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Hindustan Petroleum Corporation Ltd.

BSE: 500104 Sector: Oil & Gas
NSE: HINDPETRO ISIN Code: INE094A01015
BSE 00:00 | 24 Apr Hindustan Petroleum Corporation Ltd
NSE 05:30 | 01 Jan Hindustan Petroleum Corporation Ltd
OPEN 209.45
PREVIOUS CLOSE 209.35
VOLUME 124713
52-Week high 333.45
52-Week low 155.00
P/E 5.50
Mkt Cap.(Rs cr) 30,690
Buy Price 199.90
Buy Qty 5.00
Sell Price 201.40
Sell Qty 1296.00
OPEN 209.45
CLOSE 209.35
VOLUME 124713
52-Week high 333.45
52-Week low 155.00
P/E 5.50
Mkt Cap.(Rs cr) 30,690
Buy Price 199.90
Buy Qty 5.00
Sell Price 201.40
Sell Qty 1296.00

Hindustan Petroleum Corporation Ltd. (HINDPETRO) - Auditors Report


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Company auditors report

TO THE MEMBERS OF HINDUSTAN PETROLEUM CORPORATION LIMITED

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statements of HindustanPetroleum Corporation Limited ("the Company") which comprise the Balance Sheetas at March 312019 the Statement of Profit and Loss (including Other ComprehensiveIncome) the Statement of Changes in Equity and the Statement of Cash Flows for the yearended on that date and notes to the financial statements including a summary of thesignificant accounting policies and other explanatory information (hereinafter referred toas "the standalone financial statements") in which are included the Ind-ASfinancial statements for the year ended on that date audited by the branch auditor of theVisakh Refinery Located at Visakhapatnam.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at March 312019 the profit and totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (" the SAs").Our responsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (the "ICAI") together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules made thereunder and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the ICAI's Codeof Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the standalone financialstatements.

Emphasis of Matter

We invite attention to Note No. 62 regarding provision for impairment made to theextent of Rs. 95.70 crores towards loans given to consumers under Prime Minister UjjwalaYojana (PMUY) out of the total outstanding loans of Rs. 193742 crores the aboveimpairment has been computed based on the estimates of default as assessed by themanagement.

Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report:

1. Evaluation of uncertain direct and indirect tax positions

The Company has material uncertain direct and indirect tax positions including mattersunder dispute which involves significant judgment to determine the possible outcome ofthese disputes. The Company has disputes pending at various levels of tax authorities overthe past several years. As on March 312019 the company has total such disputed demandsamounting to Rs. 8820.35 crores ( Refer Note No. 2.16 and para (vii) (b) Annexure I ofthis report.)

Auditors' Responses

Principal Audit Procedures

• We have evaluated the appropriateness of the design and tested the operatingeffectiveness of the management's controls over the tax litigation matters.

• Obtained details of completed tax assessments and demands for the year endedMarch 31 2019 from management.

• We reviewed the management's underlying assumptions in estimating the taxprovision and the possible outcome of the disputes. The legal precedences and otherrulings were considered in evaluating management's position on these uncertain taxpositions.

• Additionally we considered the effect of the outcomes of the Appellate Ordersreceived during the year in respect of uncertain tax positions as at April 1 2018 toevaluate whether any change was required to management's position on these uncertainties.

• We have verified the orders from tax and appellate authorities for the previousyears and relied on management judgments in evaluating the tax provisions for the CurrentFinancial Year.

• Further we have relied upon the management judgements and estimates for possibleoutflow and opinion of internal experts of the company in relations to such disputed taxpositions.

2. Recoverability of pre-deposits relating to tax and non tax matters

As at March 31 2019 the Company has non-current assets i.e. pre-deposits pertainingto various tax and non-tax matters namely VAT excise duty custom duty etc. withadjudicating authorities amounting to Rs. 596.40 crores that are pending for/relating tocases pending for more than 3 years and for which there are no balance confirmations fromthe respective authorities available on records.

Auditors' Responses

Principal Audit Procedures

• We have evaluated the appropriateness of the design for recording and trackingthe recoverability of pre-deposits pertaining to the old tax and non- tax cases.

