hindustan construction company ltd share price Auditors report

To the Members of Hindustan Construction Company Limited

Report on the Audit of the Standalone Financial Statements Qualified Opinion

1. We have audited the accompanying standalone financial statements of Hindustan Construction Company Limited and its joint operations (together referred to as ‘the Company), as listed in Annexure I, which comprise the Balance Sheet as at 31 March 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of the reports of the other auditors as referred to in paragraph 16 below, except for the possible effects of the matters described in the Basis for Qualified Opinion section of our report, 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 (‘Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2023, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Basis for Qualified Opinion

3. As stated in:

a) Note 34 to the standalone financial statements, the

Companys investments in subsidiaries as at 31 March 2023 includes non-current investment and current investment in HCC Infrastructure Company Limited (‘HICL), its wholly owned subsidiary, amounting to Rs. 1,214.65 crore and

Rs. 220 crore, respectively, stated at cost. The subsidiarys consolidated net-worth as at 31 March 2023 is substantially eroded but, the said investment is considered fully recoverable by the management on the basis of factors stated in the aforesaid note including a valuation report obtained from an independent valuer.

However, in the absence of sufficient appropriate audit evidence to support the significant judgements and estimates relating to underlying assumptions applied by the management in the aforementioned valuation report, we are unable to comment upon the adjustments, if any, that are required to the carrying value of the aforesaid investment and consequential impact, if any, on the standalone financial statements.

Our audit report dated 12 May 2022 on the standalone financial statements for the year ended 31 March 2022 was also qualified in respect of this matter.

b) Note 9.1 to the the standalone financial statements, the Company has recognised net deferred tax assets amounting to Rs. 741.93 crore as at 31 March 2023, which includes deferred tax assets on carried forward unused tax losses, unused tax credits and other taxable temporary differences on the basis of expected availability of future taxable profits for utilization of such deferred tax assets. However, in view of the history of losses recorded by the Company, we are unable to obtain sufficient appropriate audit evidence with respect to the projections for future taxable profits prepared by the management and therefore, are unable to comment on any adjustments that may be required to the carrying value of aforesaid net deferred tax assets as at 31 March 2023.

Our audit report dated 12 May 2022 on the standalone financial statements for the year ended 31 March 2022 was also qualified in respect of this matter.

4. We conducted our audit in accordance with the Standards on Auditing 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 financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained together with the audit evidence obtained by the other auditors, in terms of their reports referred to in paragraph 16 of the Other Matter section below, is sufficient and appropriate to provide a basis for our qualified opinion.

Key Audit Matters

5. Key audit matters are those matters that, in our professional judgment, and based on the consideration of the reports of the other auditors as referred to paragraph 16 below, 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 financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

6. In addition to the matters described in the Basis for Qualified Opinion section, we have determined the matters described below to be the key audit matters to be communicated in our report.

Key audit matter	How our audit addressed the key audit matter
(a) Accounting of novation of specified debt and assignment of specified arbitration awards and claims pursuant to implementation of debt resolution plan as per the terms of Master Framework Agreement (‘MFA) (Refer note 31.1 to the standalone financial statements)
During the current year, the Company has successfully implemented its debt resolution plan as per the terms of Master Framework Agreement (‘MFA) in relation to its Facilities, Guarantees and Put Obligations in accordance with the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 dated 7 June 2019. Consequent to the aforementioned debt resolution plan, effective 1 July 2022:	Our audit procedures included but were not limited to the following in relation to accounting of debt resolution plan and the treatment of resultant difference arising from such debt resolution:
The Company has novated specified debt of lenders aggregating Rs. 2,855.69 crore to Prolific Resolution Private Limited (‘PRPL), a wholly owned subsidiary of the Company, with the consideration being the assignment of beneficial interest in the specified arbitration awards and claims of Rs. 6,508.44 crore with a carrying value of Rs. 2,894.11 crore in favor of PRPL;	Obtained an understanding of the terms of the MFA from the management.
The Company has also furnished a Corporate Guarantee in favor of lenders for debt novated to PRPL;	Evaluated the design and implementation and tested the operating effectiveness of the key internal controls relating to accounting, measurement and de-recognition of specified debt and specified arbitration awards and claims as per the terms of MFA.
The specified terms of facilities have also been revised with respect to the repayment terms, rates of interest and waiver of penal interest by lenders, including lenders of Lavasa Corporation Limited (‘LCL), an erstwhile subsidiary of the Company, whose liabilities were taken over in earlier years by the Company pursuant to put options and corporate guarantees issued by the Company to LCL lenders.	Reviewed the terms of the MFA to assess whether the derecognition of specified debt and specified awards and claims was in accordance with the criteria given under Ind AS 109, ‘Financial Instruments (‘Ind AS 109);
Accordingly, effective 1 July 2022, the aforementioned assets aggregating Rs. 2,894.11 crore and aforementioned liabilities aggregating Rs. 2,855.69 crore have been derecognised by the Company. The net assets transferred to PRPL represents Companys investment in PRPL and consequently the resultant net difference between assets and liabilities of Rs. 38.42 crore has been recognised as Deemed Investment in PRPL. Further, the revision in the specified term of facilities resulted in reduction of liabilities to lenders and a resultant gain of Rs. 223.30 crore, was recognised in the Statement of Profit and Loss and presented as an exceptional item.	Verified that the resultant net difference between debts novated and specified awards and claims assigned in favour of PRPL has been recognised in accordance with Ind AS 109;
The accounting treatment with respect to the derecognition of the novated debt and assigned assets as well as the recognition of the deemed investment and resulting gain due to revision of terms of facilities involved exercise of significant judgement by management and managements expert.	Verified the accounting treatment for revision in the terms of original facilities by the lenders is in accordance with Ind AS 109; and
Considering the complexities involved and material impact on the standalone financial statement for the current year, this area has been considered as key audit matter.	Evaluated the appropriateness and adequacy of the disclosures in the standalone financial statements in accordance with the applicable accounting standards

