hfcl ltd share price Auditors report


To The Members of

HFCL Limited

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

OPINION

We have audited the accompanying standalone financial statements of HFCL LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2023, the Statement of Profit and Loss (including other comprehensive income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as the "standalone financial statements").

In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of reports of the branch auditors, 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, and its profit, total comprehensive income, changes in equity and its cash flows for the year ended on that date.

BASIS FOR OPINION

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 Standards 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 obtained by us along with the consideration of audit reports of the branch auditors referred to in the Other Matters paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

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. We have determined the matters described below to be the key audit matters to be communicated in our report.

S. No. Key Audit Matters Auditors Response
1. Customer contracts - accuracy of revenue recognition, valuation of contract assets, work in progress (WIP), trade and other receivables, and accuracy of contract liabilities Our procedures included, among others, obtaining an understanding of the project execution processes and relevant controls relating to the accounting for customer contracts.
For the year ended March 31, 2023, revenue from customer contracts amounts to Rs.4,395.68 crores whereas as at March 31, 2023, contract assets amount to Rs.318.32 crores, the balance of work in progress (WIP) amounts to Rs.174.15 crores and retention amounts to Rs.239.79 crores. For the revenue recognised throughout the year, we tested selected key controls, including results reviews by management, for their operating effectiveness and performed procedures to gain sufficient audit evidence on the accuracy of the accounting for customer contracts and related financial statement captions.
The application of the revenue accounting standard (Ind AS 115, Revenue from Contracts with Customers) involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of the identified performance obligations, the appropriateness of the basis used to measure revenue recognised over a period. These procedures included reading significant new contracts to understand the terms and conditions and their impact on revenue recognition. We performed enquiries with management to understand their risk assessments relating to customer contracts.
Additionally, revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date. On a sample basis, we reconciled revenue to the supporting documentation, validated costs, tested the mathematical accuracy of calculations and the adequacy of accounting of customer contracts.
(Refer Notes 31 to the standalone financial statements). We further performed testing on a sample basis to confirm the
During order fulfilment, contractual obligations may need to be reassessed. In addition, change orders or cancelations have to be considered. As a result, total estimated contract costs may exceed total contract revenues and therefore require write-offs of contract assets, receivables and the immediate recognition of the expected loss as a provision. appropriate application of revenue recognition policies and to verify valuation of WIP balances. This included reconciling accounting entries to supporting documentation. When doing this, we specifically put emphasis on those transactions occurring close before or after the balance sheet date to obtain sufficient evidence over the accuracy of cut-off.
Regarding the revenue recognised at a point in time (PIT), the risks include inappropriate revenue recognition from revenue being recorded in the wrong accounting period or at amounts not justified as well as overstated WIP that requires impairment adjustments. We further reviewed samples of contracts with unbilled revenues to identify possible delays in achieving milestones, which require change in estimated efforts to complete the remaining performance obligations.
Performed analytical procedures and test of details for reasonableness of incurred and estimated efforts.
Our procedures did not identify any material exceptions.

 

2. Valuation of accounts receivable - risk of credit losses Our audit incorporated the following activities:
Company has a concentration of credit exposure on a number of major customers mainly Government and large organisation. Some of these major customers are facing difficult business conditions. In order to avoid significant credit losses, proper monitoring and management of credit risk is key factor. • Assessing and updating our understanding of internal controls over financial reporting with respect to credit risk;
Accounts receivable is a significant item in the Companys standalone financial statements amounting to Rs.2207.46 crores as of March 31, 2023 and provisions for impairment of receivables is an area which is influenced by managements estimates and judgment. The provision for impairment of receivables amounted to Rs.19.29 crores as at March 31, 2023. • Assessment of the Companys credit policy outlining authority for approving and responsibility to manage credit limits;
Refer Note 15 to the standalone financial statements • Inquiries with committee in order to understand and assess governance and follow-up/monitoring of key customers;
• Analytical procedures and inquiries with Business Area;
• Detailed testing and assessment of receivables to ensure these are in line with Ind AS, with a focus on significant new provisions.
We had a particular focus in our audit on how Company manages credit risk for key customers with respect to credit insurance and procedures for credit management. We also assessed and challenged managements assumptions and adherence to the Companys accounting policies with respect to provisions for impairment of receivables.
The level of the provision made against accounts receivables including credit impaired receivables and accrued balances was deemed appropriate and corresponds to the risks identified.

