KIOCL Ltd Directors Report.

To,

The Members of KIOCL Limited,

Report on the Standalone Ind AS Financial Statements:

Opinion

We have audited the accompanying Standalone Ind AS financial statements of KIOCL Limited ("the Company") which comprises the Balance Sheet as at 31st March 2021, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and Notes to the Financial Statements, including a summary of the significant accounting policies and other explanatory information (herein after referred to as "Standalone Ind AS financial statements").

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Ind AS financial statements give the information required by the Companies Act, 2013 (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 Companies Act, 2013 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2021, the profit including Other Comprehensive Income, the changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the Standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Standalone Ind AS 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 together with the ethical requirements that are relevant to our audit of the Standalone Ind AS financial statements under the provisions of the Companies Act, 2013 and the Rules there under, 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 is sufficient and appropriate to provide a basis for our opinion on the Standalone Ind AS financial statements.

Emphasis of Matters 1. Remote Audit

The entire statutory audit of the Company has been carried out based on remote access of the data as provided by the Company due to COVID-19 pandemic across India. We relied on alternative audit procedures as per the Standards on Auditing prescribed by the Institute of Chartered Accountants of India (ICAI).

As a result of the above, the audit been carried out based on the data provided for our audit purposes which we relied as correct, complete and are directly generated by the accounting system of the Company without any further manual modifications. The financial performance of the unit has been thus prepared and presented by the Company and audited by us in the aforesaid conditions.

2. Kudremukh Mining Operations

Attention is drawn to Note No. 24.07 of the Standalone Ind AS financial statements on Kudremukh Unit from where iron ore was extracted by KIOCL Limited, is abandoned long time back and all the assets located therein are either disposed of or transferred to Pellet Plant. Owing to disputes relating to land and pending issues on surrender of mines, the buildings in the township are reduced to NIL value but value of the land continues to be shown in the books of accounts. The Company is of the view that since Lakhya dam therein is the main water source for the pellet plant, the asset is shown under PPE.

3. Blast Furnace Unit (BFU)

Attention is drawn to Note No. 24.20 of the Standalone Ind AS financial statements on Blast Furnace Unit (BFU) which is not in operation since 2009, since it is not economically viable in running the unit. As per the approved project for Backward and Forward Integration of the Blast Furnace Unit, the Company is in the process of setting up a NonRecovery Coke Oven Plant as backward integration and Ductile Spun Pipe Plant as forward integration.

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Standalone Ind AS financial statements of the current period. These matters were addressed in the context of our audit of the Standalone Ind AS 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.

