From Published Accounts

NOTE 30
During
the year ended 31st March, 2015, the Company (‘GIL’) received a letter
from National Stock Exchange of India Limited (‘NSE’) whereby Securities
and Exchange Board of India (‘SEBI’) directed NSE to advise the Company
to restate the consolidated financial statements of the Group for the
year ended 31st March, 2013 for the qualifications in the Auditor’s
Report for the year then ended in respect of the matters stated in the
Paragraph 1 and 2 of ‘Basis for Qualified Opinion’ in the said Auditor’s
Report, pursuant to the Paragraph 5(d)(ii) of the SEBI Circular
CIR/CFD/DIL/7/2012 dated August 13, 2012. Further, SEBI vide Circular
CIR/ CFD/DIL/9/2013 dated 5th June, 2013 had clarified that restatement
of books of account indicated in Paragraph 5 of the aforesaid circular
shall mean that the Company is required to disclose the effect of
revised financial accounts by way of revised proforma financial results
immediately to the shareholders through Stock Exchanges. However, the
financial effects of the revision may be carried out in the annual
accounts of the subsequent financial year as a prior period item.

In
response to its representations made, the Company received a letter
from SEBI dated 27th April, 2015, whereby SEBI has reiterated its
earlier advice for restatement of financial results, in terms of the
aforementioned circulars. Further, SEBI has advised the Company to
restate financial results for financial year 2012-13 and 2013-14 and the
effect of these restatement adjustments may be carried out in the
annual accounts of the financial year 2014-15, as a prior period item in
terms of the aforementioned circulars. With regard to matter described
in note 43(iii), the Group made adjustments in these consolidated
financial statements for the year ended 31st March, 2015. With regard to
the matter described in note 44(ii)(b), the Hon’ble High Court of
Delhi, while hearing the writ petition filed by the Group in this
regard, directed SEBI not to insist on restatement of accounts till the
next hearing date, which is scheduled on 4th September, 2015. Further,
the High Court of Delhi directed the Company that if the accounts for
2014-15 are prepared, the aforementioned issue will be reflected in the
accounts and the effect of both capitalisation and non-capitalisation on
the net worth will also be disclosed in due prominence, in the
financial accounts prepared by the Company. Refer note 44(ii)(b) for the
disclosure of such effects.

NOTE 44 – MATTERS RELATED TO CERTAIN POWER SECTOR ENTITIES

i) …

ii) a) …

b)
In respect of plant under construction at Rajahmundry, pending securing
supply of requisite natural gas, the Group has put on hold active
construction work of the plant. The management of the Group believes
that the indirect expenditure attributable to the construction of the
project and borrowing costs incurred during the period of uncertainty
around securing gas supplies qualifies for capitalisation under
paragraphs 9.3 and 9.4 of AS -10 and paragraphs 18 and 19 of AS -16. The
subsidiary setting up the plant had approached the Ministry of
Corporate Affairs (‘MCA’) seeking clarification/relaxation on
applicability of the aforementioned paragraphs to the gas availability
situation referred in note 44(ii)(a) above. MCA vide its General
Circular No. 35/2014 dated 27th August, 2014 on capitalisation under
AS-10 and capitalisation of borrowing cost during extended delay in
commercial production has clarified that only such expenditure which
increases the worth of the assets can be capitalised to the cost of the
fixed assets as prescribed by AS 10 and AS 16. Further, the circular
states that cost incurred during the extended delay in commencement of
commercial production after the plant is otherwise ready does not
increase the worth of fixed assets and therefore such costs cannot be
capitalised. The Group approached MCA seeking further clarification on
the applicability of the said Circular to its Rajahmundry plant and
pending receipt of requisite clarification, the Group has continued the
capitalisation of the aforesaid expenses of Rs.1,104.92 crore (including
Rs. 424.97 crore for the current year) cumulatively upto 31st March,
2015. Further as detailed in note 30 above, during the year ended 31st
March, 2015, the Company received a letter from NSE whereby SEBI has
directed NSE to advise the Company to restate the consolidated financial
statements of the Group for the year ended 31st March, 2013 as regards
the qualification on continuance of capitalization as stated aforesaid,
post cessation of active construction work. SEBI advised the Company
that the effect of these restatement adjustments may be carried out in
the annual accounts of the financial year 2014-15, as a prior period
item. The Company filed a writ petition with the Hon’ble High Court of
Delhi in this regard. In response to the writ petition filed by the
Company, the Hon’ble High Court of Delhi directed the Company that if
the accounts for 2014-2015 are prepared, the aforementioned issue will
be reflected in the accounts and the effect of both capitalisation and
non-capitalisation on the networth will also be disclosed in due
prominence, in the financial accounts prepared by the Company.
Accordingly the effect of charging off the above expenses to the
consolidated statement of profit and loss on the net worth of the Group
is disclosed below:

*
Net worth has been calculated as per the definition of net worth in
Guidance Note on “Terms used in Financial Statements” issued by the
Institute of Chartered Accountants of India.

