GTL INFRASTRUCTURE LIMITED
Report on the Audit of Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of GTL Infrastructure Limited (“the Company”) which comprise the Balance Sheet as at March 31,2024, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity, and the Statement of Cash Flows for the year then ended, along with a summary of significant accounting policies and other explanatory information (hereinafter referred to as “Financial Statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid 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 as notified by the Ministry of Corporate Affairs (“MCA”) under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time (“Ind AS”), and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2024, and it's loss, it's total comprehensive income, it's changes in equity, and it's cash flows for the year then ended.
Basis for Opinion
We conducted our audit of the standalone financial statements 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 Responsibility 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 made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Material Uncertainty Related to Going Concern
We draw attention to the Note no. 57 to the Statement, regarding preparation of financial results on going concern basis which states that, notwithstanding the fact that the Company continued to incur cash losses, its net worth has been fully eroded, has defaulted in repayment of principal
and interest to its lenders, certain lenders including Edelweiss Asset Reconstruction Company (EARC) have called back the loans; one of the secured lender had applied before the NCLT Mumbai Bench under Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process (CIRP), which was dismissed by NCLT vide its order dated November 18, 2022, against which the said secured lender has filed an appeal before the National Company Law Appellate Tribunal, (“NCLAT”), which is sub-judice, the Company has filed its reply and now matter is posted for further hearing. Aircel, an erstwhile major customer of the Company has filed Insolvency petition before NCLT and various other events resulting into substantial reduction in the tenancy, pending debt restructuring, provisions for impairment for property, plant and equipment, legal matters in relation to Property Tax, dismantling of various telecom sites by disgruntled landowners / miscreants resulting in loss of assets (refer note no. 58 to the Statement); these conditions along with other matters set forth in notes to the financial results indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. The appropriateness of the assumption of the going concern is critically dependent upon the Company's ability to generate sufficient cash flows in future to meet its obligation.
Our opinion is not modified in respect of this matter.
Emphasis of Matter
There was a qualification in earlier audit report because of difficulty in quantification of property tax.
Refer Note no. 40 to the statement detailing efforts made by the Company to quantify the liability to be provided and contingent liability to be disclosed relating to property tax payable by the Company.
Considering the complexities involved in various litigations on the subject and non-receipt of demands for various sites in circles, the Company has made adequate provision and made disclosure under contingent liability for the balance amount of demand on the best estimate basis.
In view of above, our opinion is not modified.
Key Audit Matters (KAM)
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 31,2024. 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.
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Key Audit Matter
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How Our Audit Addressed the key audit matter
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1. Property, Plant & Equipment
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Impairment.
Annually Management reviews whether there are any indicators of impairment of the PPE of the Company by reference to the requirements under Indian Accounting Standards (Ind AS) 36 -“Impairment of Assets”. Accordingly, Management has identified impairment indicators (operating losses, significant erosion of net-worth, dismantling of towers etc.) in the Company. As a result, an impairment assessment was required to be performed by the Company by comparing the carrying value of the PPE to their recoverable amount to determine whether impairment was required to be recognised.
For the purpose of the above impairment testing, value in use has been determined by forecasting and discounting future cash flows. These conclusions are dependent upon significant management judgments, including in respect of: Estimated utilization, incremental tenancy (growth rate), frequency of assets replacement expenditure to be incurred, disposal values and discount rates applied to future cash flows.
During the year ended March 31, 2024 the management assessed carrying values of PPE and an impairment provision of ' 1,543 Lakhs and losses on account of dismantling of PPE of ' 641 Lakhs have been recognised and reduced the aggregate carrying value of PPE to ' 249,108 Lakhs, to their estimated recoverable value, which is the value in use (Refer Note no. 3(a), 35 and 58 to the Financial Statements).
We considered this matter as key audit matter due to the significance of the carrying value of the assets being assessed and due to the level of management judgments required in the assumptions impacting the impairment assessment and the sensitivity of the impairment model.
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Our audit procedures included, among others:
- Updating our understanding of management's annual impairment testing process.
- Assessing internal controls designed for identification of impairment indicators.
- Ensuring that the methodology of the impairment exercise continues to comply with the requirements of Ind AS as adopted, including evaluating management's assessment of indicators impairment against indicators of impairment specified within Ind AS 36.
- Assessing the assumptions around the key drivers of the cash flow forecasts including incremental tenancy growth, discount rates, estimated one time settlement with disputed operators, etc.
- Discussing / evaluating potential changes in key drivers as compared to previous year / actual performance with management in order to evaluate whether the inputs and assumptions used in the cash flow forecasts were suitable.
- Testing the arithmetical accuracy of the impairment model prepared by the management and obtaining the fair valuation report of value in use from an independent SEBI registered merchant banker.
- Verifying the completeness of disclosure in the financial statements as per Ind AS 36.