Sr. Key Audit Matter No. How the matter was addressed in our audit
1. Going Concern
As included in Note No. 24.35 (related to Going Concern and estimation of uncertainties that may impact the Companys operations’) to the Standalone Ind AS financial statements, the Companys financial statements have been prepared using the going concern basis of accounting. In view of the significance of the matter we have obtained appropriate audit evidence and assessed the adequacy of the disclosures related to application of the going concern assumption.
The World Health Organisation in February 2020 declared COVID 19 as a pandemic. Governments around the world including India have been taking significant measures to curb the spread of the virus including imposing mandatory lockdowns and restrictions in activities. The management has not identified a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern, and accordingly none is disclosed in the financial statements. Based on our audit of the Standalone Ind AS financial statements, we also have not identified such a material uncertainty.
These lockdowns have a significant impact on the overall economic activity in India. Accordingly, the future cash flow projections used to assess going concern are subject to significant estimation uncertainties.
In view of the above, we have identified our assessment of the going concern basis of accounting as a key audit matter.
2. Property, Plant & Equipment, Intangible Assets and its impairment Due to the materiality in the context of balance sheet of the Company and age of the PPE of the Company and the level of judgement and estimates required, we consider this to be as area of significance.
There are areas where management judgement impacts the carrying amount of property, plant and equipment, intangible assets and their respective depreciation / amortization rates and impairment. We assessed the controls in place over the PPE life cycle, evaluated the appropriateness of capitalisation process, performed tests of details on costs capitalised, the timeliness of the capitalisation of the assets and de-recognition criteria for the assets retired from active use and its impairment.
These include the decision to capitalise or expense costs; the annual asset life review; the timeliness of the capitalization of the assets and the use of the management assumptions and estimates for the determination or the measurement and recognition criteria for assets retired from active use and its impairment. In performing these procedures, we reviewed the judgements made by the management including the nature of underlying costs capitalised; determination of realisable value of the assets retired from active use; the appropriateness of assets lives applied in the calculation of depreciation; the useful lives of the assets prescribed in Schedule II of Companies Act, 2013 and the useful lives of certain assets as per the technical assessment of management and its impairment. In case of realizable value for assets retired from active use, we have relied upon the independent valuation report obtained by the management and provided to us. Weve observed that the management has regularly reviewed the aforesaid judgments and there are no material changes.
This capitalization and annual impairment test are considered to be a key audit matter due to the complexity of the accounting requirements and the significant judgement required in determining the key assumptions, including estimates of future sales volumes and prices, operating costs, terminal value growth rates, capital expenditure and the weighted-average cost of capital (discount rate), to be used to estimate the recoverable amount.
[Refer Note No. 3.1 - 3.3 & 24.08 to the Standalone Ind AS financial statements]
3. Adoption of Ind AS 116 Leases Our audit procedures on adoption of Ind AS 116 include:
The Company has adopted Ind AS 116 Leases. The application and transition to this accounting standard is complex and is an area of focus in our audit since the Company has a large number of leases with different contractual terms. • Assessed and tested the process and controls in respect of the lease accounting standard (Ind AS 116);
Ind AS 116 introduces a new lease accounting model, wherein lessees are required to recognize a right-of-use (ROU) asset and a lease liability arising from a lease on the balance sheet. The lease liabilities are initially measured by discounting future lease payments during the lease term as per the contract / arrangement. Adoption of the standard involves significant judgements and estimates including, determination of the discount rates and the lease term. Additionally, the standard mandates detailed disclosures in respect of transition. • Assessed the Companys evaluation on the identification of leases based on the contractual agreements and our knowledge of the business;
[Refer Note No. 3.4, 12.1 (c & d) & 24.12 to the Standalone Ind AS financial statements] • Evaluation of reasonableness of the discount rates applied in determining the lease liabilities;
• On a sampling basis, we performed the following procedures:
a. Assessed the key terms and conditions of each lease with the underlying lease contracts; and
b. Evaluated computation of lease liabilities and challenged the key estimates such as, discount rates, escalation in lease payments and the lease term.
• Assessed and tested the presentation and disclosure relating to Ind AS 116
Based on the above audit procedures, the presentation and disclosures in the Standalone Ind AS financial statements are in accordance with the standard.
4. Defined benefit obligation We have examined the key controls over the process involving member data, formulation of assumptions and the financial reporting process in arriving at the provision for retirement benefits. We tested the controls for determining the actuarial assumptions and the approval of those assumptions by senior management. We found these key controls were designed, implemented and operated effectively, and therefore determined that we could place reliance on these key controls for the purposes of our audit.
The valuation of the retirement benefit schemes in the Company is determined with reference to various actuarial assumptions including discount rate, rate of inflation and mortality rates. Due to the size of these schemes, small changes in these assumptions can have a material impact on the estimated defined benefit obligation. We tested the employee data used in calculating the obligation and where material, we also considered the treatment of curtailments, settlements, past service costs, re-measurements, benefits paid, and any other amendments made to obligations during the year. From the evidence obtained, we found the data and assumptions used by management in the actuarial valuations for retirement benefit obligations to be appropriate.
[Refer Note No. 13.1 (a & b) & 24.18 to the Standalone Ind AS financial statements] In this process, we have relied upon the valuation of actuary in accordance with SA 620 issued by the ICAI.
5. Provisions and Contingent Liabilities Our audit procedures in response to this matter included, among others,
The Company has exposures towards litigations relating to various matters as set out in the Notes to the Standalone Ind AS Financial Statements.
Significant management judgement is required to assess such matters to determine the probability of occurrence of material outflow of economic resources and whether a provision should be recognized, or a disclosure should be made. The management judgement is also supported with legal advice in certain cases as considered appropriate. • Understanding, assessing and testing the design and operating effectiveness of key controls surrounding assessment of litigations relating to the relevant laws and regulations;
As the ultimate outcome of the matters are uncertain and the positions taken by the management are based on the application of their best judgement, related legal advice including those relating to interpretation of laws/regulations, it is considered to be a Key Audit Matter. • Discussion with the Management any material developments and latest status of legal matters;
[Refer Note No. 14(a) & 24.1 to the Standalone Ind AS financial statements] • Evaluation of management’s assessment around those matters that are not disclosed or not considered as contingent liability, as the probability of material outflow is considered to be remote by the management; and
• Review of adequacy of the disclosures in the notes to the financial statements.
Based on the above work performed, management’s assessment in respect of litigations and related disclosures relating to contingent liabilities/other significant litigations in the Standalone Ind AS Financial Statements are considered to be reasonable.
6. Inventory Management The Company was majorly dependent on a single vendor for procurement of raw material i.e., iron ore fines, required for production of its finished goods i.e., pellets. We observed that the Company was majorly dependent on a single vendor for procurement of raw material (iron ore fines) and during the period of our audit and on our visit to the Pellet plant at Mangalore we observed that the production process was disrupted for a considerable amount of time due to non-availability of raw materials required.
This could have impact on the uninterrupted production process of the Company if the raw materials required were not available on a timely basis as per the procurement or production schedule of the Company. We were informed by the management that the Company is in the process of finding alternative source of raw material (Iron ore fines) from Odisha which require additional facilities in the manufacturing process like vertical pressure filter. The purchase order has already been placed for the installation of vertical pressure filter to process iron ore fines sourced from Odisha. We have relied upon the management replies and documents provided in this process.
7. Recognition of Intangible Asset under development In view of the significance of the matter we applied the following
Refer Note No. 3.3 & 24.14 of the Standalone Ind AS Financial Statements, during the year, the Company has recognized costs incurred towards acquisition of mining rights amounting to ^ 144.90 Lakhs as Intangible Assets under Development. audit procedures in this area, among others to obtain sufficient appropriate audit evidence:
As per the Ind AS-38, the development costs are recognized as Intangible Assets only when: Test of Controls
1. Technical feasibility has been established • Tested the Company’s design, implementation and operating effectiveness of controls to comply with the recognition criteria set out in Ind AS 38 Intangible Assets’ for projects initiated during the year.
2. The Company has committed technical and commercial resources to complete the development and use the intangible asset and Test of details
3. It is probable the asset will generate future economic benefits. • Evaluated and compared the inputs used in the assessment of future economic benefits;
The costs capitalised during the year include the contribution made to District CSR fund of Bellary District, cost of technical knowhow expenses, materials, direct labour, inspecting and testing charges, designing cost, software expenses and directly attributable overhead expenditure incurred up to the date the intangible asset is available for use including interest. • Examined approvals and clearances of the project given by the concerned authorities, reviewed the source documents to determine the expected future economic benefits and feasibility of the project.
The recognition of development cost as an intangible asset is considered to be a key audit matter given the assessment of the recognition criteria set out in Ind AS 38 Intangible Assets is made at an early stage of development and there are inherent challenges with accurately predicting the future economic benefit, which must be assessed as probable for capitalisation to commence. There is a risk therefore that development cost may get capitalised where the relevant criteria has not been met.

