FROM PUBLISHED ACCOUNTS

DISCLAIMER OF OPINION FOR REPORT
ISSUED ON FINANCIAL RESULTS IN TERMS OF SEBI LODR

RELIANCE INFRASTRUCTURE LTD. (31^ST MARCH, 2019)

From Auditor’s Report on standalone annual financial
results

1.    We
were engaged to audit the standalone annual financial results of Reliance
Infrastructure Limited (the Company) for the year ended 31^st March,
2019, attached herewith, being submitted by the company pursuant to the
requirement of regulation 33 and regulation 52 of the Securities and Exchange
Board of India (Listing Obligations and Disclosure Requirements) Regulations,
2015 (Listing Regulations). Attention is drawn to the fact that the figures for
the last quarter ended 31^st March, 2019 and the corresponding
quarter ended in the previous year as reported in these standalone annual
financial results are the balancing figures between figures in respect of the
full financial year and the published year to date figures up to the end of the
third quarter of the relevant financial year. Also, the figures up to the end
of the third quarter had only been reviewed and not subjected to audit.

2.    These
standalone annual financial results have been prepared on the basis of the
standalone annual financial statements and reviewed quarterly financial results
which are the responsibility of the company’s management. Our responsibility is
to conduct an audit of these standalone annual financial results based on our
audit of the standalone annual financial statements which have been prepared in
accordance with the recognition and measurement principles laid down in the
Companies (Indian Accounting Standards) Rules, 2015 as per section 133 of the
Companies Act, 2013 and other accounting principles generally accepted in India
and in compliance with regulation 33 and regulation 52 of the listing
regulations.

3.    Our
responsibility is to conduct an audit of the standalone annual financial
results in accordance with the standards on auditing and to issue an auditor’s
report. However, because of the matter described in the paragraph below, we
were not able to obtain sufficient appropriate audit evidence to provide a
basis for an audit opinion on these standalone annual financial results.

4.    We
refer to Note 10 to the standalone annual financial results which describes
that the company has investments in and has various amounts recoverable from a
party aggregating Rs. 7,082.96 crores (net of provision of Rs. 3,972.17 crores)
[Rs. 10,936.62 crores as at 31^st March, 2018 net of provision of Rs.
2,697.17 crores] comprising inter-corporate deposits including accrued interest
/ investments / receivables and advances. In addition, the company has provided
corporate guarantees during the year aggregating to Rs. 1,775 crores (net of
corporate guarantees aggregating to Rs. 5,010.31 crores cancelled subsequent to
the balance sheet date) in favour of the aforesaid party towards borrowings of
the aforesaid party from various companies, including certain related parties
of the company.

According to the management of the
company, these amounts have been mainly given for general corporate purposes
and towards funding of working capital requirements of the party which has been
engaged in providing engineering, procurement and construction (EPC) services
primarily to the company and its subsidiaries and its associates. We were
unable to obtain sufficient appropriate audit evidence about the relationship
of the aforementioned party with the company, the underlying commercial
rationale / purpose for such transactions relative to the size and scale of the
business activities with such party and the recoverability of these amounts.
Accordingly, we are unable to determine the consequential implications arising
therefrom and whether any adjustments, restatement, disclosures or compliances
are necessary in respect of these transactions, investments and recoverable
amounts in the standalone annual financial results of the company.

5.    On
account of the substantive nature and significance of the matter described
above, we have not been able to obtain sufficient appropriate audit evidence to
provide a basis for an audit opinion as to whether these standalone annual
financial results:

(i)    are
presented in accordance with the requirements of regulation 33 and regulation
52 of the listing
regulations; and

(ii)   give
a true and fair view of the net loss and other comprehensive income and other
financial information for the year ended 31^st March, 2019.

6.    (a)
We draw attention to Note 3 to the
standalone annual financial results regarding the scheme of amalgamation (the
scheme) between Reliance Infraprojects Limited (a wholly-owned subsidiary of
the company) and the company sanctioned by the Honourable High Court of
Judicature at Bombay vide its order dated 30^th March, 2011 wherein
the company, as determined by the Board of Directors, is permitted to adjust
foreign exchange gain credited to the standalone statement of profit and loss
by a corresponding credit to general reserve which overrides the relevant
provisions of Indian Accounting Standard 1 Presentation of financial
statements. Pursuant to the scheme, foreign exchange gain of Rs. 192.24
crores for the year ended 31^st March, 2019 has been credited to
standalone statement of profit and loss and an equivalent amount has been
transferred to general reserve.

