ilfs engineering construction co ltd Auditors report

To the Members of IL&FS Engineering and Construction Company

Limited

Report on the Audit of the Standalone Financial Statements

Opinion:

1. We have audited the accompanying Standalone Financial Statements of IL&FS Engineering and Construction Company Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2023, the Statement of Profit and Loss, Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and notes to the Standalone Financial Statements, including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "the Standalone Financial Statements").

2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, its loss and other comprehensive loss, its changes in equity and its cash flows for the year then ended.

3. We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those SAs are further described in the "Auditors Responsibilities for the Audit of the Standalone Financial Statements" section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ("ICAI") together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going Concern:

4 Attention is invited to Note 30 regarding continued losses, erosion of net-worth as at the year end, and significant reduction in the Companys income from operations and other matters detailed in the said paragraph. These events and conditions indicate a material uncertainty which cast a significant doubt on the Companys ability to continue as a going concern, and therefore it may not be able to realise its assets and discharge its liabilities including potential liabilities in the normal course of business. The ability of the Company to continue as a going concern is solely dependent on the finalisation and approval of the resolution process, which is not wholly within the control of the Company.

The Management of the Company has prepared these financial statements on a going concern basis considering status of process initiated by the Board and Interim Orders of NCLAT.

Our opinion is not modified in respect of this matter.

Emphasis of Matter:

5. We draw attention to the following notes to the standalone financial statements:

a. Note 31 (v) regarding ongoing investigations by Serious Fraud Investigation Office of Ministry of Company Affairs (SFIO), Enforcement Directorate (ED) and other regulators / agencies against Infrastructure Leasing & Financial Services Limited (IL&FS) and some of its subsidiaries (including the Company). The Standalone Financial Statements of the Company for the year ended on March 31, 2023 do not include adjustments, if any, that may arise on account of the ongoing investigations by the investigating and other agencies and Regulatory Authorities.

b. Note 51 regarding non-receipt of confirmation of balances as at March 31, 2023 from some lenders, customers and vendors. In the absence of confirmations, the adjustments, if any, on account of unsettled transactions, to the carrying values of assets and liabilities cannot be ascertained.

c. Note52 relatingto non-recognition of interest expense on borrowings availed by the Company, pursuant to the Interim Order and the Judgement passed by NCLAT specifying October 15,2018 as cut-off date for initiation of resolution process, of Rs.437.41 Crores (excluding penal/other interest and charges) for the year ended March 31, 2023. Aggregate amount of interest expense not so recognized as at March 31, 2023 is Rs. 1722.21 Crores approximately.

The adjustments, if any, arising out of the above matters to the carrying value of assets or to the amounts disclosed in Standalone Financial Statements, are not determinable at this juncture for the reasons stated in respective notes.

Ouropinion is not modified in respect of the aforementioned matters.

Key Audit Matters:

Key audit matters are those matters that, in our professional judgment, were of most significance 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 Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for Opinion and Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. For each matter below, our description of how our audit addressed the matter is provided in that context.

Description of Key Audit Matters:

