KIOCL Ltd Auditor Reports

(Issued Consequent to Audit observation dated July 5,2024 by Office of the Director General of Commercial Audit, Hyderabad and it supersedes our Independent Auditors Report Dated May 29,2024)

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 Standalone Balance Sheet as at 31^st March 2024, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Cash Flows for the year then ended and the Standalone Statement of Changes in Equity for the year then ended, and Notes to the Standalone Financial Statements, including material 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 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31^st March 2024, the Loss 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 SAs are further described in the Auditors 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. Kudremukh Mining Operations

Attention is drawn to Note No. 3.1 along with foot note thereto and Note No. 28.3.4 of the Standalone Ind AS financial statements on the Kudremukh mine site from where iron ore was extracted by KIOCL Limited and has been suspended due to the order of the Honble Supreme Court in 2006 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. The Company is of the view that pending the decision of the Government of Karnataka, since Lakhya dam therein is the main water source for the pellet plant, the asset continues to be shown under PPE.

The freehold land of 114.31 hectares together with movable assets located therein, has been proposed by the Company to be handed over to Forest Department, Government of Karnataka but the value of the land continues to be shown in the books of accounts pending the permission for such handover from Govt., of India.

2. Blast Furnace Unit (BFU)

Attention is drawn to Note No.1.10, Note No. 3.1 along with additional information thereto and Note No. 28.3.7 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 valuation report provided by the Independent Valuer, the recoverable amount in each class of BFU are more than the carrying amount and hence, no impairment loss is recognised.

3. Right to Use (ROU) Asset- The allotment of land by M/s Karnataka Industrial Areas Development Board (KIADB) at Mangalore and Doddaballapura. Attention is drawn to Note No. 3.3 along with additional information thereto and Note No. 28.1.2 and Note No 28.2.5

The company was allotted 52.86 Acres of land at Mangalore in 2008 for the purpose of building a Railway siding and 17,483 Sq.mtrs at Doddaballapura in 2016 for the purpose of setting up an R & D Centre. As per the terms and conditions of the agreement (leased land at Mangalore) the company was supposed to start construction of the Railway siding within 4 years from the date of allotment of land, failing which the Company would have to pay the difference in the cost of the land from the date of allotment to the actual date of construction. However, the company is in discussion with M/s KIADB for revising the entire lease agreement. As far as the Leased land at Doddaballapura, the company has written to KIADB for removing encroachments to enable them to use the leased land which is yet to be done by KIADB.

The ultimate outcome of the matters is uncertain and the positions taken by the management are based on the application of their best judgement, the Company is of the view that pending the decision of the M/s KIADB, the asset continues to be shown under ROU and no provisions are to be made for the differential value of the leased land at Mangalore.

4. Mining Rights in Devadari Range in Bellary District for Mining of Iron Ore and Manganese Ore.

Attention is drawn to Note No.1.6, Note No.1.9, Note No.4.1, Note No.4.2 and Note No.28.3.5 in connection with Mining Rights reserved by Government of Karnataka (GOK) on 23.1.2017, reserving an area of 470.4 ha in Devadari Range in Bellary district for mining of Iron Ore and Manganese Ore. The Company has already obtained statutory clearances from Indian Bureau of Mines, Environment clearance from MoEF&CC, Consent for Establishment by KSPCB and Forest Clearance by MoEF&CC. The Company has also paid H174.14 crores in Oct2021 and H20.21 crores in Sept2022 towards NPV, CA charges and differential CA charges respectively. Also, the Mining lease deed has been executed on 2.1.2023 for a period of 50 years and registered on 18.1.2023 paying H329.18 crores. These amounts were included under the head Mining Rights and had been shown till the previous year in the financial statements, under "Intangible Assets under Development (IAUD)" (Note No.4.2).

During this year, GOK had issued a GO on 11.4.2023 for diversion of forest land for Devadari Iron Ore Mine and for which the Company need to enter into Forest Lease Agreement with Dy. Conservator of Forest, Bellari for handing over of the land to the company and this also includes the handing over of Companys own land of 114.31 Ha with building and infrastructure at Kudremukh (Refer to Note No.28.3.4) which is still awaiting GOI permission.

Meanwhile, the Economic Feasibility Report (TFR) of the DIOM Project has with approval of the Companys Board of Directors, in Feb2024, placed before GOI for approval with a CAPEX of H178,389 Lakhs, and placed with PIB, MOF approval through Ministry of Steel and the same is awaited.