(b)  We
draw attention to Note 4 to the standalone annual financial results wherein,
pursuant to the scheme of amalgamation of Reliance Cement Works Private Limited
with Western Region Transmission (Maharashtra) Private Limited (WRTM),
wholly-owned subsidiary of the company, which was subsequently amalgamated with
the company with effect from 1^st April, 2013, WRTM or its
successor(s) is permitted to offset any extraordinary / exceptional items, as
determined by the Board of Directors, debited to the statement of profit and
loss by a corresponding withdrawal from general reserve, which override the
relevant provision of Indian Accounting Standard 1 Presentation of financial
statements. The Board of Directors of the company in terms of the aforesaid
scheme, determined an amount of Rs. 6,616.02 crores for the year ended 31^st
March, 2019 as exceptional item comprising various financial assets amounting
to Rs. 5,354.88 crores and loss on sale of shares of Reliance Power Limited
(RPower), an associate company pursuant to invocation of pledge of Rs. 1,261.14
crores. The aforesaid amount of Rs. 6,616.02 crores for the year ended 31^st
March, 2019 has to be debited to the standalone statement of profit and loss
and an equivalent amount has been withdrawn from general reserve.

Had the accounting treatment
specified in paragraphs 6(a) and 6(b) above not been followed, loss before tax
for the year ended 31^st March, 2019 would have been higher by Rs.
6,423.78 crores and general reserve would have been higher by an equivalent
amount.

7.    We draw attention to Note 8 of the
standalone annual financial results. The factors, more fully described in the
aforesaid Note, relating to losses incurred during the year and certain loans
for which the company is guarantor, indicate that a material uncertainty exists
that may cast significant doubt on the company’s ability to continue as a going
concern.

8.    We
draw attention to Note 9 to the standalone annual financial results which
describes the impairment assessment performed by the company in respect of its
investment of Rs. 5,231.18 crores and amounts recoverable aggregating to Rs.
1,219.63 crores in RPower as at 31^st March, 2019 in accordance with
Indian Accounting Standard 36 Impairment of assets / Indian Accounting
Standard 109 Financial Instruments. This assessment involves significant
management judgement and estimates on the valuation methodology and various
assumptions used in determination of value in use / fair value by independent
valuation experts / management as more fully described in the aforesaid note.
Based on management’s assessment and the independent valuation reports, no
impairment is considered necessary on the investment and the recoverable
amounts.

…..

Notes below financial results of
Reliance Infrastructure Ltd. (extracts of relevant notes)

3.  
Pursuant to the scheme of
amalgamation of Reliance Infraprojects Limited with the company, sanctioned by
the Hon’ble High Court of Judicature at Bombay on 30^th March, 2011,
net foreign exchange gain of Rs. 98.98 crores and Rs. 192.24 crores for the
quarter and year ended 31^st March, 2019, respectively, has been
credited to the statement of Profit and Loss and an equivalent amount has been
transferred to General Reserve. Had such transfer not been done, the loss
before tax for the quarter and year ended 31^st March, 2019 would
have been lower by Rs. 98.98 crores and Rs. 192.24 crores, respectively, and
General Reserve would have been lower by Rs. 192.24 crores. The treatment
prescribed under the scheme overrides the relevant provisions of Ind AS 1 Presentation
of Financial Statements. This matter has been referred to by the auditors
in their report as an emphasis of matter.