 

3. Recoverability of project and other vendor advances Our audit procedures involve the following activities:
As at March 31, 2023, current financial assets include Rs.456.86 crores in respect of project and other vendor advances and are pending to be adjusted/settled. Management exercises significant judgment when determining whether to record any impairment loss on advances • Assessing and updating our understanding of internal controls over financial reporting with respect to advances given;
As the carrying amount of project and other vendor advances accounts for a relatively high proportion of assets, there would be a material impact on the financial statements if such advances cannot be settled on schedule or fail to be recovered /settled. • Assessment of the Companys procurement policy outlining authority for approving and responsibility to manage vendor advances;
Therefore, we regard the recoverability of project and other vendor advances as a key audit matter. • Inquiries with management in order to understand and assess governance and follow-up/monitoring of key vendors;
Refer Note 19 to the Standalone Financial Statements. • Analytical procedures and inquiries with Business Area;
• Obtain balance confirmations from selected parties to ensure existence thereof
• Review of Purchase orders and/or agreements for selected parties and enquire management regarding reasons for unsettled advances as on date.
We agree with managements view that there is no reduction in the value of the advances outstanding in the books.

 

4. Recoverability relating to Goods and Services Tax recoverable: Our audit procedure involves the following activities:
As at March 31,2023, under other current assets, indirect taxes recoverable include Rs.161.10 crores in respect of GST Input Tax credit receivables. The Company has accounted for input credit on material and services received from suppliers and is carrying out continuous process of reconciliation. • Assessing and updating our understanding of internal control over financial reporting with respect to recording of invoices of suppliers
We focused on managements estimate of getting input tax credit which involves significant judgment. • Reviewing the management continuing process for reconciliation, updation and follow up with the vendors. We have relied upon the managements assessment.
Refer Note 21 to the Standalone Financial Statements.

 

5. Recoverability and Contingencies relating to other Indirect tax matters We performed the following substantive procedures:
As at March 31,2023, "Indirect Tax Recoverable" includes 4.06 crores in respect of Commercial taxes recoverable which are pending adjudication. • Understanding the process of estimation, recording and reassessing tax provisions and contingencies.
• Involving tax specialists to assist in analyzing the judgements used to determine provisions for tax matters.
The Company has open/pending tax assessments in various states. The determination of provisions and contingent liabilities arising from the open tax assessments make this a particular area of significant judgement. • We have involved our internal experts to review the nature of the amounts recoverable, the sustainability and the likelihood of recoverability upon final resolution.
We focused on managements assessment of the likely outcome and quantification of tax exposures which involves significant judgement. • Inspecting the correspondence with tax authorities.
Refer Note 21 to the Standalone Financial Statements. • Inspecting reports on open tax assessments prepared by the Company and other appropriate documentation considered necessary to understand the position and conclusions made by the Company.
We also assessed the adequacy of the Companys financial statements disclosure in respect of the tax positions and contingent liabilities.
We agree with managements evaluation.

OTHER INFORMATION

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexures to Boards Report, Business Responsibility and Sustainability Report, Corporate Governance and Shareholders Information, but does not include the financial statements and our auditors report thereon. The other information comprising the above documents is expected to be made available to us after the date of this auditors report.

Our opinion on the standalone financial statements does not cover the other information and we will 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.

When we read the other information comprising the above documents, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take necessary actions as per applicable laws and regulations.

MANAGEMENTS RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS

The Companys Board of Directors is 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, 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. 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 statement 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 is 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.

The 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 financial controls 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 system 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.

