Responsible Leadership Adani Ports and Special Economic Zone Limited Integrated Annual Report 2019-20 Integrated Annual Report 2019-20 Overview Independent Auditor’s Report Corporate Identity To reports referred to in the sub-paragraphs (a) and (b) of the The Members of Other Matters section below, is sufficient and appropriate Adani Ports and Special Economic Zone Limited to provide a basis for our audit opinion on the consolidated financial statements. Report on the Audit of the Consolidated Emphasis of Matter Financial Statements Opinion We draw attention to: Financial PerformanceFinancial (i) Note 41 to the consolidated financial statement, We have audited the accompanying consolidated financial regarding the management’s impairment assessment statements of Adani Ports and Special Economic Zone of property, plant and equipment of ` 12.07 crore and Limited (”the Parent”) and its subsidiaries, (the Parent and intangible assets of ` 1,109.49 crore, as at 31 March its subsidiaries together referred to as “the Group”) which 2020 being considered recoverable based on the includes the Group’s share of loss in its associate and joint future operational plans and cash flows wherein the ventures, which comprise the Consolidated Balance Sheet projections are made based on various judgements and as at March 31, 2020, and the Consolidated Statement of estimates related to cargo traffic, port tariffs, inflation, Profit and Loss (including Other Comprehensive Income), discount rates and implications expected to arise from the Consolidated Statement of Changes in Equity and the COVID-19 pandemic, wherein the actuals could vary, in Value Enduring Creating Consolidated Statement of Cash Flows for the year then case of Adani Murmugao Port Terminal Private Limited ended, and a summary of significant accounting policies and and Adani Kandla Bulk Terminal Private Limited and other explanatory information. also considering the expected relaxation to be received In our opinion and to the best of our information and for revenue share regarding the storage charge in case according to the explanations given to us, and based on of Adani Murmugao Port Terminal Private Limited. the consideration of reports of other auditors on separate Accordingly, for the reasons stated therein in the said financial statements of subsidiaries and joint ventures Note, no provision towards impairment is considered referred to in the Other Matters section below, the aforesaid necessary at this stage. consolidated financial statements give the information (ii) Note 47 of the consolidated financial statements required by the Companies Act, 2013 (“the Act”) in the manner Strategy for Growth wherein in case of Adani Vizhinjam Port Private Limited, so required and give a true and fair view in conformity with a matter relating to delay in compliance of Commercial the Indian Accounting Standards prescribed under section Operational Date (COD) in terms of the Concession 133 of the Act read with the Companies (Indian Accounting Agreement for the development of international Standards) Rules, 2015, as amended (‘Ind AS’), and other deep-water multipurpose seaport at Vizhinjam, Kerala accounting principles generally accepted in India, of the and status thereof as at reporting date, detailed in the consolidated state of affairs of the Group as at March 31, said note. 2020, and their consolidated profit, their consolidated total comprehensive income, their consolidated cash flows and Our report is not modified in respect of these matters. Statutory Reports their consolidated changes in equity for the year ended on Key Audit Matters that date. Basis for Opinion Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the We conducted our audit of the consolidated financial consolidated financial statements of the current period. statements in accordance with the Standards on Auditing These matters were addressed in the context of our audit specified under section 143 (10) of the Act (SAs). Our of the consolidated financial statements as a whole, and responsibilities under those Standards are further in forming our opinion thereon, and we do not provide a StatementsFinancial described in the Auditor’s Responsibility for the Audit of the separate opinion on these matters. We have determined the Consolidated Financial Statements section of our report. We matters described below to be the key audit matters to be are independent of the Group and its associate and joint communicated in our report. ventures in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) Property, Plant and Equipment & Intangible assets together with the ethical requirements that are relevant to for Service Concession Arrangement — Refer to our audit of the consolidated financial statements under the Note 41 to the consolidated financial statements provisions of the Act and the Rules made thereunder, and we Key Audit Matter Description have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We The Group has entered into Service Concession Arrangement believe that the audit evidence obtained by us and the (“SCA”) for its port facilities at Kandla and Goa. The cost audit evidence obtained by other auditors in terms of their of infrastructure facilities forming part of the SCAs are 261 Adani Ports and Special Economic Zone Limited classified as Intangible assets along with certain tangible • Our opinion on the consolidated financial statements does assets. As of March 31, 2020, the aggregate carrying value not cover the other information and we do not express any ` of these assets is 1,121.56 crore. form of assurance conclusion thereon. The Group’s evaluation of impairment of these assets • In connection with our audit of the consolidated financial involves the comparison of recoverable value of each statements, our responsibility is to read the other cash-generating unit to its corresponding carrying value. information, compare with the financial statements of the The Group used the discounted cash flow model to subsidiaries and its joint ventures audited by the other estimate recoverable value, which requires management auditors, to the extent it relates to these entities and, in to make significant estimates and assumptions related to doing so, place reliance on the work of the other auditors forecasts of future revenues and operating margins, and and consider whether the other information is materially discount rates. Changes in these assumptions could have inconsistent with the consolidated financial statements a significant impact on either the recoverable value, the or our knowledge obtained during the course of our audit amount of any impairment charge, or both. or otherwise appears to be materially misstated. Other We focused on this area as Key Audit Matter due to information so far as it relates to subsidiaries and its joint the size/materiality of the balance of assets under ventures, is traced from their financial statements audited the SCA and because the Group’s assessment of the by the other auditors. ‘recoverable value’ of the cash generating unit involves • If, based on the work we have performed, we conclude that judgements about the future results of the business and there is a material misstatement of this other information, the discount rates applied to future cash flow forecasts. we are required to report that fact. We have nothing to report in this regard. How the Key Audit Matter Was Addressed in the Audit Our audit procedures related to forecasts of future revenue Management’s Responsibility for the Consolidated and operating margin and selection of the discount rate for Financial Statements these SCAs included the following, among others: The Parent’s Board of Directors is responsible for the matters • We tested the Design, Implementation and Operating stated in section 134(5) of the Act with respect to the effectiveness of controls over impairment assessment preparation of these consolidated financial statements process, including those over the forecasts of future that give a true and fair view of the consolidated financial revenue and operating margin, and the selection of the position, consolidated financial performance including discount rate. other comprehensive income, consolidated cash flows and consolidated changes in equity of the Group including • We evaluated the reasonableness of management’s its associate and joint ventures in accordance with the revenue and operating margin forecasts by comparing the Ind AS and other accounting principles generally accepted forecasts to: in India. The respective Board of Directors of the companies − Historical revenues and operating margins. included in the Group and of its associate and joint ventures are responsible for maintenance of adequate accounting − Internal communications to management, Audit records in accordance with the provisions of the Act for Committee and the Board of Directors. safeguarding the assets of the Group and its associate and • With the assistance of our fair value specialists, we joint ventures and for preventing and detecting frauds and evaluated the reasonableness of the (1) valuation other irregularities; selection and application of appropriate methodology and (2) discount rate by: accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation − Testing the source information underlying the