To
The Members of
Mahanagar Telephone Nigam Limited
Report on the Audit of the Standalone Ind-AS Financial Statements Qualified
Opinion
We have audited the accompanying standalone Ind-AS financial statements of MAHANAGAR TELEPHONE NIGAM LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including Other Comprehensive Loss), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and notes to financial statements, including a summary of the material accounting policies and other explanatory information (hereinafter referred to as "the standalone Ind- AS financial statements").
In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the basis for Qualified Opinion Section of our report, the aforesaid standalone Ind- AS financial statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind- AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024, net loss, changes in equity and its cash flows for the year ended on that date.
Basis for Qualified Opinion
We conducted our audit of the standalone Ind-AS financial statements in accordance with the Standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards 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 (ICAI) together with the ethical requirements that are relevant to our audit of the standalone Ind AS financial statements under the provisions of the Act and the Rules made there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone Ind AS financial statements.
(i) The Net Worth of the Company has been fully eroded; The Company has incurred net cash loss during the year ended March 31st, 2024, as well as in the previous year and the current liabilities exceeded the current assets substantially.
Furthermore, Department of Public Enterprises vide its Office Memorandum No. DPE/5(1)/2014-Fin. (Part-IX-A) has classified the status of the Company as "Incipient Sick CPSE". Department of Telecommunication (DOT) has also confirmed the status vide its issue no.I/3000697/ 2017 through file no. 19-17/2017 - SU-II.
However, the standalone Ind AS financial statements of the Company have been prepared on a going concern basis keeping in view the majority stake of the Government of India.
Union Cabinet has also approved the "Revival plan of BSNL and MTNL" by reducing employee costs, administrative allotment of spectrum for 4G services, debt restructuring by raising of sovereign guaranteed bonds, monetization of assets and in principle approval for merger of BSNL and MTNL. Further, the Company had implemented the Voluntary Retirement Scheme in FY 2019-20 resulted into reduction in Employees Cost and also raised funds by issuing Bonds for Rs 6,500 crore in FY 2020-21 in line with cabinet note.
As per F.NO.20-28/2022-PR dated 2nd August 2022, the Union Cabinet in its meeting held on July 27, 2022 has approved the raising of Sovereign guaranteed bonds for MTNL with a tenure of 10 years or more for an amount of Rs. 17,571 crores with waiver of guaranteed fee to repay its high-cost debt and restructure it with new sustainable loan. During the year ended March 31, 2023, the Company has raised Rs. 10,910/- Crore and Rs. 6,660.99 Crores raised during year ended March 31, 2024. (refer note no. 78 to the standalone Ind-AS financial statements).
Further, in view of unsustainable debts of MTNL, a Committee of Secretaries (COS) was constituted by Government of India to examine matters such as asset monetization, AGR dues, debt restructuring etc for further course of action for merger of MTNL and BSNL. However, COS is reviewing various options submitted to them for solution of various issues related to MTNL which is under process.
(ii) Dues to/Receivable from Bharat Sanchar Nigam Limited (BSNL):
a) The Company has certain balances receivable from and payables to Bharat Sanchar Nigam Limited (BSNL). The net amount recoverable of Rs. 3569.07 Crores is subject to reconciliation and confirmation. In view of non-reconciliation and non-confirmation and in view of various pending disputes regarding claims and counter claims, we are not in a position to ascertain and comment on the correctness of the outstanding balances and resultant impact of the same on the standalone Ind-AS financial statements of the Company.
b) The Company has not provided a provision for doubtful claims in respect of lapsed CENVAT Credit due to non-payment of service tax to service providers within the period of 180 days and due to transition provision under Goods and Service Tax (GST) where the aforesaid CENVAT credit amounting to Rs.154.84 Crores has not been carried forward resulting in overstatement of Current Assets and understatement of loss to that extent.
c) The income arising on account of rental income in respect of property occupied by the BSNL amounting to Rs.33.52 Crores accrued during the year ended March 31st, 2024, has not been recognized in Delhi unit in the Standalone Ind-AS financial statement, however, the income arising on account of rental income in respect of property occupied by the BSNL amounting to Rs.29.94 Crores has been recognized in Mumbai Unit in the Standalone Ind-AS financial statement on estimate basis. Further, the Goods and Services Tax (GST) has also not been considered in respect of income arising on account of rented property occupied by the BSNL for both Delhi and Mumbai unit. The accumulated impact on the standalone Ind-AS financial statement of such income and liability under Goods and Services Tax (GST) for the current year and preceding years is not ascertained and quantified.
(iii) The Company has certain balances receivable from and payable to the Department of Telecommunication (DOT). The net amount recoverable of Rs. 7.16 Crores, is subject to reconciliation and confirmation. In view of non-reconciliation and non-confirmation, we are not in a position to ascertain and comment on the correctness of the outstanding balances and resultant impact of the same on standalone Ind AS financial statements of the Company for the year ended March 31, 2024. (Also refer point no. (a) of note no. 70 to the standalone Ind-AS financial statements).
(iv) The Company has certain balances recoverable from its debtors on account of service tax amounting to Rs. 64.27 crores in the Delhi Wireless Unit. The balance is recoverable from BSNL and various private parties which are subject to reconciliation and confirmation. Further identification of balance on account of BSNL and other parties are not available. In the absence of reconciliation and confirmation we are not in a position to comment on the correctness of the outstanding balance as above and resultant impact on standalone Ind AS financial statements of the Company.
(v) Up to the financial year 2011-12 License Fee payable to the DOT on IUC charges to BSNL was worked out on accrual basis as against the terms of License agreements requiring deduction for expenditure from the gross revenue to be allowed on actual payment basis. Fromfinancial year 2012-13, the license fee payable to the DOT has been worked out strictly in terms of the license agreements. The Company continues to reflect the difference in license fee arising from working out the same on accrual basis as aforesaid for the period up to financial year 2011-12 by way of contingent liability of Rs. 140.36 Crores instead of actual liability resulting in understatement of current liabilities and understatement of loss to that extent. (Refer note no. 82 to the standalone Ind-AS financial statements).
(vi) Except for the impairment loss of assets of CDMA units provided in earlier years, no adjustment has been considered on account of impairment loss, if any, during the year, with reference to Indian Accounting Standard - 36 "Impairment of Assets" prescribed under Section 133 of the Act. In view of uncertainty in achievement of future projections made by the Company, we are unable to ascertain and comment on the provision required in respect of impairment in carrying value of cash generating units and its consequent impact on the loss for the year ended March 31, 2024, accumulated balance of other equity and also the carrying value of the cash generating units. (Refer note no. 72 to the standalone Ind-AS financial statements).