 

Key audit matter	How our audit addressed the key audit matter
(b) Recognition of contract revenue, margin and contract costs (Refer note 24 to the standalone financial statements)
The Companys revenue primarily arises from construction contracts which, by its nature, is complex given the significant judgements involved in the assessment of current and future contractual performance obligations.	Our audit procedures to address this key audit matter included, but were not limited to the following:
The Company recognizes contract revenue and the resultant profit/ loss on the basis of stage of completion determined based on the proportion of contract costs incurred at balance sheet date, relative to the total estimated costs of the contract at completion. The recognition of contract revenue and the resultant profit/ loss therefore rely on estimates in relation to forecast revenue and forecast contract costs. These contract estimates are reviewed by the management on a periodic basis. In doing so, the management is required to exercise judgement in its assessment of the transaction price (i.e., revenue on contracts) which may also include variable considerations that are recognised when the recovery of such consideration is highly probable. The judgment is also required to be exercised to assess the completeness and accuracy of forecast costs to complete.	Obtained an understanding of the Companys revenue recognition processes and evaluated the appropriateness of the Companys accounting policy for revenue recognition in accordance with Ind AS 115 – Revenue from contracts with customers;
Changes in these judgements, and the related estimates as contracts progress can result in material adjustments to revenue and margins. As a result of the above judgments, complexities involved and material impact on the related financial statement elements, this area has been considered a key audit matter in the audit of the standalone financial statements.	Evaluated the design and tested the operating effectiveness of key internal financial controls including those related to estimation of forecasted contract revenue and contracts costs;
	For a sample of contracts, performed the following procedures:
	- inspected the underlying documents such as customer contract/ agreement and variation orders, if any, for the significant contract terms and conditions;
	- evaluated the identification of performance obligations of the contract;
	- obtained an understanding of and evaluated the reasonableness of the assumptions applied in determining the forecasted revenue and cost to complete;
	- tested the existence and valuation of variable consideration with respect to the contractual terms and conditions and inspected the correspondence with customers; and
	- reviewed the legal and contracting experts note and/ or legal opinion from independent legal counsel obtained by the management, if any;
	- For cost incurred to date, tested samples to appropriate supporting documents and performed cut-off procedures;
	- Tested the forecasted cost by obtaining executed purchase orders/ agreements/ relevant documents and evaluated the reasonableness of management judgements/ estimates; and
	Evaluated the appropriateness and adequacy of the disclosures related to contract revenue and costs in the standalone financial statements in accordance with the applicable accounting standards.

 

Key audit matter	How our audit addressed the key audit matter
(c) Uncertainties relating to recoverability of unbilled work-in-progress (contract assets), current trade receivables and non-current trade receivables (Refer Note 35 of the standalone financial statements)
The Company, as at 31 March 2023, has unbilled work- in-progress (contract assets), current trade receivables and non-current trade receivables amounting to Rs. 602.33 crore, Rs. 255.69 crore and Rs. 57.52 crore, respectively, which represent various receivables in respect of closed/ substantially closed/ suspended/ terminated projects. The Company is at various stages of negotiations/ discussions / arbitration/ litigation with the customers in respect of the aforementioned receivables.	Our audit procedures included, but were not limited to, the following:
Management, based on contractual tenability, progress of the negotiations/ discussions/ arbitration/ litigation and relying on the legal opinion obtained from independent legal counsel in certain cases, has determined that no provision is required to be recognised for the aforementioned receivables.	Obtained an understanding of the management process and evaluated the design and tested the effectiveness of key internal financial controls for assessing the recoverability of unbilled work-in-progress (contract assets) and trade receivables.
Considering the materiality of the amounts involved, uncertainty associated with the outcome of the negotiations/ discussions/ arbitration/ litigation and significance of management judgement involved in assessing the recoverability, this was considered to be a key audit matter in the audit of the standalone financial statements.	Assessed the reasonability of judgements exercised and estimates made by management with respect to the recoverability of these receivables and validated them with corroborating evidence;
Further, the aforementioned matter as fully explained in Note 35 to the standalone financial statements is also considered fundamental to the users understanding of the standalone financial statements.	Verified contractual arrangements to support managements position on the tenability and recoverability of these receivables;
	Obtained an understanding of the current period developments for respective receivables pending at various stages of negotiations/ discussions/ arbitration/ litigation and corroborated the updates with relevant underlying documents.
	Reviewed the legal and contractual experts note and/ or legal opinion from independent legal counsel obtained by the management with respect to certain contentious matters; and
	Evaluated the appropriateness and adequacy of the disclosures in the standalone financial statements in accordance with the applicable accounting standards.

