From Published Accounts

Illustrative    Limited   
Review Report for a company where Interim Resolution Professional (IRP)
has been appointed under the Corporate Insolvency Resolution Process (CIRP)

Lanco Infratech
Ltd (From Notes to Unaudited Standalone Financial
Results for the quarter ended December 31, 2017)

STATEMENT
OF STANDALONE RESULTS FOR THE QUARTER AND NINE MONTHS ENDED DECEMBER 31, 2017

STATEMENT
WISE REVENUE, RESULTS, ASSETS AND LIABILITIES FOR THE QUARTER AND NINE MONTHS
ENDED DECEMBER 31, 2017 – STANDALONE

1. Hon’ble National Company Law Tribunal
(NCLT), Hyderabad Bench vide order dated August 07, 2017, has initiated
Corporate Insolvency Resolution Process (CIRP) in the Company under Section 7
of the Insolvency and Bankruptcy Code, 2016 (IBC), based on the application
filed by IDBI Bank Limited, Financial Creditor of the Company. Mr. Savan
Godiawala (IP Registration No.IBBI.IPA-001/IP-P00239/2017-18/10468) was
appointed as Interim Resolution Professional (IRP) with effect from August 07,
2017 under the provisions of IBC. In the first Committee of Creditors meeting
dated September 12, 2017, Mr. Savan Godiawala has been confirmed as Resolution
Professional. The Resolution Professional has relied upon assistance provided
by members of the Audit Committee in review of the aforesaid unaudited
financial results and representations, clarifications and explanations provided
by the Managing Director & Chief Executive Officer, Chief Financial
Officer, other directors and Key Managerial Personnel of the Company in
relation to such financial results in the meetings called by the Resolution
Professional. The reviewed financial results have been examined by the
directors of the Company constituting the Board of Directors of the company
(powers of whom stand suspended in accordance with IBC) and accordingly, the
Resolution Professional, in reliance of such examination by the directors of
the Company and the aforesaid representations, clarifications and explanations,
has approved the same. It is clarified however, that the Resolution Professional
has not conducted an independent verification of these unaudited financial
results and has not certified on the truthfulness, fairness, accuracy or
completeness of these results, in so far as it pertains to the period prior to
commencement of the CIRP and his appointment. The Resolution Professional has
approved the financial results only to the limited extent of discharging the
power of the board of directors of the company which has been conferred upon
him inter alia in terms of provisions of section 17 of Insolvency and
Bankruptcy Code, 2016.

2. Exceptional item includes:

a)  
The company acquired Griffin Coal Mining Company Pty Limited and
Carpenter Mine Management Pty Limited referred as Griffin Coal Mine Operations
through its erstwhile wholly owned subsidiary Lanco Resources International Pte
Limited (LRIPL) to further invest in expansion to enhance the capacity.
Post-acquisition, many approvals were obtained for mine expansion and other
infrastructure related facilities. LRIPL along with its subsidiary companies
(Griffin Coal Mine Operations) has been incurring losses from acquisition
onwards. Due to circumstances beyond the control of company, the mine expansion
got delayed, resultantly anticipated incremental EBIDTA could not be earned,
thus increasing the loans from the lenders to meet the interest obligations.
Due to default in debt servicing, as per the Security Agreement entered by
LRIPL with lenders, lenders appointed the Receivers and Managers on April 27,
2017 and transferred the pledged shares to the nominee of the Security Agent of
the lenders. Consequent to this, during the quarter ended June 30, 2017,
impairment provision has been created against the receivables in respect of
said share transfer at carrying value of Rs.534.16 cr, Loans receivable along
with interest Rs.567.27 cr, and charged off the balance existing in the Foreign
Currency Monetary item Translation Difference account of  Rs.9.83 cr pertaining to the said loans
receivable.

b)  A
provision of Rs.20.57 cr is created in the quarter ended June 30, 2017 for
diminution in the value of investment of Lanco Wind Power Private Limited, a
subsidiary of the company.

c)   A
provision of Rs.130.56 cr is created in the previous quarter ended September
30, 2017,  for possible diminution in the
value of investment of Lanco Power Limited (LPL), a subsidiary of the company
which is holding the shares of Lanco Mandakini Hydro Energy Private Limited
(LMHEPL) directly and indirectly, on account of lenders proposal to invoke
change in management (outside SDR) by exercising the pledged shares of the
LMHEPL.