(vii) The Company does not follow a system of obtaining confirmations and performing reconciliation of balances in respect of amount receivables from trade receivables, deposits with Government Departments and others, claim recoverable from operators and other parties and amount payable to trade payables, claim payable to operators, and amount payable to other parties.
Accordingly, amounts receivable from and payable to the various parties are subject to confirmation and reconciliation. Pending such confirmation and reconciliation, the impact thereof on the standalone financial statements are not ascertainable and quantifiable. (Refer note no. 67 to the standalone Ind-AS financial statements).
(viii) The Company does not follow a system of reconciliation of difference between TDS balance as per book and as per TDS certificate and form 26AS under Income-tax Act as applicable. Pending such reconciliation the impact thereof if any on the standalone IND AS financial statement is not ascertainable and quantifiable
(ix) Unlinked credit of Rs. 86.63 Crore on account of receipts from subscribers against billing by the Company which could not be matched with corresponding receivables is appearing as liabilities in the balance sheet. To that extent, trade receivables and current liabilities are overstated. Pending reconciliations, the impact thereof on the standalone financial statements are not ascertainable and quantifiable. (Also refer note no. 66 to the standalone Ind-AS financial statements).
(x) Property, Plant and Equipment are generally capitalized on the basis of completion certificates issued by the engineering department or bills received by the finance department in respect of bought out capital items or inventory issued from the Stores. Due to delays in issuance of the completion certificates or receipt of the bills or receipt of inventory issue slips, there are cases where capitalization of the Property, Plant and Equipment gets deferred to next year. We are unable to comment whether the Capital Work-in-progress (CWIP) shown in books in the current year are actually part of CWIP or have already been commissioned. The resultant impact of the same on the standalone Ind AS financial statements by way of depreciation and amount of Property, Plant and Equipment capitalized in the balance sheet cannot be ascertained and quantified.
(xi) Department of Telecommunication (DOT) had raised a demand of Rs. 3,313.15 Crore in 2012-13 on account of one-time charges for 2G spectrum held by the Company for GSM and CDMA for the period of license already elapsed and also for the remaining valid period of license including spectrum given on trial basis.
Also as explained, pending finality of the issue by the Company regarding surrender of a part of the spectrum, crystallization of issue by the DOT in view of the claim being contested by private operators and because of the matter being sub-judice in the Court on account of dispute by other private operators on the similar demands the amount payable if any, is indeterminate. Accordingly, no liability has been created for the demand made by DOT on this account and Rs. 3,205.71 Crores has been disclosed as contingent liability till FY 2018- 19 although no further demand is there from DOT till date. However as explained further, the TDSAT while setting aside the levy of OTC on spectrum allotted beyond 6.2 MHz directed Govt. to review the demand for spectrum allotted after July 1st, 2008 and that too w.e.f, January 1, 2013 in case the spectrum beyond 6.2 MHz was allotted before January 1st, 2013. As explained as per the TDSAT orders also no further demand has been raised till now and as per management based on TDSAT direction the demand, if any cannot be more than Rs. 455 .15 crores the same is considered as contingent liability.
In view of the above we are not in a position to comment on the correctness of the stand taken by the Company and the ultimate implications of the same on the standalone Ind AS financial statement of the Company. (Also refer note no. 61 to the standalone Ind-AS financial statements).
(xii) The company has recovered Electricity Charges from the tenants, on which liability for Goods and Services Tax (GST) has not been considered, as the expenses recovered without installing sub meter in some of the cases. The actual impact of the same on the standalone Ind AS financial Statement for the year ended March 31, 2024, has not been ascertained and quantified.
(xiii) The TDS on provision for Expenses (Accrued Liability) has not been deducted under chapter XVII- B of Income Tax Act, 1961. The actual impact of the same on the standalone Ind-AS financial statement for the year ended March 31, 2024, has not been ascertained and quantified.
(xiv) The Company is making the provision for interest for late/non-payment to MSME vendors which is subject to deduction of tax under section 194A of Income Tax Act, 1961. The actual impact of the same on the standalone Ind-AS financial statements for the year ended March 31, 2024, is not ascertained and quantified.
(xv) The company has not recognized for loss allowance for trade receivables as per the requirements of Ind AS 109 "Financial Instruments" amounting to Rs.74.89 Crore relating to companies which are under insolvency process and certain trade receivables amounting to Rs.11.55 Crore pertaining to infrastructure business, wherein there is significant increase in credit risk.
The impact of the aforesaid on the standalone Ind-AS financial statements for the year ended March 31, 2024 lias not been ascertained and quantified.
The above basis for qualified opinion referred to in Para no. (i) to (iii), (v) to (vii) and (ix) to (xv) were subject matter of qualification in the Auditors Report for the year ended on M arch 31, 2023.
In the absence of information, the effect of which cant be quantified, we are unable to comment on the possible impact of the items stated in the point nos. (i), (ii)(a), (iii), (iv),(v), (vi), (vii),(viii), (ix), (x), (xi) (xii), (xiii),(xiv) and (xv) on the standalone Ind-AS financial statements of the Company for the year ended on March 31, 2024.
Emphasis of Matters
We draw attention to the following notes on the standalone Ind-AS financial statements being matters pertaining to Mahanagar Telephone Nigam Limited requiring emphasis by us.
(i) Note no. 63 of Ind-AS financial statements regarding pending dispute with the Income Tax Department before the Honble Courts regarding deduction claimed by the Company u/s 80 IA of the Income Tax Act, 1961 we are unable to comment on the adequacy or otherwise of the provision and/ or contingency reserve held by the Company.
(ii) Note no. 64(b) Impact of accounting of claims and counter claims of MTNL with M/S M&N Publications Ltd., in a dispute over printing, publishing and supply of telephone directories for MTNL, will be given in the year when the ultimate collection/ payment of the same becomes reasonably certain.
(iii) Note no. 15 &19 Amount receivable from BSNL & Other Operators have been reflected as loans and other financial assets instead of bifurcating the same into trade receivables and other financial assets.
(iv) Note No.80 The operations and maintenance of wireless network has been handed over to BSNL as an outsource agency from April 1, 2021 (in case of Delhi) and September 1, 2021 (in case of Mumbai) onwards. Pending finalization of standard operating procedures, the financial impact of the same (if any) will be accounted for on finalization of operational modalities.
(v) Note No.70(d) The Amounts recoverable from Department of Telecommunication (DOT) in respect of settlement of General Provident Fund (GPF) of Combined Service Optees absorbed employees in MTNL and the matter has been under review with DOT and the full amount of GPF including interest thereon, claimed of the Company in respect of which correspondence is going on between the Company and DOT are continued to be shown as recoverable from DOT and payable to GPF.