From Auditors’ Report

Basis for Qualified Opinion

1.
As detailed in Note 44(ii)(b) to the accompanying consolidated
financial statements for the year ended 31st March, 2015, GMR
Rajahmundry Energy Limited (‘GREL’), a subsidiary of GIL, not audited by
us, has capitalised Rs. 424.97 crore and Rs. 1,104.92 crore for the
year ended and cumulatively upto 31st March, 2015 respectively towards
indirect expenditure and borrowing costs (net of income earned during
aforementioned period) incurred on a plant under construction where
active construction work has been put on hold pending securing supply of
requisite natural gas and has approached the Ministry of Corporate
Affairs (‘MCA’) seeking clarification on the applicability of the
General Circular 35/2014 dated 27th August, 2014 issued by MCA. However,
in our opinion, the aforesaid capitalisation of such expenses is not in
accordance with the relevant Accounting Standards. Had the aforesaid
expenditure not been capitalised, loss after tax and minority interest
of the Group for the year ended and cumulatively upto 31st March, 2015
would have been higher by Rs. 393.88 crore and Rs. 1,059.62 crore
respectively. In respect of the above matter, our audit report for the
year ended 31st March, 2014 was similarly qualified. In this regard,
also refer sub-paragraph 2 and 4 in Emphasis of Matter paragraph.

2.
As detailed in Note 43(iii) to the accompanying consolidated financial
statements for the year ended March 31, 2015, GMR Kishangarh Udaipur
Ahmedabad Expressways Limited (‘GKUAEL’), a subsidiary of GIL, not
audited by us, issued a notice of intention to terminate the Concession
Agreement with National Highways Authority of India (‘NHAI’) during the
earlier year and a notice of dispute to NHAI invoking arbitration
provisions of the Concession Agreement during the current year. Both the
parties have appointed their arbitrators and the arbitration process is
pending commencement.

As at 31st March, 2015, GKUAEL has
incurred and capitalised indirect expenditure and borrowing costs of
Rs.130.99 crore (including Rs. 6.56 crore incurred during the year ended
31st March, 2015) and has given capital advances of Rs. 590.00 crore to
its EPC Contractor. The Group also provided a bank guarantee of Rs.
269.36 crore to NHAI. Pursuant to the notice of dispute, GKUAEL
terminated the EPC contract on 15th May, 2015, transferred the aforesaid
project costs of Rs. 130.99 crore to claims recoverable and consequent
to the letter received from National Stock Exchange of India Limited
(‘NSE’), as referred in note 30 to the accompanying consolidated
financial statements, the Group has made a provision of Rs. 130.99 crore
towards such claims recoverable including Rs. 124.43 crore pertaining
to earlier years.

The notice of dispute and initiation of
arbitration proceedings, indicate the existence of a material
uncertainty that may cast a significant doubt about the going concern of
the GKUAEL and its impact on the net assets/bank guarantee provided by
the Group. Having regard to the uncertainty, we are unable to comment on
the final outcome of the matter and its consequential impact on the
consolidated financial statements for the year ended 31st March, 2015.
In respect of the above matter, our audit report for the year ended 31st
March, 2014 was similarly qualified. In this regard, also refer
sub-paragraph 2 in Emphasis of Matter paragraph.

3 and 4 – not reproduced

Qualified
Opinion In our opinion and to the best of our information and according
to the explanations given to us, except for the effect of the matters
described in sub-paragraphs 1 and 4 and the possible effect of the
matters described in sub-paragraphs 2 and 3 in the Basis for Qualified
Opinion paragraph, the aforesaid consolidated financial statements give
the information required by the Act in the manner so required and give a
true and fair view in conformity with the accounting principles
generally accepted in India, of the consolidated state of affairs of the
Group as at 31st March, 2015, its consolidated losses and its
consolidated cash flows for the year ended on that date.

Emphasis of Matter
We
draw attention to the following matters in the notes to the
accompanying consolidated financial statements for the year ended 31st
March, 2015:

1. …

2. N ote 30 regarding the receipt of a
letter by GIL from NSE whereby Securities and Exchange Board of India
(‘SEBI’) has directed NSE to advise GIL to restate the consolidated
financial statements of the Group for the year ended 31st March, 2013
for qualifications in the Auditor’s Report referred in the
aforementioned note, within the period specified and in terms of clause
5(d)(ii) of the SEBI Circulars dated 13st August, 2012 and 5th June,
2013. The Group has made adjustments in these consolidated financial
statements with regard to the matter described in note 43(iii) to the
accompanying consolidated financial statements. With regard to the
matter described in note 44(ii) (b) to the accompanying consolidated
financial statements, the Hon’ble High Court of Delhi, while hearing the
writ petition filed by the Group, directed SEBI not to insist on
restatement of accounts till the next hearing date. Also refer
sub-paragraphs 1 and 2 in Basis for Qualified Opinion paragraph.

3. …

4.
N ote 44(ii)(a) regarding (i) cessation of operations and the losses
including cash losses incurred by GMR Energy Limited (‘GEL’) and GMR
Vemagiri Power Generation Limited (‘GVPGL’), subsidiaries of GIL, and
the consequent erosion of net worth resulting from the unavailability of
adequate supply of natural gas; and (ii) rescheduling of the commercial
operation date and the repayment of certain project loans by GREL,
pending linkage of natural gas supply. Continued uncertainty exists as
to the availability of adequate supply of natural gas which is necessary
to conduct operations at varying levels of capacity in the future and
the appropriateness of the going concern assumption is dependent on the
ability of the aforesaid entities to establish consistent profitable
operations as well as raising adequate finance to meet their short term
and long term obligations. The accompanying consolidated financial
statements for the year ended 31st March, 2015 do not include any
adjustments that might result from the outcome of this significant
uncertainty.

5 to 11 – not reproduced

Our opinion is not qualified in respect of the aforesaid matters.