3. Mahatamil Mining and Thermal Energy
Limited (MMTEL), a subsidiary of the company had entered into Coal Mining
Services Agreement (CMSA) with Mahatamil Collieries Limited (MCl) for
developing and mining of Gare Pelma Sector II Coal block located in Raigarh
district in the state of Chhattisgarh. The allocation of said coal block was
cancelled by the Hon’ble Supreme Court’s order dated September 24, 2014. As per
CMSA, MMTEL has incurred an amount of Rs.204.66 cr till March 31, 2015 towards
exploration, infrastructure and performance security deposit. The amount
incurred has been claimed by MMTEL as per terms of the Coal Mines (Special
Provisions) Ordinance, 2014. The company’s investment of Rs.90.42 cr and other
advances amounting to Rs.80.84 cr made in MMTEL as on December 31, 2017, is
considered recoverable from MCL by the management based on the said claim. This
is an emphasis of matter in the auditor’s limited review report.

4. Lanco Hoskote Highways Limited (LHHL) and
Lanco Devihalli Highways Limited (LDHL), subsidiaries of the company,  have been incurring losses since commencement
of operations and also due to de-recognition of Capital Grant from Reserves as
per the requirement of Ind AS 11 Appendix – A on Service Concession
Arrangement, the Net Worth has eroded significantly as at December 31, 2017.
The Management is taking necessary steps to improve the profitability in future
and is of the view that the carrying value of Investment of the company along
with its subsidiaries aggregating to Rs.805.66 cr in LHHL & LDHL is
realisable at the value stated therein. Accordingly, no adjustments have been
made in these financials results. This is an emphasis of matter in the
auditor’s limited review report.

5. Lanco Hills Technology Park Private
Limited (LHTPPL), a subsidiary of the company has been incurring losses and the
Net Worth has eroded significantly as at December 31, 2017. The Management is
taking various initiatives to improve the profitability, and completion of
certain project components through development partners and is of the view that
the carrying value of the Investment Rs.1,332.08 cr in LHTPPL is realisable at
the value stated therein. Accordingly, no adjustments have been made in these
financials results. This is an emphasis of matter in the auditor’s limited
review report.

6. Lanco Kanpur Highways Limited (LKHL), a
subsidiary of the company, had entered into concession agreement with NHAI for
developing a road project in Uttar Pradesh state under BOOT mechanism. The
construction work is delayed due to right of way to be arranged by NHAI. During
the FY 2015-16, LKHL had received notice of termination of concession agreement
from NHAI, and LKHL issued a notice of termination of concession agreement to
NHAI. Arbitration proceedings have been initiated to settle the claims and the
counter claims associated with the termination as per the Concession Agreement.
Based on the expert legal opinion, the management is confident on the
recoverability of its claims submitted and is not expecting any liability on
counter claims filed by NHAI. The company invested in LKHL Rs.196.50 cr, other
advances receivable Rs.0.23 cr and received EPC contract mobilisation advance
of Rs.143.54 cr as on December 31, 2017. This is an emphasis of matter in the
auditor’s limited review report.

7. Diwakar Solar Projects Limited (DSPL), a
subsidiary of the Company engaged in setting up solar thermal power plant (100
MW); is affected on account of various factors beyond the control of the
management. DSPL has filed petition with Central Electricity Regulatory Commission
(CERC) for extension of Commercial Operation Date (COD) and to revise the Power
Purchase Agreement (PPA) Tariff for viability of the project on the ground that
the bid Direct Normal Irradiation (DNI) was different from the actual DNI. The
Management is confident upon tariff revision and extension of COD for executing
the project. In view of this, the company does not foresee any requirement for
adjustment in carrying value of investment of Rs.219.59 cr as at December 31,
2017. This is an emphasis of matter in the auditor’s limited review
report.           

8. During/the previous quarter ended
September 30, 2017, one of the lenders has recalled its loans given to the
Lanco Teesta Hydro Power Limited (LTHPL), an associate of the company and
invoked the pledged shares issued by LTHPL as security towards the loan
facility amounting to Rs.296.63 cr. Vide share purchase agreement dated March
30, 2012, shares held by the company in LTHPL were transferred to Lanco Hydro
Power Limited, a subsidiary of the company. The eventual financial obligation
on the company is yet to be determined and hence, no adjustments have been made
in these financial results. This is an emphasis of matter in the auditor’s
limited review report.

9. During the previous quarter ended
September 30, 2017, one of the lenders has recalled its loans given to the
group companies and invoked the Corporate Guarantees issued by the company in
favour of those group companies amounting to Rs.7,266.17 cr. The eventual
financial obligation on the company is yet to be determined, hence, no
adjustments have been made in these financial results including changes that
may be warranted due to exchange fluctuations. 
This is a matter of qualification in the auditor’s limited review report.   