(vi) Note No.78 In pursuance of DoT letter No. F.No. 30-04/2019-PSU Affairs dt. October 29, 2019 and decision of Board of Directors of MTNL through circular regulation on November 4, 2019, the MTNL Voluntary Retirement Scheme has been introduced with effect from November 4, 2019 under which 14,387 number of MTNL employees opted for VRS and the expenditure of ex-gratia on account of compensation to be borne by the DOT/Government of India through budgetary supports as per approval of cabinet. Balance amount payable to VRS opted employees as on March 31, 2024 is shown in the financial statements of the company as receivable from DOT and payable to VRS retirees, to reflect the actual position with reference to VRS scheme of 2019 of MTNL.
(vii) Note No. 82 The payables towards license fees and spectrum usage charges have been adjusted with excess pension payouts to Combined Pensioners Optees recoverable from DOT in respect of which matter is under consideration and correspondence in going on between the Company and DOT.
(viii) Note No. 82 The License agreement between Company and DOT does not have any guidance on change in method of calculation of Adjusted Gross Revenue (AGR) due to migration to Ind-AS from I-GAAP. Provisioning and payment of liability in respect of license fees and spectrum usage charges payable to DOT has been done on the basis of Ind- AS based financial statements. The amount of difference in computation of Adjusted Gross Revenue (AGR) is under consideration of DOT.
(ix) Note No. 15(iv) Dues from the Operators being on account of revenue sharing agreements are not treated as debtors and consequently are not taken into account for making provision for doubtful debts. (Also refer clause no. (k) of note no. 3 to the standalone Ind-AS financial statements).
(x) Note 58(A) Certain immovable properties transferred from Department of Telecommunications (DoT) to MTNL in earlier years, which were taken on lease by DoT prior to incorporation of MTNL. On March 30, 1987, both DoT and MTNL entered into a sale deed for transfer of the several movable and immovable assets from DoT to MTNL. The said transfer includes the leasehold lands and buildings which are now in possession of MTNL since the execution of the sale deed. These leasehold immovable properties have not been mutated or renewed in the name of MTNL till date. However, considering MTNL is a Public Sector Undertaking (PSU), the sale deed not registered at that time and executed by DOT is deemed to have been registered for the purpose of transfer of all such assets in terms of section 90 of the Indian registration act, 1908 as considered by the MTNL and stamp duty payaCle, if any, will be borne and paid by Government as and when any such occasion arises as per sale deed. Accordingly, these leasehold immovable properties have been classified by the management under the heading Right of Use assets.
(xi) Note No. 60 In certain cases of freehold and leasehold land the company is having title deeds which are in the name of the Company but the value of which are not lying in the books of accounts of the Company.
(xii) Note No. 67 Regarding amount of receivable and payables (Including NLD/ILD Roaming operators) are subject to confirmation & reconciliation. The recoverable and payable from operators are under constant review and regular efforts are being taken for reconciliation and recovery of old outstanding dues. Adjustment if any may be required will be done once the reconciliation process is done.
(xiii) Note No. 81 Regarding amount payable to GPF trust is currently in the process of reconciling its liabilities to determine the provident fund payables to employees. The adjustment if any resulting from this recomputation/ reconciliation will be recognized once the reconciliation process is completed.
Our opinion is not modified in respect of the aforesaid matters.
Material uncertainty related to going concern
We draw attention to Note no. 78 in the Ind-AS financial statements, which indicates that the Company has accumulated losses and its net worth has been fully/ substantially eroded, the Company has incurred net loss/net cash loss during the current and previous year(s) and the companys current liabilities exceeded its current assets as at the balance date. These events or conditions, along with other matters as set forth in Note 78, indicate that a material uncertainty exists that may cast significant doubt on the Companys ability to continue as a going concern.
Further, Government of India has also approved the "Revival plan of BSNL and MTNL" by reducing employee costs, administrative allotment of spectrum for 4G services, debt restructuring by raising of sovereign guaranteed bonds, monetization of assets and in principle approval for merger of BSNL and MTNL. Further, the Company implemented the Voluntary Retirement Scheme in FY 2019-20 resulted into reduction in Employees Cost and also raised funds by issuing Bonds for Rs. 6,500 Crore in the Financial Year 2020-21 in line with cabinet note.
Recently, as per F.NO.20-28/2022-PR dated August 2, 2022, the Union Cabinet in its meeting held on February 27, 2022 has approved the raising of the Sovereign Guarantee Bonds for MTNL with the tenure of 10 years or more for the amount of Rs. 17,571 Crore with the waiver of guaranteed fee to repay its highest cost debt and restructure it with new sustainable loan. During the year ended March 31, 2023, the Company has raised Rs. 10,910/- Crore and Rs. 6,660.99 Crores raised during year ended March 31, 2024.
Further, in view of unsustainable debts of MTNL, a Committee of Secretaries (COS) was constituted by Government of India to examine matters such as asset monetization, AGR dues, debt restructuring etc for further course of action for merger of MTNL and BSNL. However, COS is reviewing various options submitted to them for solution of various issues related to MTNL which is under process.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, 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.