 

Key audit matter	How our audit addressed the key audit matter
(d) Assessment of going concern basis of accounting (Refer Note 2(iv)(a) to the standalone financial statements)
The Company has incurred continued losses in the previous years, resulting in substantial erosion of its net worth. Further, the Company was also in continued default on payment to its lenders and had overdue payments to operational creditors of which certain creditors also applied before the National Company Law Tribunal (‘NCLT) for debt resolution under the Insolvency and Bankruptcy Code, 2016, however, none of which have been admitted so far.	Our audit procedures included but were not limited to, the following in relation to assessment of appropriateness of going concern basis of accounting:
During the current year, the Company has successfully implemented the debt resolution plan as explained in Note 31.1 to the standalone financial statements. Consequently, the Company is no longer in default in repayment of dues to its lenders as at 31 March 2023. Management has prepared future cash flow forecasts to assess the Company ability to operate as a going concern for a period of at least 12 months from the date of financial statements and concluded that the going concern basis of accounting used for preparation of the accompanying standalone financial statements is appropriate with no material uncertainty over going concern.	Obtained an understanding of the process followed by management for assessing the Companys ability to continue as a going concern. Also, obtained an understanding around the methodology adopted by the Company to assess their future business performance including the preparation of a cash flow forecast for the business;
We have considered the assessment of managements evaluation of Companys ability to continue as a going concern as a key audit matter for the current year audit due to the pervasive impact thereof on the standalone financial statements and the significant management judgements and assumptions that are inherently subjective and dependent on future events, involved in preparation of cash flow projections and determination of the overall conclusion by the management.	Evaluated the design and tested the operating effectiveness of key controls relating to managements assessment of going concern;
	Obtained from management, the projected cash flows for the next twelve months basis their future business plans;
	Inspected the relevant underlying documents for assessing the appropriateness of projected cash flow for the next 12 months;
	Tested the appropriateness of the key assumptions used by the management that had the most material impact on the cash flow forecasts and discussed these assumptions with the management and with those charged with governance;
	Performed independent sensitivity analysis to test the impact of the variations on the cash flows due to change in the key assumptions; and
	Assessed the appropriateness and adequacy of the disclosures, in respect of use of going concern assumption for preparation of standalone financial statement in accordance with the applicable accounting standards.

Information other than the Financial Statements and Auditors Report thereon

7. The Companys Board of Directors are responsible for the other information. The other information comprises the information included in the Board Report, Report on Corporate Governance and Management Discussion and Analysis Report, but does not include the standalone financial statements and our auditors report thereon.

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 in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. As described in the Basis for Qualified Opinion section above, the modifications pertain to recoverability of exposure in a wholly owned subsidiary and realisability of deferred tax assets. Accordingly, we are unable to conclude whether or not the other information is materially misstated with respect to these matters.

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

8. The accompanying standalone financial statements have been approved by the Companys Board of Directors. The Companys Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act and other accounting principles generally accepted in India. 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

9. In preparing the financial statements, the 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 the Board of Directors either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

10. Those Board of Directors are also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Financial Statements

11. Our objectives are to obtain reasonable assurance about whether the 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 Standards on Auditing 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 financial statements.

12. As part of an audit in accordance with Standards on Auditing, specified under section 143(10) of the Act we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the 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 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 Board of Directors 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 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation; and

Obtain sufficient appropriate audit evidence regarding the financial statements of the Company and its joint operations or the business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit of financial statements of the Company and such joint operations included in the financial statements, of which we are the independent auditors, if any. For the joint operations included in the financial statements, which have been audited by other auditors, such other auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.

13. 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.

14. 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.

15. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 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 Matter

16. We did not audit the financial statements of eight (8) joint operations included in the standalone financial statements of the Company, whose financial statements reflects total assets and net assets of Rs. 265.14 crore and Rs. 66.65 crore, respectively, as at 31 March 2023, and the total revenues of Rs. 362.09 crore, total net loss after tax of Rs. 0.57 crore, total comprehensive loss of Rs. 0.57 crore, and cash outflows (net) of Rs. 8.08 crore for the year ended on that date, as considered in the standalone financial statements. These financial statements have been audited by other auditors, whose audit reports 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 joint operations, and our report in terms of sub-section (3) of section 143 of the Act in so far as it relates to the aforesaid joint operations, is based solely on the reports of such other auditors.

Further, of these joint operations, the financial statements of five (5) joint operations have been prepared in accordance with accounting principles generally accepted in India, including accounting standards issued by the ICAI. The Companys management has converted the financial statements of such joint operations in accordance with Ind AS. We have audited these conversion adjustments made by the Companys management. Our opinion, in so far as it relates to the amounts and disclosures included in respect of these joint operations, is based on the audit report of other auditors and the conversion adjustments prepared by the management of the Company and audited by us.

Our opinion above on the standalone financial statements, and our report on other legal and regulatory requirements below, are not modified in respect of the above matters with respect to our reliance on the work done by and the reports of the other auditors.

Report on Other Legal and Regulatory Requirements

17. As required by section 197(16) of the Act, based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.

18. As required by the Companies (Auditors Report) Order, 2020 (‘the Order) issued by the Central Government of India in terms of section 143(11) of the Act, we give in the Annexure II a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

19. Further to our comments in Annexure II, as required by section 143(3) of the Act based on our audit and on the consideration of the reports of other auditors as referred to in paragraph 16 above, we report, to the extent applicable, that:

a) We have sought and except for the matters described in the Basis for Qualified Opinion section, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit of the accompanying standalone financial statements;

b) Except for the possible effects of the matters described in the Basis for Qualified Opinion section, 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 financial statements dealt with by this report are in agreement with the books of account;

d) Except for the possible effects of the matters described in the Basis for Qualified Opinion section, in our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;

e) The matters described in paragraph 3 under the Basis for Qualified Opinion section, 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 and taken on record by the Board of Directors, none of the directors are disqualified as on 31 March 2023 from being appointed as a director in terms of section 164(2) of the Act;

g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion section;

h) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company as on 31 March 2023 and the operating effectiveness of such controls, refer to our separate Report in Annexure III wherein we have expressed a modified opinion; and

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 and based on the consideration of the reports of other auditors as referred to in paragraph 16 above:

i. The Company, as detailed in note 6.1, 33, 34 and 35 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2023;

ii. The Company, as detailed in note 20.1 to the standalone financial statements, has made provision as at 31 March 2023, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

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

iv. a) The management has represented that, to the best of its knowledge and belief, as disclosed in note 46(v) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any person or entity, including foreign entities (‘the 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 (‘the Ultimate Beneficiaries) or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;

b) The management has represented that, to the best of its knowledge and belief, as disclosed in note 46(vi) to the standalone financial statements, no funds have been received by the Company from any person or entity, including foreign entities (‘the 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 such audit procedures performed as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under subclauses (a) and (b) above contain any material misstatement.

v. The Company has not declared or paid any dividend during the year ended 31 March 2023.

vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 requires all companies which use accounting software for maintaining their books of account, to use such an accounting software which has a feature of audit trail, with effect from the financial year beginning on 1 April 2023 and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 (as amended) is not applicable for the current financial year.