The Expenditure incurred as at the end of the financial year, in a sum of H52988.31 Lakhs are been classified as Mining Right under "Other Intangible assets" (Note No.4.1), which was hitherto shown under "intangible assets under development" (Note No.4.2), on account of the said Mining Right satisfying the criteria set forth in the Accounting Standard Ind AS 38 (Para 21) in that the said expenditure demonstrates that the expected future economic benefits that are attributable to the asset will flow to the company and that the cost of the asset could be measured reliably.

Reference is invited to Note No.1.6, where it has been stated that intangible assets are amortized over their respective estimated useful lives on a straight-line basis, from the date that they are available for use. Here reference is invited to Note No.1.9 where it has also been stated that no amortization is charged on the Mining Rights before the start of the commercial production for which the companys Note No.28.3.5 is to be referred to, wherein the company has stated the steps taken by it to get various permissions, before start of commercial production in the said leased land for which mining rights had been acquired by the company.

5. SAP Software under development/acquisition.

Attention is drawn to Note No.4.2 - The Company had initiated in earlier years, an Enterprise Resource Planning (ERP - SAP) with the said SAP determined to go LIVE from 1.4.2023. The Company during this year had to fall back with their Legacy Software for certain operations and relying on SAP for only certain of their operations, thereby full-fledged usage of SAP for all modules was not in place during financial year 2023- 24. The Company is of the view that in the current year 2024- 25, the SAP is expected to be fully functional and the expenditure continues to be shown under "Intangible assets under Development" (Note No.4.2) (IAUD) as at the year end.

6. Stoppage of Pellet Plant

Attention is invited to Note No.28.3.15 on the stoppage of Pellet Plant during the year. The Company continues to incur losses during the year and in the preceding year. The Pellet Plant had not been in operation for a total of 129 days. From 27.2.2024 and till date the Pellet Plant is not in operation, due to non - availability of raw material and unviable market conditions. The Company expects to resume production by end of May 2024, as they expect that the market is improving leading to a favorable situation for resuming the plant.

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.

Key Audit Matter	How the matter was addressed in our audit
1. Property, Plant & Equipment, Intangible Assets, and its impairment	Due to the materiality in the context of the 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 capitalization process, performed tests of details on costs capitalized, the timeliness of the capitalization of the assets and de-recognition criteria for the assets retired from active use and its impairment.
These include the decision to capitalize 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 capitalized; determination of realizable 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. 2, 3.1, 3.2, 4.1, 4.2 & 28.3 to the Standalone Ind AS financial statements]
2 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);
	* Assessed the Companys evaluation on the identification of leases based on the contractual agreements and our knowledge of the business;
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.	* 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
[Refer Note No. 3.3, 13.2, 15.2 & 28.2.5 to the Standalone Ind AS financial statements]	Based on the above audit procedures, the presentation and disclosures in the Standalone Ind AS financial statements are in accordance with the standard.
3 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. 1.15, 14, 17 & 28.2.1 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.
4 Provisions and Contingent Liabilities	Our audit procedures in response to this matter included, among others,
The Company has exposure towards litigations relating to various matters as set out in the Notes to the Standalone Ind AS Financial Statements.	• Understanding, assessing and testing the design and operating effectiveness of key controls surrounding assessment of litigations relating to the relevant laws and regulations;
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.	• Discussion with the Management any material developments and latest status of legal matters;
	• Evaluation of managements 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.
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. [Refer Note No. 14, 17 & 28.1.2 to the Standalone Ind AS financial statements]
	Based on the above work performed, managements 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.
5 Inventory Management	We observed that the Company was majorly dependent on a single vendor for procurement of raw materials (iron ore fines) and during the year we observed that the production process was disrupted for a considerable amount of time (Refer to Note No.28.3.15 to the Standalone Ind AS financial statements).
The Company was majorly dependent on a single vendor for procurement of raw material i.e., iron ore fines, required for the production of its finished goods i.e., pellets.
	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 which has been capitalized during the year. We have relied upon the management replies and documents provided in this process.
This could have an 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.
	KIOCL during the year have obtained the second stage approvals for mining in Devadari mines, Bellary district, therefore their dependency on NMDC will be reduced in the coming financial years.

Information Other than the Standalone Ind AS Financial

Statements and Auditors Report thereon

1. The Companys 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, Boards Report including Annexures to Boards Report, Corporate Governance and Shareholders Information, but does not include the Standalone Ind AS financial statements and our auditors 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 Companys 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 (Ind AS) 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 Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

3. The Board of Directors are responsible for overseeing the Companys 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 auditors report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone 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 managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the Standalone 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 auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Standalone 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. 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.