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2. Litigation Matters and Contingent Liabilities
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The Company is subject to number of significant litigations. Major risks identified by the Company in that area related to Service Tax/GST, Property Tax, Stamp Duty matters, Labour Law matters, Legal cases initiated by various rental site owners and by a FCCB holders, Application filed by a lender to the NCLT under IBC for the recovery of loan which was dismissed by NCLT and against which lender has filed an appeal before the National Company Law Appellate Tribunal, (“NCLAT”), which is subjudice, arbitration with the vendors / service providers, etc. The amount of litigation may be significant and estimates of the amounts of provisions or contingent liabilities are subject to significant Management judgment. (Refer Note No. 36, 38 (A), 39 & 40 to the Financial Statements)
Due to complexity involved in these litigation matters, management's judgment regarding recognition and measurement of provisions for these legal proceedings is inherently uncertain and might change over time as the outcomes of the legal cases are determined. Accordingly, it has been considered as a key matter.
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Our audit procedures included, among others:
- Assessing the procedures implemented by the Company to identify and gather the risks it is exposed to due to various litigations filed against it.
- Obtaining an understanding of the analysis performed by the Company, with relating supporting documentation, and reading written statements from internal legal experts, where applicable.
- Discussion with the management on the development in these litigations during the year ended March 31,2024.
- Enquiring from the Company's legal counsel (internal) and study the responses as received from them.
- Verification that the accounting and disclosure of contingent liability in the financial statements made by the Company is in accordance with the assessment of legal counsel / management.
Obtaining representation letter from the management on the
assessment of these matters as per SA 580 (revised) - Written
representations.
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Key Audit Matter
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How Our Audit Addressed the key audit matter
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3. Revenue Recognition
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Managing revenue recognition for the Company's extensive mobile tower network across India's 22 Telecom Circles is intricate. The primary revenue sources are Infrastructure Provisioning Fees (IPF) and Energy (EB) & Other Reimbursements Billing. IPF encompasses fees charged for providing tower infrastructure to telecom operators, while EB pertains to billing for energy usage associated with the towers.
These revenue streams are essential components of the Company's financial model, but their accurate recognition poses challenges due to the diverse agreements in place. Each agreement, whether for Ground Based Towers, Roof Top Towers, or Roof Top Poles, contains unique terms and conditions, necessitating tailored billing processes.
Billing of Energy & Other Reimbursements at actuals and consequent reconciliations with customers, highlight the complexity of revenue recognition. These reconciliations are critical for ensuring financial accuracy and compliance with regulatory requirements.
Therefore, meticulous attention to detail is indispensable throughout the revenue recognition process. Precise recording of IPF and EB, aligned with internal policies and external regulations, is paramount for maintaining financial integrity and stakeholder trust in the Company's operations.
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Our audit procedures included, among others:
Test of Controls:
- Evaluation of Internal Controls: Assess the design and implementation of internal controls related to revenue recognition, including those over customer contracts review, authorization of revenue transactions and segregation of duties.
- Testing Operating Effectiveness: Select a sample of transactions and test the operating effectiveness of controls, such as verifying that revenue recognition is in compliance with Company policies and accounting standards.
Test of Details:
- Analytical Procedures: Compare current and prior period revenue figures to identify significant variances, investigating them further for potential misstatements.
- Substantive Testing of Revenue Transactions: Select a sample of revenue transactions to verify accuracy and completeness, tracing them back to underlying contracts or agreements.
- Confirmation of Revenue with Customers: Independently confirm revenue amounts with customers, particularly for significant transactions, to validate recorded revenue.
- Testing Revenue Cut-off: Review revenue transactions around year-end to ensure proper timing, verifying compliance with revenue recognition principles.
- Evaluation of Revenue Estimates and Judgments:
Scrutinize management's revenue estimates and judgments,
Reconciliation of Revenue to Documentation: Reconcile
recorded revenue amounts to supporting documentation,
ensuring consistency and accuracy.
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4. Going Concern
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Assessing the Company's ability to continue its operations as a going concern represents a critical aspect of our audit. This evaluation is paramount in light of the Company's financial position, current economic conditions, and other relevant factors that may impact its ability to meet its obligations and sustain operations in the foreseeable future. Our scrutiny of the going concern assumption aims to provide stakeholders with assurance regarding the Company's viability and resilience amidst potential challenges and uncertainties.
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Audit Procedures for Going Concern Assessment:
- Reviewing NCLT Appeal Orders: Examining NCLT appeal orders, which unequivocally affirm the Company's status as a going concern.
- Discussion with Those Charged with Governance (TCWG): Engaging in substantive discussions with TCWG to delve into considerations surrounding the Company's going concern status.
- Examination of Management’s Note: Thoroughly scrutinizing the management's note, inclusive of a comprehensive presentation addressing material uncertainties surrounding the Company's going concern.