Information Other than the Standalone Ind AS Financial Statements and Auditors Report

thereon

1. The Company’s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Corporate Governance and Shareholder’s Information, but does not include the Standalone Ind AS financial statements and our auditor’s report thereon.

2. Our opinion on the Standalone Ind AS financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

3. In connection with our audit of the Standalone Ind AS 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 Ind AS financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material

misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Managements Responsibilities for the Standalone Ind AS Financial Statements

1. The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act 2013, with respect to the preparation of these Standalone Ind AS financial statements that give a true and fair view of the financial position and financial performance, changes in equity and cash flows of the Company in accordance with the Accounting Principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with relevant rules issued thereunder and other accounting principles generally accepted in India and in compliance with Regulation 33 of the Listing Regulations. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

2. In preparing the Standalone Ind AS financial statements, management is responsible for assessing the Company’s 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.

3. The Board of Directors are responsible for overseeing the Company’s financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Ind AS Financial Statements

1. Our objectives are to obtain reasonable assurance about whether the Standalone Ind AS financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 Ind AS financial statements.

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

• Identify and assess the risks of material misstatement of the Standalone Ind AS 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 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 management’s 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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Standalone Ind AS financial statements or, if such disclosure is inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s 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 Ind AS financial statements, including the disclosures, and whether the Standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

3. Materiality is the magnitude of misstatements in the Standalone Ind AS 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 Standalone Ind AS financial statements.

4. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings that we identify during our audit.

5. 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.

6. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Ind AS financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s 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

1. The financial statements of the Company for the year ended 31St March 2020, were audited by another auditor who expressed an unmodified opinion on those statements on 25th June 2020.

2. The Company has requested its debtors and creditors for confirmation of balances as disclosed in Note No. 24.29 to the Standalone Ind AS financial statements. However, we have not received any confirmations and hence, we have relied upon the balances appearing in the books for the reporting period.