For Walker Chandiok & Co LLP

Chartered Accountants

Firms Registration No.: 001076N/N500013

Shashi Tadwalkar

Partner

Membership No.: 101797

UDIN: 23101797BGXFAB9892

Place: Mumbai

Date: 18 May 2023

Annexure I to the Independent AudItors report

List of joint operations included in the Standalone Financial Statements

Sr. No.	Name of the entity
1.	Kumagai – Skanska – HCC - Itochu Group
2.	HCC - L&T Purulia Joint Venture
3.	Alpine - Samsung - HCC Joint Venture
4.	Alpine - HCC Joint Venture
5.	HCC - Samsung Joint Venture CC 34
6.	Nathpa Jhakri Joint Venture
7.	HCC VCCL Joint Venture
8.	HCC - HDC Joint Venture

Annexure II to the Independent AudItors report

Annexure II referred to in Paragraph 19 of the Independent Auditors Report of even date to the members of Hindustan Construction Company Limited on the standalone financial statements for the year ended 31 March 2023

In terms of the information and explanations sought by us and given by the Company and the books of account and records examined by us in the normal course of audit, and to the best of our knowledge and belief, we report that:

(i) (a) (A) The Company has maintained proper records showing full particulars, including quantitative details and situation of property, plant and equipment and right of use assets.

(B) The Company has maintained proper records showing full particulars of intangible assets. (b) The Company has a regular programme of physical verification of its property, plant and equipment and right of use assets under which the assets are physically verified in a phased manner over a period of 3 years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this programme, certain property, plant and equipment and right of use assets were verified during the year and no material discrepancies were noticed on such verification.

(c) The title deeds of all the immovable properties held by the Company (other than properties where the Company is a lessee and the lease agreements are duly executed in favor of the lessee) disclosed in note 3A to the standalone financial statements are held in the name of the Company. (d) The Company has not revalued its property, plant and equipment (including right of use assets) or intangible assets during the year.

(e) No proceedings have been initiated or are pending against the Company for holding any benami property under the Prohibition of Benami Property Transactions Act, 1988 (as amended) and rules made thereunder. (ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year. In our opinion, the coverage and procedure of such verification by the management is appropriate and no discrepancies of 10% or more in the aggregate for each class of inventory were noticed as compared to book records. (b) As disclosed in note 18.5 to the standalone financial statements, the Company has been sanctioned a working capital limit in excess of Rs. 5 crore by banks based on the security of current assets. The quarterly returns/ statements, in respect of the working capital limits have been filed by the Company with such banks and such returns/ statements are in agreement with the books of account of the Company for the respective periods which were subject to audit/ review, except for the following.

Rs. crore

Name of the Bank (Nature of Current Assets offered as Security)	Working capital limit sanctioned	Quarter End	Particulars	Amount disclosed as per Statement	Amount as per books of accounts	Difference	Remarks/ reason, if any
ICICI Bank, Punjab National Bank, Indian Bank, Union Bank of India, Canara Bank,	1,101.65	31 March 2022	Inventory and Unbilled work-in- progress	2,187.87	3,028.59	840.72	Difference is mainly on account of arrangement with banks/ financial institution, which requires the Company to submit the details
State Bank of India, IDBI			Trade Receivables	1,748.15	4,234.78	2,486.63	of inventory, trade receivable,
Bank Limited, Jammu & Kashmir Bank, Standard Chartered Bank, Bank of Baroda, Federal Bank,	1,101.65	30 June 2022	Inventory and Unbilled work-in- progress	2,295.50	3,026.01	730.51	unbilled work-in-progress excluding projects executed as joint operations and projects which are closed/ suspended/ terminated etc.
DBS Bank			Trade Receivables	1,726.20	4,279.58	2,553.38

(iii) (a) The Company has provided loans or guarantees to subsidiaries during the year as per details given below: Rs. crore

Particulars	Guarantees	Security	Loans	Advances in nature of loans
Aggregate amount provided/ granted during the year:
- Subsidiaries	3,111.32	-	23.88	-
Joint Ventures -	-	-	-	-
- Associates	-	-	-	-
- Others	-	-	-	-
Balance outstanding as at balance sheet date in respect of above cases:
- Subsidiaries	3,111.32	-	23.88	-
- Joint Ventures	-	-	-	-
- Associates	-	-	-	-
- Others	-	-	-	-

(b) In our opinion, and according to the information and explanations given to us, the investments made, guarantees provided, security given and terms and conditions of the grant of all loans and advances in the nature of loans and guarantees provided are, prima facie, not prejudicial to the interest of the Company.

(c) In respect of loans and advances in the nature of loans granted by the Company, the schedule of repayment of principal and payment of interest has been stipulated, but the principal and payment of interest are currently not due for repayment since these have been renewed as stated in clause 3(e) below.

(d) There is no amount which is overdue for more than 90 days in respect of loans or advances in the nature of loans granted to such companies, firms, LLPs or other parties.