• We have discussed and reviewed the nature of the amounts recoverable vis a visthe underlying cases. We further discussed the sustainability of the cases on a samplebasis and the likelihood of recoverability or otherwise upon final resolution from therespective authorities.

• We enquired with the management about these cases vis a vis the current positionand the efforts taken by the management to recover the deposits placed or obtaining thebalance confirmations from the respective authorities

• Further we have relied on the management estimations and judgements withreference to inherent uncertainties involved while determining the outcome of these cases.

3. Evaluation of disputed claims against the company under various non-tax matters

The company has disputed claims against it which are pending at various courts/forumsand are various stages in the judicial process. The management has exercised significantjudgement in assessing the possible outflow in such matters and accordingly an amount ofRs. 581.67 crores has been disclosed for which the company is contingently liable whilepossibility of any outflow in matters having claims amounting to Rs. 430.33 crores hasbeen considered remote.

Auditors' Responses

Principal Audit Procedures

• Read and analysed select key correspondences internal/external legal opinions/consultations by management for key disputed non tax matters;

• Reviewed and verified other legal pronouncements wherever available in similarmatters in the case of the company/other corporates

• Discussed with appropriate senior management and evaluated management'sunderlying key assumptions in estimating the provisions; and

• Assessed management's estimate of the possible outcome of the disputed cases andrelied on the management judgements in such cases.

4. Assessment for impairment of Investment in Wholly Owned Subsidiaries and variousfinancial assistance provided to them

The Company has wholly owned subsidiaries named 'HPCL Biofuels Ltd' (HBL) and PrizePetroleum Corporation Ltd (PPCL). PPCL has a wholly owned subsidiary namely PrizePetroleum International Pte Ltd. (the Step-Down Subsidiary / PPIPL) incorporated inSingapore.

(i) HPCL Biofuels Ltd. (HBL)

Since its inception HBL has not been able to break-even based on which this projectwas approved. There has been a significant erosion in the net worth of the subsidiary.

Based on this management assessed that the recoverable amount of the Company'sinvestment exceeded its carrying value.

The above assessment includes significant estimations pertaining to projections of cashflows arising from sale of sugar ethanol and co-gen and to make several estimates andassumptions such as Minimum Sales Price Capability of Repayment of Loans escalationfactors interest cost reserves and other operating costs.

(Refer Note no. 60 of the Ind AS Standalone Financial Statements)

Auditors' Responses

Principal Audit Procedures

• We reviewed the process followed by the Company to assess the valuation ofinvestments with respect to the transactions that took place during the year.

• We analysed impairment tests performed by the management and verified that thecriteria used to perform these tests are consistent with those established in applicablereporting regulations.

• In estimating the impairment of investments we have reviewed that managementhas followed the discounting of future cash flows of the revenue streams of HBL from itsCash Generating Unit using a pretax discount rate.

• Further we have studied the industry specific data pertaining to the productsdealt by HBL (Sugar and Ethanol) available in the public domain including the industryoutlook published by the credit rating agencies. This data includes Minimum Selling Pricesof the sugar estimated sugar recovery etc.

• We considered the adequacy of the disclosures in the financial statements inrespect of this matter.

(ii) Prize Petroleum International Pvt Ltd.

HPCL has given corporate guarantee on behalf of PPIPL for obtaining borrowings from aconsortium of banks. Due to uncertainty in the exploration and production of oil and gaswith reference to its reserves and gas prices there is a possibility of the corporateguarantee being invoked.

(Refer Note no. 61 of the Ind AS Standalone Financial Statements)

Auditors' Responses

Principal Audit Procedures

• We reviewed the management estimates and assumptions especially on ProductionProfile Scenarios and Gas Prices in respect of impairment of the Corporate Guarantee incase of Prize Petroleum International Pte Ltd

• Further we made enquiries with the technical expert (petroleum engineer) of thesubsidiary to substantiate the production profiles of the production blocks running overthe future periods

• Further this assessment exercise was audited by the independent auditor ofPPIPL.

• We considered the adequacy of the disclosures in the financial statements inrespect of this matter.

