the underlying internal control systems. However process of contract closing work needs to be expedited.

(v) According to the information and explanations given to us, there are no contracts or arrangements during the year referred to in section 301 of the Companies Act 1956, to be entered in the register maintained under that section. In view of above, other paragraphs of clause (v) of paragraph 4 of the order are not applicable.

(vi) Since the Company has not accepted any deposit from the public, the question of compliance with the directives issued by the Reserve Bank of India and the provisions of section 58A, 58AA and other relevant provisions of the Companies Act, 1956, and rules framed there under, does not arise.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of business.

(viii) We have broadly reviewed the cost records maintained by the company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956, in respect of Transmission & Telecom operations of the Company and we are of the opinion that prima facie the prescribed records have been made and maintained. we have, however, not made detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) a) According to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues with appropriate authorities including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, wealth Tax, Service Tax, Custom duty, Excise duty, Cess and other statutory dues applicable to the Company and that there are no undisputed statutory dues outstanding as on 31st March, 2014 for a period of more than six months from the date they became payable. As informed, provisions of the Employees State Insurance Act are not applicable to the Company.

b) According to information and explanations given to us, following disputed demands of Income Tax / Sales Tax / Customs duty / wealth Tax / Service Tax / Excise duty / Cess dues have not been deposited:

Name of the Statute Nature of Amount Period to which the Dues (Rs.in crore) amount relates

Punjab VAT Act, 2005 Entry Tax 9.64 2011-12 to 2013-14 (Entry Tax)

J&K GST Act 1962 Sales Tax 33.99 1992-93 to 2001-02

J&K GST Act 1962 Sales Tax 31.56 2002-03 to 2008-09

Finance Act, 1994 Service Tax 1.57 2004-05

Finance Act, 1994 Service Tax 1.89 2007-08 & 2008-09

Income Tax Act, 1961 Income Tax 153.76 2010-11

Income Tax Act, 1961 Income Tax 162.47 2004-05 to 2009-10

Total 394.88

Name of the statue Forum where the dispute is pending

Punjab VAT Act, 2005 (Entry Tax) Hon''ble High Court, Punjab & Haryana

J&K GST Act 1962 Sales Tax Appellate Tribunal, J&K State,

J&K GST Act 1962 Dy. Commissioner of Sales Tax (Appeals), Jammu.

Finance Act, 1994 CESTAT, Kolkata

Finance Act, 1994 Commissioner of Central Excise, Customs & Service Tax, Bhubaneswar.

Income Tax Act, 1961 Commissioner of Income Tax (Appeals), Delhi.

Income Tax Act, 1961 Income Tax Appellate Tribunal, Delhi.

Total

(x) The Company does not have accumulated losses at the end of financial year and has not incurred any cash loss in the financial year under audit, and also in the immediately preceding financial year.

(xi) on the basis of audit procedures adopted by us and according to the records, the Company has not defaulted in repayment of dues to any financial institution or bank or bondholders.

(xii) The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The company is not a chit fund or nidhi/ mutual benefit fund/society. Accordingly, Clause (xiii) of paragraph 4 of the order is not applicable.

(xiv) In our opinion, the Company is not dealing in or trading in shares, debentures, and other investments. Accordingly, Clause (xiv) of paragraph 4 of the order is not applicable.

(xv) In the case of Power Link Transmission Limited, wherein the Company has pledged its shares in favour of financial institutions for financial assistance obtained by the said company, as per the terms and conditions of Joint Venture agreement. According to the information and explanations given to us, except the above, the Company has not given any guarantee for loans taken by others from banks or financial institutions. In our opinion and to the best of our information and according to explanations given to us, the terms and conditions of the above share pledge agreement are not, prime facie, prejudicial to the interest of the company.

(xvi) In our opinion on an overall basis and according to the information and explanations given to us, the company has applied the term loans for the purpose they were obtained.

(xvii) In our opinion, on an overall basis, and according to the information and explanations given to us, the company has not used the funds raised on short term basis for long term investment.

(xviii) The Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) The Company has not issued any debentures. However, in respect of certain bonds amounting to Rs.1999.20 crore, security/ charge is yet to be created.