Key audit matter	How the matter was addressed in our audit
Estimated Cost to complete the Project:
Refer note 3 (a) to the Standalone Financial Statements
The Company recognises revenue under percentage of completion method as specified under Indian Accounting	Our audit approach was a combination of test of compliance of companys internal controls and substantive procedures which included the following:
Standard (IND AS)-115 - Revenue from contract with customers. Recognition of revenue requires estimation of total contract cost which comprises of the actual cost incurred till date and estimated cost further to be incurred to complete the projects. Estimation of the cost to complete involves exercise of significant judgement by management including assessment of technical data and hence identified as Key Audit Matter.	• Tested the design, implementation and operating effectiveness of the controls surrounding determination and approval of estimated cost.
	• Verified the contracts with customers on test check basis and the actual cost incurred and terms and condition related to the variation of the cost.
	• Obtained and relied on the internal assessments supporting the accuracy of the estimate of the total cost of the project for selected contracts on test check basis.
Trade receivables and Contract Assets
Refer note 7 and 12 to the Standalone Financial Statements
Trade receivables, retention money and contract assets (project work in progress) amounting to Rs.124.85 Crores, Rs.305.35 Crores and Rs.486.83 Crores respectively, represents approximately 51% of the total assets of the Company as at March 31, 2023. In assessing the recoverability of the aforesaid balances, managements judgement involves consideration of aging status, Companys right to recover from clients or related receivables/advances, evaluation of litigations and the likelihood of collection based on the terms of the contract. Management estimation is required in the measurement of work completed during the period for recognition of unbilled revenue. We considered this as key audit matter due to the materiality of the amounts and significant estimates and judgements as stated above.	Our audit procedures amongst others included the following:
	• We understood and tested on a sample basis the design and operating effectiveness of management control over the recognition of the trade receivables, retention money and contract assets.
	• We performed test of details and tested relevant contracts, for the provisions made by the management towards doubtful and credit loss.
	• We tested the aging of trade receivables at year end.
	• We performed test of details and tested relevant contracts and documents with specific focus on measurement of work completed during the period for material unbilled revenue balances included in contract asset.
	• We performed additional procedures, in respect of material over-due trade receivables and long outstanding contract assets, i.e. tested historical payment records.
	• We assessed the allowance for impairment made by management.
Provisions and Contingent Liabilities:
Refer note 3 (p) to the Standalone Financial Statements
The Company is involved in various taxes and other disputes for which final outcomes cannot be predicted and which could potentially result in significant liabilities. The assessment of the risks associated with the litigations is based on complex assumptions, which require the use of judgements and such judgements relates, primarily, to the assessment of the uncertainties connected to the prediction of the outcome of the proceedings and to the adequacy of the disclosures in the financial statements. Because of the judgement required, the materiality of such litigations and the complexity of the assessment process, the area is a key matter for our audit.	Our audit approach was combination of test of compliance of companys internal controls and substantive procedures which included the following:
	• Assessing the appropriateness of the design and implementation of the Companys controls over the assessment of litigations and completeness of disclosures.
	• Examining the supporting documentation for the positions taken by the management, correspondence from in-house legal counsel and/or legal team and reviewing the minutes of Board and subcommittee, to confirm the operating effectiveness of these controls.
	• Review of assumptions used in the evaluation of potential risk and tax risks performed by the legal and tax department of the Company considering the legal precedence and other rulings in similar cases.
	• Consideration of recent judgements passed by the appropriate authorities in order to challenge the basis used for the accounting treatment and resulting disclosures.

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

The Companys management and Board of Directors are responsible for the preparation of other information. The other information comprises the information included in the Directors Report, Management Discussion and Analysis and Corporate Governance Report but does not include the Standalone Financial Statements and our Auditors Reports there on.

Our opinion on the Standalone Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we perform, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements:

The Companys Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance (including other comprehensive loss), changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Rules issued thereunder. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Financial Statements, management and Board of Directors are responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Board of Directors is also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Financial Statements:

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.

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

• Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to Standalone Financial Statements in place and the operating effectiveness of such controls.

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

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone 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 auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements:

1. As required by the Companies (Auditors Report) Order, 2020 ("the Order") issued by the Central Government in terms of subsection (11) of section 143 of the Act, we give in the "Annexure A", a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act, we report that:

a. we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

c. The standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows dealt with by this Report are in agreement with the books of account;

d. In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under section 133 of the Act, read with relevant rules made thereunder;

e. The matter relating to going concern described under Material Uncertainty Related to Going Concern paragraph above, and the matters stated under (a), (b) and (c) under Emphasis of Matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;

f. On the basis of the written representations received from the directors as on March 31, 2023 taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2023 from being appointed as a director in terms of Section 164(2) of the Act;

g. With respect to the adequacy of the internal financial controls with reference to Standalone Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B";

h. With respect to the matter to be included in the Auditors Report under section 197 (16), according to the information and explanations given to us, the Company has not paid any remuneration to its directors during the current year except sitting fees paid to the non- executive / independent directors, which is in accordance with the applicable provisions of the Companies Act, 2013;

i. With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014 as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements (Refer Note - 31 to the Standalone Financial Statements);

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

iii. There are no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended March 31, 2023.

iv.