Information Other than the Standalone Financial Statements and Auditors' Report Thereon

The Company's Board of Directors is responsible tor the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Directors' Report including Annexures to Directors' Report Corporate Governance and Shareholder's Information but does not include the standalonefinancial statements and our auditor's report thereon. The Other information is expectedto to be made available to us after the date of this Auditors' report.

Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. When we read the other information if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

The Board of Directors are responsible for overseeing the Company's financial reportingprocess.

Auditor's Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Other Matter

a) We did not audit the financial statements of 1 branch viz Visakh Refinery includedin the stand alone financial statements of the Company whose financial statements reflecttotal assets of Rs. 14350.38 crores as at 31st March 2019 and the totalrevenue of Rs. 50718.87 crores for the year ended on that date as considered in thestandalone financial statements of this branch have been audited by the branch auditorswhose reports have been furnished to us and our opinion in so far as it relates to theamounts and disclosures included in respect of branches is based solely on the report ofsuch branch auditors.

b) We refer to note no. 49 in connection with 21 Un-incorporated Jointly ControlledEntities ('UJCEs') involved in exploration activities of which majority of UJCEs areunder relinquishment. The standalone Ind AS financial statements include Company'sproportionate share in Assets and Liabilities as on March 312019 and Income andExpenditure for the year ended on March 312019 amounting to Rs. 3.13 crores and Rs. 14.89crores Rs. 1.44 crores and Rs. 3.78 crores respectively. In respect of these UJCEs theaudited accounts are not available with the Company. The financial information has beenincorporated based on data received from the respective operators.

c) The standalone Ind AS financial statements of the Company for the year ended March31 2018 were audited by the joint auditors of the Company one of which is thepredecessor audit firm and have expressed an unmodified opinion dated May 22 2018 onsuch financial statements.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ('the Order') issued bythe Central Government of India in terms of section 143(11) of the Act we give in theAnnexure- I a statement on the matters specified in paragraph 3 and 4 of the Order tothe extent applicable.

2. As required by the section 143(5) of the Act we give in the Annexure II astatement on the directions / sub-directions issued by the Comptroller and Auditor-Generalof India.

3. As required by Section 143(3) of the Act based on our audit we report that:

a) We have sought and obtained all the information and explanations which to the bestof 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 theCompany so far as it appears from our examination of those books and proper returnsadequate for the purposes of our audit have been received from branches not visited by us.

c) The report on the accounts dated May 17 2019 of the Visakh refinery of the companyaudited under section 143(8) of the Act by the branch auditors has been provided to us andhas been properly dealt with by us in preparing this report.

d) The Balance Sheet the Statement of Profit and Loss including Other ComprehensiveIncome Statement of Changes in Equity and the Statement of Cash Flow dealt with by thisReport are in agreement with the relevant books of account.

e) In our opinion the aforesaid standalone financial statements comply with the Ind ASspecified under Section 133 of the Act read with Rule 7 of the Companies (Accounts)Rules 2015 as amended.

f) As per notification no. G.S.R 463(E) dated June 5 2015 the Government companiesare exempted from the provisions of section 164(2) of the Act accordingly we are notrequired to report whether any of the directors of the Company are disqualified in termsof provisions contained in the said section;

g) With respect to the adequacy of the internal financial controls with reference tofinancial statements and the operating effectiveness of such controls refer to ourseparate Report in "Annexure IN"

h) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended. As pernotification no. G.S.R 463(E) dated June 5 2015 the Government companies are exemptedfrom the provisions of section 197 of the Act and hence we are not required to report asto whether the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.

i) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements-Refer Note No.55 to the standalone Ind-ASFinancial Statements read with Para 1 and 3 of Key Audit Matters here in above.