Report on Other Legal and Regulatory Requirements

1. As required under the directions and sub-directions issued by the Comptroller and Auditor General of India in terms of Sub-section (5) of Section 143 of the Companies Act 2013, we are enclosing our report in "Annexure A".

2. As required by the Companies (Auditor’s Report) Order, 2016 ("the Order"), issued by the Central Government of India in terms of sub- section (11) of section 143 of the Companies Act, 2013, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable our report thereon is enclosed as "Annexure B".

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

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. Accordingly, we have relied upon the expenditure statement as certified by the management.

(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 Balance Sheet, the Statement of Profit and Loss (Including Other Comprehensive Income), Statement of Changes in Equity and the Statement of Cash Flows dealt with by this report are in agreement with the books of account;

(d) In our opinion, the aforesaid Standalone Ind AS financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, Companies (Indian Accounting Standards) Rules, 2015, as amended;

(e) 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 C".

(f) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, 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 Ind AS financial statements. Refer clause 1 of Note No. 24 of the Standalone Ind AS financial statements.

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

(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Company.

For YCRJ & Associates
Chartered Accountants
FRN: 006927S
Sd/
Place: Bangalore CA Rajnish Rama Rao
Date: 27/05/2021 Partner
UDIN: 21202465AAAACE8683 M. No. 202465

Annexure - A to the Auditors Report

Referred to in Paragraph 1 under "Report on Other Legal and Regulatory Requirements" section of our report to the Members of the Company of even dated

Report on Directions issued by the Comptroller and Auditor General of India under section 143(5) of the Companies Act, 2013

1. The units of the Company have a system in place to process all the accounting transactions through IT system. Transactions relating to Inventory are recorded in a separate software called Price Stores ledger (PSL) which is not integrated with the Financial Accounting System. Similarly, production details are not linked to the Financial Accounting System. During our audit, we have not come across any major implications (whether financial or otherwise) of processing of accounting transactions through IT system on the integrity of the accounts.

2. According to the information & explanations given to us, there is no restructuring of an existing loan or cases of

waiver / write off of debts / loans / interest etc., made by a lender. As such, there is no financial implication involved.

3. According to the information & explanations given to us, the Company has not received any funds for specific schemes from Central / State Government or its agencies during the financial year 2020-21.

However, as per information and explanations provided to us, in the year 2018-19, the Company had received a grant of ^ 11.20 lakhs from the Government of India - Ministry of Steel for the purpose of Research and Development. Out of the said grant, ^ 10.62 lakhs was disbursed to M/s Dayananda Sagar College of Engineering, Bengaluru for carrying out Research and Development on synthesis of Kudremukh Iron Ore Mine Tailings based on Geo-polymer Aggregate using Ash as a precursor in the Construction Industry during earlier years prior to FY 2020-21 and the balance amount shall be disbursed upon receiving a confirmation from the Ministry of Steel.

For YCRJ & Associates
Chartered Accountants
FRN: 006927S
Sd/
Place: Bangalore CA Rajnish Rama Rao
Date: 27/05/2021 Partner
UDIN: 21202465AAAACE8683 M. No. 202465

Annexure - B to the Auditors Report

Referred to in Paragraph 2 under "Report on Other Legal and Regulatory Requirements" section of our report to the Members of the Company of even dated

We report that:

1. In respect of the Company’s fixed assets:

A. The Company has maintained proper records showing full particulars including quantitative details and situation of Property, Plants and Equipment. The comprehensive description of assets, their current location and asset numbering is to be updated in the fixed asset register.

B. The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years.

In accordance with this programme, certain fixed assets were verified by the management during the

year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

C. According to the information and explanations given to us and based on our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

2. Physical verification of inventory has been conducted at reasonable intervals by the management and no material discrepancies were noticed;

3. The Company has not granted loans to bodies corporate covered in the register maintained under section 189 of the Companies Act, 2013 (the Act).

4. In our opinion and according to the information and explanations given to us, the Company has not entered in to any transaction attracting the provisions of section 185 and 186 of the Act.

5. The Company has not accepted any deposits from the public and does not have any unclaimed deposits as at March, 31, 2021 and therefore reporting under paragraph 3(v) of the Order is not applicable to the Company.

6. On the basis of records produced to us, we are of the opinion that, prima facie, the cost records prescribed by the Central Government of India under sub-section (1) of section 148 of the Companies Act, 2013 have been made and maintained. However, we are not required to and have not carried out any detailed examination of such accounts and records.

7. According to the information and explanations given to us and on the basis of our examination of the records of the Company,

A. The Company is generally been regular in depositing the amounts deducted / accrued in the books of account in respect of undisputed applicable statutory dues including provident fund, employees’ state insurance, income-tax, sales tax, and service tax, duty of customs, duty of excise, GST, cess and any other statutory dues applicable to it with the appropriate authorities.