• Obtain sufficient appropriate audit evidence regarding the financial information of the foreign branches of the Company. We are responsible for the direction, supervision and performance of the audit of the standalone financial statements of the Company of which we are the independent auditors. For the foreign branches included in the standalone financial statements, which have been audited by other auditors, such branch auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion. Our responsibilities in this regard are further described in the section titled Other Matters in this audit report.

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

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.

OTHER MATTERS

The Standalone Financial Statements includes financial performance of three foreign branches which reflects total assets of Rs.75.27 crores, total revenue of Rs.52.95 crores, Net Profit after tax of Rs.8.69 crores and total comprehensive income of Rs.8.42 crores and net cash outflow amounting to Rs.0.16 crores for the year ended on 31st March 2023, which were audited by respective independent branch auditors. The independent branch auditors report on the financial statements of these branches have been furnished to us by the management and our opinion on the standalone financial statements, in so far as it relates to the amounts and disclosures included in respect of these branches is solely based on the report of such independent branch auditors.

Our opinion is not modified in respect of this matter.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

A. As required by the Companies (Auditors Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of sub-section (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.

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

a) We have sought and obtained all the information and explanations which to the best of 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 the Company so far as it appears from our examination of those books.

c) The reports on the accounts of foreign branch offices audited by independent branch auditors have been furnished to us by the management of the Company and have been properly dealt with by us in preparing this report.

d) the Standalone Balance Sheet, the Standalone Statement of Profit and Loss including Other Comprehensive Income, the Standalone Statement of Cash Flows and Standalone Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

e) In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act, read with relevant rules made thereunder.

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 is 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 over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls with reference to standalone financial statements.

h) With respect to the other matters to be included in the Auditors Report in accordance with the requirements of Section 197(16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of Section 197 of the Act.

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 48 to the standalone financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - Refer Note 48 to the standalone financial statements;

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

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 entity ("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;

(c) Based on the 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 misstatement.

v. (a) The final dividend declared and paid by the Company during the year is in accordance with Section 123 of the Act, as applicable.

(b) As stated in Note 42 to the standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing

Annual General Meeting. The amount of dividend proposed is in accordance with section 123 of the Act, as applicable.

vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31,2023.

For S Bhandari & Co. LLP For Oswal Sunil & Company
Chartered Accountants Chartered Accountants
Firm Registration No. Firm Registration No. 016520N
000560C/C400334
(P. D. Baid) (Sunil Bhansali)
Partner Partner
Membership No: 072625 Membership No: 054645
UDIN: 23072625BGXCTF5627 UDIN: 23054645BGYNGI5435
Place: New Delhi Place: New Delhi
Date: May 08, 2023 Date: May 08, 2023

Annexure Rs.A To The Independent Auditors Report

(Referred to in Paragraph A under Rs.Report on Other Legal and Regulatory Requirements section of our report to the Members of HFCL Limited of even date)

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. In respect of the Companys Property, Plant and Equipment and Intangible Assets:

(a) (A) The Company has maintained proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment. (B) The Company has maintained proper records showing full particulars of intangible assets.

(b) Property, Plant and Equipment of the Company are physically verified according to a phased program designed to cover all items over a period of three years, which, in our opinion, is reasonable having regard to sise of the Company and the nature of its assets. Pursuant to the program, physical verification of the (Property, Plant and Equipment) was carried out during the year by the management and according to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) The title deeds of all the immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favor of the lessee) disclosed in the financial statements are held in the name of the Company except the following:

Description of property Gross carrying value (Rs. in crores) Held in the name of Whether promoter, director or their relative or employee Period held- indicate range, whether appropriate Reason for not being held in name of the Company
Leasehold land at Solan 0.28 State Government of Himachal Pradesh No Since 23rd September,1994 Property is under dispute for titleship
Freehold land at Jaipur 1.64 Erstwhile amalgamated Company No Since 05th January, 2011 Subject to Mutation of properties
Freehold Land at Telangana 12.41 Telangana State Industrial Infrastructure Corporation Limited (TSIIC) No Since 5th September, 2022 Subject to fulfilment of stipulated conditions

(d) The Company has not revalued its Property, Plant and Equipment (including Right of Use assets) and intangible assets during the year. Hence reporting under clause 3 (i) (d) of the Order is not applicable.