(a) the Management has represented that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) the Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the company from any person or entity, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material mis-statement.

v. The Company has not declared or paid any dividend during the year.

vi. With respect to maintenance of books of account using accounting software which has a feature of recording audit trail (edit log) facility, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable since Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable with effect from 1st April 2023

	For M Bhaskara Rao and Co
	Chartered Accountants
	Firm Registration No. 000459S
	M V Ramana Murthy
	Partner
Place: New Delhi	Membership No 206439
Date: May 25, 2023	UDIN: 23206439BGSWVL1428

Re: IL&FS Engineering and Construction Company Limited

"Annexure A" to the Independent Auditors Report on the Standalone Financial Statements

(Referred to in paragraph (1) under "Report on Other Legal and Regulatory Requirements" of our Report of even date to the members of IL&FS Engineering and Construction Company Limited on the Standalone Financial Statements for the year ended March 31, 2023)

To the best of our information and according to the explanations provided to us by the Company and the books of account and records examined by us in the normal course of audit, we state that:

(i) (a) (A) The Company has maintained proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment and relevant details of right-of-use assets.

(B) The Company has maintained proper records showing full particulars of intangible assets.

(b) The property, plant and equipment have been physically verified during the year by the Management in accordance with a programme of verification, which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals having regard to the size of the Company and the nature of their assets. No material discrepancies were noticed on such verification.

(c) The title deeds of immovable properties included under the head Property, Plant and Equipment in the financial statements have been lodged with the lenders for working capital facility as security, we have not been provided with confirmation by the lenders in respect of holding of these title deeds as at the year end.

(d) The Company has not revalued its Property, Plant and Equipment or intangible assets during the year and accordingly, paragraph 3(i)(d) of the Order is not applicable.

(e) No proceedings have been initiated during the year or are pending against the Company as at March 31, 2023 for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder.

(ii) (a) The management has conducted physical verification of inventories at reasonable intervals during the year. Discrepancies noticed on physical verification of inventories were not material and have been properly dealt with in the books of account.

(b) The lenders have recalled the limits sanctioned in excess of Rs.5 Crores in earlier years and treated the accounts as nonperforming assets. As informed to us, the Company is not submitting the quarterly statements to the working capital lenders on a regular basis. Accordingly, paragraph 3(ii)(b) of the Order is not applicable, at present. Refer Note 53 (ix) of Notes to financial statements.

(iii) According to the information and explanations given to us, the Company has not made any investments, provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms, limited liability partnerships or other parties during the year and accordingly paragraph 3(iii) of the Order is not applicable, at present.

(iv) According to the information and explanations furnished to us and in our opinion, the Company has complied with the provisions of Section 185 and Section 186 of the Companies Act, 2013, in respect of grant of loans, investments made and providing guarantees and securities, as applicable.

(v) The Company has not accepted any deposits or amounts which are deemed to be deposits to which the directions issued by the Reserve Bank of India and provisions of Section 73 to Section 76 or any other relevant provision of the Act and the Rules made there under, where applicable. Further no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal and accordingly paragraph 3(v) of the Order is not applicable, at present.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Companies Act, 2013, related to the construction services and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(vii) With respect to statutory dues:

(a) The Company has generally been regular in depositing undisputed statutory dues including goods and services tax, provident fund, employees state insurance, income tax, sales tax, service tax, customs duty, excise duty, value added tax, cess and any other material statutory dues applicable to it with the appropriate authorities during the year;

There were no arrears in respect of undisputed amounts payable in respect of goods and services tax, provident fund, employees state insurance, income-tax, sales-tax, service tax, customs duty, excise duty, value added tax, cess and other material statutory dues as at March 31, 2023 for a period of more than six months from the date the same became payable, except for:

