H.G. infra Engineering Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of H.G. Infra Engineering Limited ("the Company"), which includes three jointly controlled operations consolidated on a proportionate basis (Refer note 51 to Standalone Financial Statements), which comprises the Standalone Balance Sheet as at March 31, 2023, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as the "standalone financial statements").
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 Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards ("Ind AS") prescribed under Section 133 of the Act read with Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, its total comprehensive income (comprising of profit and other comprehensive income), its changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the standalone financial statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence obtained by us, and the audit evidence obtained by the other auditors in terms of their reports referred to in "Other Matters" paragraph below, is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements for the year ended March 31, 2023. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Key Audit Matter
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Our audit procedures in respect of this area included the following:
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1. Estimation of contract cost and revenue recognition. (Refer to note 1 (F) (i), 2 (d), 29 and 52) of the Standalone Financial Statements)
Revenue from construction contracts is recognised over a period of time in accordance with the requirements of Ind AS 115, 'Revenue from Contracts with Customers. The contract revenue amounts to H43,071.01 million for engineering, procurement and construction contracts, which usually extends over a period of 2-3 years, and the contract prices are fixed and, in few cases, subject to clauses with price variances and variable consideration.
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i. Evaluated the accounting policy for revenue recognition and assessed compliance of the policy with the principles enunciated under Ind AS 115 - 'Revenue from Contracts with Customer.
ii. Understood and evaluated the design and tested the operating effectiveness of key internal financial controls, including those related to review and approval of estimated costs and review of provision for foreseeable losses, if any, by the authorised representatives.
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Key Audit Matter
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Our audit procedures in respect of this area included the following:
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n accordance with Input method prescribed under Ind AS 115, the contract revenue is measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total costs. This method requires the Company to perform an initial assessment of total estimated cost and reassess the total construction cost at the end of each reporting period to determine the appropriate percentage of completion.
The estimation of total cost to complete the contract involves significant judgement and estimation throughout the period of contract, as it is subject to revision as the contract progresses -based on latest available information including physical work done on the ground, changes in cost estimates and need to accrue provision for onerous contracts, if any. Besides recognition
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iii. We obtained the revenue workings (percentage of completion calculations) from the Company's management, for all contracts, containing actual costs incurred, estimated costs (comprising of actual costs and remaining costs to completion), estimated contract revenue and actual revenues recognised during the year based on proportion of actual costs to estimated costs. For sample of contracts, we agreed contract revenue with key contractual terms, agreed current year's actual costs with system generated reports and agreed estimated costs with costs sheets for individual contracts approved by the authorised representatives. Reperformed the calculation of revenues during the year using proportion of actual costs to estimated costs and compared the results with workings provided by the Company.
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of revenues based on actual costs and estimated costs to
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iv. For actual costs incurred during FY 2022-23, we tested the
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complete the work, at the period end, the measurement and
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samples to appropriate supporting documents.
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recognition of contract assets (unbilled revenue) and contract liabilities (unearned revenue) related to each of the contracts is also dependent on cost estimates.
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v. To validate the remaining costs to completion, for sample contracts, we obtained the approved costs sheets (for each of such sample contracts) containing the breakdown of such
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n view of above, we have considered the estimation of construction contract costs as a key audit matter.
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costs. Evaluated the reasonableness of management's judgements and assumptions through comparison of actual margins during the year with base margins estimated at the beginning, comparison between financial progress (proportion of actual costs to estimated costs) and physical progress certified by the Independent Engineer, past trends of recovery of price escalation with incremental costs incurred and comparison of actual costs within similar contracts.
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vi. Assessed the adequacy and appropriateness of the disclosures made in standalone financial statements in compliance with the requirements of Ind AS 115.
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2. Valuation of accounts receivable and contract assets in
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i. Understood and evaluated the design and tested the
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view of risk of credit losses. (Refer note 1 (K), 39(i), 7 and
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operating effectiveness of key internal financial controls in
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11 - Trade Receivables and Note 16(a) for contract asset
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relation to determination of expected credit loss.
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to Standalone Financial Statements)
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i. Obtained confirmation from parties, for sample balances,
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Accounts receivable and Contract assets are significant
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with respect to outstanding balances. Wherever confirmations
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items in the Company's standalone financial statements
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are not received for the samples, performed alternate procedures
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aggregating to H14,63 7.81 million as of March 31, 2023
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through verification of Company's invoices approved by the
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and provision for impairment of receivables and contract
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respective customers which represents acknowledgement of
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assets amounted to H317.64 millions as at March 31, 2023.
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work delivered.