10. During the nine months period ended
December 31, 2017, certain customers of the Company encashed Bank Guarantees
(BG) provided by the Company towards 
advances received and performance security. In the opinion of the
management against the encashed BGs, value amounting to Rs.519.69 cr is
recoverable from the customers and necessary steps are being initiated.
Consequently, no adjustments have been made in these financial results. This is
a matter of qualification in the auditor’s limited review report.

11. The Company had been referred to NCLT by
one of its lenders and consequently CIRP has been initiated, as detailed in
Note 1. During the quarter ended June 30, 2017, the Company’s Net worth has
been fully eroded. The Company’s ability to meet its contractual obligations
involving EPC Contracts, financial obligations to its lenders and investment
commitments to group companies is dependent on resolution of the matters as
part of CIRP. Currently, the Company is in the process of identifying the
resolution alternatives, and accordingly, the financial results are prepared on
a going concern basis. This is a matter of qualification in the auditor’s
limited review report.

12. 
As reported in the previous periods, during the quarter the lenders of
Lanco Kondapalli Power Limited (LKPL) converted portion of their debt into
equity shares of LKPL under Strategic Debt Restructuring Scheme (SDR), RBI
guidelines. On account of SDR, the effective shareholding of the company in
LKPL reduced to 28.15% from 58.91% and ceased to be subsidiary with effect from
November 22, 2017.

From
Independent Auditors’ Review Report on Standalone Unaudited Financial Results

1. The Hon’ble National Company Law Tribunal
(“NCLT”), Hyderabad Bench, admitted the Corporate Insolvency
Resolution Process (“CIRP”) application filed by a Financial Creditor
of Lanco Infratech Limited (“the Company”), and appointed an
Interim Resolution Professional (“IRP”), in terms of the Insolvency
and Bankruptcy Code, 2016 (“the Code”) to manage the affairs of the
Company as per the provisions of the Code. The Committee of Creditors of the
Company, in its meeting dated September 12, 2017, confirmed the IRP as the
Resolution Professional (“RP”) for the Company. In view of pendency
of the CIRP, and in view of suspension of powers of Board of Directors and as
explained to us, the powers of adoption of this standalone financial results
vests with the RP.

2. Not reproduced

3. Not reproduced

4. Without qualifying our review conclusion,
attention is invited to

a) 
Note 3 to the financial results, dealing with cancellation of coal
blocks by the Hon’ble Supreme Court, which included coal mine jointly allotted
to Tamil Nadu Electricity Board and Maharashtra State Mining Corporation
Limited (“the Allottees”). Mahatamil Mining and Thermal Energy
Limited (MMTEL), a subsidiary of the Company, entered into Coal Mining Services
Agreement with the Allottees of the mine, pursuant to which, the amount
invested and advances provided aggregating to Rs.171.26 crore, the
realisability of which is dependent on the compensation to be awarded under the
Ordinance issued by the Government of India. The Company obtained a legal
opinion in this regard, based on which, the investment is considered to be
recoverable, notwithstanding the denial of obligation by the Allottees in
regard to certain cost components, and no adjustments have been made in these
financial results, pending the final outcome of claims by MMTEL.

b) Note 4 to the financial results, in
relation to the carrying value of investments in Lanco Hoskote Highway Limited
(LHHL) and Lanco Devihalli Highways Limited (LDHL), subsidiaries of the
Company, which have been incurring losses ever since the commencement of
commercial operation and accumulated losses incurred so far eroded the net
worth significantly. Taking into consideration the management’s assessment of
the situation including its efforts towards seeking further concessions from
grantors, the management of the Company is of the view that the carrying value
of the investment is realizable at the value stated therein. Accordingly, no
adjustments have been made in these financial results.

c) Note 5 to the financial results, in
relation to the carrying value of investment in Lanco Hills Technology Park
Private Limited (LHTPPL), a subsidiary of the Company, where the accumulated
losses incurred so far eroded the net worth significantly. Taking into
consideration the management’s assessment of the situation including its
efforts to complete certain project components through development partners,
the management of the Company is of the view that the carrying value of the
investment is realisable at the value stated therein. Accordingly, no
adjustments have been made in these financial results.