(xx) The end use of money raised by Follow-on Public offer (FPo) during the year as stated in the Red Herring Prospectus (RHP) filed with SEBI is disclosed in the Note 2.34 to the Financial Statements. Proceeds utilized during the year have been duly verified by the monitoring agency IFCI Ltd. Unutilized FPo proceeds are kept with Banks as Term deposits for utilization in future.

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

For S. K. MEHTA & CO. For CHATTERJEE & CO. For SAGAR & ASSOCIATES

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Registration No.000478N Firm Registration No. 302114E Firm Registration No. 003510S

(CA Rohit Mehta) (CA R.N.Basu) (CA B.Aruna)

Partner Partner Partner

Membership No.091382 Membership No.050430 Membership No.216454

Place of Signature: New Delhi Dated : 29th May, 2014


Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Power Grid Corporation of India Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibilityfor the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 ofthe Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control 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.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. 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 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 control relevant to the Company''s preparation and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, 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.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the 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 generallyaccepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

(c) inthe case of the Cash Flow Statement, of the cash flows forthe year ended on that date.

Emphasis of Matters

We draw attention to:

Note 2.25(a) & 2.25(c) of the financial statements, in respect of the provisional recognition of revenue from transmission charges.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required under the provisions of Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 ofthe Companies Act, 1956, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Companies Act, 1956, we report that:

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e. in pursuance to the notification No. GSR 829(E) dated 21.10.2003, issued by the Department of Company Affairs; clause (g) of sub- section (1) of section 274 of the Companies Act, 1956 pertaining to disqualification of Directors is not applicable to a Government Company.

Annexure to the Independent Auditors'' Report

Re: PowerGrid Corporation of India Limited

Annexure referred to in our report of even date for the year ended 31st March, 2013

(i) a) The Company has generally maintained records of Fixed Assets, showing full particulars including quantitative details and situation of Fixed Assets.

b) The fixed assets have been physically verified by external agencies during the year and discrepancies, though not material, noticed on such verification have been reconciled/ adjusted in the books of account. In our opinion, frequency of verification is reasonable.

c) During the year the company has not disposed off substantial part of its Fixed Assets.

(ii) a) Physical verification of inventories lying with the company has been conducted during the year by the external agencies. In respect of material lying with contractors, company is having system of obtaining confirmation from contractors on periodic basis. Inour opinion system and frequency of verification is reasonable.

b) The procedures of physical verification of inventories, followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) The Company has maintained proper records of inventory. The discrepancies noticed on physical verification of the inventories have been properly dealt with in the books of account.

(iii) According to the information and explanations given to us, the Company has neither granted nor taken any loans, secured or unsecured to / from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

In view of above, other paragraphs ofclause (iii) of paragraph 4 ofthe Order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems, commensurate with the size ofthe Company and the nature of its business, with regard to purchase of inventory and fixed assets and income from sales of services and goods. During the course of our audit we have not observed any continuing failure to correct major weaknesses in the underlying internal control systems. However process of contract closing work needs to be expedited.

(v) According to the information and explanations given to us, there are no contracts or arrangements during the year referred to in section 301 ofthe Companies Act 1956, to be entered in the register maintained under that section. In view of above, other paragraphs of clause (v) of paragraph 4 of the Order are not applicable.

(vi) Since the Company has not accepted any deposit from the public, the question of compliance with the directives issued by the Reserve Bank of India and the provisions of section 58A, 58AA and other relevant provisions of the Companies Act, 1956, and rules framed there under, does not arise.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of business.