(e) The Company has granted loans or advances in the nature of loans, which had fallen due during the year and such loans or advances in the nature of loans were renewed/ extended during the year. The details of the same has been given below: Rs. crore

Name of the party	Total loan amount	Aggregate amount of existing loans renewed or extended or settled by fresh loans	Nature of extension (i.e. renewed/ extended/ fresh loan provided)	Percentage of the aggregate to the total loans or advances in the nature of loans granted during the year
HCC Infrastructure Company Limited	1,562.41	1,562.41	Renewal	Nil
Maan Township Developers Limited	19.12	19.12	Renewal	Nil
HRL Township Developers Limited	0.41	0.41	Renewal	Nil
Highbar Technologies Limited	2.39	2.39	Renewal	Nil
HCC Mauritius Enterprises Limited	133.96	133.96	Renewal	Nil
HCC Mauritius Investment Limited	42.81	42.81	Renewal	Nil

(f) The Company has not granted any loan or advance in the nature of loan, which is repayable on demand or without specifying any terms or period of repayment.

(iv) The Company has not entered into any transaction covered under section 185 of the Act. As the Company is engaged in providing infrastructural facilities as specified in Schedule VI of the Act, provisions of section 186 except sub-section (1) of the Act are not applicable to the Company. In our opinion, and according to the information and explanations given to us, the Company has complied with the provisions of sub-section (1) of section 186 in respect of investments, as applicable.

(v) In our opinion, and according to the information and explanations given to us, the Company has not accepted any deposits or there are no amounts which have been deemed to be deposits within the meaning of sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). Accordingly, reporting under clause 3(v) of the Order is not applicable to the Company.

(vi) The Central Government has specified maintenance of cost records under sub-section (1) of section 148 of the Act in respect of the products of the Company. 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 and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) (a) In our opinion, and according to the information and explanations given to us, undisputed statutory dues including goods and services tax, provident fund, employees state insurance, income-tax, cess and other material statutory dues, as applicable, have not been regularly deposited with the appropriate authorities and there have been significant delays in a large number of cases. Undisputed amounts payable in respect thereof, which were outstanding at the year-end for a period of more than six months from the date they became payable are as follows:

Statement of arrears of statutory dues outstanding for more than six months

Name of the statute	Nature of dues	Amount ( Rs. crore)	Period to which the amount relates	Due Date	Date of Payment
The Manipur Professions, Trades, Callings And Employments Taxation Act, 1981	Professional Tax	0.00*	April 2022 to September 2022	Various	Various
The Tamil Nadu Tax on Professions, Trades, Callings and Employments Act, 1992		0.00*	August 2022	31-Oct-22	Unpaid
The Employees Provident Funds And Miscellaneous Provisions Act, 1952	Contribution to provident fund	0.00*	June 2021 to June 2022	Various	Unpaid

*represents amounts less than Rs. lakh.

(b) According to the information and explanations given to us, there are no statutory dues referred in sub-clause (a) which have not been deposited with the appropriate authorities on account of any dispute except for the following: Rs. crore

Name of the statute	Nature of dues	Total Amount	Amount paid under protest	Period to which the amount relates to	Forum where dispute is pending
		15.54	15.54	AY 2008-09 to AY 2010-11	High Court
The Income Tax Act, 1961	Income Tax	2.45	2.45	AY 2010 - 11	Commissioner of Income Tax (Appeals)
		32.07	-	AY 2015-16	Income Tax Appellate Tribunal
	Entry Tax	0.43	0.01	FY 2011-12 and FY 2017-18	Assessment Officer upto Commissioner Level
		6.02	1.59	Multiple years from FY 2003-04 to FY 2017-18	Appellate Tax Tribunal
The Central Sales Tax Act, 1956	Central Sales Tax	11.63		FY 2004-05, FY 2010-11 and FY 2017-18	Assessment Officer upto Commissioner Level
	Value Added Tax	46.88	2.70	Multiple years from FY 2004-05 to FY 2017-18	Assessment Officer upto Commissioner Level
		67.75	0.04	Multiple years from FY 2004-05 to FY 2016-17	Appellate Tax Tribunal
		3.84	-	FY 2012-13	High Court
Goods and Services Tax Act, 2017	GST	7.11	1.09	FY 2017-18 and FY 2019-20	High Court
		0.11	0.01	Multiple years from 2013-14 to FY 2017-18	Assessment Officer upto Commissioner Level
The Finance Act 1994	Service Tax	28.71	1.07	Multiple years from FY 2008-09 to FY 2017-18	CESTAT
		44.18	-	FY 2011-12 and 2012-2013	Supreme Court

(viii) According to the information and explanations given to us, no transactions were surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (43 of 1961) which have not been previously recorded in the books of accounts

(ix) (a) According to the information and explanations given to us, the Company has not defaulted in repayment of loans or other borrowings to any lender or in the payment of interest thereon, except for the below:

Nature of borrowing, including debt securities	Name of lender	Amount not paid on due date (Rs. crore)	Whether principal or interest	No. of days delay or unpaid till the date of audit report	Remarks, if any
Debentures	Life Insurance Corporation	0.20	Interest	91 to 180 days	Refer note below
		2.98	Principal	181 to 365 days
		0.23	Interest	181 to 365 days
Term Loans from Banks	Bank of Maharashtra	0.15	Interest	0 to 30 days
		0.30	Interest	31 to 90 days
		0.12	Principal	91 to 180 days
		0.43	Interest	91 to 180 days	Refer note below
		1.19	Principal	181 to 365 days
		0.80	Interest	181 to 365 days
		7.38	Principal	>365 days
		2.55	Interest	>365 days
Term Loans from Banks	Canara Bank	2.01	Interest	0 to 30 days
		4.02	Interest	31 to 90 days
		0.95	Principal	91 to 180 days
		6.73	Interest	91 to 180 days	Refer note
		9.49	Principal	181 to 365 days	below
		11.79	Interest	181 to 365 days
		95.50	Principal	>365 days
		40.36	Interest	>365 days