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The Company has a concentration of credit exposure on certain customers, which include government and private organisations, where there are delays in collections due to various reasons.
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iii. Performed inquiry procedures with senior management of the Company regarding status of collectability of the receivable and contract assets.
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The management periodically assess the adequacy of provisions recognised, as applicable, on receivables and contract assets, based on factors such as credit risk of the customer, status of the project, discussions with the customers and underlying contractual terms and conditions. This involves significant judgement.
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iv. In respect of material contract balances, corroborated our inquiry procedures with the correspondence between the Company and the customers, contracts and other documents.
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Key Audit Matter
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Our audit procedures in respect of this area included the following:
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Given the relative significance of these receivables and contract assets to the standalone financial statements and the nature and extent of audit procedures involved to assess the recoverability of receivables and contract assets, we determined this to be a key audit matter.
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v. Assessed the inputs used by the Management to determine the amount of allowances by considering factors such as credit risk of the customer, cash collections, past history and status of the project, and correspondence with customers.
vi. Presented the results of our work done to the audit committee.
vii. Assessed the adequacy and appropriateness of the disclosures made in the standalone financial statements in this regard.
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information Other than the Standalone Financial Statements
The Company's Management and Board of Directors are responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Director's Report, Corporate Governance Report and Other Information included in the Annual Report but does not include the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and Board of Directors for the Standalone Financial Statements
The Company's Management and Board of Directors are responsible for the matters stated in Section 134(5) of 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 other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards ("Ind AS") specified under Section 133 of the Act. 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 standalone financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, Management and Board of Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
We give in "Annexure A" a detailed description of Auditor's responsibilities for Audit of the Standalone Financial Statements.
Other Matters
1. We did not audit the financial statements of three jointly controlled operations included in the standalone financial statements of the Company, whose financial statements reflect total assets of H40.26 millions as at March 31, 2023, and total revenues of H63.45 millions, total net profit after tax of H0.11 million and total comprehensive income of H0.11 million for the year ended March 31, 2023, and cash inflows (net) of H0.23 million for the year then ended. The
financial statements of these jointly controlled operations have been audited by other auditors whose reports have been furnished to us by the Management, and our opinion on the standalone financial statements (including other information) in so far relates to the amounts and disclosures included in respect of these Jointly controlled operations, is based solely on the report of other auditors.
Our opinion is not modified in respect of the above matter with respect to our reliance on the work done and the reports of the other auditors.
2. The standalone financial statements of the Company for the year ended March 31,2022, were audited by another firm of Chartered Accountants along with the joint auditors i.e. M/s Shridhar & Associates, Chartered Accountants, whose report dated May 23, 2022 expressed an unmodified opinion on those standalone financial statements.
Our opinion is not modified in respect of the above matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of Section 143 of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
(c) The Standalone Balance Sheet, the Standalone Statement of Profit and Loss (including other comprehensive income), the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flow 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 Ind AS specified under Section 133 of the Act;
(e) On the basis of the written representations received from the directors as on March 31, 2023 taken on record by the Board of Directors, none of the directors are disqualified as on March 31,2023 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 with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure C";
(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 standalone financial statements. Refer Note 46 to the standalone financial statements;
ii. The Company has long-term contracts for which there were no material foreseeable losses as at March 31,2023. Refer Note 16(a) to the standalone financial statements. Further, the Company did not have any outstanding derivative contracts as at March 31, 2023;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended March 31, 2023;
iv. 1. The Management has represented that,
to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Company or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
2. The Management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, as on the date of this audit report, that the Company shall, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate
Beneficiaries") by or on behalf of the Funding Party or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
3. Based on the audit procedures performed that have been considered reasonable and appropriate in the circumstances, and according to the information and explanations provided to us by the Management in this regard nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e) as provided under (1) and (2) above, contain any material mis-statement.
v. The dividend declared and paid during the year by the Company is in compliance with section 123 of the Act.
vi. As proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the company only w.e.f. April 1, 2023, reporting under this clause is not applicable.
3. In our opinion and according to information and explanations given to us, the remuneration paid and provided by the Company to its directors during the current year is within the limits prescribed under Section 197 of the Act and the rules thereunder.
For MSKA & Associates For Shridhar & Associates
Chartered Accountants Chartered Accountants
ICAI Firm Registration No.105047W ICAI Firm Registration No.134427W
Rahul Aggarwal Abhishek Pachlangia
Partner Partner
Membership No.: 505676 Membership No.: 120593
UDIN: 23505676BGXENT7371 UDIN: 23120593BGWJLX6234
Place: Jaipur Place: Jaipur
Date: May 10, 2023 Date: May 10, 2023
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