(viii) We have broadly reviewed the cost records maintained by the company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209 (1) (d) ofthe Companies Act, 1956, in respect of Transmission & Telecom Operations of the Company and we are of the opinion that prima facie the prescribed records have been made and maintained. We have, however, not made detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) a) According to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues with appropriate authorities including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to the Company and that there are no undisputed statutory dues outstanding as on 31st March, 2013 for a period of more than six months from the date they became payable. As informed, provisions of the Employees State Insurance Act are not applicable to the Company,

b) According to information and explanations given to us, following disputed demands of Income Tax / Sales Tax / Customs Duty / Wealth Tax/Service Tax / Excise Duty / Cess dues have not been deposited:

Amount Period to which the Name of the Statute Nature of dues (Rs. in crore) amount relates

Punjab VAT Act, 2005 (Entry Tax) Entry Tax 8.78 2011-12 to 2012-13

J&K GST Act 1962 Sales Tax 33.98 1992-93 to 2001-02

J&K GST Act 1962 Sales Tax 18.51 2002-03 to 2007-08

J&K VAT Act 2005 Sales Tax 0.15 2008-09

Finance Act 1994 Service Tax 1.57 2004-05

Finance Act 1994 Service Tax 1.89 2007-08 & 2008-09

Income Tax Act 1961 Income Tax 5.04 2008-09& 2009-10

Income Tax Act 1961 Income Tax 157.43 2004-05 to 2007-08

Total 227.35

Name of the Statute Forum where the dispute is pending

Punjab VAT Act, 2005 (Entry Tax) Honbl. High Court, Punjab & Haryana

J & K GST Act 1962 J&K State, Sales Tax Appellate Tribunal

J & K GST Act 1962 Dy. Commissioner of Sales Tax (Appeals), Jammu, J&K State

J & K VAT Act 2005 Dy. Commissioner of Sales Tax (Appeals), Jammu, J&K State

Finance Act 1994 CESTAT, Kolkata

Finance Act 1994 Commissioner of Central Excise, Customs & Service Tax, Bhubaneswar.

Income Tax Act 1961 Commissioner of Income Tax (Appeals),Delhi.

Income Tax Act 1961 Income Tax Appellate Tribunal, Delhi.

(x) The Company does not have accumulated losses at the end of financial year and has not incurred any cash loss in the financial year under audit, and also in the immediately preceding financial year.

(xi) On the basis of audit procedures adopted by us and according to the records, the Company has not defaulted in repayment of dues to any financial institution or bank or bondholders.

(xii) The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The company is not a chit fund or nidhi/ mutual benefit fund/society. Accordingly, Clause (xiii) of paragraph 4 of the Order is not applicable.

(xiv) In our opinion, the Company is not dealing in or trading in shares, debentures, and other investments. Accordingly, Clause (xiv) of paragraph 4 of the Order is not applicable.

(xv) In the case of Power Link Transmission Limited, wherein the Company has pledged its shares in favour of financial institutions for financial assistance obtained by the said company, as per the terms and conditions of Joint Venture agreement. According to the information and explanations given to us, except the above, the Company has not given any guarantee for loans taken by others from banks or financial institutions. In our opinion and to the best of our information and according to explanations given to us, the terms and conditions ofthe above share pledge agreement are not, prime facie, prejudicial to the interest ofthe company.

(xvi) In our opinion on an overall basis and according to the information and explanations given to us, the company has applied the term loans for the purpose they were obtained.

(xvii) In our opinion, on an overall basis, and according to the information and explanations given to us, the company has not used the funds raised on short term basis for long term investment.

(xviii) The Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under section 301 ofthe Companies Act, 1956.

(xix) The Company has not issued any debentures. However, in respect of certain bonds raised during the year amounting to Rs.1990 crore, security/ charge is yet to be created.

(xx) The end use of money raised by Follow-on Public Offer (FPO) during the year 2010-11 as stated in the draft prospectus filed with SEBI and offer document are disclosed in the Note 2.34 to the financial statements. For the interim period the FPO proceeds were kept with Banks as Term Deposits and ultimately utilized for the stated end use and the same has been duly verified by the monitoring agency IFCI Ltd.

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

For S.K.MEHTA & CO. For CHATTERJEE & CO. For SAGAR & ASSOCIATES

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Registration No.000478N Firm Registration No. 302114E Firm Registration No. 003510S

(CA Jyoti Bagga) (C A R.N.Basu) (C A B.Srinivasa Rao)

Partner Partner Partner

Membership No.087002 Membership No.050430 Membership No.202352

Place of Signature: Gurgaon

Date: 28th May, 2013


Mar 31, 2012

1. We have audited the attached Balance Sheet of Power Grid Corporation of India Limited as at 31st March, 2012, and the Statement of Profit and Loss and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with Auditing Standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003, issued by the Central Government of India in terms of sub section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. We draw attention to Note No. 2.25(a) & 2.25(c) in respect of provisional recognition of revenue from transmission charges.

