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Power Finance Corporation Ltd.

BSE: 532810 Sector: Financials
NSE: PFC ISIN Code: INE134E01011
BSE 00:00 | 24 Apr Power Finance Corporation Ltd
NSE 05:30 | 01 Jan Power Finance Corporation Ltd
OPEN 91.80
PREVIOUS CLOSE 91.70
VOLUME 249341
52-Week high 138.80
52-Week low 78.70
P/E 3.79
Mkt Cap.(Rs cr) 24,038
Buy Price 90.50
Buy Qty 50.00
Sell Price 91.05
Sell Qty 20.00
OPEN 91.80
CLOSE 91.70
VOLUME 249341
52-Week high 138.80
52-Week low 78.70
P/E 3.79
Mkt Cap.(Rs cr) 24,038
Buy Price 90.50
Buy Qty 50.00
Sell Price 91.05
Sell Qty 20.00

Power Finance Corporation Ltd. (PFC) - Auditors Report


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Company auditors report

TO THE MEMBERS OF POWER FINANCE CORPORATION LIMITED

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

OPINION

We have audited the standalone financial statements of Power Finance CorporationLimited ('the Company') whichcomprise the Balance Sheet as at 31st March 2019 and theStatement of Profit and Loss (including Other Comprehensive Income) Statement of Changesin Equity and the Statement of Cash Flows for the year then ended and Notes to theFinancial Statements including a summary of Significant Accounting Policies and otherexplanatory information.

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 Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31st March 2019 and the profit and total comprehensive income changes in equityand its cash flows for the year ended on that date.

BASIS FOR OPINION

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder Section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the Key Audit Matters to becommunicated:

Key Audit Matter Auditors' Response
1 Credit impairment of financial instruments Our procedures included:
The most significant areas where we identified greater levels of management Judgement are: • The assessment and calculation of material SICR indicators and criteria.
• Significant Increase in Credit Risk (SICR) Company has classified SICR based on the indicator defined in Ind AS. Selection of any other criteria can materially impact the ECL recognised for certain portfolios. • The accuracy of critical data elements input into the system used for computation of PD and LGD.
• ECL model Impairment loss measurement requires use of statistical models to estimate the Probabilities of Default (PD) Loss Given Default (LGD) and Exposure at Default (EAD). These models are key driver to measure ECL. • The completeness and accuracy of data flows from source systems into the ECL calculation.
• Individually assessed Stage 3 carrying value the carrying value of loans and advances to borrowers may be materially misstated if individual impairments are not appropriately identified and estimated. Company has availed services of Crisil Ltd. to estimate the carrying value of its stage 3 portfolio. • Company has availed services of independent expert to estimate the carrying value of its stage 3 portfolio. We have reviewed the carrying value provided by such expert.
The effect of these matters is that as part of our risk assessment we determined that the value of ECL has a high degree of estimation uncertainty with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole. Our results:
We considered the credit impairment charge and provision recognised and the related disclosures to be acceptable& satisfactory.
2 Valuation of financial instruments at Fair Value Our procedures included:
Company enters into derivative contracts in accordance with RBI guidelines to manage its currency and interest rate risk. These derivative contracts are categorised at FVTPL and certain derivative contracts are designated under cash flow hedge (Hedge Accounting). Company obtains fair value of derivative contracts from the counter party banks. Our procedure include review of the fair value obtained using observable market inputs like prevailing exchange rate interest rate curves and other volatility index subsequent thereto.
We consider the valuation of the derivative financial instruments and hedge accounting as a key audit matter due to material exposure and the fact that the inappropriate application of these requirements could lead to a material effect on the income statement. Our results:
We did not find any material misstatement in measuring derivative contracts at fair value obtained from counter party banks while considering other inputs.
3 Recoverability of Company's investment in Subsidiaries Associates and Joint Ventures Our procedures included:
The carrying value of the Company's investment in subsidiaries represents 33.50% of the Company's total net worth. Review of financial statements of all subsidiaries associates and joint ventures.
Due to the materiality of the investment in the context of the parent Company's financial statements and the market risk related with recoverability of investments this was considered to be the area of focus during the course of Company's audit. Our results:
We did not find any material risk in recoverability of the investments.
4 Information Technology Our procedures included:
Control Performance Evaluated sample of key controls operating over the information in relation to financial accounting and reporting systems.
The key financial accounting and reporting processes are highly dependent on the automated controls over the Company's IT systems. There is a risk that improper segregation of duties or user access management controls  (in relation to key financial accounting and reporting systems) may undermine our ability to place some reliance thereon in our audit. Our results:
We did not find any material deficiencies as per our analysis of reports emanating from IT systems on Financial Accounting and reporting.

