Key audit matter

How our audit addressed the key audit matter

1. Assessment of going concern basis

(refer note 2.1 to the accompanying standalone financial statements)

The Company's current liabilities exceeds its current assets by

Our audit procedures included but were not limited to, the

H 755.13 crore as at 31 March 2024. Such factor indicated a

following in relation to assessment of appropriateness of going

need to assess the Company's ability to continue as a going

concern basis of accounting:

concern and as mentioned in note 2.1 to the accompanying

• Obtained an understanding of the management's process

standalone financial statements, the Company has taken

for identifying all the events or conditions that could impact

into consideration various initiatives including monetization

the Company's ability to continue as a going concern and

of assets, recovery of outstanding claims in various infra

the process followed to assess the mitigating factors for

business (highway/ EPC), raising finances from financial

such events or conditions. Also, obtained an understanding

institutions/group companies, strategic investors and from

around the methodology adopted and the associated

strategic initiatives and refinancing of existing debts which

controls implemented by the Company to assess their future

have been considered as mitigating factors in its assessment

business performance to prepare a robust cash flow forecast;

for use of going concern basis of accounting for preparation of

• Reconciled the cash flow forecast to the future business

the accompanying standalone financial statements.

plans of the Company as approved by the Board of Directors

For the aforesaid purpose, the Management has prepared

and considered the same for our assessment of the

future cash flow forecasts based on the management business

Company's capability to meet its financial obligation falling

plans as approved by the Board of the Directors and performed

due within next twelve months;

sensitivity analysis of the key assumptions and inputs used

• In order to corroborate management's future business plans

in such projections to assess whether the Company would be

and to identify potential contradictory information, we read

able to operate as a going concern for a period of at least 12

the minutes of the Board of Directors and discussed the

months from the date of financial statements and concluded

same with the management;

Key audit matter

How our audit addressed the key audit matter

that the going concern basis of accounting used for preparation

• Tested the appropriateness of key assumptions used by the

of the accompanying financial statements is appropriate and

management, that had most material impact in preparation

there is no material uncertainty in such assessment.

of the cash flow forecast and evaluated the completeness

We have considered the assessment of management's

and accuracy of the expected outflow on account of debt

evaluation of going concern basis of accounting as a key audit

repayments and other commitments made by the Company;

matter due to the pervasive impact thereof on the standalone

• Performed independent sensitivity analysis to test the

financial statements and the significant judgements and

impact of estimation uncertainty on the cash flows due to

assumptions that are inherently subjective and dependent

change in key assumptions;

on future events, involved in preparation of cash flow

• Reviewed the historical accuracy of the cash flow

projections and determination of the overall conclusion by the

projections prepared by the management in prior periods;

management.

• Inspected the relevant documents and other supporting evidence for management's plan for raising finance through strategic investors and of refinancing of existing borrowings and recoverability of claims; and

• Assessed the appropriateness and adequacy of the disclosures made in the standalone financial statements in respect of going concern.

2. Revenue recognition and measurement of upfront losses on Long-term construction contracts

(refer note 2.2.c for the accounting policy and note 33 for disclosures of the accompanying standalone financial statements)

For the year ended 31 March 2024, the Company has

Our audit procedures for recognition of contract revenue,

recognized revenue from Engineering, procurement and

margin and contract costs, and related receivables and liabilities

construction (EPC) contracts of H 329.71 crore and has

included, but were not limited to, the following:

accumulated provisions for upfront losses amounting to H 2.77

• Evaluated the appropriateness of the Company's accounting

crore as at 31 March 2024.

policy for revenue recognition from construction contracts

The Company's revenue primarily arises from construction

in accordance with Ind AS 115, 'Revenue from Contracts

contracts, which is recognised over a period of time in

with Customers';

accordance with the requirements of Ind AS 115, Revenue

• Assessed the design and implementation of key controls,

from Contract with Customers, as further explained in note

over the recognition of contract revenue and tested the

33 to the accompanying standalone financial statements,

operating effectiveness of these controls;

and which, by its nature, is complex given the significant judgements involved in the assessment of current and future

• For a sample of contracts, we have tested the appropriateness of amount recognized as revenue by

contractual performance obligations.

evaluating key management judgements inherent in

The Company recognises revenue based on the stage of

determining the forecasted contract revenue and costs to

completion which is determined on the basis of the proportion

complete that drive the accounting under the percentage

of value of goods or services transferred as at the Balance

of completion method by performing following procedures:

Sheet date, relative to the value of goods or services promised under the contract.