B. There were no outstanding of aforesaid statutory dues as on 31st March 2021 for a period of more than six months from the date they became payable.

C. There are no dues of duty of customs which have not been deposited with the appropriate authorities on account of any dispute. However, according to information and explanations given to us, the following dues of income tax, sales tax, duty of excise, service tax and value added tax have not been deposited by the Company on account of disputes:

Statute Nature of dues ^ in Lakhs Period Dispute Forum
The Central Excise Act, 1944

Non-payment of SAD on DTA clearance of Pellets

1454.11 2010-11

CESTAT

1248.99 2011-12
3145.21 2011-12
Finance Act, 1994 Service Tax 60.77 2012-14 CESTAT

8. The Company does not have any loans or borrowings from

any financial institution, banks, government or debenture holders during the year. Accordingly, paragraph 3(viii) of the Order is not applicable to the Company.

9. The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable to the Company.

10. Based on the audit procedures performed and based on the information and explanations given to us, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the year.

11. As per notification No. GSR 463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 of the Companies Act, 2013 is not applicable to the Government Companies. Accordingly, paragraph 3(xi) of the Order is not applicable to the Company.

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

13. In our opinion and according to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards.

14. During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year and hence reporting under paragraph 3(xiv) of the Order is not applicable to the Company.

15. In our opinion and 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 non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable to the company.

16. The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For YCRJ & Associates
Chartered Accountants
FRN: 006927S
Sd/
Place: Bangalore CA Rajnish Rama Rao
Date: 27/05/2021 Partner
UDIN: 21202465AAAACE8683 M. No. 202465

Annexure - C to the Auditors Report

Referred to in Paragraph 3(e) under "Report on Other Legal and Regulatory Requirements" section of our report to the Members of the Company of even dated

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

We have audited the internal financial controls over financial reporting of KIOCL LIMITED (referred to as the "Company") as of March 31, 2021, in conjunction with our audit of the Standalone financial statements of the company of the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The respective Board ofDirectors of the of the Holding company, its subsidiary companies, its associate companies and jointly controlled companies, which are companies incorporated in India, are 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 respective company’s 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.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting 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 the ICAI and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both issued by the Institute of Chartered Accountants of India. 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 controls 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 auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide us for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s 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 company’s internal financial control over financial reporting includes those policies and procedures that

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

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s 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, 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, 2021, 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.

According to the information and explanation given to us,

the Company has established its internal financial controls over financial reporting criteria based on or considering the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. However, the documentation with regards to the system of internal financial controls over financial reporting of the Company needs further updation. Also, the Company is in the process of implementing an integrated ERP system comprising of Accounting, Inventory and other related modules in order to have efficient and effective control over the month end and year end transactions.

For YCRJ & Associates
Chartered Accountants
FRN: 006927S
Sd/-
Place: Bangalore CA Rajnish Rama Rao
Date: 27/05/2021 Partner
UDIN: 21202465AAAACE8683 M. No. 202465

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THE COMPANIES ACT, 2013 ON THE FINANCIAL STATEMENTS OF KIOCL LIMITED FOR THE YEAR ENDED 31st MARCH, 2021

The preparation of the financial statements of KIOCL Limited for the year ended 31 March, 2021 in accordance with the financial reporting framework prescribed under the Companies Act, 2013 (Act) is the responsibility of the management of the Company. The Statutory Auditors appointed by the Comptroller and Auditor General of India under Section 139 (5) of the Act are responsible for expressing opinion on the financial statements under Section 143 of the Act based on independent audit in accordance with the Standards on Auditing prescribed under Section 143 (10) of the Act. This is stated to have been done by them vide their Audit Report dated 27 May, 2021.

I, on behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit of the financial statements of KIOCL Limited for the year ended 31 March, 2021 under Section 143 (6)(a) of the Act. This supplementary audit has been carried out independently without access to the working papers of the Statutory Auditors and is limited primarily to inquires of the Statutory Auditors and Company personal and a selective examination of some of the accounting records.

On the basis of my supplementary audit, nothing significant has come to my knowledge which would give rise to any comment upon or supplement to Statutory Auditors’ report under Section 143(6)(b) of the Act.

For and on behalf of the
Comptroller and Auditor General of India
Sd/-
(M.S. Subrahmanyam)
Place: Hyderabad Director General of Commercial Audit
Date: 15/07/2021 Hyderabad