OTHER MATTER

The comparative financial information of the Company for the year ended 31 March 2018and the transition date opening balance sheet as at 1st April 2017 included in theseStandalone Ind AS financial statements are based on the previously issued statutoryfinancial statements prepared in accordance with the Companies (Accounting Standards)Rules 2006 audited by us/the predecessor auditors whose audit report for the year ended31 March 2018 and 31st March 2017 dated 25.05.2018 and 29.05.2017 respectively expressedan unmodified opinion on those standalone financial statements as adjusted for thedifferences in the accounting principles adopted by the Company on transition to the IndAS which have been audited by us.

Our opinion is not modified in respect of above matter.

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 Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theAccounting Standards specified under Section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate implementationand maintenance of accounting policies; making judgments and estimates that are reasonableand prudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

Those Board of Directors are also responsible for overseeing the Company's financialreporting process.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these 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 financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe company 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 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'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatement in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonable knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) Planning the scope of our auditwork and in evaluating the results of our work: and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

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 financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen 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.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in term of sub-section (11) of Section 143 ofthe Companies Act 2013 we give in the Annexure "A" a statement on thematters specified in paragraphs 3 and 4 of the Order.

2. The Comptroller and Auditor General of India has issued the directions and subdirections indicating the areas to be examined in term of Sub-section 5 of Section 143 ofthe Act the compliance of which is set out in Annexure "B".

3. 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 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;

(c) The Balance Sheet the statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account;

(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014;

(e) In terms of Notification No. GSR 463(E) dated 05.06.2015 issued by Ministry ofCorporate Affairs Government of India provisions of Sub-section 2 of Section 164 of theAct are not applicable to the Company being a government company.

(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in Annexure "C".

(g) 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 2014in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note No. 39 to the standalone financialstatements;

ii. The Company did not have any long - term contracts including derivative contractsfor which there were any material foreseeable losses;

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

FOR M.K. AGGARWAL & CO. FOR GANDHI MINOCHA & CO.
Chartered Accountants Chartered Accountants
Firm's Registration No.: 01411N Firm's Registration No.: 000458N
by the hand of by the hand of
Sd/- Sd/-
CA M.K. AGGARWAL CA BHUPINDER SINGH
Partner Partner
Membership No.014956 Membership No.092867
Date: 29.05.2019
Place: Mumbai

Annexure A to Independent Auditors' Report on the Audit of the Standalone FinancialStatements

(Referred to in Para 1 under the heading 'Report on other Legal and RegulatoryRequirements' of our report of even date to The Members of Power Finance CorporationLimited on the standalone financial statements for the year ended 31st March 2019)

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

(b) As explained to us the management carries out the physical verification of fixedassets once in a year. In our opinion the frequency of physical verification isreasonable having regard to the size of the company and nature of its assets. As explainedto us no material discrepancies were noticed by the management on such physicalverification necessitating any adjustment.

(c) According to information and explanations given to us the records examined by usand based on the examination of conveyance deeds/ registered sale deed provided to us wereport that the title deeds comprising all immovable properties of land and buildingswhich are free hold are held in the name of the Company as at the balance sheet date. Inrespect of immovable properties of land and building that have been taken on lease thelease agreement are in the name of the company.

ii. The Company is a Non-Banking Finance Company. Accordingly it does not hold anyinventory. Thus clause 3(ii) of the Companies (Auditor's Report) Order 2016 is notapplicable.

iii. As explained to us and verified from books and records the Company has notgranted any loans secured or unsecured to Companies firms or other parties covered inthe register maintained under Section 189 of the Companies Act 2013. Further clauses3(iii) (a) (b) and (c) of the Companies (Auditor's Report) Order 2016 are not applicableto the Company.

iv. The Company has not given any loans investment guarantees and securities whichmay be covered under section 185 and 186 of the Companies Act 2013.