In addition to the matters described in the basis of qualified opinion section, we have determined the matters described below to be the key audit matters to be communicated in our report
| Sr. No. | Key Audit Matter | How our audit Addressed the key Audit Matter |
| 1 | Revenue Recognition: | Our audit approach included control testing and substantive procedures covering in particular: |
| There is an inherent risk around the accuracy of revenue recorded given the complexity of systems and the impact of changing pricing models to revenue recognition (tariff structures, incentive arrangements, discounts etc.) | Testing the IT environment (i.e., IT general controls) in which billing, rating and other relevant support systems reside, including the change control procedures in place around systems that bill material revenue streams. | |
| Refer Notes no. 57 to the standalone Ind- AS financial statements. | Testing the end-to-end reconciliation from business support systems to billing and rating systems to the general ledger. This testing includes validating material journals processed between the billing system and general ledger. | |
| Performing tests on the accuracy of customer bill generation on sample basis and testing of a sample of the credits and discounts applied to customer bills: and testing receipts for a sample of customers back to customer invoice. | ||
| 2 | Uncertain Taxation Matters: | We have obtained details of completed tax assessments and demands up to March 31, 2024, from the management. |
| The Company has material uncertain tax matters under dispute which involves significant judgment to determine the possible outcome of these disputes. | We assessed the managements underlying assumptions in estimating the tax provisions and the possible outcome of the disputes. | |
| Refer Note no. 50 and 63 to the standalone Ind-AS financial statements. | We also considered legal precedence and other rulings, including in the Companys own cases, in evaluating managements position on these uncertain tax positions. | |
| 3 | The Company holds investments comprising investments in Joint Ventures, and subsidiaries of Rs 106.13 Crore | We assessed the net assets values of the investment as at 31 March 2024 with the Companys investment carrying values. |
| Investment in Joint Ventures and subsidiaries accounted for at cost less any provision for impairment. Investment is tested for impairment annually. If impairment exists, the recoverable amounts of the investment in Joint Ventures and subsidiaries are estimated in order to determine the extent of the impairment loss, if any. Any such impairment loss is recognized in the income statement. | -discussed and evaluated the management assessment of the impairment requirement of the investment. | |
| Refer to Note no. 9 of standalone Ind-AS financial statements. | ||
| 4 | Contingent liabilities | We have obtained an understanding of the Companys internal instructions and procedures in respect of estimation and disclosure of contingent liabilities and ad- opted the following audit procedures. |
| There are numbers of litigations pending before various forums against the Company and the managements judgement is required for estimating the amount to be disclosed as contingent liability. | - understood and tested the design and operating effectiveness of controls as established by the man- agement for obtaining all relevant information for pending litigation cases. | |
| We identified this as a key audit matter because the estimates on which these amounts are based involve a significant degree of management judgement in interpreting the cases and it may be subject to management bias. | - discussed with the management any material developments and latest status of legal matters. | |
| (Refer to Note no. 50 of standalone Ind-AS Financial statements.) | - read various correspondences and related documents pertaining to litigation cases and relevant external legal opinions obtained by the management and performed substantive procedures on calculations supporting the disclosures of contingent liabilities. | |
| - examined managements judgements and assessment whether provisions are required. | ||
| - considered the management assessments of those matters that are not disclosed as the probability of material outflow is considered to be remote. | ||
| - reviewed the adequacy and completeness of disclosures. |
Information Other than the Standalone Ind-AS Financial Statements and Auditors Report Thereon
The Companys Board of Directors are responsible for the preparation of the other information. The other information comprises the information included in the Boards Report including Annexures to Boards report, Management Discussion and analysis and report on Corporate Governance but does not include the standalone Ind-AS financial statements and our auditors report there on. The above mentioned other information is expected to be made available to us after the date of this auditors report.
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.
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.
When we read the other information, if we conclude that there is material misstatement therein, we are required to communicate the matter to those charged with governance.
Responsibilities of the Management and those charged with governance for the Standalone Ind-AS Financial Statements
The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
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.
Those Board of Directors are also responsible for overseeing the Companys financial reporting process.
Auditors Responsibilities for the Audit of the Standalone Ind-AS Financial Statements
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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone Ind-AS financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone 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 financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3) (i) of the Act, we are also responsible for expressing our opinion on whether the Company has an adequate internal financial controls system with reference to standalone Ind-AS financial statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone Ind-AS financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone 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.
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 financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those Charged with governance, we determine those matters that were of most significance in the audit of the standalone 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 comparative Ind-AS financial statements for the year ended 31st March 2023 included in these Standalone Ind-AS financial statements have been audited by SCV & Co.LLP Chartered Accountants jointly with SPMG & Co. another firm of chartered accountants, whose audit report dated May 29, 2023 expressed modified opinion on the comparative Ind-AS financial statements.
Our opinion is not modified in respect of this matter
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors Report) Order, 2020 ("the Order"), issued by the Central Government of India in term of sub section (11) of section 143 of the Act, we give in the Annexure A a statement on the matters specified in paragraph 3 and 4 of the Order, to the extent applicable.
2. As required by section 143(5) of the Act, we give in "Annexure B" a statement on the matters specified by the Comptroller and Auditor General of India for the Company.
3. As per the Notification No. GSR 463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 is not applicable to the Government Companies. Accordingly, reporting in accordance with the requirement of provisions of section 197(16) of the Act is not applicable on the Company.
4. As required by Section 143(3) of the Act, based on our audit we report that:
a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit except for the matters described in the Basis for Qualified Opinion Paragraph above.
b) Except for the possible effects of the matters described in the Basis for Qualified Opinion Paragraph above, 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 relevant books of account.
d) In our opinion, except for the matters described in the Basis of Qualified Opinion Paragraph above, the aforesaid standalone Ind-AS financial statements comply with the Ind AS specified under Section 133 of the Act, read with relevant rules issued thereunder.
e) Being the Government Company pursuant to the Notification No. GSR 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, Government of India, provisions of sub-section (2) of section 164 of the Act, are not applicable to the Company.
f) The matters described in the Basis of Qualified Opinion Paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.
g) With respect to the adequacy of the internal financial controls with reference to standalone Ind-AS financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure C" wherein we have expressed a modified opinion.
h) The qualification relating to the maintenance of accounts and other matter connected there with are as stated in the Basis of Qualified Opinion Paragraph above.
i) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind-AS financial statements. (Refer to note no. 50 of the Standalone Ind-AS financial statements).
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;
iii. There is no amount which is required to be transferred to Investor Education and Protection Fund by the Company. Accordingly, reporting under this clause is not applicable.
iv. (a) The Management has represented that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(b) The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(c) Based on the audit procedures performed as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. The company has not declared or paid any dividend during the year. Accordingly, the provision of Section 123 of the Act is not applicable.
vi. Based on our examination, which included test checks, the Company has used accounting softwares for maintaining its books of account for the financial year ended March 31, 2024 which has a feature of recording audit trail (Edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the softwares. Further, as represented by the management the edit log is maintained through a "Database trigger" maintained in the system. The database trigger can only be altered by super user/DBA. However, as confirmed by the management there are no instance of the audit trail feature being tampered with during the year ended March 31, 2024.
As Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from April 1, 2023, reporting under Rule 11(g) of Companies (Audit & Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the financial year ended March 31, 2024.
| For D K Chhajer & Co. | For B M Chatrath & Co. LLP |
| Chartered Accountants | Chartered Accountants |
| FRN No. 304138E | FRN No. 301011E / E300025 |
| (CA Nand Kishore Sarraf) | (CA Sanjay Sarkar) |
| Partner | Partner |
| Membership No. 510708 | Membership No. 064305 |
| UDIN No.: 24510708BKBMPG6167 | UDIN No.: 24064305DKFEEN6978 |
| Place: New Delhi | |
| Date: 29th May 2024 |
ANNEXURE-A
ANNEXURE TO THE INDEPENDENT AUDITORS REPORT
Referred to in our Independent Auditors Report of even date to the members of Mahanagar Telephone Nigam Limited on the Standalone Ind-AS Financial Statements for the year ended 31stMarch,2024.