Name of the Statute	Nature of dues	Amount (Rs in Crore)	Period to which the amount relates*	Due Date
Income Tax Act, 1961	Tax Deducted at Source	20.03	Prior to 15.10.2018	Various dates
GST Act	GST	18.71	Prior to 15.10.2018	Various dates
GST Act	GST	109.09	Prior to 15.10.2018	Various dates

*the non-payment is pursuant to Order of NCLAT, refer note 30 to the financial statements

(b) According to the records of the Company, the amounts disputed by the Company and not deposited in respect of Income tax, Sales tax, Service tax, Duty of custom, Duty of excise, Value added tax and Cess, are as follows:

Name of the Statute	Nature of dues	Amount demand (Rs in Crore)	Period to which the amount relates	Forum where dispute is pending
Haryana VAT	VAT (Ex parte)	34.32	2012-18	Asst commissioner, Haryana GST
Maharashtra VAT Act, 2002	VAT	38.21	2014-15 to 2017-18	Sales Tax Appeals Kolhapur, Maharashtra
U P VAT Act, 2008	VAT Assessment (Exparte)	105.36	2014-15 to 2017-18	Deputy Commissioner, Commercial Taxes, (GST), Lucknow
Telangana VAT	VAT (including penalty)	9.64#	2013-14 to 2017-18	Asst Commissioner (Audit), Punjagutta
Karnataka VAT Act 2003	VAT	0.11	2017-18	Asst Commissioner (Audit), Bengaluru
Gujarat VAT Act 2003	VAT	8.06	2016-17 and 201718	Asst Comm State Tax, Gandhinagar
Assam VAT Act 2003	VAT	0.07	2015-16	Asst Commissioner State Tax
Goods and Service Tax	Goods and Service Tax	10.19	2019-20	Asst Commissioner
Act 2017 (Bihar)	Act
Goods and Service Tax	Goods and Service Tax	22.12#	2018-19 to 2021-22	Joint Commissioner Appeals
Act 2017 (Kerala)	Act
West Bengal VAT Act	VAT	16.19	2016-17 to 2017-18	Asst Commissioner State Tax
Income Tax Act, 1961	Income Tax	39.49*	Assessment Year 2007-08 to 2011-12	Commissioner of Income Tax (Appeals), Hyderabad

* includes amount paid under protest Rs.38.59 Crores

# includes amount paid under protest Rs.1.72 Crores

(viii) There were no transactions that were not recorded in books which have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.

(ix) (a) The Company has defaulted in the repayment of loans, other borrowings and payment of interest to its lenders as at March 31, 2023. The Company has not taken any loan from the Government and not issued any debentures during the year.

Details of default in repayment of borrowings and interest recognised there on March 31, 2023 are given below:

Term Loans: Banks

Name of lender	Amount not paid on due date* (Rs.in Crores)	Principal or interest	No. of Days delay or unpaid
ICICI Bank	46.30	Principal and interest	1371 - 1642 days
State Bank of India	17.19	Principal and interest	1371 - 1461 days
Bank of Maharashtra	7.70	Principal and interest	1371 - 1642 days
IDBI Bank	6.61	Principal and interest	1461 - 1642 days
Bank of India	1.61	Principal and interest	1461 - 1550 days
Punjab National Bank	5.52	Principal and interest	1461 - 1642 days
Bank of Baroda	5.17	Principal and interest	1371 - 1642 days
Indian Overseas Bank	3.62	Principal and interest	1461 - 1550 days
Indian Bank	14.34	Principal and interest	1096 - 1642 days