 

Term Loans from Banks	Central Bank of India	0.30	Interest	0 to 30 days
		0.60	Interest	31 to 90 days
		0.83	Interest	91 to 180 days	Refer note below
		2.13	Principal	181 to 365 days
		1.61	Interest	181 to 365 days
		12.70	Principal	>365 days
		7.18	Interest	>365 days
Term Loans from Banks	IDBI Bank Limited	0.34	Interest	0 to 30 days
		0.67	Interest	31 to 90 days
		1.11	Principal	91 to 180 days
		1.07	Interest	91 to 180 days	Refer note below
		10.76	Principal	181 to 365 days
		2.06	Interest	181 to 365 days
		11.56	Principal	>365 days
		1.44	Interest	>365 days
Term Loans from Banks	Indian Overseas Bank	0.47	Interest	0 to 30 days
		0.94	Interest	31 to 90 days
		1.51	Interest	91 to 180 days	Refer note below
		3.02	Principal	181 to 365 days
		2.68	Interest	181 to 365 days
		21.82	Principal	>365 days
		8.31	Interest	>365 days
Term Loans from Banks	Punjab National Bank	0.14	Interest	0 to 30 days
		0.28	Interest	31 to 90 days
		0.40	Interest	91 to 180 days	Refer note below
		1.44	Principal	181 to 365 days
		0.77	Interest	181 to 365 days
		6.41	Principal	>365 days
		1.98	Interest	>365 days
Term Loans from Banks	State Bank of India	0.76	Interest	0 to 30 days	Refer note below
		1.51	Interest	31 to 90 days
		2.40	Interest	91 to 180 days
		4.82	Interest	181 to 365 days
		40.48	Principal	>365 days
		14.55	Interest	>365 days
Term Loans from Banks	Syndicate Bank	1.18	Interest	0 to 30 days
		2.36	Interest	31 to 90 days
		3.66	Interest	91 to 180 days	Refer note below
		7.76	Principal	181 to 365 days
		7.42	Interest	181 to 365 days
		53.07	Principal	>365 days
		25.32	Interest	>365 days
Term Loans from Banks	Union Bank of India	0.23	Interest	0 to 30 days
		0.47	Interest	31 to 90 days
		0.66	Interest	91 to 180 days	Refer note below
		1.54	Principal	181 to 365 days
		1.47	Interest	181 to 365 days
		9.74	Principal	>365 days
		5.08	Interest	>365 days

 

Term Loans from Banks	United Bank of India	1.64	Interest	0 to 30 days
		3.28	Interest	31 to 90 days
		2.02	Interest	91 to 180 days	Refer note below
		11.45	Principal	181 to 365 days
		4.03	Interest	181 to 365 days
		79.29	Principal	>365 days
		37.56	Interest	>365 days
Term Loans from Financial	SREI Finance Private Limited	0.92	Interest	0 to 30 days
Institutions		1.83	Interest	31 to 90 days
		2.99	Interest	91 to 180 days	Refer note below
		4.31	Principal	181 to 365 days
		5.53	Interest	181 to 365 days
		44.08	Principal	>365 days
		17.67	Interest	>365 days
Term Loans from Financial	Asia Credit Opportunities	0.66	Interest	0 to 30 days
Institutions	(Mauritius) Limited	1.44	Interest	31 to 90 days
		1.35	Interest	91 to 180 days	Refer note below
		2.29	Interest	181 to 365 days
		75.06	Principal	>365 days
		8.79	Interest	>365 days
Term Loans from Financial	Industrial Finance	0.81	Interest	0 to 30 days
Institutions	Corporation of India	1.62	Interest	31 to 90 days
		0.63	Principal	91 to 180 days
		2.37	Interest	91 to 180 days	Refer note below
		6.07	Principal	181 to 365 days
		4.17	Interest	181 to 365 days
		39.51	Principal	>365 days
		14.23	Interest	>365 days
Term Loans from Financial	The Federal Bank Limited	0.06	Interest	0 to 30 days
Institutions		0.12	Interest	31 to 90 days
		0.40	Interest	91 to 180 days	Refer note below
		0.30	Interest	181 to 365 days
		4.52	Principal	>365 days
		1.04	Interest	>365 days
Term Loans from Financial	National Bank for Agriculture	0.17	Principal	0 to 30 days
Institutions	and Rural Development	0.17	Interest	0 to 30 days
		0.34	Interest	31 to 90 days
		0.17	Principal	91 to 180 days	Refer note below
		0.49	Interest	91 to 180 days
		1.91	Principal	181 to 365 days
		0.96	Interest	181 to 365 days
		11.46	Principal	>365 days
		2.97	Interest	>365 days
Term Loans from Financial	Life Insurance Corporation	0.00*	Interest	0 to 30 days
Institutions		0.40	Principal	31 to 90 days
		0.02	Interest	31 to 90 days
		0.40	Principal	91 to 180 days	Refer note below
		0.12	Interest	91 to 180 days
		1.21	Principal	181 to 365 days
		0.14	Interest	181 to 365 days
		0.00*	Principal	>365 days
		0.00*	Interest	>365 days

 