(i) (i) (a) (A) Delhi unit (Both basic and Wireless) has maintained records of Property, Plant and Equipment. However, identification numbers, cost of acquisition and location of the Property, Plant and Equipment are not mentioned.
In case of Mumbai units (both basic and WS), Property, Plant and Equipment Registers have been maintained w.e.f. 01.04.2002. However, location of property, Plant and Equipment has not been mentioned in the Property, Plant and Equipment Registers.
The Corporate office has maintained Property, Plant and Equipment; however, identification numbers and location of Property, Plant and Equipment are not mentioned.
(B) The Company has maintained proper records showing particulars of intangible assets, however sufficient description of intangible assets, identification numbers and location of intangible assets are not maintained.
(b) As per the policy of the Company, Property, Plant and Equipment are required to be physically verified by the management on rotation basis, once in three years, which in our opinion is reasonable and adequate in relation to the size of the Company and the nature of its business. Physical verification of Property, Plant and Equipment was conducted by the management during the year ended on March 31, 2024, except Corporate office and RF feeder cables in Delhi Wireless unit. As per Management, it is not practically feasible to verify/measure the length of RF feeder cables in wireless as the cables are underground. According to the information and explanation given to us, no material discrepancies were noticed in respect of Asset verified by the management. Tire accuracy, reliability and completeness of the fixed assets verification procedure could not be verified by us.
(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties (other than immovable properties where the Company is the lessee and the leases agreements are duly executed in favor of the lessee) disclosed in the standalone Ind- As financial statements are held in the name of the Company, except for the following which are not held in the name of the Company:
In respect of Delhi Units:
According to the information and explanations given by the company in Note No. 58A(1) and 58A(3) of the notes to accounts of the standalone Ind AS financial statement to us and on the basis of our examination of the records of the Company, we express no opinion on the validity of the title of the company of immovable properties disclosed in the financial statements and held as Property, Plant and Equipment or as investment property.
Further, according to the information and explanations given to us, in Delhi one leasehold property has been encroached.
The value of the immovable properties as per title deeds are subject to reconciliation with books of accounts.
In respect of Mumbai Units:-
| Description of Property | Type of properties | Gross carrying value (Amount in Rs.)* | Held in the name of | Whether promoter, director or their relative or employee | Period held - Range (In Years) | Reason for not being held in name of compa- ny/ Remarks |
| Plot No. 11. Near Lokha- ndwala, Complex, Akurli Road, Kandivali (E), Mumbai-400 101 | Leasehold Land | 63,89,373 | MHADA | No | More than 20 years | MHADA Allotment letter is available on records for allotmentof land. No sale/ lease deed is available for verification. |
| Plot -1, MIDC, Taloja, Navi Mumbai-400 218 | Leasehold Land | 1,96,200 | President of India | No | More than 30 years | Lease Agreement executed by MTNL on behalf of President of India is available on record. |
| Permission letter from Panvel Municipal Corporation is available on records. | ||||||
| Panvel Tel Exchange, Plot No.-229B, Panvel, Mumbai | Leasehold Land | Nil | President of India (P&T) | No | More than 30 years | Lease agreement executed between president of india and City and Industrial development corporation of Maharashtra Limited is also available in records. |
| Juhu Danda Complex, Santa Cruz - West, Mumbai | Freehold Land | Nil | GOI/P&T | No | More than 20 years | Letter of DOT is available on records for use of plot in favour of MTNL. No sale deed is available for verification. |
| Bandra Reclamation, Opposite Leelavati Hospital, Bandra(W), Mumbai-400 050 | Freehold Building | 1,09,83,418 | Bombay Housing and Area Development Board | No | More than 30 years | MHADA Allotment letter is available on records for allotment. No sale deed is available for verification. |
| Magathane, Borivali(E), HIG Colony, Magathane, Borivali(E), Mumbai-400 066 | Freehold Building | 42,70,028 | Bombay Housing and Area Development Board | No | More than 30 years | MHADA Allotment letter is available on records for allotment. No sale deed is available for verification. |
* Not reflected in the documents produced before us.
The value of the immovable properties as per title deeds are subject to reconciliation with books of accounts.
Furthermore, in respect of 11 cases of freehold and leasehold land have been encroached by the various persons in respect of which matter is either pending in court or perusing with the various authorities for clearing the encroachment. (Refer Note 58 A (3))-According to the information and explanations given by the company in Note No. 58 A(1) of the notes to accounts of the standalone Ind AS financial statements to us and on the basis of our examination of the records of the Company, we do not express opinion on the validity of the title of the company of said immovable properties disclosed in the financial statements and held as Property, Plant and Equipment or as investment property.
(d) 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 revalued any of its Property, Plant and Equipment (including right of use assets) or intangible assets or both during the year.
(e) According to the information and explanations given to us and on the basis of our examination of the records of the Company, 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) In respect of Delhi Units:
In our opinion, physical verification of inventory has been conducted by the management at reasonable intervals.
In respect of Mumbai Units:
In our opinion, physical verification of inventory has been conducted by the management at reasonable intervals.-
In our opinion, the frequency of such verification is reasonable, and procedures and coverage as followed by management needs to be strengthened. No discrepancies were noticed on verification between the physical stocks and the book records that were 10% or more in the aggregate for each class of inventory.
(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 been sanctioned working capital limits in excess of five crore rupees, in aggregate, from banks which is not on the basis of security of current assets. Thus, clause 3(iii) of the Order is not applicable.
(iii) (a). 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 investments, provided guarantee or security or granted any advances in the nature of loans, secured or unsecured, to companies, firms, limited liability partnerships or any other parties during the year. Thus 3(iii) of the Order is not applicable:
(iv) According to the information and explanations given to us and on the basis of our examination of the records, the Company has not given any loans, or provided any guarantee or security as specified under Section 185 of the Companies Act, 2013 and the Company has not provided any guarantee or security as specified under Section 186 of the Companies Act, 2013. Thus, clause 3(iv) of the Order is not applicable.
(v) The Company has not accepted any deposits from the public within the meaning of Section 73 to Section 76 or any other relevant provisions of the Companies Act, 2013 or rules framed there under. Accordingly, clause 3(v) of the Order is not applicable.
(vi) As per the information and explanation given to us, Company is required to maintain the cost records under Section 148(1) of the Companies Act 2013. As explained the Company has not yet maintained the required cost records for the year ended March 31, 2024.
(vii)
a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/ accrued in tire books of account in respect of undisputed statutory dues including Goods and Services Tax, provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, wherever applicable, have generally been regularly deposited with the appropriate authorities except the point no (x), (xi), (xii), (xiii) of the Basis for Qualified Opinion Paragraph above.