5. Further to our comments in the annexure referred to in paragraph 3 above, we report that:

a) We have 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 appears from our examination of those books;

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

d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956;

e) Being a Government Company, pursuant to the Notification no. GSR 829(E) dated 21.10.2003, issued by the Department of Company Affairs; clause (g) of sub-section (1) of section 274 of Companies Act, 1956 pertaining to disqualification of Directors is not applicable to the Company;

f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements, read together with Accounting Policies and Notes on Accounts annexed thereto give the information required by the Companies Act, 1956, in the manner so required, and give a true and fair view in conformity with the accounting principles generally accepted in India :

i) in the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

ii) in the case of Statement of Profit and Loss, of the profit of the Company for the year ended on that date; and

iii) in the case of Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Annexure to the Auditors' Report

RE: POWER GRID CORPORATION OF INDIA LIMITED

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

(i) a) The Company has generally maintained records of Fixed Assets, showing full particulars including quantitative details and situation of Fixed Assets.

b) The fixed assets have been physically verified by external agencies during the year and discrepancies, though not material, noticed on such verification have been reconciled/ adjusted in the books of account. In our opinion, frequency of verification is reasonable.

c) During the year the company has not disposed off substantial part of its Fixed Assets.

(ii) a) Physical verification of inventories lying with the company has been conducted during the year by the external agencies. In respect of material lying with contractors, company is having system of obtaining confirmation from contractors on periodic basis. In our opinion system and frequency of verification is reasonable.

b) The procedures of physical verification of inventories, followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) The Company has maintained proper records of inventory. The discrepancies noticed on physical verification of the inventories have been properly dealt with in the books of account.

(iii) According to the information and explanations given to us, the Company has neither granted nor taken any loans, secured or unsecured to / from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

In view of above, other paragraphs of clause (iii) of paragraph 4 of the Order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems, commensurate with the size of the Company and the nature of its business, with regard to purchase of inventory and fixed assets and income from sales of services. During the course of our audit we have not observed any continuing failure to correct major weaknesses in the underlying internal control systems. However process of contract closing work needs to be further expedited.

(v) According to the information and explanations given to us, there are no contracts or arrangements during the year referred to in section 301 of the Companies Act 1956, to be entered in the register maintained under that section. In view of above other paragraphs of clause (v) of paragraph 4 of the Order are not applicable.

(vi) Since the Company has not accepted any deposit from the public, the question of compliance with the directives issued by the Reserve Bank of India and the provisions of section 58A, 58AA and other relevant provisions of the Companies Act, 1956, and rules framed there under, does not arise.

(vii) The Company has an Internal Audit system. In our opinion, the scope and coverage of Internal Audit are commensurate with the size and nature of its business.

(viii) We have broadly reviewed the cost records maintained by the company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209 (1)(d) of the Companies Act, 1956, in respect of Transmission & Telecom Operations of the Company and we are of the opinion that prima facie the prescribed records have been made and maintained. We have, however, not made detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) a) According to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues with appropriate authorities including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to the Company and that there are no undisputed statutory dues outstanding as on 31st March, 2012 for a period of more than six months from the date they became payable. As informed, provisions of the Employees State Insurance Act are not applicable to the Company.

b) According to information and explanations given to us, following disputed demands of income tax / sales tax / customs duty / wealth tax / service tax / excise duty / cess dues have not been deposited:

Nature of dues Amount Forum where the disputes are pending (Rs. in crore)

Entry Tax 0.02 Appellate Board, Commercial Tax Department, Madhya Pradesh

Entry Tax 1.05 Dy. Commissioner (Appeals), Commercial Tax Department, Madhya Pradesh

Entry Tax 11.40 Joint Commissioner of Commercial Tax (Appeal), Patna

Entry Tax 5.98 Honbl. High Court, Punjab & Haryana

Sales Tax 33.89 J&K State, Sales Tax Appellate Tribunal

Sales Tax 18.51 Dy. Commissioner of Sales Tax (Appeal), Jammu, J&K State

Service Tax 1.57 Commissioner of Central Excise, Patna Diversion Tax (For non-agriculture use of land) 2.23 S D O, Itarsi

Income Tax 160.84 Commissioner of Income Tax (Appeals), Delhi.