4. 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.

5. 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 auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

The Ind AS standalone financial statements of the Company for the year ended March 31, 2023, were audited by another auditor who expressed an unmodified opinion on those statements.

Report on Other Legal and Regulatory Requirements

1. As required under the directions, specific 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 (Auditors Report) Order, 2020 ("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 B" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable our report.

3. A. 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.

(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 except for the matters stated in the paragraph B(f) below, on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014;

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

(d) In our opinion, the aforesaid Standalone Ind AS financial statements comply with the Accounting Standards (Ind AS) 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) As per notification number G.S.R. 463(E) dated 5^th June, 2015 issued by Ministry of Corporate Affairs, section 164(2) of the Act regarding the disqualifications of Directors is not applicable to the Company, since it is a Government Company;

(f) The modifications relating to the maintenance of accounts and other matters connected therewith are as stated in the paragraph 3.A(b) above on reporting under Section 143(3)(b) of the Act and paragraph 3.B(f) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.

(g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure C".

(h) As per notification number G.S.R. 463 (E) dated 5^th June 2015 issued by Ministry of Corporate Affairs, section 197 of the Act regarding remuneration to director is not applicable to the Company, since it is a Government Company;

B. 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, in our opinion and to the best of our information and according to the explanations given to us:

(a) The Company has disclosed the impact of pending litigations on its financial position in its Standalone Ind AS financial statements. Refer Note No. 28.1.2 of the Standalone Ind AS financial statements.

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

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

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

(ii) The management has represented, that, to the best of its knowledge and belief, no funds have been received by the company from any person or entity, including foreign entity ("Funding Party"), 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;

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

(e) The company has not paid any dividend during the year.

(f) i) The reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 is applicable from 1 April 2023. The Company has during the year migrated to New SAP based (ERP Software package), in respect of its departments relating to Inventory Management and Human Resources Management. Based on our examination which included test checks, the said software has a feature of recording audit trail (edit log) facility and the same has operated throughout the period during which it was in operation during the year, in respect of all relevant transactions recorded in the respective software in respect of the said Departments. In respect of the Department functions, not migrated to the new software, the company continues to use the same old software (Legacy systems) for all its accounting functions, except to the departments stated above, which does not have a feature of recording audit trail (edit log). The Company expect to migrate the remaining department functions to the new software in the current year.

ii) Based on our examination and in our opinion, in respect of the certain Departments as mentioned in para f(i) above, though that they do not have a separate audit trail facility, namely in the Old legacy software system, the said software has all the essential features as that of the audit trail, including the non tampering of the transactions entered thereto, and hence the qualitative aspect of accounting in respect of the company has not been affected for the year.

iii) Further, for the Departments where audit trail facility was enabled and operated throughout the year for the respective accounting software, during the course of our audit, we did not come across any instance of the audit trail feature being tampered with.

	For G BALU ASSOCIATES LLP Chartered Accountants
	FRN:000376S/S200073
Place: Bengaluru	Sd/- CA R. RAVISHANKAR
Date: 11-07-2024	Partner
UDIN: 24026819BKBOWL2363	Membership No.:026819

Annexure - A to the Independent 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. During the year, the Company has implemented new SAP (ERP software package) for two of its departments, namely Inventory Management and Human Resources Management, but continue to follow their old legacy software (Financial Accounting System- FAS), for rest of its departments, especially the Accounts department. This involves the data in respect of the departments which were migrated to the new SAP software, need to be fed into the old legacy software. 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 and 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 and 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 2023-24.

4. Specific Directions issued dated 07.05.2024:

Specific Directions	Remarks
Examine the Components of expenses covered under H52,728.73 Lakhs as on 31.3.2023 under the head "Intangible Assets under development" and comment on the admissibility of expenses as per Para 57 of IndAS-38.	The Accounts of the Company had been Audited by a different Firm of Chartered Accounts as on 31.3.2023
	The Expenditure was H52,728.73 Lakhs as at 31.3.2023 and it was at H52,988.31 Lakhs as at 31.3.2024. During this year, the Company has obtained Techno Economic Feasibility Report (TEF) and approved by the Board of Directors of the company on 2nd February 2024. This Expenditure mainly relating to the Mining Rights acquired by the company from GOK vide GO dt.23.1.2017 (at Devadari Range in Bellary Disrict) and also Lease agreement entered with GOK on 2.1.2023 (registered on 18.1.2023).
	During the year, the Company had classified the Mining Right under "Intangible Assets" in the asset side of the Balance Sheet (Note No.4.1), which was hitherto shown under "Intangible Asset Under Development" (Note No.4.2). The Company has recognised the Mining Rights as an Intangible Asset as per IndAS-38 (Para 21), as the said asset demonstrates, that, it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity, and that the cost of the asset can be measured reliably.
	Since the said expenditure has now been identified and classified as an Intangible asset, the question of considering the said expenditure under IndAS-38 - Para 57 relating to Intangible assets under development, does not arise. We also refer to the Note No.28.3.5 of the Ind AS Financial statements in this regard.

