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INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF HINDUSTAN PETROLEUM CORPORATION LIMITED
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of HINDUSTAN PETROLEUM CORPORATION LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2015, 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 in which, is incorporated financial statements of Visakh Refinery, audited by the branch auditor, whose report has been considered in preparing this report.
Management's Responsibility for the 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.
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 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 accounting policies used and the reasonableness of the accounting estimates made by 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.
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, of the state of affairs of the Company as at March 31, 2015, and its profit and its cash flows for the year ended on that date.
Emphasis of Matter
a) We refer to Note No. 58 which indicates that the Company has less than the minimum number of Independent Directors required in terms of the provisions contained in the listing agreement and the Companies Act, 2013. Pending such appointment, these financial statements have been reviewed and recommended to the Board of Directors by the Audit Committee consisting of only one Independent Director; and
b) We refer to Note No. 50 which describes the basis of calculation of the overall ceiling for investments in joint ventures and subsidiaries in terms of the guidelines issued by the Department of Public Enterprises, Government of India where the Company has approached the Ministry of Petroleum and Natural Gas and necessary approval / clarification is awaited. Our opinion is not modified in respect of these matters.
The accompanying standalone financial statements include the Company's proportionate share in jointly controlled assets Rs. 24.15 crores, liabilities Rs. 114.20 crores, Income Rs. Nil, expenditure Rs. 27.13 crores and the elements making up the Cash Flow Statement and related disclosure in respect of 23 nos. of blocks under NELP / joint venture accounts for exploration and production, which are based on unaudited statements from the respective operators and certified by the management. Our observations thereon are solely based on such statements from the operators and certification of the management.
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 section 143(11) of the Act, we give in the Annexure I a statement on the matters specified in paragraph 3 and 4 of the Order, to the extent applicable.
2. As required by the section 143(5) of the Act, we give in the Annexure II a statement on the directions / sub–directions issued 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 reports on the accounts of the branch office of the Company viz. Visakh Refinery audited under section 143(8) of the Act by branch auditor have been sent to us and have been preperly dealt with by us in preparing this report;
(d) 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;
(e) 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;
(f) On the basis of written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2015 from being appointed as a director in terms of section 164(2) of the Act and
(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 55 (I) to the financial statements;
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long–term contracts including derivative contracts; and
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
Annexure I referred to in paragraph 1 under "Report on Other Legal and Regulatory Requirements" of our report of even date
(i) a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
b) The fixed assets of the Company, other than LPG cylinders and pressure regulators with customers are physically verified by the Management in a phased program of three to five years cycle. In our opinion, the programme is reasonable having regard to the size of the Company and the nature of its assets. In our opinion and as per the information given by the management, the discrepancies observed were not material and have been appropriately accounted in the books of account.
(ii) a) As explained to us, the inventories were physically verified during the year by the management at reasonable intervals other than inventories lying with third parties. In case of materials lying with third parties, certificates confirming stocks held have been received from them.
b) In our opinion and according to the information and explanations given to us, 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 and according to the information and explanations given to us and on the basis of our examination of the inventory records, the Company has maintained proper records of its inventories. The discrepancies noticed on physical verification, as compared to the book records, were not material and have been properly dealt with in the books of account.
(iii) Based on the audit procedures applied by us and according to the information and explanations given to us and on the basis of our examination of the records, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 to the Act. Consequently, clauses (a) and (b) of sub–para (iii) of the Order regarding interest and repayment of such loans are not applicable.
(iv) In our opinion and according to the information and explanations given to us, and having regard to the explanation that some of the items are of a specialized nature, in respect of which suitable alternative sources do not exist for obtaining comparative quotations, there are adequate internal control procedure commensurate with the size of the Company and the nature of its business, for the purchase of inventories and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company and according to the information and explanation given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system.
(v) The Company has not accepted any deposits from the public, within the meaning of sections 73 to 76 of the Act and the rules framed there under except old cases under dispute aggregating to Rs. 0.02 crores where the Company has complied with necessary directions.
(vi) We have broadly reviewed the books of account maintained by the Company in respect of products where the maintenance of cost records has been specified by the Central Government under Section 148 (1) of the Act and the rules framed there under and we are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of these records with a view to determine whether they are accurate or complete.
(vii) a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company, has been generally regular in depositing undisputed statutory dues, including Provident fund, Employees' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, duty of Customs, duty of Excise, Value Added tax, Cess and other material statutory dues, as applicable, with the appropriate authorities. There are no undisputed statutory dues, as at March 31, 2015, which were in arrears for a period of more than six months from the date they became payable.
b) According to information and explanation given to us and the records of the Company examined by us, the dues of Sales tax, Income Tax, duty of Customs, Wealth tax, Service tax, duty of Excise, Value added tax, Cess, which have not been deposited on account of disputes with the relevant authorities, are as under:
c) According to the information and explanations given to us and as per the records of the Company examined by us, in our opinion, the amounts required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 and rules there under have been transferred to the said fund within time to the extent applicable.
ix) According to the information and explanations given to us and the records of the Company examined by us, the Company has not defaulted in repayment of dues to bank or debenture holders. There are no outstanding dues in respect of any financial institution.
(x) In our opinion and according to the information and explanations given to us, the Company has not given guarantees for loans taken by others from banks and financial institutions during the year.
(xi) In our opinion and according to the information and explanations given to us, the term loans prima facie, have been applied for the purpose for which they were raised.
(xii) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we neither came across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management.
For CVK & Associates
Chartered Accountants Firm
Firm Registration No. 101745W
A. K. Pradhan
Membership No. 032156
For G. M. Kapadia & Co
Firm Registration No. : 104767W
Place: New Delhi
Date: 28th May, 2015