Income Tax 2.60 Income Tax Appellate Tribunal, Delhi.

Total 238.09

(x) The Company does not have accumulated losses at the end of financial year and has not incurred any cash loss in the financial year under audit, and also in the immediately preceding financial year.

(xi) On the basis of audit procedures adopted by us and according to the records, the Company has not defaulted in repayment of dues to any financial institution or bank or bondholders.

(xii) The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The company is not a chit fund or nidhi/ mutual benefit fund/society. Accordingly, Clause (xiii) of paragraph 4 of the Order is not applicable.

(xiv) In our opinion, the Company is not dealing in or trading in shares, debentures, and other investments. Accordingly, Clause (xiv) of paragraph 4 of the Order is not applicable.

(xv) In the case of Power Link Transmission Limited, wherein the Company has pledged its shares in favour of financial institutions for financial assistance obtained by the said company, as per the terms and conditions of Joint Venture agreement. According to the information and explanations given to us, except the above, the Company has not given any guarantee for loans taken by others from banks or financial institutions. In our opinion and to the best of our information and according to explanations given to us, the terms and conditions of the above share pledge agreement are not, prime facie, prejudicial to the interest of the company.

(xvi) In our opinion on an overall basis and according to the information and explanations given to us, the company has applied the term loans for the purpose, they were raised during the year.

(xvii) In our opinion, on an overall basis, and according to the information and explanations given to us, the company has not used the funds raised on short term basis for long term investment.

(xviii) The Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under section 301 of the Companies Act, 1956.

(xix) The Company has not issued any debentures. However, in respect of certain bonds raised during the year amounting to Rs. 2,655 crore security/ charge is yet to be created.

(xx) The end use of money raised by Follow-on Public Offer during the year 2010-11 as stated in the draft prospectus filed with SEBI and offer document are disclosed in the Note No. 2.34 to the financial statements and the same has been duly verified by us.

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

For S. K. MEHTA & CO. For CHATTERJEE & CO. For SAGAR & ASSOCIATES

Chartered Accountants Chartered Accountants Chartered Accountants

Firm Registration No. 000478N Firm Registration No. 302114E Firm Registration No. 003510S

(S.K. Mehta) (S.K. Chatterjee) (V. Vidyasagar Babu)

Partner Partner Partner

Membership No. 010870 Membership No. 003124 Membership No. 027357

Place: New Delhi

Dated: 29th May, 2012


Mar 31, 2003

We have audited the attached Balance Sheet of Power Grid Corporation of India Ltd., as at March 31, 2003 and the annexed Profit and Loss Account of the company for the year ended on that date together with the Schedules annexed thereto and cash flow statement for the year ended on that date. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material mis-statements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We report as follows:

1. The Company is governed by the Electricity (Supply) Act, 1948. The Company is also governed by the Electricity Regulatory Commissions Act, 1998. The provisions of the said Acts read with the rules thereunder, have prevailed wherever the same have been inconsistent with the provisions of the Companies Act, 1956.

2. As required by the Manufacturing and Other Companies (Auditors Report) Order, 1988, issued by the Central Government in terms of section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

3. On the basis of written representations received from the directors, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2003 from being appointed as a director in terms of clause (g) of sub- section (1) of section 274 of the Companies Act, 1956.