4.    Pursuant
to the scheme of amalgamation of Reliance Cement Works Private Limited with
Western Region Transmission (Maharashtra) Private Limited (WRTM), wholly-owned
subsidiary of the company, which was subsequently amalgamated with the company
w.e.f. 1^st April, 2013, during the quarter and year ended 31^st
March, 2019 an amount of Rs. 6,616.02 crores has been withdrawn from General
Reserve and credited to the statement of Profit and Loss against the
exceptional items of Rs. 8,597.36 crores and Rs. 12,797.36 crores for the
quarter and year ended 31^st March, 2019 representing a loss on sale
/ w/off of / provision for diminution in the value of certain financial assets
including Rs. 1,261.14 crores being loss on sale of investments pursuant to
invocation of pledge. Had such withdrawal not been done, the loss before tax
for the quarter and year ended 31^st March, 2019 would have been
higher by Rs. 6,616.02 crores and General Reserve would have been higher by an
equivalent amount. The treatment prescribed under the scheme overrides the
relevant provisions of Ind AS 1 Presentation of Financial Statements.
This matter has been referred to by the auditors in their report as an emphasis
of matter.

…..

8.  
The company has incurred net
losses (after impairment of assets) of Rs. 913.39 crores during the year ended
31^st March, 2019. Further, in respect of certain loan arrangements
of certain subsidiaries / associates, certain amounts have fallen due and / or
have been reclassified as current liabilities by the respective subsidiary /
associate companies. The company is guarantor in respect of some of the loans /
corporate guarantee arrangements and consequently, the company’s ability to
meet its obligations is significantly dependent on material uncertain events
including restructuring of loans, achievement of debt resolution and
restructuring plans, time-bound monetisation of assets as well as favourable
and timely outcome of various claims. The company is confident that such cash
flows would enable it to service its debt, realise its assets and discharge its
liabilities, including devolvement of any guarantees / support to the
subsidiaries and associates in the normal course of its business. Accordingly,
the standalone annual financial results of the company have been prepared on a
going concern basis.

9.  
The company has an investment of
Rs. 5,231.18 crores as at 31^st March, 2019 which represents 33.10%
shareholding in Reliance Power Limited (RPower), an associate company. Further,
the company also has net recoverable amounts aggregating to Rs. 1,219.63 crores
from RPower as at 31^st March, 2019. RPower has incurred a net loss
(after impairment of certain assets) of Rs. 2,951.82 crores for the year ended
31st March, 2019 and its current liabilities exceeded its current assets by Rs.
12,249.17 crores as at that date. Management has performed an impairment
assessment of its investment in RPower as required by Indian Accounting
Standard 36 Impairment of assets, Indian Accounting Standard 109 Financial
Instruments, by considering inter alia the valuations of the
underlying subsidiaries of RPower which are based on their value in use
(considering discounted cash flows) and valuations of other assets of RPower /
its subsidiaries based on their fair values, which have been determined by
external valuation experts and / or management’s internal evaluation. The
determination of the value in use / fair value involves significant management
judgement and estimates on the various assumptions including relating to growth
rates, discount rates, terminal value, time that may be required to identify
buyers, negotiation discounts, etc. Further, management believes that the above
assessment based on value in use / fair value appropriately reflects the
recoverable amount of the investment as the current market price / valuation of
RPower does not reflect the fundamentals of the business and is an aberration.
Based on management’s assessment and the independent valuation reports, no
impairment is considered necessary on this investment and recoverable amounts.

10.
The Reliance Group of companies, of which
the company is a part, supported an independent company in which the company
holds less than 2% of equity shares (EPC Company) to inter alia
undertake contracts and assignments for the large number of varied projects in
the fields of power (thermal, hydro and nuclear), roads, cement, telecom, metro
rail, etc. which were proposed and / or under development by the Group. To this
end, along with other companies of the Group, the company funded EPC Company by
way of EPC advances, subscription to Debentures and Preference Shares and
inter-corporate deposits. The aggregate funding provided by the company as on
31^st March, 2019 was Rs. 7,082.96 crores (previous year Rs.
10,936.62 crores) net of provision on Rs. 3,972.17 crores, Rs. 2,697.17
crores). In addition, the company has provided corporate guarantees during the
year aggregating (net of subsequent cancellation) to Rs. 1,775 crores.

The activities of EPC Company have
been impacted by the reduced project activities of the companies of the Group.
In the absence of the financial statements of the EPC Company for the year
ending 31^st March, 2019 which are under compilation, it has not been
possible to complete the evaluation of the nature of relationship, if any,
between the independent EPC Company and the company. At present, based on the
analysis carried out in earlier years, the EPC Company has not been treated as
related party.