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For R. Devendra Kumar & Associates For M.P Chitale & Co.
Chartered Accountants Chartered Accountants
Firm Registration No.:114207W Firm Registration No.:101851W
Sd/- Sd/-
Devendra Kumar Gupta Anagha Thatte
Partner Partner
Membership No.009032 Membership No.: 105525
Place : New Delhi
May 20 2019

ANNEXURE 'I'

(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements'section of our report of even date to the Members of Hindustan Petroleum CorporationLimited)

i. In respect of the Company's fixed assets :

a) The Company has maintained proper records showing full particulars includingquantitative details and situation of Property Plant and Equipment (fixed assets).

b) The Property Plant and Equipment (PPE) of the Company other than LPG cylinders andpressure regulators with customers are physically verified by the Management in a phasedprogram of three years cycle. In our opinion the programme is reasonable having regard tothe size of the Company and the nature of its assets. In our opinion and as per theinformation given by the management the discrepancies observed were not material and havebeen appropriately accounted in the books of account.

c) On the basis of the information to the extent compiled by the Company pending thereconciliation of the available records title deeds/Lease deeds for immovable propertiesheld as Property Plant & Equipment are not available with the Company in the case of 6properties with Gross block Rs. 0.30 crores and in the case of 19 properties with Grossblock Rs. 2.49 crores where property tax receipts are held by the Corporation tosubstantiate the title to such properties. In other cases based on verification ofrecords on random basis the title deeds are held in the name of the company. For thepurpose of reporting under this clause where ever title deeds of immovable propertieswere not available we have relied on other substantive evidences like allotment lettersnoting in municipal / revenue records conveying title to the Company over the property.

ii. During the year the inventories have been physically verified at reasonableintervals by the management. The discrepancies noticed on physical verification ascompared to the book records were not material having regards to size and nature ofoperations and have been properly dealt with in the books of account.

iii. As per notification no. G.S.R 463(E) dated June 5 2015 the Government companiesare exempted from the provisions of section 188 of the Act in respect of contracts orarrangements entered into between the Government companies. The Company has not grantedloans secured or unsecured to companies firms limited liability partnerships or otherparties covered in the register maintained under section 189 of the Act. Hence thequestion of reporting under subclauses (a) (b) & (c) of the clause 3(iii) of theOrder does not arise.

iv. The Company has not granted any loans or provided any guarantees or security to theparties covered under section 185 of the Act. The Company has complied with the provisionsof section 186 of the Act in respect of investments made or loans or guarantee or securityprovided to the parties covered under section 186 of the Act.

v The Company has not accepted any deposits from the public within the meaning ofsections 73 to 76 of the Act and the rules framed there under. We are informed by theManagement that no order has been passed by the Company Law Board or National Company LawTribunal or Reserve Bank of India or any court or any other tribunal in this regard.

vi. We have broadly reviewed accounts and records maintained by the Company pursuant torules made by the Central Government for the maintenance of cost records under section148(1) of the Act in respect of Company's products to which the said rules are madeapplicable and are of the opinion that prima facie the prescribed accounts and recordshave been made and maintained. We have however not made a detailed examination of therecords with a view to determine whether they are accurate.

vii. (a) According to the information and explanations given to us and according to therecords of the Company examined by us in our opinion the Company is generally regular indepositing with the appropriate authorities undisputed statutory dues including ProvidentFund Employees' State Insurance Income-tax Sales Tax Service Tax Goods & ServiceTax duty of Custom duty of Excise Value Added Tax Cess and any other statutory dueswherever applicable.

According to the information and explanations given to us no undisputed amountspayable in respect of aforesaid dues were outstanding as on March 31 2019 for a period ofmore than 6 months from the date they became payable.

(b) According to the information and explanations given to us the particulars ofstatutory dues that have not been deposited on account of disputes are as under:

Statute Forum pending i.e. STAT/High Court etc. Period to which the amount relates Amount (Rs. in Crores)
Customs Appellate Authority* 2007-2013 4.56
Tribunal** 1998-2013 763
Customs Total 12.19
Central Excise Appellate Authority* 1994-2018 1736
Tribunal** 1994-2018 522.41
High Court 1994-2017 6.11
Board of Revenue 1999-2013 0.05
Adjudicating Authority*** 2004-2014 0.81
Central Excise Total 546.75
Sales Tax/Entry Tax Appellate Authority* 1976-2017 2059.32
Tribunal** 1976-2016 4969.63
High Court 1979-2017 1015.13
Board of Revenue 1999-2014 2.75
Adjudicating Authority*** 1976-2016 18.92
Supreme Court 2002-2004 6.68
Sales Tax/Entry Tax Total 8072.44
Service Tax Appellate Authority* 2005-2018 1.38
Tribunal** 2002-2015 92.66
High Court 1981-2013 3.75
Supreme Court 2004-2012 3.25
Service Tax Total 101.04
Income tax Tribunal** 2006-11 8793
Income tax Total 8793
Grand Total 8820.35