Annexure - B to the Independent 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.

As per the books and records produced before us and as per the information and explanations given to us and based on such audit checks that we considered necessary and appropriate, we report that:

i. I n respect of the Companys Property, Plant and Equipment (PPE) and Intangible Assets:

a. (A) The Company has maintained proper records showingfull particulars including quantitative details and situation of Property, Plants and Equipment and relevant details of right-of-use assets. The tagging of the Asset numbers in the PPE Register to the individual Property, Plant and Equipment is yet to be done by the company.

(B) The Company has maintained proper records showing full particulars of Intangible Assets.

b. According to the information and explanations given to us, the Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner, every year.

As explained to us, 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.

d. As per the information and explanation given us the Company has not revalued any of its Property, Plant and Equipment (including right of-use assets) or Intangible assets during the year.

e. As per the information and explanation given us, no proceedings have been initiated during the year or are pending against the Company as at March 31, 2024 for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder.

ii. a. The inventory has been physically verified by themanagement during the year. In our opinion, the frequency of such verification is reasonable, and procedures and coverage as followed by management were appropriate. No discrepancies were noticed onverification between the physical stocks and the book records that were more than 10% in the aggregate of each class of inventory.

b. According to the information and explanations given to us, the Company has overdraft facility against deposits with banks in excess of H5 crore, in aggregate. As explained to us, since the facilities were sanctioned against fixed deposits, there were no requirement of submission of quarterly returns or statements with the banks and hence the same were not submitted by the Company.

iii. As per the information and explanation given to us, during the year, the company has not made investments in, provided any guarantee or security or granted any loans, secured or advances in the nature of loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or other parties. Hence reporting under clause 3(iii) of paragraph 3 of the Order are not applicable.

iv. As per the information provided and explanation given to us, there are no loans, investments, guarantees, and security under section 185 and 186 of the Companies Act 2013. Hence the provisions of clause 3(iv) of paragraph 3 of the Order are not applicable.

v. As per the information provided and explanation given to us, the Company has not accepted any deposits from the public and does not have any unclaimed deposits as at March 31, 2024 and therefore reporting under paragraph 3(v) of the Order is not applicable to the Company.

vi. 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.

vii. 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 has 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, Value Added Tax, cess and any other statutory dues applicable to it with the appropriate authorities.

There were no outstanding of aforesaid statutory dues as on 31^st March 2024 for a period of more than six months from the date they became payable.

b. As per the information and explanations given to us, the following statutory dues have not been deposited on account of dispute:

Statute	Nature of dues	Hin Lakhs	Period	Dispute Forum
The Central Excise Act, 1944	Non-payment of SAD on DTA clearance of Pellets	1454.11	2010-11	High Court of Karnataka
		1248.99	2011-12
		3145.21	2011-12
Finance Act, 1994	Service Tax	60.77	2012-14	CESTAT
The Customs Act,1962	Customs Duty	58.45	2022-23	Commissioner Appeals (Customs)
Income Tax Act,1961	Income Tax	1045.07	2018-19	CIT (Appeals)

viii. As per the information and explanations given to us, there were no transactions relating to previously unrecorded income that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (43 of 1961). Hence, reporting under clause 3(viii) of the Order is not applicable.

ix. a. As per the information and explanations given to us, the company has not defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender.

b. As per the information and explanations given to us, the company has not been declared as wilful defaulter by any bank or financial institution or other lender.

c. As per the information and explanations given to us, and as per our review, prima facie, the term loans were applied for the purpose for which the loans were obtained. However, we have not carried out any detailed examination of such accounts, records and utilisation.

d. As per the information and explanations given to us, and as per our review, prima facie, funds raised on short term basis have not been utilised for long term purposes. However, we have not carried out any detailed examination of such accounts, records and utilisation.

e. As per the information and explanations given to us, the company has not taken any funds during the year from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures.

f. As per the information and explanations given to us, the company has not raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies.

x. a. As per the information and explanations given to us, the company has not raised any money by way of initial public offer or further public offer (including debt instruments) during the year.