The recognition of contract revenue, contract costs and the

- reviewed the contract terms and conditions;

- evaluated the identification of performance obligation of the contract;

resultant profit/loss therefore rely on the estimates in relation

to forecast contract revenue and the total cost. These contract

- evaluated the appropriateness of management's

estimates are reviewed by the management on a periodic

assessment that performance obligation was satisfied

basis. In doing so, the management is required to exercise

over time and consequent recognition of revenue using

judgement in its assessment of the valuation of contract

percentage of completion method;

variations and claims and liquidated damages as well as the

- obtained an understanding of the assumptions applied in

completeness and accuracy of forecast costs to complete and

determining the forecasted revenue and cost to complete;

the ability to deliver contracts within contractually determined

- assessed management's estimates of the impact

timelines. The final contract values can potentially be impacted

to revenue and budgeted costs arising from scope

on account of various factors and are expected to result

changes made to the original contracts, claims, disputes

in varied outcomes. Changes in these judgements, and the

and liquidation damages (including prolongation claims)

related estimates as contracts progress can result in material

with reference to supporting documents including

adjustments to revenue and margins/ onerous obligations.

variation orders and correspondence between the

Owing to these factors, we have determined revenue

Company and the customers; and

recognition and provision for upfront losses from EPC contracts

• Assessed the appropriateness and adequacy of disclosures

as a key audit matter for the current year audit.

made by the management with respect to revenue

In addition to the above, following disclosure made in the

recognised during the year in accordance with applicable

accompanying standalone financial statements has been

accounting standards.

Key audit matter

How our audit addressed the key audit matter

considered as fundamental to the users' understanding of such financial statements:

Note 33(i) to the accompanying standalone financial statements which describes that the Company has recognized certain claims in the current year and preceding year ended 31 March 2023 pertaining to Dedicated Freight Corridor Corporation ('DFCC') project basis evaluation by the joint venture ('JV') incorporated between the Company and SEW Infrastructure Limited, of JV's entitlement under the contract towards recovery of prolonged cost, as further detailed in the aforesaid note. Based on the legal opinion, the management is of the view that the aforesaid claims as included in unbilled revenue as at 31 March 2024 are fully recoverable.

3. Fair value measurement of investments in subsidiaries, associates and joint ventures

(refer Note 2.2.n for the accounting policy and Note 5 for disclosures of the accompanying standalone financial statements)

The Company has determined the fair value of its investments

Our audit procedures to assess the reasonableness of fair valuation

in unquoted equity shares including instruments in the nature

of investments included, but were not limited to the following:

of equity of its subsidiaries, joint ventures and associates as

• Obtained a detailed understanding of the management's

at the year end. Determining the fair value of such unquoted

process and controls for determining the fair valuation of

investments requires use of valuation techniques which has

unquoted equity and preference instruments;

been performed by independent valuation experts, applying

• Evaluated the design and tested the operating

applicable valuation methodologies.

effectiveness of key controls implemented for fair valuation

The Company has total investment of H 3,049.67 crore as at 31 March 2024 which constitutes 44.77% of total assets of the Company. The aforementioned investments are carried at

of the investments;

• Obtained the valuation reports of the management's valuation expert and assessed the expert's professional

their respective fair values as at the reporting date as per Ind AS 109 - 'Financial Instruments'.

competence, objectivity and capabilities in performing the valuation of the investments;

The determination of carrying value of the Company's investments in subsidiaries, joint ventures and associates is dependent on management's estimates of future cash flows

• Assessed the appropriateness of the valuation methodology used for the fair valuation computation;

and their judgment with respect to final determination of tariff

• Carried out an assessment of forecasts of future cash

rates, operational performance of the plants, life extension

flows prepared by the management across various sectors

plans, availability and market prices of gas, coal and other fuels,

and business of the investee companies which involved,

restructuring of loans, outcome of litigations, etc. in case of

evaluating the key assumptions including the discount

investments in entities in the energy business and estimation

rate and comparing the estimates to externally available

of vehicle traffic and rates and favourable outcomes of

industry, economic and financial data with the support of

litigations, etc. in case of investments in expressway business. Owing to the uncertainties involved in forecasting and

our auditor's expert and assessed the appropriateness of the aforesaid key assumptions;

discounting future cash flows, significant management's

• Engaged in discussions with the management on the

judgement and subjectivity involved in estimates and

performance of the Company's investments as compared to

underlying key assumptions used in the valuation models and

previous year in order to evaluate whether the inputs and

the significance of the Company's investments as at 31 March

assumptions used in the cash flow forecasts were suitable;

2024 in context of standalone financial statements, we have

• Discussed the significant ongoing litigations in the investee

determined this as a key audit matter for current year audit.

companies which had a material impact to ascertain

In addition to the above, following disclosures made in the

the appropriateness of the outcome considered in the

accompanying standalone financial statements have been

respective valuation models;

considered as fundamental to the users' understanding of

• Tested the arithmetical accuracy of the computations done

such financial statements:

in accordance with the valuation models; and

a. As explained in note 5.2 to the accompanying Standalone

• Ensured the appropriateness and adequacy of the related

financial statements, the Company has invested in GMR

disclosures in the standalone financial statements in

Consulting Services Limited ('GCSL'), subsidiary of the Company, which have further invested in step down subsidiaries and joint ventures. The Company together with GCSL has investments in GMR Energy Limited ('GEL'), a subsidiary of the Company amounting to H 1,169.61 crore

accordance with the accounting standards.