 

* Appellate Authority represents Assistant Commissioner (A) Deputy Commissioner (A) Joint Commissioner (A) Additional Commissioner (A)
** Tribunal represents Sales Tax Appellate Tribunal Central Excise and Service tax Appellate Tribunal (CESTAT) Income Tax Appellate Tribunal (ITAT)
*** Adjudicating authority represents Assessing Officer Additional Commissioner Deputy Commissioner Joint Commissioner Additional Commissioner Chief Commissioner

viii. According to the information and explanations given to us the Company has notdefaulted in repayment of loans or borrowing to financial institutions banks governmentor dues to debenture holders.

ix. The Company has not raised money by way of Initial Public Offer or Further PublicOffer (including debt instruments). According to the information and explanations given tous and on the basis of the records examined by us the Company has prima facie applied theterm loan for the purpose for which it was obtained.

x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us no instances of material fraudby the Company or on the Company by its officers and employees have been noticed orreported during the year.

xi. As per notification no. G.S.R 463(E) dated June 5 2015 the Government companiesare exempted from the provisions of section 197 of the Act accordingly the question ofreporting whether the payment of managerial remuneration by the Company is in accordancewith the requisite approvals mandated by the provisions of section 197 read with ScheduleV to the Act does not arise.

xii. The Company is not a chit fund or a Nidhi company. Hence the question ofreporting under clause 3(xii) of the Order does not arise.

xiii. As per notification no. G.S.R 463(E) dated June 5 2015 the Government companiesare exempted from the provisions of section 188 of the Act in respect of contracts orarrangements entered into between the Government companies. The Company has complied withthe provisions of section 177 and section 188 of the Act in respect of transactions withthe related parties and the details have been disclosed in the standalone Ind AS financialstatements as required by the applicable Indian Accounting Standards.

xiv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under audit.

xv. The Company has not entered into any non-cash transactions with directors orpersons connected with him covered under the provisions of section 192 of the Act.

xvi. The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.

For R. Devendra Kumar & Associates For M.P Chitale & Co.
Chartered Accountants Chartered Accountants
Firm Registration No.:114207W Firm Registration No.:101851W
Sd/- Sd/-
Devendra Kumar Gupta Anagha Thatte
Partner Partner
Membership No.009032 Membership No.: 105525
Place : New Delhi
May 20 2019

ANNEXURE II

(Referred to in paragraph 2 under "Report on Other Legal and RegulatoryRequirements" of our report of even date to the Members of Hindustan PetroleumCorporation Limited)

Based on the verification of records of the Company and based on information andexplanations given to us we give below a report on the directions issued by theComptroller and Auditor General of India in terms of the section 143(5) of the Act.