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, partly or optionally convertible debentures during the year.

Hence, reporting under clause 3(x) of the Order is not applicable.

xi. a. Based on examination of the books and records of the Company and according to the information and explanations given to us, considering the principles of materiality outlined in Standards on Auditing, we report that no fraud by the Company or on the Company has been noticed or reported during the course of the Audit.

b. According to the information and explanations given to us, no report under sub-section (12) of section 143 of the Companies Act has been filed in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government, during the year and up to the date of this report.

c. As per the information and explanation given to us, the Company has not received any whistle blower complaints during the year.

xii. The company is not a Nidhi Company. Hence, reporting under clause 3(xii) of the Order is not applicable.

xiii. 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.

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

b. We have considered, the internal audit reports issued to the company till date, for the period under audit.

xv. As per the information and explanations given to us, the Company has not entered into any non-cash transactions with its directors or persons connected with its directors. Accordingly, paragraph 3(xv) of the Order is not applicable to the company.

xvi. In our opinion, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934 and also is not a Core Investment Company (CIC) as defined in the Core Investment Companies (Reserve Bank) Directions, 2016. Hence, reporting under clause 3(xvi) (a), (b), (c) and (d) of the Order is not applicable.

xvii. The Company has incurred cash loss of H 2287.30 Lakhs during FY 2023-24 and the company incurred cash loss of H 9,335.90 Lakhs in the immediately preceding financial year.

xviii. There has been resignation of the statutory auditors of the Company during the year. There is only a change in the appointment of the Statutory Auditor during the year as provided by Comptroller and Auditor General under Sec 143(5) of The Companies Act, 2013.

xix. On the basis of the financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements and our knowledge of the Board of Directors and Management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report indicating that Company is not capable of meeting its liabilities existing at the date of the 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. In this connection, we refer to the Note No.28.3.15 on stoppage in the operations of the pellet plan and our Emphasis of Matter (No.6) given above.

xx. a. As per the information and explanations given to us,

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

b. In respect of ongoing projects, the Company has transferred unspent Corporate Social Responsibility (CSR) amount as at the end of the previous financial year, to a special account within a period of 30 days from the end of the said financial year in compliance with the provision of section 135(6) of the Act.

xxi. As this report is being given on the Standalone Financial Statements of the company, reporting under clause 3(xxi) is not applicable.

	For G BALU ASSOCIATES LLP
	Chartered Accountants
	FRN:000376S/S200073
	Sd/-
Place: Bengaluru	CA R. RAVISHANKAR
Date: 11-07-2024	Partner
UDIN: 24026819BKBOWL2363	Membership No.:026819

Annexure - C to the Independent Auditors Report

Referred to in Paragraph 3(f) 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 31,2024, in conjunction with our audit of the Standalone financial statements of the company of the year ended on that date.

Managements Responsibility for Internal Financial Controls

The respective Board of Directors 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 companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Auditing of Internal Financial Controls Over Financial Reporting (the "Guidance Note") issued by the ICAI and the Standards on Auditing, prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial 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 auditors judgment, including the assessment of the risks of material misstatement of the Standalone financial statements, whether due to fraud or error.

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

Meaning of Internal Financial Controls over Financial Reporting

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

Inherent Limitations of Internal Financial Controls over Financial Reporting

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

Opinion

In our opinion, the Company has in all material respects, adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2024, based on the internal financial 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.(the "Guidance Note").

Emphasis of Matters

1. The Company though has implemented its new ERP Software during the year, continues to follow its legacy accounting software, and expected that the ERP Software to be fully functional during the year 2024-25.

2. The Standard Operating Procedures (SOPs) and Manuals prepared in the earlier years are required to be updated/ modified to reflect the current practices.

Our opinion is not modified in respect of these matters.

	For G BALU ASSOCIATES LLP
	Chartered Accountants
	FRN:000376S/S200073
	Sd/-
Place: Bengaluru	CA R. RAVISHANKAR
Date: 11-07-2024	Partner
UDIN: 24026819BKBOWL2363	Membership No.:026819

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 31 MARCH 2024

The preparation of financial statements of KIOCL Limited for the year ended 31 March 2024 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 Revised Audit Report dated 11 July 2024 which supersedes their earlier Audit Report dated 29 May 2024.

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 2024 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 personnel and a selective examination of some of the accounting records.

In view of the revision made in the Statutory Auditors Report to give effect to some of my audit observations raised during supplementary audit, I have no further comments to offer upon or supplement to the 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: 29-07-2024	Hyderabad