d) Note 6 to the financial results, in
relation to Lanco Kanpur Highways Limited (LKHL), a subsidiary of the Company,
which has received a notice of termination to the Concession Agreement from
National Highways Authority of India (NHAl) and simultaneously, LKHL has also
issued a notice of termination to NHAI. Arbitration proceedings have been
initiated to settle the claims and the counter claims associated with the
termination as per the Concession Agreement. LKHL has incurred certain costs
towards the project during the period when the concession was in force and
subsequently, aggregating to Rs.53.19 crore, the reliability of these amounts
is dependent on the outcome of the arbitration proceedings. Accordingly, no adjustments
have been made in these financial results.

e) Note 7 to the financial results, in
relation to the carrying value of investment 
amounting to Rs.219.59 crore in Diwakar Solar Projects Ltd (DSPL), a
subsidiary of the Company, which explains the management’s efforts in obtaining
the extension of revised COD and revision in tariff. In the opinion of the
management, the execution of the project with the extended timelines for
bringing the assets to its intended use with revised tariff being considered
favourably, is still viable even after considering low implementation
activities and significant time and cost overruns. Accordingly, in the opinion
of the management, no provision is required for any diminution in the carrying
value of the investment. Pending the final outcome in the matters relating to
extension of revised COD and revision of tariff, no adjustments have been
carried out to the carrying value of the investment.

f) Note 8 to the financial results, In
regard to invocation of pledged shares of Lanco Teesta Hydro Power Limited
(LTHPL), an associate of the Company, issued by the Company in favour of the
lender of LTHPL, amounting to Rs.296.63 crore. One of the lenders of LTHPL, has
filed a petition in NCLT in terms of Section 7 of the Code, which is pending
admittance by the NCLT. In view of the factors 
detailed in the said note and pending determination of the eventual
financial obligation on the Company, no adjustments have been made to these
financial results.

Our conclusion is not qualified in respect
of the matters reported in paragraph 

5. 
Attention is invited to

a) Note 9 to the financial results, in
regard to the various Corporate Guarantees extended by the Company in favour of
one of the lenders of Group Companies. The lender has invoked these guarantees
amounting to Rs.7,266.17 crore and is pursuing recovery actions against the
Company. In view of the factors detailed in the said note and pending
determination of the eventual financial obligation on the Company, the impact
on the financial results is also not quantifiable, accordingly no adjustments
have been made to these financial results.

b) 
Note 10 to the financial results, regarding encashment of Bank Guarantee
by customers of the Company amounting to Rs.949.35 crore. The management is of
the opinion that the encashment is not in accordance with the conditions
specified in the Engineering, Procurement and Construction (EPC) contract and
is of the opinion that the encashed value of Bank Guarantee, net of advances,
is fully recoverable and no adjustments have been made in these financial
results. Pending initiatives by the management against the invocation of Bank
Guarantee, had the impact been factored in these financial results, the Loss
for the Quarter would have been higher by Rs.519.69 crore with a consequential
impact on reserves, to the same extent.

c) 
Note 11 to the financial results, regarding application by the Financial
Creditor, initiating the insolvency provisions under the Insolvency and
Bankruptcy Code, 2016 (the Code) and the consequential appointment of RP under
the Code, and adequacy of disclosure concerning the Company’s ability to meet
its contractual obligation in respect of EPC Contracts including management’s
technical estimates in regard to estimated cost to completion, realisation of
value of inventories and other financial assets, financial obligations
including repayment of various loans including invoked guarantees both by
lenders and customers, unpaid interest and the ability to fund various obligations
pertaining to operations including unpaid/overdue creditors, for
ensuring/commencing normal operations and further investments required towards
ongoing projects under construction. These matters essentially require the
Company to resolve the situations specified therein within the framework
specified through the CIRP. Under these circumstances, the possible erosion in
the carrying value of Investments is also not ascertainable at this point in
time. In the absence of any specific guidance or direction that can be assessed
out of CIRP, material uncertainties exist that may cause significant doubt on
the Company’s ability to continue as a going concern. However, the
appropriateness of preparation of financial results on a going concern basis is
subject to the Company’s ability to resolve the matters through the CIRP or
such other forum or manner as specified in the said Note.

6. Based on our review conducted as stated
above, except for possible effects of the matters specified in Paragraph 5
above, nothing has come to our attention that causes us to believe that the
accompanying statement of unaudited financial results prepared in accordance
with aforesaid Indian Accounting Standards and other accounting principles
generally accepted in India, has not disclosed the information required to be
disclosed in terms of Regulation 33 of the SEBI (Listing Obligations &
Disclosure Requirements) Regulations, 2015 as modified by Circular No.
CIR/CFD/FAC/62/2016 dated July 5, 2016, including the manner in which it is to
be disclosed, or that it contains any material misstatement.