*Amount outstanding as on March 31, 2023

Working Capital Loans: Cash Credit from Banks

Name of lender	Amount not paid on due date* (Rs.in Crores)	Whether Principal or interest	No. of days delay or unpaid
Indian Bank	63.44	Principal and interest
Bank of India	19.29	Principal and interest
Bank of Maharashtra	23.09	Principal and interest
ICICI	69.62	Principal and interest	1627 days from
IDBI	20.22	Principal and interest	16th Oct 2018 to
Indian Overseas Bank	33.37	Principal and interest	31st Mar 23
Punjab National Bank	54.10	Principal and interest
State Bank of India	183.27	Principal and interest
Bank of Baroda	36.80	Principal and interest

*Amount outstanding as on March 31, 2023

Borrowings from Financial Institutions (Promoter Group entities)

Nature of borrowing including debt securities	Name of lender	Amount not paid on due date*	Whether Principal or interest	No. of days delay or unpaid
Secured/ unsecured borrowings - Term loans	Infrastructure Leasing & Financial Services Ltd	1655.07	Principal	927 to 1644 days
Secured/ unsecured borrowings - Term loans	IL&FS Financial Services Limited	128.40	Principal	1108 to 1655 days
Secured/ unsecured borrowings - Term loans	IL&FS Transportation Networks Limited	78.00	Principal	1092 to 1514 days
Secured/ unsecured borrowings - Term loans	Tierra Enviro Limited	39.40	Principal	1767 to 1824 days
Secured/ unsecured borrowings - Term loans	IL&FS Cluster Development Initiative Limited	15.00	Principal	1461 days
Secured/ unsecured borrowings - Term loans	Sabarmati Capital One Limited	11.60	Principal	1672 to 1676 days
Secured/ unsecured borrowings - Term loans	IL&FS Airports Ltd	37.60	Principal	1189 to 1376 days
Secured/ unsecured borrowings - Term loans	Rohtas Bio Energy Limited	62.00	Principal	1283 days
Secured/ unsecured borrowings - Term loans	RIDCOR Infra Projects Limited	20.00	Principal	1096 days

*Amount outstanding as on March 31, 2023

The above details of interest defaults to Banks and Financial Institutions is exclusive of unrecognised interest of Rs.1722.21 Crores

and default in redemption of Optionally convertible cumulative redeemable preference shares Rs. 39.75 Crores, refer Note 50 and

No 52 to Standalone Financial Statements.

(b) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.

(c) The Company has not taken any term loan during the year. Accordingly, paragraph 3 (ix) (c) of the Order is not applicable, at present.

(d) On an overall examination of the financial statements of the Company, funds raised on short term basis have not been used for long-term purposes by the Company.

(e) On an overall examination of the financial statements of the Company, the Company has not, during the year, taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries or joint ventures.

(f) The Company has not raised any loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies and hence reporting on clause 3(ix)(f) of the Order is not applicable.

(x)

(a) The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) during the year. Accordingly, paragraph 3(x)(a) of the Order is not applicable.

(b) During the year, the Company has not made any preferential allotment or private placement of shares or convertible debentures (fully, partially or optionally convertible), and accordingly, paragraph 3(x)(b) of the Order is not applicable.

(xi)

(a) During the course of our examination of the books and other records of the Company carried out in accordance with the generally accepted auditing practices in India, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year, nor have we been informed of such case by the management under report.

(b) No report under sub-section (12) of section 143 of the Companies Act has been filed in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government, during the year and upto the date of this report.

(c) As represented to us by the management, there are no whistle blower complaints received by the Company during the year.

(xii) The Company is not a Nidhi Company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to usand based on our examination of the recordsofthe Company, transactions with the related parties are in compliance with Sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards.

(xiv)

(a) In our opinion, the Company has an adequate internal audit system commensurate with the size and nature of its business.

(b) We have considered, the internal audit reports for the year under audit, issued to the Company during the year and till date, in determining the nature, timing and extent of our audit procedures.

(xv) In our opinion during the year the Company has not entered into non-cash transactions with directors or persons connected with them and hence provisions of Section 192 of the Act, are not applicable.

(xvi)

(a) Based on the information and explanations furnished to us, in our opinion, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934.

(b) In our opinion, the Company has not conducted any Non-Banking Financial or Housing Finance activities.