- Review of Company’s Statement: Assessing the Company's official statement affirming its commitment to ongoing operations and asset preservation, with no intention to cease operations or initiate asset liquidation.
- Management Representation Letters (MRL) Obtained: Acquiring Management Representation Letter to corroborate management's assertions and commitments regarding the Company's going concern status.
- Analysis of Industry Landscape, Debt Recovery and Debtor Days: Conducting an in-depth evaluation of the industry context, actual recovery from significant debtors.
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Key Audit Matter
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How Our Audit Addressed the key audit matter
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- Review of Customer Dispute and Credit Notes:
The investigation into the dispute with customers has been diligently conducted, particularly regarding its potential impact on both customer retention and revenue generation, which are pivotal for the Company's ongoing viability. Furthermore, credit notes, representing revenue reversals, have been assessed in the context of evaluating the Company's going concern status.
- Debt Restructuring to Attain Sustainable Levels: Upholding the Company's Expectation of Prudent and Healthy Debt Repayment
- Strategic Focus on EBITDA Optimization and Revenue Enhancement: To evaluate Company's going concern, we have reviewed its EBITDA, the anticipation additional tenancies on telecom towers and assess management's efforts to boost revenue.
Company’s Forecasted Reduction in Tenant Exits and Revenue Growth Projections: The Company has forecasted a reduction in tenant exits in future years, attributed to the resolution of disputes with old customers and the anticipated new agreements. This projection forms a key basis for our assessment of the Company's going concern assumption, reflecting its anticipated revenue growth trajectory.
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Other Matter
The confirmations of loans, bank balances, and receivables are received in the majority of the cases. Where the amounts stated by the parties did not match with the balances of books of accounts, reconciliations were made and the effects if necessary are properly dealt with in the books of accounts.
Information Other than the Standalone Financial Statements and Auditor’s Report Thereon
The Company's Board of Directors is responsible for the other information. The other information comprises the management discussion & analysis and director's report included in the annual report but does not include the Standalone Financial Statements and our auditor's report thereon. The above information is expected to be made available to us after the date of this auditor's report.
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 identified above when it becomes available 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.
When we read the above other information, if we conclude that there is material misstatement therein, we are required to communicate the matter to those charged with governance
Responsibility of management and those charged with the 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 Financial Statements that give a true and fair view of the Financial Position, Financial Performance including Other Comprehensive Income, Cash Flows and the Statement of Changes in Equity of the Company in accordance with the Ind AS and other accounting principles generally accepted in India.
This responsibility also includes maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of the appropriate accounting policies; making judgements 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 fair presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the 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.
The 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 financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• 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.
• 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 system in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• 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.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the 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 financial statements of the current year 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 A” 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 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 appears from our examination of those books;
c) The Balance Sheet, Statement of Profit and Loss including 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) I n our opinion, the aforesaid financial statements
comply with the accounting standards specified under section 133 of the Act;
e) On the basis of 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;
f) With respect to the adequacy of the internal financial controls of the Company with reference to these financial statements and the operating effectiveness of such controls, refer to our separate Report in “Annexure B”.
g) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act, as amended: In our opinion and to the best of our information and according to the explanations given to us, the managerial remuneration paid/ payable by the Company to whole-time directors are in accordance with the provisions of section 197 of the Act.
h) Based on our examination, the Company has utilized accounting software to maintain its books of account, which includes a feature for recording an audit trail (edit log) throughout the year. The audit trail facility has been operational for all relevant transactions recorded in the software. During the course of our audit, we did not encounter any instances where the audit trail feature had been tampered with.
i) With respect to the other matters to be included in the Auditor's Report in accordance with Rules 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 and as represented by the management:
i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements in Note No. 36, 38 (A), 39 and 40 to the Financial Statements.
ii. The Company has made provisions, as required under the applicable laws and Ind AS, for material foreseeable losses on long-term contracts; the Company does not have any 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) Management has represented to us
that, to the best of its knowledge and
belief, as disclosed in the notes to the financial statements, during the year 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, 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) Management has represented to us that, to the best of its knowledge and belief, as disclosed in the notes to the financial statements, during the year no funds have been received by the Company from any person(s) or entity(ies), 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
c) based on our audit procedure conducted that are considered reasonable and appropriate in the circumstances, nothing has come to our attention that cause us to believe that the representation given by the management under paragraph (2)(i)(iv) (a) & (b) contain any material misstatement.
v. The Company has not declared or paid any dividend during the year and has also not proposed dividend for the year.
For CVK & Associates
Chartered Accountants Firm Regd.No.101745W
Shriniwas Y. Joshi
Partner
Place : Mumbai Membership No. 032523
Dated : May 14, 2024 UDIN: 24032523BKARGR9618
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