According to the information and explanations given to us, no undisputed amounts payable in respect of Goods and Services Tax, provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess or other statutory dues were in arrears as at 31st March 2024 for a period of more than six months from the date they became payable.
b) According to the information and explanations given to us, there are no dues of Goods and Services Tax, provident fund, employees state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess or other material statutory dues which have not been deposited with the appropriate authorities on account of any dispute except for the following dues:
In respect of Delhi Units:
i. Sales Tax:
| Name of the Statute | Amount (Rs. in Cr.) (Net) | Period to which amount relates | Forum where the dispute is pending |
| Delhi Value Added Tax Act, 2004 | 12.21 | 2007-08 | Delhi Value Added Tax, Tribunal |
| Central Sales Tax Act, 1956 | 0.04 | 2012-13 | Addl. Comm. Sales Tax |
| TOTAL | 12.25 |
ii. Service Tax:
| Name of the Statute | Amount (Rs in Cr) | Period to which amount relates | Forum where the dispute is pending |
| Finance Act, 1994 | 66.86 | 2014-15 to June-17 | Commissioner of Central Excise and Service Tax |
| Finance Act, 1994 | 4.22 | 2005-06 | Commissioner of Central Excise and Service Tax |
| Finance Act, 1994 | 0.04 | 2000-03 | Commissioner of Central Excise and Service Tax |
| Finance Act, 1994 | 1.36 | 2008-12 | Commissioner of Central Excise and Service Tax |
| Finance Act, 1994 | 22.01 | 2006-08 | Supreme Court |
| TOTAL | 94.49 |
iii. GST:
| Name of the Statute | Amount (Rs. in Cr.) (Net) | Period to which amount relates | Forum where the dispute is pending |
| Goods & Services Tax Act,2017 | 28.78 | 2017-18 | Special Commissioner of GST |
| Goods & Services Tax Act,2017 | 16.08 | 2018-19 | GST Assesement Officer |
| TOTAL | 44.86 |
iv. Labour Cess:
| Name of the Statute | Amount (Rs. in Cr.) (Net) | Period to which amount relates | Forum where the dispute is pending |
| Building and other Construction Workers Welfare Cess Act, 1996. | 9.73 | 1996 to 2001 | Deputy Labour Commissioner |
In respect of Mumbai Basic Units- i. Sale Tax:
| Name of the Statute | Amount (Rs. in Cr.) (Net) | Period to which amount relates | Forum where the dispute is pending |
| Bombay Sales Tax Act, 1959 | 0.37 | 1993-94 | Maharashtra Sales Tax Tribunal,Mumbai |
| Bombay Sales Tax Act, 1959 | 5.32 | 1996-97 | Honble High Court of Bombay |
| Bombay Sales Tax Act, 1959 | 216.11 | 2003-04 | Maharashtra Sales Tax Tribunal, Mumbai |
| Bombay Sales Tax Act, 1959 | 101.57 | 2004-05 | Maharashtra Sales Tax Tribunal, Mumbai |
| Bombay Sales Tax Act, 1959 | 14.97 | 2009-10 | Maharashtra Sales Tax Tribunal, Mumbai |
| Bombay Sales Tax Act, 1959 | 6.11 | 2011-12 | Maharashtra Sales Tax Tribunal, Mumbai |
| Bombay Sales Tax Act, 1959 | 26.47 | 2012-13 | Honble High Court of Bombay |
| Bombay Sales Tax Act, 1959 | 2.40 | 2014-15 | Deputy Commissioner of Sales tax |
| TOTAL | 373.32 |
ii. Service Tax:
| Name of the Statute | Amount (Rs. in Cr.) (Net) | Period to which amount relates | Forum where the dispute is pending |
| Finance Act, 1994 | 2.91 | 2012-13 to 2016-17 | Custom Excise and Service Tax Appellate Tribunal |
| TOTAL | 2.91 |
In respect of Corporate Office: i. Income Tax:
| Name of the Statute | Amount (Rs. in Cr.) (Net) | Period to which amount relates | Forum where the dispute is pending | Remarks |
| Income Tax Act, 1961 | Nil | A.Y 1998-99 to A.Y 2006-07 | Honble High Court of Delhi | Total disputed demand of Rs. 636.34 Crore either paid by the Company or deducted by the Income Tax Department from refund due to the Company |
| Income Tax Act, 1961 | Nil | A.Y 2007-08 to A.Y 2009-10 | Honble Income Tax Appellant Tribunal and Commissioner of Income Tax (Appeal) | |
| TOTAL | Nil |
(viii) 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 surrendered or disclosed any transactions, previously unrecorded as income in the books of account, in the tax assessments under the Income-tax Act, 1961 as income during the year.
(ix) (a) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of loans or other borrowings or in the payment ofinterest thereon to any lender.
(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 been declared a wilful defaulter by any bank or financial institution or other lender.
(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, term loans have been generally applied for the purposes for which they were raised.
(d) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, funds raised on short term basis have not been utilized for long-term purposes.
(e) According to the information and explanations given to us and on an overall examination of the financial statements of the Company, we report that the Company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries as defined under the Companies Act, 2013. Accordingly, clause 3(ix)(e) of the Order is not applicable.
(f) According to the information and explanations given to us and procedures performed by us, we report that the Company has not raised loans during the year on the pledge of securities held in its subsidiaries as defined under the Companies Act, 2013. Accordingly, clause 3(ix)(f) of the Order is not applicable.
(x) (a) The Company has not raised any money by way of initial public offer or further public offer (including debt instruments) during the year. Accordingly, clause 3(x)(a) of the Order is not applicable.
(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 or partly convertible debentures during the year. Accordingly, clause 3(x)(b) of the Order is not applicable.
(xi) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of fraud by the Company or on the Company, noticed or reported during the year, nor have been informed of such case by the Management.
(b) According to the information and explanations given to us and on the basis of our examination of the records of the Company carried out in accordance with the generally accepted auditing practices in India, a report under Section 143(12) of the Act, in Form ADT-4 as prescribed under Rule 13 of Companies (Audit & Auditors) Rules, 2014 was not required to be filed by us with the Central Government, during the year and up to the date of this Report. Further, as informed by the Company, the Cost Auditor as well as the Secretarial Auditor of the Company have not filed any report under Section 143(12) of the Act with the Central Government in Form ADT-4 as prescribed under Rule 13 of Companies (Audit and Auditors) Rules, 2014 during the year and up to the date of this Report. Accordingly, reporting under Clause 3(xi)(b) of the Order is not applicable to the Company.