(e) As informed by the management, 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 (as amended 2016) and rules made thereunder. Hence reporting under clause 3 (i) (e) is not applicable.

ii. (a) As per the information furnished, the Inventories have been physically verified by the management at reasonable intervals during the year. In our opinion, having regard to the size, nature and location of inventory, the coverage and procedure of such verification by the management its appropriate and no discrepancies of 10% or more in aggregate for each class of inventory were noticed on such verification.

(b) The company has been sanctioned working capital limits in excess of five crores rupees, in aggregate, from banks on the basis of security of current assets. As per the information and explanation given to us and as disclosed in the Note 25 of the standalone financial statement, the quarterly returns or statements filed by the company with banks are in agreement with the books of accounts of the Company.

iii. The company has made investments in, provided guarantee, security, granted loans and advances in the nature of loans, secured or unsecured, to companies and other parties

(a) The aggregate amount during the year, and balance outstanding at the balance sheet date with respect to such loans and guarantees to,

(A) Subsidiaries and jointly controlled entities:

Particulars Guarantees (Rs. in crores) Securities (In Numbers) Loans (unsecured) (Rs. in crores) Advances in nature of loans (Rs. in crores)
Aggregate amount granted / provided during the year Nil Nil 44.08 Nil
Balance outstanding as at balance sheet date 248.00 3,58,500 (Shares of HTL Limited Pledged against loan given to subsidiary) 73.58 72.00

(B) Other than subsidiaries and jointly controlled entities:

(Amount in Rs. crores)

Guarantees Loans Advances in nature of loans
Aggregate amount granted/provided during the year Nil Nil Nil
Balance outstanding as at balance sheet date 20.16 16.50 Nil

(b) In our opinion, the investments made, guarantees provided, security given and the terms and conditions of grant of loans and guarantees provided are not prima facie, prejudicial to the Companys interest.

(c) In respect of loans granted by the Company, the schedule of repayment of principal and payment of interest has been stipulated and the repayments of principal amounts and receipts of interest are generally been regular as per stipulation, except delay in the following cases:

Name of the Entity Gross amount (in crores) Due date Extent of delay
Raddef Private Limited 0.66 (interest) March 10, 2023 22 days
Satvik securities Private Limited 0.45 (interest) January 7, 2023 84 days
ESHAN Financial Services Private Limited 0.45 (interest) December 24, 2022 98 days
Fair deal Enterprises 0.20 (interest) October 16, 2022 167 days

(d) In respect of loans granted by the Company, there is no overdue amount for more than 90 days remaining outstanding as at the balance sheet date except in following cases

No. of cases Principle amount overdue (in crores) Interest Overdue (in crores) Total Overdue (in crores)
2 - 0.65 0.65

(e) Loan granted by the Company which has fallen due during the year and has been extended by entering mutual agreements.

Name of the parties Aggregate amount of existing loans extended ( In crores) Percentage of the aggregate to the total loans granted during the year
Raddef Private Limited 2.00 4.54%

(f) The Company has not granted any loans or advances in the nature of loans either repayable on demand or without specifying any terms or period of repayment. Hence, reporting under clause 3 (iii) (f) is not applicable.

iv. In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Companies Act, 2013 in respect of loans granted, investments made and guarantees and securities provided, where applicable.

v. The Company has not accepted any deposit or amounts which are deemed to be deposits within the meaning of the provisions of Section 73 to 76 or any other relevant provisions of the Companies Act, 2013 and rules framed there under. Hence, reporting under clause 3 (v) is not applicable.

vi. As per information and explanation given to us by the management, the Central Government has not prescribed the maintenance of cost records under section 148(1) of the Act, for any of the production of goods and services rendered by the Company. Hence reporting under clause 3(vi) of the order is not applicable.

vii. According to the information and explanations given to us, in respect of statutory dues:

(a) In our opinion, the Company has generally been regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Duty of Custom, Value added tax, Cess other statutory dues applicable to it with the appropriate authorities except delay in depositing of Goods and Services Tax (GST) and Income Tax.

