Adani Power Limited
Report on the Audit of the Standalone Financial Statements
Qualified Opinion
We have audited the accompanying standalone financial statements of Adani Power Limited ("the Company”), which comprise the Balance sheet as at March 31, 2024 the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of material accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matters described in the 'Basis for Qualified Opinion' section of our report, the aforesaid standalone financial statements give the information required by the Companies Act, 2013, as amended ("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, 2024, its profit including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.
Basis for Qualified Opinion
We draw attention to Note 63 of the standalone financial statements. Pending adjudications / outcome of the investigations by the Securities and Exchange Board of India as stated therein, we are unable to comment on the possible consequential effects thereof, if any, on the standalone financial statements. Our audit opinion for the year ended March 31, 2023 was also modified for the above and other matter.
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs), as 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 together with the ethical requirements that are relevant to our audit of the 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 we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.
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 financial year ended March 31, 2024. 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. In addition to the matter described in the 'Basis for Qualified Opinion' section we have determined the matters described below to be the key audit matters to be communicated in our report. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the standalone financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone financial statements.
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Key audit matters
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How our audit addressed the key audit matter
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Revenue recognition and assessment of recoverability of receivables related to change in law claims (Also refer
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Notes 3(vii), 12 and 32 to the standalone financial statements)
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The Company, having Power Purchase Agreements (PPA)
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Our audit procedures in response to this key audit matter
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are eligible for compensation claims against various Change in Law events having cost implications on
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included, but not limited to, the following:
- Examined the Company's accounting policies with
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generation and supply of power such as additional duties and taxes, increased cost of power generation, etc., due to purchase of alternative coal in terms of the framework
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respect to assessing compliance with Ind AS 115 "Revenue from Contract with Customers”.
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of supply of power as per PPA entered by the respective
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- Obtained understanding of the key controls that
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Thermal Power Plant/ Units with the various Discoms.
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management has in place to monitor change in law events and related claims, status of various pending
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The compensation claims (invoices) are raised by the
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claims including under appeals and orders passed by
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Company upon approval of change in law event by the
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various regulatory authorities and tested those key
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relevant Regulatory Authorities. The invoices for change in law claims are raised considering operational / cost
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controls.
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parameters based on qualitative parameters approved
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- Inspected the relevant state regulatory commission,
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in terms of the relevant Regulatory Authorities Orders
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CERC, appellate tribunal and court rulings and
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and are subject to partial/ final acceptance of the
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examined management assumptions / judgement
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claims by the respective Discoms. Considering that the
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relating to various parameters in terms of regulatory
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methodology and the parameters of claims are subject to
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orders, for measuring / estimating the amount of
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final acceptance by the respective Discoms, the revenue
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such claims.
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is recognised in the books of account based on the
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- Examined the underlying parameters and
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prudent parameters and methodology, till the respective
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assumptions / judgement used for measuring /
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matters are accepted / settled with the Discoms.
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computing the amounts of compensation claims
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Thus, the revenue/ receivables from Discoms are subject
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as per regulatory orders through verification of
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to adjustments to the extent there may be adverse impact
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historical information and other available internal
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on account of appeals with the regulatory authorities.
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and external data.
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In certain cases where the regulatory order(s) are
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- Tested on sample basis, the accuracy of the
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subject matter of appeal with higher appellate
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underlying data used for computation of such
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forums / authorities, and the amount of claims are not
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claims.
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ascertainable, revenues for change in law claims are not
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- Tested the joint reconciliations for trade receivables
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recognised, pending outcome of the final decision.
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performed by the Company with the respective
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In view of the complexity and judgement involved
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Discoms, wherever available with underlying records.
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in estimation of the amounts of such claims and
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- Tested the status of the outstanding receivables
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recoverability thereof, the same is considered as a key
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and recoverability of the overdue / aged receivables
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audit matter.
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through inquiry with management, and collection trends in respect of receivables.
- Assessed the disclosures in accordance with the requirements of Ind AS 115 "Revenue from Contract with Customers”.
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Key audit matters
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How our audit addressed the key audit matter
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Revenue recognition for regulated power generation business (Also refer Note 32 to the standalone financial
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statements)
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In the regulated power generation business of Udupi Thermal Power Plant (Udupi TPP), the tariff is determined by the regulator based on cost plus return on equity basis wherein cost is subject to prudential norms.
The Company invoices its customers on the basis of provisional approved tariff which was based on Tariff Regulation and is subject to true up adjustment. As the Company is entitled to tariff based on actual cost incurred for the year, at point of revenue recognition it recognises adjustments for the escalation/ de-escalation in the various parameters compared to the entitled parameters.