(c) In our opinion, the Company is not a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India.

(d) We have been informed that the Company has one Core Investment Company as part of the Group.

(xvii) The Company has incurred Rs.114 Crores cash losses during the financial year covered by our audit and Rs.373 Crores immediately preceding financial year.

(xviii) There has been no resignation of the statutory auditors during the year, accordingly paragraph 3(xviii) of the Order is not applicable.

(xix) On the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the financial statements, the knowledge of the Board of Directors and Management plans and based on our examination of the evidence supporting the assumptions, and significant reduction in the Companys income from operations in the absence of new business orders and the other matters stated in the Note 30 to financial statements, in our opinion, there exists a material uncertainty which cast a significant doubt on the Companys ability to continue as a going concern, and therefore it may not be able to realise its assets and discharge its liabilities including potential liabilities in the normal course of business. The ability of the Company to continue as a going concern is solely dependent on the finalisation and approval of the resolution plan, which is not wholly within the control of the Company.

(xx) In our opinion, provisions of Section 135 of the Act is not applicable to the Company at present. Accordingly, paragraph 3(xx) (a) and (b) of the Order is not applicable

	For M Bhaskara Rao and Co
	Chartered Accountants
	Firm Registration No. 000459S
	M V Ramana Murthy
	Partner
Place: New Delhi	Membership No 206439
Date: May 25, 2023	UDIN: 23206439BGSWVL1428

IL&FS Engineering and Construction Company Limited "Annexure B" to the Independent Auditors Report on the standalone financial statements

(Referred to in paragraph 2 (h) under "Report on Other Legal and Regulatory Requirements" section of our Report of even date to the members of IL&FS Engineering and Construction Company Limited)

Report on the Internal Financial Controls under Clause (i) of subsection 3 of Section 143 of the Companies Act, 2013 (the Act)

We have audited the internal financial controls with reference to Standalone Financial Statements of IL&FS Engineering and Construction Company Limited (the Company) as of March 31, 2023 in conjunction with our audit of the Standalone Financial Statements of the Company for the year ended on that date, (Financial Statements)

Managements Responsibility for Internal Financial Controls

The Companys management is responsible for establishing and maintaining internal financial controls with reference to Financial Statements based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls with reference to Standalone Financial Statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the Guidance Note) and the Standards on Auditing, issued by ICAI and Standards on Auditing prescribed under Section 143(10) of the Act, to the extent applicable to an audit of internal financial controls with reference to Standalone Financial Statements. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with reference to Standalone Financial Statements was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system with reference to Standalone Financial Statements and their operating effectiveness. Our audit of internal financial controls with reference to Standalone Financial Statements included obtaining an understanding of internal financial controls with reference to Standalone Financial Statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the Standalone financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the

Companys internal financial controls with reference to Standalone Financial Statements.

Meaning of Internal Financial Controls with reference to Standalone Financial Statements

A companys internal financial control with reference to Standalone Financial Statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Standalone Financial Statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control with reference to Standalone Financial Statements includes those policies and procedures that:

1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of Standalone Financial Statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of Management and directors of the company; and

3) provide reasonable assurance regarding prevention ortimely detection of unauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the Standalone Financial Statements.

Inherent Limitations of Internal Financial Controls with reference to Standalone Financial Statements

Because of the inherent limitations of internal financial controls with reference to Standalone Financial Statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls with reference to Standalone Financial Statements to future periods are subject to the risk that the internal financial control with reference to Standalone Financial Statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has maintained, in all material respects, adequate internal financial controls with reference to Standalone Financial Statements and such internal financial controls with reference to Standalone Financial Statements were operating effectively as of March 31, 2023, based on internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

	For M Bhaskara Rao and Co
	Chartered Accountants
	Firm Registration No. 000459S
	M V Ramana Murthy
	Partner
Place: New Delhi	Membership No 206439
Date: May 25, 2023	UDIN: 23206439BGSWVL1428