There were no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income Tax, Goods and Services Tax, Service Tax, duty of Custom, Sales Tax, Value Added Tax, Cess and other material statutory dues in arrears as at March 31,2023 for a period of more than six months from the date they became payable.

(b) Details of statutory dues including Sales Tax, Value Added Tax, Income Tax, Excise Duty, Custom Duty and Service Tax which have not been deposited as on March 31,2023 on account of disputes are as under:

Name of the statute Nature of dues Amount in Rs. Period to which the amount relates Forum where dispute is pending Remarks
Value Added Tax Act Sales Tax 2,37,42,719/- 1997-98 & 1998-99 Honble High Court of Punjab & Haryana. 50,00,000/- Paid
Delhi Value Added Tax Act, 2004 Sales Tax 2,10,76,837/- 2009-10 & 2010-11 Addl. Commissioner, Department of Trade & Taxes, New Delhi 16,00,000/- Paid
Mumbai Value Added Tax, 2002 Sales Tax 3,69,96,738/- 2014-15 Joint Commissioner of Sales Tax (Appeal), Mumbai -
Delhi Value Added Tax Act, 2004 Sales Tax 12,27,714/- 2015-16 Asst. VATO, Department of Trade & Taxes, New Delhi
Custom Tariff Act Custom Duty 1,97,54,154/- 2001-02 & 2003-04 Supreme Court, New Delhi Liability of Rs.1,97,54,154/- already paid by Company under protest
Mumbai Value Added Tax, 2002 Sales Tax 98,24,593/- 2013-14 Joint Commissioner of Sales Tax (Appeal), Mumbai 23,89,741/- Paid
Central Excise Tariff Act, 1985 Excise Duty 82,17,348/- 2005-06 Central, Excise and Service Tax Appellate Tribunal, Mumbai Provision already made amounting to Rs.47,25,005/-
Finance Act, 1994 Service Tax 8,86,93,872/- 2017-18 Asst. Commissioner (Circle-11), Audit-II, New Delhi 1,00,00,000/- Paid
GST Goods & Service Tax 20,40,125/- 2019-20 Assistant Commissioner of State Tax Raipur - 4
Central Excise Tariff Act,1985 Excise duty 37,37,000/- 2014-15 High court, Shimla The matter has been decided in the favour of the Company but the department has preferred appeals at higher level

viii. According to the information and explanations given to us and records examined by us, there are no transactions that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961. Hence, reporting under clause 3 (viii) is not applicable.

ix. (a) According to the information and explanations given to us and records examined by us, the Company has not defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender as at the Balance Sheet date. The Company has not taken any loan/ borrowing from Financial Institution or Government.

(b) According to the information and explanations given to us and records examined by us, the Company has not been declared willful defaulter by any bank or financial institution or other lender. Hence, reporting under clause 3 (ix) (b) is not applicable.

(c) Based on our examinations of the records and information and explanations given to us, the term loans have been applied for the purpose for which these are raised.

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

(e) On an overall examination of the financial statements of the Company, the Company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries and jointly controlled entities.

(f) Based on our examinations of the records and information and explanations given to us, the Company has not raised loans during the year on the pledge of securities held in its subsidiaries and jointly controlled entities . Hence, reporting under clause 3 (ix) (f) 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 and hence reporting under clause 3(x)(a) is not applicable.

(b) Based on our examinations of the records and information and explanations given to us, the Company has made private placement by way of share warrant during the year and the requirements of section 42 and section 62 of the Companies Act, 2013 have been complied with. Further, funds raised have been used for the purposes for which the funds were raised.

xi. (a) We have been informed by the management that a commercial fraud amounting to Rs.4.78 crores has been done on the Company by a foreign customer to whom export of the optical fiber cables were made. A complaint has been filed by the Company with Economic Office Wing, Delhi Police. Full provision has been made against such receivables appearing under "Disputed- Credit Impaired Trade Receivables", except above no other fraud by the Company and no other material fraud on the Company has been noticed or reported during the year.