Accruals are determined based on tariff regulations and past tariff orders and are subject to verification and approval by the regulators. Further the costs incurred are subject to prudential checks and the prescribed norms. Significant judgements are made in determining the accruals including interpretation of tariff regulations. Further certain matters for disallowance of claims have been litigated by the Company before higher authorities.
Revenue recognition and accrual of regulatory claims is a key audit matter considering the significant judgements involved in the determination thereof.
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Our audit procedures in response to this key audit matter
included, but not limited to, the following:
- Examined the Company's accounting policies with respect to assessing compliance with Ind AS 115 "Revenue from Contract with Customers”.
- Performed test of controls over revenue recognition and accruals through inspection of evidence of performance of these controls.
- Performed the tests of details, on sample basis, including the following key procedures:
• Evaluated the key assumptions used by the Company by comparing it with the assumptions in provisional approved tariff order.
• For tariff orders (including updated tariff order) received by the Company, assessed the impact recognised by the Company and for matters litigated by the Company, also assessed the management's evaluation of the likely outcome of the dispute based on past precedents.
• Examined the underlying parameters for measuring / computing the claims and verified the working as per CERC regulatory orders.
- Tested the status of the outstanding receivables and recoverability of the overdue / aged accruals through inquiry with management, and collection trends in respect of receivables.
- Assessed the disclosures in accordance with the requirements of Ind AS 115 "Revenue from Contract with Customers”.
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Information Other than the Financial Statements and Auditor's Report Thereon (Other Information)
The Company's Board of Directors is responsible for the other information. The other information comprises the 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 such other information is materially inconsistent with the 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 the Management and Those Charged with Governance for the Standalone Financial Statements
The Company's Board of Directors is 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 including other comprehensive income, cash flows and changes in equity 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 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. 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 the 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 statements 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 is 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 management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those Charged with Governance 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.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Ý Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Ý Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
Ý Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Ý Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Ý Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements for the financial year ended March 31, 2024 and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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 the "Annexure 1” a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and except for the possible effect of the matters described in the Basis for Qualified Opinion paragraph, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) Except for the possible effect of the matters described in the Basis for Qualified Opinion paragraph and the matter stated in paragraph 2(j)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014, 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 Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;
(d) Except for the possible effect of the matters described in the Basis for Qualified Opinion paragraph above, in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) The possible effect of the matters described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;
(f) On the basis of the written representations received from the directors as on March 31, 2024 taken on record by the Board of Directors, none of the directors is disqualified as on
March 31, 2024 from being appointed as a director in terms of Section 164 (2) of the Act;
(g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph and paragraph (b) above and the matter stated in paragraph 2(j)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014;
(h) With respect to the adequacy of the internal financial controls with reference to standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in "Annexure 2” to this report;
(i) The Company has not paid any managerial remuneration to its directors and thus, the provisions of section 197 read with Schedule V of the Act are not applicable to the Company for the year ended March 31, 2024;
(j) 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, as amended 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 40 to the standalone 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;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
iv. a) The management has represented
that, to the best of its knowledge and belief, as disclosed in the note 62 to the standalone financial statements, 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
person or entities, including foreign entities ("Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
b) The management has represented that, to the best of its knowledge and belief, as disclosed in the note 62 to the standalone financial statements, no funds have been received by the Company from any person or entities, including foreign entities ("Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
c) Based on such audit procedures performed that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.
v. The dividend on compulsory redeemable preference shares in respect of the same declared for the previous years and paid by the Company during the year, is in accordance with section 123 of the Companies Act 2013 to the extent it applies to payment of dividend.
As stated in note 59 of the standalone financial statements, the Board of Directors of the Company have proposed dividend on compulsory redeemable preference shares for the year which is subject to
the approval of members at the ensuing Annual General Meeting. The dividend declared is in accordance with Section 123 of the Act to the extent it applies to declaration of dividend.
vi. Based on our examination which included test checks, the Company has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. However, the audit trail feature is not enabled for certain direct changes to data when using certain access rights, as described in note 69 to the standalone financial statements.
Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with in respect of the accounting software where audit trail was enabled.
For S R B C & CO LLP
Chartered Accountants
ICAI Firm Registration Number: 324982E/E300003
per Santosh Agarwal
Partner
Membership Number: 093669
UDIN:24093669BKFCGR9737
Place of Signature: Ahmedabad
Date: May 1, 2024
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