v. According to the information and explanations given to us the Company has notaccepted any deposit from public during the year within the meaning of section 73 to 76 orany other relevant provision of the companies Act2013 and the Companies (Acceptance ofDeposits) Rules 2014.

vi. The Central Government has not prescribed the maintenance of cost records underSub-section 1 of Section 148 of the Act for any of the services rendered by the Company.Accordingly clause 3(vi) of the Companies (Auditor's Report) Order 2016 is notapplicable to the Company.

vii. In respect of statutory dues on the basis of information and explanations givento us and on the basis of our examination of the records of the company we report that:

(a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including Provident Fund Employees' State Insurance Income Tax ServiceTax Goods & Service Tax and other material statutory dues as applicable to it andthere is no undisputed amount payable in respect of aforesaid dues outstanding for aperiod of more than six months from the date they become payable as on 31st March 2019as per the accounts of the Company.

(b) Wherever any dues / demand has been raised by any statutory authority and has beendisputed by the Company the same has been duly deposited under contest except infollowing cases:

Name of the Statute Nature of the Dues Total Disputed Amount (Rs) Amount paid under protest (Rs) Pending Amount (Rs) Period to which the amount relates Forum where dispute is pending
Chapter V of Finance Act 1994 Service Tax and Penalty 8655830 590170/- 8065660 01 April 2011 to 31 December 2015 CESTAT Delhi
1691418 Nil 1691418 01 January 2016 to 30 November  2016 Commissioner CE & ST LTU New Delhi
Income Tax Act 1961 Income Tax 176418418 153070190 23348228 AY 2016-17 CIT (Appeals) - 22 Delhi
Income Tax Act 1961 Penalty 259123160 Nil* 259123160 AY 2014-15 CIT (Appeals) - 22 Delhi

*The due date of payment of penalty amount is 28 April 2019 against which stay ofdemand has been granted upon payment of 20% of total demand till disposal of company'sappeal before CIT(A) or till 30.10.2019. Accordingly amount of `51824630/- (20% oftotal demand) has been deposited by the Corporation on 26.04.2019.

viii .According to information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not defaulted in repayment ofloans or borrowing to a financial institution bank Government or dues to debentureholders.

ix. Money raised by the company by way of all types of debt instruments and term loansduring the year was applied for the purposes for which it was raised.

x. To the best of our knowledge and according to the information and explanations givento us no fraud by the Company or any fraud on the Company by its officers and employeeshas been noticed or reported during the year.

xi. According to information and explanations given to us being a Government CompanySection 197 of Companies Act 2013 does not apply to the Company. Accordingly clause3(xi) of the Companies (Auditor's Report) Order 2016 is not applicable.

xii. According to information and explanations given to us the Company is not a NidhiCompany. Hence the Nidhi Rules 2014 are not applicable to the Company. Accordinglyclause 3(xii) of the Companies (Auditor's Report) Order 2016 is not applicable to theCompany.

xiii. According to information and explanations given to us and on the basis of ourexamination of the records of the Company all transactions with the related parties arein compliance with Section 177 and 188 of the Companies Act 2013 where applicable. Thedetails have been disclosed in the Financial Statements as per the requirement of theaccounting standard.

xiv.According to information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

xv. The Company has not entered into any non-cash transactions with directors orpersons connected with them which are covered under Section 192 of Companies Act 2013.

xvi.The Company is a Non- Banking Finance Company and has obtained registration undersection 45-IA of the Reserve Bank of India Act 1934.

FOR M.K. AGGARWAL & CO. FOR GANDHI MINOCHA & CO.
Chartered Accountants Chartered Accountants
Firm's Registration No.: 01411N Firm's Registration No.: 000458N
by the hand of by the hand of
Sd/- Sd/-
CA M.K. AGGARWAL CA BHUPINDER SINGH
Partner Partner
Membership No.014956 Membership No.092867
Date: 29.05.2019
Place: Mumbai

Annexure-B to Independent Auditors' Report on the Audit of the Standalone FinancialStatements

(Referred to in Para 2 under the heading 'Report on other Legal and RegulatoryRequirements' of our report of even date to The Members of Power Finance CorporationLimited on the standalone financial statements for the year ended 31st March 2019)