Working Capital Demand	ICICI Bank	137.05	Principal	>365 days	Refer note
Loan		4.01	Interest	>365 days	below
Working Capital Demand	Indian Bank	25.68	Principal	>365 days	Refer note
Loan		9.78	Interest	>365 days	below
Working Capital Demand	Canara Bank	17.42	Principal	>365 days	Refer note
Loan		0.54	Interest	>365 days	below
Working Capital Demand	State Bank of India	90.99	Principal	>365 days	Refer note
Loan		35.22	Interest	>365 days	below
Working Capital Demand Loan	IDBI Bank Limited	80.20	Principal	>365 days	Refer note below
Working Capital Demand	Jammu & Kashmir Bank	51.71	Principal	>365 days
Loan	Limited	1.43	Interest	>365 days	Refer note
Working Capital Demand	The Federal Bank Limited	15.20	Principal	>365 days	below
Loan		3.80	Interest	>365 days	Refer note
Working Capital Demand	Punjab National Bank	204.39	Principal	>365 days	below
Loan		6.07	Interest	>365 days	Refer note
Cash Credit	Punjab National Bank	186.75	Principal	>365 days	below
		12.80	Interest	>365 days	Refer note
Cash Credit	ICICI Bank	12.71	Principal	>365 days	below
		2.05	Interest	>365 days	Refer note
Cash Credit	Indian Bank	29.11	Principal	>365 days	below
		13.89	Interest	>365 days	Refer note
Cash Credit	Union Bank of India	17.53	Principal	>365 days	below
		9.64	Interest	>365 days	Refer note
Cash Credit	IDBI Bank Limited	81.29	Principal	>365 days	below
Cash Credit	Canara Bank	14.10	Principal	>365 days	Refer note
		0.83	Interest	>365 days	below
Cash Credit	State Bank of India	164.99	Principal	>365 days	Refer note
		87.24	Interest	>365 days	below
Cash Credit	Jammu & Kashmir Bank	73.53	Principal	>365 days	Refer note
	Limited	3.34	Interest	>365 days	below
Cash Credit	Bank of Baroda	29.75	Principal	>365 days	Refer note
		15.95	Interest	>365 days	below
Cash Credit	The Federal Bank Limited	8.52	Principal	>365 days	Refer note
		4.17	Interest	>365 days	below
Cash Credit	DBS Bank Limited	2.53	Principal	>365 days	Refer note
		2.06	Interest	>365 days	below
Other Bank Loans	Bank of Maharashtra	0.13	Interest	0 to 30 days
		0.27	Interest	31 to 90 days
		0.39	Interest	91 to 180 days	Refer note below
		0.81	Interest	181 to 365 days
		11.93	Principal	>365 days
		4.77	Interest	>365 days
Other Bank Loans	ICICI Bank	1.13	Interest	0 to 30 days
		2.31	Interest	31 to 90 days
		3.40	Interest	91 to 180 days	Refer note below
		10.72	Principal	181 to 365 days
		6.95	Interest	181 to 365 days
		59.49	Principal	>365 days
		9.56	Interest	>365 days

 

Other Bank Loans	Canara Bank	0.35	Interest	0 to 30 days
		0.71	Interest	31 to 90 days
		1.05	Interest	91 to 180 days	Refer note
		2.14	Interest	181 to 365 days	below
		31.31	Principal	>365 days
		6.30	Interest	>365 days
Other Bank Loans	Union Bank of India	0.55	Interest	0 to 30 days
		1.11	Interest	31 to 90 days
		1.64	Interest	91 to 180 days	Refer note
		3.35	Interest	181 to 365 days	below
		49.05	Principal	>365 days
		7.52	Interest	>365 days

* represents amount less than Rs. lakh.

Note: Above represents default in payment of loans and other borrowing to lenders until 30 June 2022. Pursuant to implementation of the resolution plan w.e.f. 1 July 2022, as detailed in note 31.1 to the accompanying standalone financial statements, the Company is no longer in default in repayment of dues to its lenders.

(b) According to the information and explanations given to us including representation received from the management of the Company, and on the basis of our audit procedures, we report that the Company has not been declared a willful defaulter by any bank or financial institution or government or any government authority.

(c) In our opinion and according to the information and explanations given to us, the Company has not raised any money by way of term loans during the year and there has been no utilisation during the current year of the term loans obtained by the Company during any previous years. Accordingly, reporting under clause 3(ix)(c) of the Order is not applicable to the Company.

(d) In our opinion and according to the information and explanations given to us, the Company has not raised any funds on short term basis during the year. Accordingly, reporting under clause 3(ix)(d) of the Order is not applicable to the Company.

(e) According to the information and explanations given to us and 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, associates or joint ventures.

(f) According to the information and explanations given to us, the Company has not raised any loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies.

(x) (a) The Company has not raised any money by way of initial public offer or further public offer (including debt instruments), during the year. Accordingly, reporting under clause 3(x)(a) of the Order is not applicable to the Company.

(b) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or (fully, partially or optionally) convertible debentures during the year. Accordingly, reporting under clause 3(x)(b) of the Order is not applicable to the Company.

(xi) (a) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company or no material fraud on the Company has been noticed or reported during the period covered by our audit.

(b) According to the information and explanations given to us including the representation made to us by the management of the Company, no report under sub-section 12 of section 143 of the Act has been filed by the auditors in Form ADT-4 as prescribed under Rule 13 of Companies (Audit and Auditors) Rules, 2014, with the Central Government for the period covered by our audit. (c) According to the information and explanations given to us including the representation made to us by the management of the Company, there are no whistle-blower complaints received by the Company during the year.

(xii) The Company is not a Nidhi Company and the Nidhi Rules, 2014 are not applicable to it. Accordingly, reporting under clause 3(xii) of the Order is not applicable to the Company.