Sr. No. Areas to be examined Observations/findings
1. Whether the Company has system in place to process all the accounting transactions through IT system? If yes the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications if any may be stated. As per the information and explanations furnished to us the company has an Enterprise Resource Planning ERP system in the name of "JD Edwards (JDE)" to process the accounting transactions. There are large number of other applications including workflow applications and portals to address specific requirements. Most of these applications/modules have real time integration with ERP (JDE) system for smooth accounting / recording of transactions. As a part of our general review of IT controls we have carried out the review of major controls in existence in the applications with regard to integrity of data flowing to JDE. Basis our sample verification nothing significant has come to our attention that causes us to believe that there are material gaps pertaining to IT controls.
Further we have also relied on the exercise conducted by the management with the help of consultant to check the design of internal controls and its operating effectiveness including the IT systems and control.
Further management has conducted the system audit with the help of the consultants which has not reported any significant gaps.
Apart from above there are few other accounting process being undertaken through excel spreadsheet like inventory valuation interest calculation of treasury funding activities matching of open credits in the case of Trade accounts receivables matching of suppliers accounts wherein sufficient controls for data integrity have been observed in our review of general IT controls. There is however a need of automation of such processes to ensure complete data integrity.
2. Whether there is any restructuring of an existing loan or cases of waiver/ write off of debts/loans/interest etc. made by a lender to the company due to the company's inability to repay the load? If yes the financial impact may be stated. No such instances have been noticed during the financial year 2018-19.
3. Whether funds received/receivable for specific schemes from Central/ State agencies were properly accounted for/utilized as per its term and conditions? List the cases of deviation As per the information and explanations furnished to us the funds received /receivable by the company for specific schemes from Central/State agencies to the extent these are recorded in the books of accounts and records produced before us were properly accounted. We are informed that in the case of schemes of Central Government i.e. PMUYDBTL other subsidies etc claims for reimbursements duly certified by Chartered Accountants are filed with Petroleum Planning and Analysis cell (PPAC) for reimbursement and hence these are not considered as Grants and no utilisation certificates are filed.
In the case of certain state specific scheme utilisation certificates are furnished by the company separately to the respective agencies. During the course of our test checks of the records available at Head Office of the company in respect of such claims for reimbursement recorded in the books which are approved by PPAC nothing has come to our notice that causes us to believe that there has been any violation of terms and conditions in relation to these claims. The separate audit of these claims filed with PPAC is carried out by separate firms of Chartered Accountants.

 

For R. Devendra Kumar & Associates For M.P Chitale & Co.
Chartered Accountants Chartered Accountants
Firm Registration No.:114207W Firm Registration No.:101851W
Sd- Sd-
Devendra Kumar Gupta Anagha Thatte
Partner Partner
Membership No.009032 Membership No.: 105525
Place : New Delhi
May 20 2019

ANNEXURE III

Referred to in paragraph 3(g) under "Report on Other Legal and RegulatoryRequirements" of our report of even date

Report on the Internal Financial Controls with reference to Financial Statements underclause (i) of sub-section 3 of section 143 of the Companies Act 2013 ("theAct")

We have audited the Internal Financial Controls with reference to Financial Statementsof HINDUSTAN PETROLEUM CORPORATION LIMITED ('the Company') as of March 31 2019 inconjunction with our audit of the standalone Ind AS financial statements of the Companyfor the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining InternalFinancial Controls with reference to Financial Statements established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India (ICAI). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to company's policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under the Act.

Auditors' Responsibility

Our audit of Internal Financial Controls with reference to Financial Statementsincludes assessing the risk that a material weakness exists and testing and evaluating thedesign and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the standalone Ind AS financial statements whether dueto fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's Internal Financial Controls withreference to Financial Statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A Company's Internal Financial Controls with reference to Financial Statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of standalone Ind AS Financial Statements for externalpurposes in accordance with generally accepted accounting principles. A company's InternalFinancial Control over Financial Reporting includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation ofstandalone Ind AS Financial Statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisitionuse or disposition of the company's assets that could have a material effect on thestandalone Ind AS Financial Statements.

Inherent Limitations of Internal Financial Controls with reference to FinancialStatements

Because of the inherent limitations of Internal Financial Controls with reference toFinancial Statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the Internal Financial Controls withreference to Financial Statements to future periods are subject to the risk that theInternal Financial Control with reference to Financial Statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate InternalFinancial Controls with reference to Financial Statements and such Internal FinancialControls with reference to Financial Statements were operating effectively as on March312019 based on the criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

Other Matters

Our aforesaid report under section 143(3)(i) of the Act on the adequacy and operatingeffectiveness of the Internal Financial Controls with reference to Financial Statementsinsofar as it relates branch office of the Company viz. Visakh Refinery audited by thebranch auditor appointed under section 143(8) of the Act is based on the report of thebranch auditor which has been sent to us and has been properly dealt with by us inpreparing this report.

For R. Devendra Kumar & Associates For M.P. Chitale & Co.
Chartered Accountants Chartered Accountants
Firm Registration No.:114207W Firm Registration No.:101851W
Sd/- Sd/-
Devendra Kumar Gupta Anagha Thatte
Partner Partner
Membership No.009032 Membership No.: 105525
Place : New Delhi
May 20 2019