As required under Section 143(5) of the Companies Act 2013 with respect to thedirections and sub-directions issued by The Comptroller & Auditor General of India wereport that :

Questionnaire Replies
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. Company has a system in place to process all the accounting transactions through IT system. During FY 2018-19 all the accounting transactions have been processed through IT system. Since system of processing all financial transactions is in place all transactions are done mandatorily through system only as such question of processing of transactions outside IT system on the integrity of the accounts doesn't arise.
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 loan? If yes the financial impact may be stated. During the year under consideration there is no case of restructuring of any existing loan or case of waiver / write off of debts / loans / interest etc. by a lender to the Company.
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. Funds released by Ministry of Power for the projects / schemes sanctioned under Integrated Power Development Scheme (R-APDRDP subsumed) have been properly accounted for and released onward to the beneficiaries as per guidelines and terms & conditions of sanction.
4 Keeping in view the expiry of exemption given by RBI to PFC from RBI's restructuring norms on 31.03.2017 the Company has been advised to seek a clarification from RBI with regard to the date of applicability of RBI restructuring norms especially on the existing loans which were hitherto classified under the restructuring norms approved by MoP so that the financial statements for the year 2018-19 are finalized accordingly. The matter pertains to application of RBI's Restructuring/ Reschedulement / Renegotiation norms (RRR) on certain class of assets where exemption was available upto 31.03.2017. In this regard it is submitted that the Company has adopted Ind AS w.e.f. 01.04.2018 as required under Companies (Indian Accounting Standards) Rules 2015 and Ind AS does not prescribe such restructuring norms for asset classification and provisioning thereon. The asset classification and provisioning has been done in accordance with requirements of Ind AS.

 

FOR M.K. AGGARWAL & CO. FOR GANDHI MINOCHA & CO.
Chartered Accountants Chartered Accountants
Firm's Registration No.: 01411N Firm's Registration No.: 000458N
by the hand of by the hand of
Sd/- Sd/-
CA M.K. AGGARWAL CA BHUPINDER SINGH
Partner Partner
Membership No.014956 Membership No.092867
Date: 29.05.2019
Place: Mumbai

Annexure C to the Independent Auditors 'Report on the Audit of the Standalone FinancialStatements

(Referred to in Para 3(f) under the heading 'Report on other Legal and RegulatoryRequirements' of our report of even date to The Members of Power Finance CorporationLimited on the standalone financial statements for the year ended 31st March 2019)

Report on the Internal Financial Controls with reference to standalone financialstatements under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013("the Act")

We have audited the internal financial controls with reference to standalone financialstatements of Power Finance Corporation Limited ("the Company") as of 31stMarch 2019 in conjunction with our audit of the Standalone Financial Statements of theCompany for 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 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India ('ICAI'). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlswith reference to financial statements that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.

AUDITORS' RESPONSIBILITY

Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI prescribed under Sub-section 10 of Section 143 of the Act to the extentapplicable to an audit of internal financial controls. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether internal financial controls with reference tofinancial statements were established and maintained and if such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the internalfinancial controls system with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of internal financial controls withreference to financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgment including theassessment of the risks of material misstatement of the 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 systemwith reference to financial statements.

MEANING OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS

A company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control withreference to financial statements includes those policies and procedures that (1) pertainto the maintenance of records that in reasonable detail accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorisations ofthe Management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition use or dispositionof the company's assets that could have a material effect on the 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 internal financialcontrols system with reference to financial statements and such internal financialcontrols with reference to financial statements were operating effectively as at 31stMarch 2019 based on the internal control over financial reporting criteria establishedby the Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India.

FOR M.K. AGGARWAL & CO. FOR GANDHI MINOCHA & CO.
Chartered Accountants Chartered Accountants
Firm's Registration No.: 01411N Firm's Registration No.: 000458N
by the hand of by the hand of
Sd/- Sd/-
CA M.K. AGGARWAL CA BHUPINDER SINGH
Partner Partner
Membership No.014956 Membership No.092867
Date: 29.05.2019
Place: Mumbai

NON-BANKING FINANCIAL COMPANIES AUDITORS' REPORT

FOR THE YEAR ENDED 31st MARCH 2019

To

Board of Directors

Power Finance Corporation Limited Urjanidhi 1 Barakhamba Lane Connaught Place NewDelhi-110001

Dear Sir

As required by the "Non-Banking Financial Companies Auditor's Report (ReserveBank) Directions 2016" issued by the Reserve Bank of India on the matters specifiedin Chapter - II of the said Directions to the extent applicable to the Company we reportthat:

1. The Company is engaged in the business of non-banking financial institution havingvalid certificate of registration as an Infrastructure Finance Company issued by ReserveBank of India vide No. B- 14.00004 dated 28-07-2010 in lieu of earlier certificate no.14.00004 dated 10.02.1998. Further the Company is entitled to continue to hold suchregistration in terms of its asset / income pattern as on 31.03.2019.