Key audit matter How our audit addressed the key audit matter

and has outstanding loan (including accrued interest) amounting to H 2,268.77 crore recoverable from GEL as at 31 March 2024. GEL has further invested in GMR Kamalanga Energy Limited ('GKEL') and GMR Warora Energy Limited ('GWEL'), both subsidiary companies, and GMR Bajoliholi Hydropower Private Limited ('GBHHPL'), a Joint Venture of GEL. The carrying value of investment of the Company in GEL is dependent upon fair values of GKEL,

GWEL and GBHHPL. The carrying values aforementioned investments in GEL is based on the respective valuation performed by an external expert using the discounted future cash flows method and other matters as follows:

- Note 5.5 to the accompanying standalone financial statements which states that the fair value of investment in GKEL is significantly dependent on the achievement of certain key assumptions considered in aforementioned valuation such as expansion and optimal utilization of existing plant capacity, and timing and amount of settlement of disputes with customers and capital creditors, which are outstanding as on 31 March 2024 as further explained in the said note.

- Note 5.3 and Note 5.4 to the accompanying standalone financial statements which states that the fair value of investment in GWEL is also dependent upon recoverability of claims relating to transmission charges from Maharashtra State Electricity Distribution Company Limited (MSEDCL), which are under dispute and pending settlement / realization as on 31 March 2024, capacity utilization of plant in future years and certain other key assumptions as considered in the valuation performed by an external expert as explained in the said note.

The claims pertain to recovery of transmission charges from MSEDCL by GWEL. GWEL has disputed the contention of MSEDCL that the cost of transmission charges is to be paid by GWEL. However, based on the Order of the Appellate Tribunal for Electricity ('APTEL') ('the Order') dated 8 May 2015, currently contested by MSEDCL in the Supreme Court and pending conclusion, GWEL has accounted for reimbursement of such transmission charges in the Statement of Profit and Loss amounting to H 616.33 crore for the period from 17 March 2014 to 31 March 2024 and accordingly has disclosed the aforesaid transmission charges and those invoiced directly to MSEDCL by Power Grid Corporation Limited for the period December 2020 to March 2024 as contingent liability, as further described in aforesaid note.

- Note 5.6 to the accompanying standalone financial statements, which states that the fair value of investment in GBHHPL is also dependent upon achievement of business plans of GMR Bajoli Holi Hydropower Private Limited ('GBHHPL'), and recoverability of capital advances in the near future given to contractor of GBHPPL's project, which along with other claims and counter claims are pending before the Arbitral Tribunal as described in the said note.

Key audit matter How our audit addressed the key audit matter

The management of the Company, based on its internal assessment, legal opinion, certain interim favourable regulatory orders and valuation assessment made by an external expert, is of the view that the carrying value of the aforesaid investment of the Company in GEL, taking into account the matter described above in relation to the investment made by GEL in GWEL,

GKEL and GBHHPL, is appropriate and accordingly, no adjustments to the aforesaid balance have been made in the accompanying standalone financial statements for the year ended 31 March 2024. b. Note 5.7 of the accompanying standalone financial statements, in relation to the investment made by the Company together with GMR Highways Limited (GMRHL), a subsidiary of the Company, in GMR Hyderabad Vijayawada Expressway Private Limited (GHVEPL) amounting to H 1,136.54 crore.

The fair value of investment in GHVEPL considered for the purpose of determining the carrying values of aforesaid investments is based on the valuation performed by an external expert using the discounted future cash flows method which is significantly dependent upon claims receivables from National Highway Authority of India (NHAI) as detailed in aforesaid note 5.7, that are pending before Hon'ble High Court as on 31 March 2024.

The management of the Company, based on its internal assessment, legal opinion, certain interim favourable orders and valuation assessment made by the external expert as mentioned above, is of the view that the carrying value of the aforesaid investment of the Company along with GMRHL in GHVEPL, taking into account the aforesaid matter is appropriate and accordingly, no adjustments to the aforesaid balance have been made in the accompanying standalone financial statements for the year ended 31 March 2024.