4. The impact of change in accounting policies during the year :

i) Surcharge, which was hitherto accounted for on receipt basis is now accounted for on receipt / certainty of receipt. This change in policy has resulted in increase in other income and profit by Rs. 19229 lacs.

ii) The company has capitalised w.e.f. 01.04.1999 certain insurance spares which were previously treated as inventory resulting in increase in fixed assets and decrease in current assets by Rs. 1878 lacs. This change has also resulted in increase in depreciation by Rs. 50 lacs, prior period depreciation by Rs. 182 lacs and decrease in profit by Rs. 232 lacs.

iii) Levelling, clearing and grading charges of land which were hitherto included in the cost of land are now being capitalised as part of the cost of the buildings retrospectively. This change has resulted in increase in the cost of Building and decrease in the cost of land by Rs. 2556 lacs. This change has also resulted in increase in depreciation by Rs. 67 lacs, prior period depreciation by Rs. 738 lacs and decrease in profit by Rs. 805 lacs.

5. i) Restoration of deposits of Rs. 11206 lacs, as referred to in Note no. 81(a) and 811(a) in Schedule 18, has resulted in overstating capital reserve and understating loan fund to such extent. In our opinion, the methodology of write back of front-end fee, restoration of deposit and showing external liability as capital reserve is not correct.

ii) Rs. 9400 lacs are deposits with CANFINA, as referred to in Note no. 81 (a) in Schedule 18, against which, though the Company holds an adhoc provision of Rs. 5000 lacs, we are unable to express an opinion about the extent of recoverability.

iii) Rs. 1806 lacs are deposits with ABFSL, as referred to in Note no. 8 II (a) in Schedule 18 which, though according to the management are good and recoverable, we are unable to express an opinion about the extent of recoverability.

iv) Set-off of maturity value of bonds of Rs. 1576.66 lacs during the year 1998- 99, as referred to in Note no. 8 Kb) in Schedule 18, against deposits with CANFINA, has resulted in understatement of liabilities and current assets to such extent

Pending settlement of the above matters, the resultant net effect on the accounts is not ascertainable.

6. i) Pending disposal of appeal filed by the Company against the CERC orders before the Honble Delhi High Court, the transmission income for the year has been accounted for provisionally on the basis of tariff determined as per CERC norms (Note no. 14(a) in Schedule 18), the consequential effect of which is not ascertainable.

ii) Depreciation on fixed assets has been provided at the rates specified in the tariff notification issued by CERC (Note no. 15 in Schedule 18), resulting in understatement of depreciation and overstatement of profit for the year by Rs. 46106 lacs.

iii) The Government of India Scheme of April, 2002, for one time settlement of State Electricity Boards dues to the Company as on September 30, 2001 (Note no. 20 in Schedule 18), when implemented, may result in securitisation of Sundry Debtors retrospectively by issue of bonds.

7. Further to our comments in the annexure referred to in paragraph 2 above, we report that :

a) We have 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 appears from our examination of the books.

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

d) In our opinion, subject to our observations vide paragraph 1 above, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956.

e) Subject to our observations referred in paragraph 6 (ii) above resulting in overstatement of profit by Rs. 46106 lacs, and in paragraphs 5 (i) to (iv), 6 (i) and 6 (iii) the consequential effect of which is not ascertainable, in our opinion and to the best of our information and according to the explanations given to us, the said financial statements, read together with the Notes on Accounts given in Schedule 18 and Accounting Policies, in so far as these are not inconsistent with the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998, give the information required by the Companies Act, 1956, in the manner so required, and give a true and fair view in conformity with the accounting principles generally accepted in India;

i) in the case of Balance Sheet, of the state of affairs of the Company as at March 31, 2003;

ii) in the case of Profit and Loss Account, of the profit for the year ended on that date; and

iii) in the case of Cash Flow Statement, of the cash flows of the company for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT ANNEXURE REFERRED TO IN PARAGRAPH 2 OF OUR REPORT OF EVEN DATE

i) The Company has generally maintained record of Fixed Assets. However, such record do not, in few cases, give full particulars including location of Fixed Assets. The assets have been physically verified by external agencies at reasonable intervals and discrepancies noticed on such verification, though not material, have not been reconciled / adjusted.

ii) None of the Fixed assets of the company have been revalued during the year.

iii) Physical verification of stores and spares has been conducted at reasonable intervals, except for materials lying with contractors.

iv) The procedure of physical verification of stores, followed by the company, is reasonable and adequate in relation to the size of the company and the nature of its business.