(c) According to the information and explanations given to us, no whistle blower complaints has been received by the Company during the year.
(xii) According to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, clause 3(xii) of the Order is not applicable.
(xiii) In our opinion and as per the information and explanation given to us, the Company has complied with the Provision of Section 177 of the Act and has not entered into any transaction requiring compliance with Section 188 of the Act.
(xiv) (a) In our opinion, the Internal Audit System of the Company is not commensurate with the size of the Company and the nature of its business. Moreover, extent of coverage of the areas of operations, frequency/ quality of reporting/ timeliness of the reporting and the follow up of internal audit observations need to be strengthened.
(b) We have considered the internal audit reports of the Company issued till date for the period under audit. However, the Internal Audit Reports of some of the units/zones of the Company were provided at short notice or only partly provided, hence not considered.
(xv) In our opinion and according to the information and explanations given to us, the Company has not entered into any non-cash transactions with its directors or persons connected to its directors and hence, provisions of Section 192 of the Companies Act, 2013 are not applicable to the Company.
(xvi) (a) In our opinion, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. Hence, reporting under clause 3(xvi)(a), (b) and (c) of the Order is not applicable.
(b) In our opinion, there is no core investment company within the Group (as defined in the Core Investment Companies (Reserve Bank) Directions, 2016) and accordingly reporting under clause 3(xvi)(d) of the Order is not applicable.
(xvii) The Company has incurred cash losses of Rs 2613.59 Crore and Rs. 2,204.09 Crore in the current and in the immediately preceding financial year respectively.
(xviii) There has been no resignation of the statutory auditors during the year. Accordingly, clause 3(xviii) of the Order is not applicable.
(xix) The Company has accumulated losses and its net worth has been fully/ substantially eroded, the Company has incurred net loss/net cash loss during the current year and the companys current liabilities exceeded its current assets as at the balance sheet date. According to the information and explanations given to us and 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, our knowledge of the Board of Directors and management plans and based on our examination of the evidence supporting the assumption in our opinion, these events or conditions, along with other matter, indicate that a material uncertainty exists as on the date of the audit report and the Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date.
(Also refer Qualified opinion paragraph (i) of our Independent Auditors Report and note no. 78 to the standalone Ind-AS financial statements.).
(xx) In our opinion and according to the information and explanations given to us, there is no amount required to be spent by the company in accordance with section 135 of the companies act 2013. Accordingly, clause 3 (xx) of the Order is not applicable to the Company.
(xxi) The reporting under Clause 3(xxi) of the Order is not applicable in respect of audit of standalone Ind-AS financial statements. Accordingly, no comment in respect of the said clause has been included in this report.
| For D K Chhajer & Co. | For B M Chatrath & Co. LLP |
| Chartered Accountants | Chartered Accountants |
| FRN No. 304138E | FRN No. 301011E / E300025 |
| (CA Nand Kishore Sarraf) | (CA Sanjay Sarkar) |
| Partner | Partner |
| Membership No. 510708 | Membership No. 064305 |
| UDIN No.: 24510708BKBMPG6167 | UDIN No.: 24064305DKFEEN6978 |
| Place: New Delhi | |
| Date: 29th May 2024 |
ANNEXURE-B
ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT
Referred to in our Independent Auditors Report of even date to the members of Mahanagar Telephone Nigam Limited on the Standalone Ind-AS Financial Statements for the year ended 31st March 2024.
Directions indicating the areas to be examined by the Statutory Auditors during the course of audit of annual accounts of Mahanagar Telephone Nigam Limited (Standalone) for the financial year 2023-24 issued by the Comptroller & Auditor General of India under section 143(5) of the Companies Act, 2013.
Based on the information and explanations given to us we report as under:
| Sr. No. | Areas Examined | Observation / Finding |
| 1 | Whether the company has system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated. | Yes, Majority of the accounting transactions are done through the IT system. Although manual intervention is prevalent. Adequate security measures for manual intervention need to be strengthened with supervisory sanction only and properly documented. |
| However, the billing of following services is not integrated with WFMS (accounting software): - | ||
| 1) Lease Circuit | ||
| 2) Toll Free | ||
| 3) IUC | ||
| 4) Post Paid | ||
| 5) GSM IUC | ||
| 2 | Whether there is any restructuring of an existing loan or cases of waiver/write off of debts/loans/ interest etc. made by lender to a company due to the companys inability to repay the loan? If yes, the financial impact may be stated. Whether such cases are properly accounted for? | As certified by the management and those charged with governance, we have been informed that there is no restructuring of loan/ wavier/ write off of debts/ loan/ interest made by lender to a company due to the companys inability to repay the loan during the financial year 2023-24. |
| 3 | Whether funds (grants/subsidy etc.) received/ receivable from the specific schemes from central/ state government or its agencies were properly accounted for/ utilized as per its terms and conditions? List the cases of deviation. | The company has received the Swachh Action Plan contribution during FY 2017-18 is Rs. 0.21 Crore, FY 2018-19 is Rs. 0.35 Crore, FY 2019-20 is Rs 0.35 Crore out of which Rs. 0.22 Crore is pending utilization with the Company. |
| Further, the company has not received any contribution under Swachh Action Plan during FY 2020-21, 2021-2022, 2022-23 & 2023-24. | ||
| 4 | Whether the amount of revenue of share (License fees and Spectrum Usage charges) recognized in the financial statement in accordance with the License conditions agreed by the company with DoT? If so, detailed statement & calculation sheet may be attached. | Yes, AGR Audit Report and Calculation sheet attached herewith. |
We have conducted the audit of accounts of Mahanagar Telephone Nigam Limited for the year ended 2023-24 in accordance with the directions issued by the C&AG of India under section 143(5) of the Companies Act, 2013 and certify that we have complied with the all directions issued to us.
| For D K Chhajer & Co. | For B M Chatrath & Co. LLP |
| Chartered Accountants | Chartered Accountants |
| FRN No. 304138E | FRN No. 301011E / E300025 |
| (CA Nand Kishore Sarraf) | (CA Sanjay Sarkar) |
| Partner | Partner |
| Membership No. 510708 | Membership No. 064305 |
| UDIN No.: 24510708BKBMPG6167 | UDIN No.: 24064305DKFEEN6978 |
| Place: New Delhi | |
| Date: 29th May 2024 |
ANNEXURE C
ANNEXURE C TO THE INDEPENDENT AUDITORS REPORT
(Referred to in paragraph (g) under Report on Other Legal and Regulatory Requirements section of our report of even date)
Report on the Internal Financial Controls with reference to the standalone Ind-AS financial statements under Clause (i) of sub-section 3 of section 143 of the Companies Act, 2013 ("the Act")
We have audited the internal financial controls with reference to the standalone Ind-AS financial statements of Mahanagar Telephone Nigam Limited ("the Company") as of 31st March 2024 in conjunction with our audit of the standalone Ind-AS financial statements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys management is responsible for establishing and maintaining internal financial controls based on the internal control with reference to financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.
