NTPC Ltd

NTPC LIMITED

1. We have audited the attached Balance Sheet of NTPC LIMITED as at 31^stMarch 2010, the Profit and Loss Account and also the Cash Flow Statement for the yearended on that date annexed thereto. These financial statements are the responsibility ofthe company’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

2. We conducted our audit in accordance with Auditing Standards generally accepted inIndia. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from material misstatement. Anaudit includes examining, on test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by the management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditors’ Report) Order, 2003 issued by theGovernment of India in terms of sub-section (4A) of section 227 of the Companies Act,1956, we enclose in the annexure a statement on the matters specified in paragraphs 4 and5 of the said Order.

4. Further to our comments in annexure referred to in para 3 above, we report that:

a) We have obtained all the information and explanations which to the best of ourknowledge 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, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account;

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the Accounting Standards referred to in sub-section(3C) of Section 211 of the Companies Act, 1956;

e) Being a Government company, pursuant to the Notification no. GSR 829(E) dated21.10.2003 issued by Government of India, provisions of clause (g) of sub-section (1) ofsection 274 of the Companies Act, 1956, are not applicable to the company;

f) We draw attention to Schedule 26 - Notes on Accounts:

i) Note no. 2 (a) and (b) in respect of accounting of sales on provisional basispending determination of tariff by the Central Electricity Regulatory Commission;

ii) Note no. 2 (e) in respect of accounting of sales of Rs.10,443 million in earlieryears (reduced to Rs.10,256 million in the current year) based on the order of theAppellate Tribunal for Electricity in favour of the Company pending disposal of the appealbefore the Hon’ble Supreme Court of India.

g) In our opinion, and to the best of our information and according to the explanationsgiven to us, the said accounts read with the Accounting Policies and Notes thereon inSchedule 26, give the information required by the Companies Act, 1956 in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

a. in the case of Balance Sheet, of the state of affairs of the company as at 31^stMarch 2010,

b. in the case of Profit and Loss Account, of the profit for the year ended on thatdate, and

c. in the case of Cash Flow Statement, of the cash flows for the year ended on thatdate.

Statement referred to in paragraph (3) of our report of even date to the members ofNTPC LIMITED on the accounts for the year ended 31^st March 2010

(i) (a) The Company has generally maintained proper records showing full particularsincluding quantitative details and situation of fixed assets.

(b) All the assets have not been physically verified by the management during the yearbut there is a regular programme of verification which, in our opinion, is reasonablehaving regard to the size of the Company and the nature of its assets. No materialdiscrepancies were noticed on such verification.

(c) Substantial part of the fixed assets has not been disposed off during the year.

(ii) (a) The inventory has been physically verified by the management at reasonableintervals.

(b) The procedures of physical verification of inventories followed by the managementare reasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) The Company is maintaining proper records of inventory. The discrepancies noticedon physical verifi cation of inventories, wherever material, have been properly dealt within the books of account.

(iii) (a) The Company has not granted any loans secured or unsecured to any Company,firm or other parties covered in register maintained under section 301 of the CompaniesAct, 1956.

In view of clause (iii)(a) above, the clauses (iii)(b), (iii)(c) and (iii)(d) are notapplicable.

(e) The Company has not taken any loans, secured or unsecured from companies, firms orother parties covered in register maintained under section 301 of the Companies Act, 1956.

In view of (iii) (e) above, the clauses (iii) (f) and (iii) (g) are not applicable.

(iv) In our opinion and according to the information and explanations given to us,there is adequate internal control system commensurate with the size of the Company andthe nature of its business for purchase of inventory and fixed assets and for sale ofelectricity, goods and services. During the course of our audit, we have not observed anycontinuing failure to correct major weaknesses in internal control systems.

(v) (a) According to the information and explanations given to us, during the yearunder audit there have been no contracts or arrangements which need to be entered in theregister maintained under section 301 of the Companies Act, 1956.

In view of clause (v) (a) above, the clause (v) (b) is not applicable.

(vi) In our opinion and according to the information and explanations given to us, theCompany has complied with the directives issued by the Reserve Bank of India, theprovisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act,1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the depositsaccepted from the public. No order has been passed by the Company Law Board or NationalCompany Law Tribunal or Reserve Bank of India or any Court or any other tribunal.

(vii) In our opinion, the Company has an internal audit system commensurate with itssize and nature of business.

(viii) We have broadly reviewed the accounts and records maintained by the Companypursuant to the Rules made by the Central Government for the maintenance of cost recordsunder section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that primafacie the prescribed accounts and records have been made and maintained. We have not,however, made detailed examination of the records with a view to determine whether theyare accurate and complete.

(ix) (a) Undisputed statutory dues including provident fund, investor education andprotection fund, income tax, sales-tax, wealth tax, service tax, custom duty, excise duty,cess and other statutory dues have generally been regularly deposited with the appropriateauthorities within a period of six months from the date they became payable which hassince been deposited with the appropriate authorities.

(b) The disputed statutory dues aggregating to Rs.1,732 million that have not beendeposited on account of matters pending before appropriate authorities are detailed below:

(x) The Company has no accumulated losses and has not incurred cash losses during thefinancial year covered by our audit and the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, theCompany has not defaulted in repayment of dues to financial institutions, banks ordebenture holders.

(xii) According to the information and explanations given to us, Company has notgranted loans and advances on the basis of security by way of pledge of shares, debenturesand other securities.

(xiii) The Company is not a chit fund or a nidhi/mutual benefit fund/society.Therefore, the provisions of clause 4(xiii) of the Companies (Auditor’s Report)Order, 2003 are not applicable to the Company.

(xiv) The Company is not dealing in or trading in shares, securities, debentures andother investments. Accordingly, the provisions of clause 4(xiv) of the Companies(Auditor’s Report) Order, 2003 are not applicable to the Company.

(xv) The Company has not given any guarantees for loans taken by others from banks orfinancial institutions.

(xvi) According to the information and explanations given to us, the term loans havebeen applied for the purpose for which the y were obtained.

(xvii) According to the information and explanations given to us and on an overallexamination of the balance sheet of the Comp any, we report that no funds raised onshort-term basis have been used for long-term investment.

(xviii) According to the information and explanations given to us, the Company has notmade preferential allotment of shares during the year.

(xix) According to the information and explanations given to us, the Company hascreated security or charge in respect of the Bonds issued by the Company during the yearexcept in respect of certain bonds raised in March 2010 for which security creation is inprocess.

(xx) According to the information and explanations given to us, the Company has notraised any money by public issue during the year.

(xxi) According to the information and explanations given to us, two cases of fraudinvolving an aggregate amount of Rs.1 million towards missing goods and one case ofsuspected fraud amounting Rs.5 million have been committed on the Company during the year,which are under investigation. Further, by the Company, no frauds have been reported.