2. The Company is meeting the requirement of net owned funds applicable to anInfrastructure Finance Company as contained in Master Direction - Non-Banking FinancialCompany - Systemically Important Non-Deposit taking Company and Deposit taking Company(Reserve Bank) Directions 2016.

3. The company is registered as Non-deposit accepting Infrastructure Finance Companywith RBI. The Board of Directors has passed resolution in its meeting held on 25.05.2018for non-acceptance of any public deposit during FY 2018-19.

4. Company has not accepted any public deposits during the financial year 2018-19.

5. As per roadmap issued by Ministry of Corporate Affairs regarding applicability ofInd AS Company is required to apply Ind AS from FY 2018-19 (with transition date of01.04.2017). The prudential norms related to income recognition accounting standardsasset classification provisioning etc. specified in RBI's Master Direction - Non-BankingFinancial Company - Systemically Important Non-Deposit taking Company and Deposit takingCompany (Reserve Bank) Directions 2016 are inconsistent with the Ind AS system ofcalculating expected credit loss on impaired loans and classification thereof. The Companyhas aligned its income recognition asset classification provisioning etc. as perrequirements of Ind AS.

6. As per information and explanation given to us the statement of capital funds riskassets/exposures and risk asset ratio(NBS-7 return) has been filed by company for all thequarters of FY 2018-19 based on financial results of respective quarters drawn on thedate of filing with in the stipulated period including CRAR in compliance with RBI norms.Further CRAR based on audited financial statements for the year ended 31.03.2019 has beencorrectly arrived at and it is in compliance with minimum prescribed CRAR by RBI.

FOR M.K. AGGARWAL & CO. FOR GANDHI MINOCHA & CO.
Chartered Accountants Chartered Accountants
Firm's Registration No.: 01411N Firm's Registration No.: 000458N
by the hand of by the hand of
Sd/- Sd/-
CA M.K. AGGARWAL CA BHUPINDER SINGH
Partner Partner
Membership No.014956 Membership No.092867
Date: 29.05.2019
Place: Mumbai

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION

143(6)(b) OF THE COMPANIES ACT 2013 ON THE FINANCIAL STATEMENTS OF POWER

FINANCE CORPORATION LIMITED FOR THE YEAR ENDED 31 MARCH 2019

The preparation of financial statements of Power Finance Corporation Limited for theyear ended 31 March 2019 in accordance with the financial reporting framework prescribedunder the Companies Act 2013 (Act) is the responsibility of the Management of theCompany. The statutory auditors appointed by the Comptroller and Auditor General of Indiaunder Section 139 (5) of the Act are responsible for expressing opinion on the financialstatements under Section 143 of the Act based on independent audit in accordance with thestandards on auditing prescribed under section 143 (10) of the Act. This is stated to havebeen done by them vide their Audit Report dated 29 May 2019.

I on behalf of the Comptroller and Auditor General of India have conducted asupplementary audit of the financial statements of Power Finance Corporation Limited forthe year ended 31 March 2019 under Section 143 (6) (a) of the Act. This supplementaryaudit has been carried out independently without access to the working papers of thestatutory auditors and is limited primarily to inquiries of the statutory auditors andcompany personnel and a selective examination of some of the accounting records.

On the basis of my supplementary audit nothing significant has come to my knowledgewhich would give rise to any comment upon or supplement to statutory auditor's reportunder section 143 (6) (b) of the Act.

For and on behalf of the
Comptroller & Auditor General of India
Sd/-
(Rina Akoijam)
Principal Director of Commercial Audit &
Ex-officio Member Audit Board III
New Delhi
Place : New Delhi
Date : 26.07.2019