v) Material discrepancies noticed on physical verification in the stock of stores and spares have been properly dealt with in the accounts, except materials lying with contractors, where verification is not undertaken.

vi) In our opinion and on the basis of our examination of the stock records, the valuation of stock is fair and proper in accordance with the normally accepted accounting principles, and is on the same basis as in the earlier years.

vii) The company has not taken any loans from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. We were informed that there are no Companies under the same management.

viii) The Company has not given any loans, secured or unsecured, to parties listed in the register maintained under section 301 of the Companies Act, 1956.

ix) The company has given deposits of Rs 9400 lacs to Canbank Financial Services Ltd (CANFINA) and Rs. 1806 lacs to Andhra Bank Financial Services Ltd (ABFSL), who have not repaid the principal amount and interest thereon. The company, however, holds an adhoc provision of Rs. 5000 lacs against deposit with CANFINA. In case of other loans and advances, in the nature of loans, given by the company, the repayment of loan and interest, wherever applicable, are generally as stipulated.

x) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures, commensurate with the size of the company and the nature of its business, with regard to purchase of stores, components, plant and machinery, equipments and other assets, and for the sale of power.

xi) According to the information and explanation given to us, there are no transactions of purchase/sale of goods, materials and services made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956, aggregating during the year to Rs 50000/- (Rupees fifty thousand only) or more, in respect of each party.

xii) According to the information and explanations given to us, the Company has a system of determining unserviceable and damaged stores and the Company makes necessary adjustments in the accounts for any such stores.

xiii) Since the Company has not accepted any deposit from the public, the question of compliance with the guidelines issued by the Reserve Bank of India and the provisions of section 58-A of Companies Act, 1956, and rules framed thereunder, does not arise.

xiv) The Company does not have any by-product. In our opinion, reasonable records have been maintained by the Company for sale and disposal of scrap.

xv) The company has an Internal Audit system. In our opinion, the scope and coverage of Audit are commensurate with the size and nature of its business. However, the compliance and implementation mechanism needs to be further strengthened.

xvi) The Central Government has prescribed maintenance of Cost Records under Section 209 (1 )(d) of the Companies Act, 1956 in respect of Transmission Operations of the Company. We have broadly reviewed the Cost Records prepared by the Company and are of the opinion that, prima facie, the prescribed records have been maintained.

xvii) The Company is regular in depositing Provident Fund dues with the appropriate authority. As informed, the provisions of the Employees State Insurance Act are not applicable to the Company.

xviii) According to the information and explanations given to us, there are no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty and Excise Duty which have remained outstanding as at March 31, 2003, for a period of more than six months from the date they became payable.

xix) According to the information and explanations given to us and the records of the company examined by us, no personal expenses have been charged to revenue account, other than those payable under contractual obligations or in accordance with generally accepted business practices.

xx) The Company is not a sick industrial company within the meaning of section 3(1 )(o) of the Sick Industrial Companies (Special Provisions) Act, 1985.

xxi) In regard to the Companys activities relating to Transmission of Power, Telecom, Consultancy, Project Management, Supervision and Contracts:-

a) The Company has a reasonable system of recording receipts, issues and consumption of materials, stores, and allocating materials consumed to the relative jobs (including construction of infrastructure for providing transmission services) commensurate with the size and nature of its business.

b) The Company has reasonable system of allocation of man hours consumed, to respective activities.

c) The Company has a reasonable system of authorisation at proper levels, and adequate system of internal control on issue and allocation of stores and labour to jobs.

d) The Company has a reasonable system of recording receipts, issues and consumption of materials and stores, commensurate with the size and the nature of its business.

xxii) In regard to the companys activities relating to the trading, since the company does not deal with tangible goods, the question of determination of damaged goods does not arise.

For Hingorani M & Co. For Venugopal & Chenoy For D.R Sen & Co. Chartered Accountants Chartered Accountants Chartered Accountants

(Pardeep Kumar) (P.V.Sri Hari) (A.K. Sinha) Partner Partner Partner

Place : Gurgaon Date : 27th June, 2003.

 
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