(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.

(c) As represented and based on our examination of records made available to us by the management, there are no whistle blower complaints received by the Company during the year. hence reporting under clause 3(xi)(c) is not applicable.

xii. The Company is not a Nidhi company and hence reporting under clause 3(xii) is not applicable.

xiii. According to the information and explanations given to us and based on our examination of the records of the Company, the transactions with related parties are in compliance with Sections 177 and 188 of the Companies Act, 2013 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 internal audit system commensurate with the size and nature of its business.

(b) We have considered the internal audit reports issued for the year under audit.

xv. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into any non-cash transactions with its directors or persons connected with its directors. Hence, reporting under clause 3(xv) is not applicable.

xvi. (a) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934 and hence reporting under clause 3(xvi)(a), (b) and (c) is not applicable.

(b) According to the information and explanations given to us and based on our examination of the records of the Company, there are two Core Investment Companies (CIC) in the Group, which are as under:

S. No. Name of the Company
1. MN Ventures (P) Ltd.
2. Nextwave Communications (P) Ltd.

xvii. The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

xviii. There has been no resignation of the statutory auditors during the year. hence reporting under clause 3(xviii) 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 standalone financial statements, our knowledge of the Board of Directors and management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report that the Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date.

We however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one year from the balance sheet date, will get discharged by the Company as and when they fall due.

xx. (a) There are no unspent amounts towards Corporate Social Responsibility (CSR) on other than ongoing projects requiring a transfer to a Fund specified in Schedule VII to the Companies Act in compliance with second proviso to sub-section (5) of Section 135 of the said Act. Accordingly, reporting under clause 3(xx)(a) is not applicable for the year.

(b) In respect of ongoing projects, the Company has deposited cheques of unspent amount for the financial year ending March 31, 2023 by opening a separate Unspent CSR account within a period of thirty days from the end of the financial year in compliance with section 135(6) of the said Act.

For S Bhandari & Co. LLP For Oswal Sunil & Company
Chartered Accountants Chartered Accountants
Firm Registration No. 000560C/C400334 Firm Registration No. 016520N
(P. D. Baid) (Sunil Bhansali)
Partner Partner
Membership No: 072625 Membership No: 054645
UDIN: 23072625BGXCTF5627 UDIN: 23054645BGYNGI5435
Place: New Delhi Place: New Delhi
Date: May 08, 2023 Date: May 08, 2023

Annexure - B To The Independent Auditors Report

(Referred to in paragraph B(g) under Rs.Report on Other Legal and Regulatory Requirements section of our report of even date)

Report on the Internal Financial Controls over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

To The Members of HFCL Limited

We have audited the internal financial controls over financial reporting of HFCL 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.

MANAGEMENTS RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Management of the Company is responsible for establishing and maintaining internal financial controls 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 the 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 Companies Act, 2013 (hereinafter referred to as "the Act").

AUDITORS RESPONSIBILITY

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting of the Company 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") issued by ICAI and the Standards on Auditing as prescribed under Section 143 (10) of the Companies act, 2013, to the extent applicable to an audit of internal financial controls. 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 over financial reporting 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 control system over financial reporting and their operating effectiveness.

Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, 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 judgment, 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 internal financial controls system over financial reporting.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A companys internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, 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 financial statements in accordance with the 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; (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

Because of the inherent limitations of internal financial controls over financial reporting, 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 over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting 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, to the best of our information and according to the explanations given to us, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2023, 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.

For S Bhandari & Co. LLP For Oswal Sunil & Company
Chartered Accountants Chartered Accountants
Firm Registration No. 000560C/C400334 Firm Registration No. 016520N
(P. D. Baid) (Sunil Bhansali)
Partner Partner
Membership No: 072625 Membership No: 054645
UDIN: 23072625BGXCTF5627 UDIN: 23054645BGYNGI5435
Place: New Delhi Place: New Delhi
Date: May 08, 2023 Date: May 08, 2023