(xiii) In our opinion and according to the information and explanations given to us, all transactions entered into by the Company with the related parties are in compliance with sections 177 and 188 of the Act, where applicable. Further, the details of such related party transactions have been disclosed in the standalone financial statements, as required under Indian Accounting Standard (Ind AS) 24, Related Party Disclosures specified in Companies (Indian Accounting Standards) Rules 2015 as prescribed under section 133 of the Act.

(xiv) (a) In our opinion and according to the information and explanations given to us, the Company has an internal audit system as per the provisions of section 138 of the Act which is commensurate with the size and nature of its business.

(b) We have considered the reports issued by the Internal Auditors of the Company till date for the period under audit.

(xv) According to the information and explanation given to us, the Company has not entered into any non-cash transactions with its directors or persons connected with its directors and accordingly, reporting under clause 3(xv) of the Order with respect to compliance with the provisions of section 192 of the Act are not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Accordingly, reporting under clauses 3(xvi)(a), (b) and (c) of the Order are not applicable to the Company. Further, based on the information and explanations given to us and as represented by the management of the Company, the Group as defined in Core Investment Companies (Reserve Bank) Directions, 2016) does not have any CIC.

(xvii) The Company has not incurred cash losses in the current financial year but had incurred cash losses amounting to Rs.59.46 crores in the immediately preceding financial year. For the purpose of reporting under this clause, while arriving at the amount of cash losses, the possible effects of the qualifications as described in ‘Basis for Qualified Opinion section of the audit report on the financial statements for the current year and immediately preceding financial year issued by us, in respect of which we are unable to determine the effect thereof on the cash losses reported under this clause due to lack of necessary information, have not been taken into consideration.

(xviii) There has been no resignation of the statutory auditors during the year. Accordingly, reporting under clause 3(xviii) of the Order is not applicable to the Company.

(xix) According to the information and explanations given to us and 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 plans of the Board of Directors and management 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 indicating that 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) According to the information and explanations given to us, the Company has met the criteria as specified under sub-section (1) of section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, however, in the absence of average net profits in the immediately three preceding years, there is no requirement for the Company to spend any amount under sub-section (5) of section 135 of the Act. Accordingly, reporting under clause 3(xx) of the Order is not applicable to the Company.

(xxi) The reporting under clause 3(xxi) of the Order is not applicable in respect of audit of standalone financial statements of the Company. Accordingly, no comment has been included in respect of said clause under this report.

For Walker Chandiok & Co LLP

Chartered Accountants Firms Registration No.: 001076N/N500013

Shashi Tadwalkar

Partner Membership No.: 101797 UDIN: : 23101797BGXFAB9892

Place: Mumbai Date: 18 May 2023

Annexure III to the Independent AudItors report

Annexure III to the Independent Auditors Report of even date to the members of Hindustan Construction Company Limited, on the standalone financial statements for the year ended 31 March 2023

Independent Auditors Report on the internal financial controls with reference to financial statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (‘the Act)

1. In conjunction with our audit of the standalone financial statements of Hindustan Construction Company Limited

(‘the Company) as at and for the year ended

31 March 2023, we have audited the internal financial controls with reference to financial statements of the Company as at that date.

Responsibilities of Management and Those Charged with Governance for Internal Financial Controls

2. The Companys Board of Directors is responsible for establishing and maintaining internal financial controls 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 (‘the Guidance Note) issued by the Institute of Chartered Accountants of India (‘the 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 the Companys 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 Act.

Auditors Responsibility for the Audit of the Internal Financial Controls with Reference to Financial Statements

3. Our responsibility is to express an opinion on the Companys internal financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the ICAI prescribed under Section 143(10) of the Act, to the extent applicable to an audit of internal financial controls with reference to financial statements, and the Guidance Note issued by the ICAI. 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 financial statements were established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements includes obtaining an understanding of such internal financial controls, 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 financial statements, whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the Companys internal financial controls with reference to financial statements.

Meaning of Internal Financial Controls with Reference to Financial Statements

6. A companys internal financial controls with reference to financial statements 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 controls with reference to financial statements include 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 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 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 with Reference to Financial Statements

7. Because of the inherent limitations of internal financial controls with reference to 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 financial statements to future periods are subject to the risk that the internal financial controls with reference to financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Qualified opinion

8. According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified in the operating effectiveness of the Companys internal financial controls with reference to financial statements as at 31 March 2023:

a) The Companys internal financial control system towards estimating the carrying value of investment in the subsidiary company, as explained in Note 34 to the standalone financial statements were not operating effectively which could potentially lead to not providing for adjustments, if any, that may be required to the carrying values of investments and dues recoverable from such subsidiary and its consequential impact on the earnings, other equity and related disclosures in the standalone financial statements.

b) The Companys internal financial controls system with respect to assessing the recoverability of deferred tax assets, as explained in Note 9.1 to the standalone financial statements were not operating effectively, which could potentially lead to a material misstatement in the carrying amount of deferred tax assets and its consequential impact on the earnings, other equity and related disclosures in the standalone financial statements.

9. A ‘material weakness is a deficiency, or a combination of deficiencies, in internal financial controls with reference to financial statements, such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis.

10. In our opinion, the Company has, in all material respects, adequate internal financial controls with reference to financial statements as at 31 March 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 issued by the ICAI, and except for the effects/possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Companys internal financial controls with reference to financial statements were operating effectively as at 31 March 2023.

11. We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the standalone financial statements of the Company as at and for the year ended 31 March 2023, and these material weaknesses have affected our opinion on the standalone financial statements of the Company, and we have issued a qualified opinion on the standalone financial statements.

For Walker Chandiok & Co LLP

Chartered Accountants Firms Registration No.: 001076N/N500013

Shashi Tadwalkar

Partner Membership No.: 101797 UDIN: 23101797BGXFAB9892 Place: Mumbai Date: 18 May 2023