Auditors Responsibility
Our responsibility is to express an opinion on the Companys internal financial controls with reference to the standalone Ind-AS financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and 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 applicable to an audit of Internal Financial Controls and, 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 with reference to the standalone Ind-AS financial statements was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial control system with reference to these standalone Ind-AS financial statements and their operating effectiveness. Our audit of internal financial controls with reference to these standalone Ind-AS financial statements included obtaining an understanding of internal financial controls with reference to these standalone Ind-AS financial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the standalone Ind-AS financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls system with reference to these standalone Ind-AS financial statements.
Meaning of Internal Financial Controls with reference to these standalone Ind-AS financial statements.
A companys internal financial control with reference to these standalone Ind-AS financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone Ind-AS financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financialcontrolover financial statements includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company.
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone Ind-AS 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 standalone Ind-AS financial statements.
Inherent Limitations of Internal Financial Controls with reference to the standalone Ind-AS financial statements
Because of the inherent limitations of internal financial controls with reference to the standalone Ind-AS financial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detecned. Also, projections of any evaluation of the internal financial controls with reference to the standalone Ind-AS financial statements to future periods are subject to the risk that the internal financial control with reference to the standalone Ind-AS financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Qualified Opinion
According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified in the operating effectiveness of the Companys internal financial controls over financial reporting with reference to the standalone Ind-AS financial statements as at March 31, 2024:
(i) The Company does not have appropriate internal control system for ensuring capitalization of Property, Plant and Equipment as and when the same is ready for use due to delayed issue of completion certificate by engineering department or due to delay in receipt of bills from the vendors for bought out items or due to delay of inventory issue slip by stores. Hence, the date of capitalization is not reliable. This could potentially result into delayed capitalization and corresponding impact on the operational results due to lower charge of depreciation.
(ii) The Company does not have an appropriate internal control system for ensuring decommissioning and de-capitalization of Property, Plant and Equipment in respect of assets which are no longer in use and held for disposal as scrap. This could potentially result into overstatement of gross block and corresponding impact on the operational results due to higher charge of depreciation and lower provision for impairment of assets.
(iii) The Company does not have an appropriate internal control system to ensure that provisions made pending receipt of bills from vendors / contractors / operators / government departments at the quarter end and year end are duly reversed when actual bills are received and accounted for. This could potentially result in the same being accounted twice.
(iv) The Company does not have an appropriate internal control system to track open purchase orders, work orders, agreements and contracts which have been entered with vendors / contractors / operators / government departments and are lying open. This could have a bearing on efficiency of operations and recording of financial liabilities and provisions pertaining to the same.
(v) The Company does not have an integrated ERP system. Different software packages used by the company are interfaced through software links or manual intervention leaving gaps between them. This could potentially result into impaired financial reporting. In Mumbai Unit the Company does not have an appropriate internal control system for reconciliation of Debtors between Billing software and Accounts, which could potentially result in some changes in the standalone Ind-AS financial statements.
(vi) The Company does not have an appropriate internal control system for reconciliation of vendors / contractors / operators / government departments, accounts which could potentially result in some changes in the standalone Ind-AS financial statements. The cases identified by us have been appropriately qualified at various places in our report.
(vii) The Company does not have effective internal audit system so as to cover all major areas with extensive scope. The extent and depth of coverage, manner of conduct and reporting in respect of internal audit is very weak. This could potentially result into weak checks and balances and unreported financial irregularities ultimately resulting into distorted financial reporting.
(viii) The Company does not have an appropriate internal control system for reconciliation of items of unlinked debits and credits because of receipts from the subscriber and the amount debited by the banks. This could potentially lead unreported financial adjustments ultimately resulting into distorted financial reporting.
(ix) The Company does not have an appropriate internal control system for invoicing which are due and payable based on manual invoicing. The invoicing systems does not have reliability of measurement and reconciliation of items. This leads to multiple revisions and errors in invoicing. This could potentially lead errors in revenue recognition.
(x) The Company does not have appropriate internal control system for ensuring end use of issued inventory. The accounting is done based on the requisition statement of item and not actual installation or commission of item. This could potentially result into nonidentification of pilferage and also early capitalization of equipment.
(xi) The Company does not have an appropriate internal control system for ensuring billing and recovery of water and electricity charges from the lessee. This could potentially result in non-recovery and delayed recovery of such charges causing financial loss of the absolute expenses and finance cost on the delay in realization. This could also result in inaccurate expense values in the financial statements of the company.
(xii) The company does not have appropriate internal control system towards renewals of the expired Rent/Lease agreements. Even though in some of the cases where lease agreements have been expired, company is receiving rentals on the terms and conditions mentioned in the expired agreement with the parties.
(xiii) The company does not have appropriate internal control towards the timely closure of workorders w.r.t landline & FTTH connections and creation of customer master for billing. Thiscould potentially result in leakage and potential loss of revenue.
(xiv) The Company does not have appropriate internal control system for reconciliation of TDS refundable with form 26 AS and TDS certificate where applicable, which could potentially result in changes in standalone Ind AS financial statement.
(xv) In some cases, company is recognising rentals on the terms and conditions mentioned in the expired agreements with the parties and not receiving any amount from such parties for more than one year. However, the company has not provided provision for doubtful debts for all such cases.
A material weakness is a deficiency, or a combination of deficiencies, in internal financial control with reference to the standalone Ind-AS financial statements, such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis.
In our opinion, except for the effects / possible effects of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls with reference to the standalone Ind-AS financial statements and such internal financial controls with reference to the standalone Ind- AS financial statements were operating effectively as of March 31, 2024 , 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.
We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the standalone Ind-AS financial statements of the Company for the year ended March 31, 2024, and these material weaknesses do not affect our opinion on the standalone Ind-AS financial statements of the Company.
| For D K Chhajer & Co. | For B M Chatrath & Co. LLP |
| Chartered Accountants | Chartered Accountants |
| FRN No. 304138E | FRN No. 301011E / E300025 |
| (CA Nand Kishore Sarraf) | (CA Sanjay Sarkar) |
| Partner | Partner |
| Membership No. 510708 | Membership No. 064305 |
| UDIN No.: 24510708BKBMPG6167 | UDIN No.: 24064305DKFEEN6978 |
| Place: New Delhi | |
| Date: 29th May 2024 |
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