nlc india ltd share price Auditors report


To

The Members of NLC India Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying Standalone Financial Statements of NLC India Limited ("the Company") ("NLCIL"), which comprise the Standalone Balance Sheet as at 31st March, 2023, 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 for the year then ended including a summary of the significant accounting policies and other explanatory information in which are included the Returns for the year ended on that date audited by the branch auditors of the Companys branches located at Talabira and Barsingsar (hereinafter referred to as "Standalone Financial Statements").

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone 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 Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, its profit (including other comprehensive income), the changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the "Auditors Responsibilities for the Audit of the Standalone Financial Statements" section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ("ICAI") together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence obtained by us and the audit evidence obtained by the branch auditors in terms of their reports referred to in "Other Matter" section below, is sufficient and appropriate to provide a basis for our opinion on the Standalone Financial Statements.

Material Uncertainty Related to Going Concern

We draw attention to Note 57(c) of the Standalone Financial Statements, wherein the non-availability of adequate quantum of land for lignite mining operations and power generation have been elaborated upon. Such non-availability situation may cast significant uncertainties relating to the operations of the Company and eventually the Companys ability to continue as a going concern in future.

Our opinion is not modified in respect of this matter.

Emphasis of Matter

We draw attention to the following matters in the Notes to the Standalone Financial Statements:

1. Note 23(d), 24(a) and 29(c), where the Company has filed Petition with CERC for determination of Input transfer price for Neyveli Mines on 26th July, 2022. Pending disposal of the petition, the Company has filed interlocutory application seeking approval of the provisional lignite transfer price for Neyveli Mines for the tariff period 2019-24. CERC vide order dated 4th May, 2023 has issued the interim lignite transfer price for the period 2019-24. Accordingly, the Company has recognized an amount of Rs. 1560.96 Crore on account of the differential energy charges between Interim Lignite transfer price and already billed amount and correspondingly an amount of Rs. 1,087.57 Crore has been written-off towards Power surrender, water, Security charges, surcharge and interest on these items already recognized earlier.

2. Note 13(c), regarding the adjustments to be carried out in respect of the mine closure deposit and regulatory income based on the outcome of the application, which is made to Coal Controller during the current period. Further, an amount of Rs. 23.33 Crore has been provisionally considered as regulatory income based on the existing mine plan, pending execution of the escrow agreement as per revised mining plan with Coal Controller.

3. Note 17(a), the tax holiday period as per section 80IA of Income Tax Act, 1961 for NLCIL Barsingsar project is upto the FY 2025-26. The estimated deferred tax in respect of temporary differences which reverse during this tax holiday period have been derecognized to the extent of Rs. 96.64 Crore.

4. Note 10a(c), regarding an amount of Rs. 196.55 Crore provision towards expected credit loss allowance on outstanding trade receivables as at 31st March, 2023, pending completion of exercise of reconciliation of balances and resolving various issues, in respect of which actions have been initiated.

5. Note 7(b), where the Company considered an amount of Rs. 734.56 Crore under the interest free settlement scheme as opted by a DISCOM within the cut-off date i.e., 3rd July, 2022.

6. Note 10a(e), with regard to amount billed on VSVS to DISCOMs and the Companys petition filed before CERC seeking their direction on the recoverability of this amount.

Our opinion on the Standalone Financial Statements is not modified in respect of the above matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

The following have been considered as Key Audit Matters :

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

The following have been considered as Key Audit Matters :

Sl.No Key Audit Matter

Auditors Response

1. Assessment of provisions and contingent liabilities in respect of certain litigations including direct and indirect taxes, various claims filed by other parties not acknowledged as debt.

In view of the significance of the matter, we performed the following key audit procedures:

• Testing the design and operating effectiveness of controls relating to taxation and contingencies;

A high level of judgment is required in estimating the amount of provisioning. The Companys assessment is supported by the facts of matter, their own judgment, experience and independent legal advice wherever considered necessary.

• We evaluated managements judgements in respect of estimates of provisions, exposures and contingencies;

Accordingly, unexpected adverse outcomes which may significantly impact the reported profit and net assets are disclosed.

• In understanding and evaluating managements judgements, we have utilized our internal tax experts;

A sum of Rs. 12,233.31 Crore have been considered by the Company towards contingent liability and commitments representing claims of third parties. Refer Note 49 of the Standalone Financial Statements.

• We have also examined the status of recent and current tax assessments and enquiries, the outcome of previous claims, judgmental positions taken in tax returns and developments in the tax environment; and

Included in the above, is a sum of Rs. 5,297.57 Crore that has been considered by the Company towards contingent liability which includes claims of third partys compensation for land acquisition (disclosed as "From Others"). The Company has not accepted the said claims which are contested in legal proceedings and are pending for disposal by the appellate authorities.

• Additionally, we also evaluated the adequacy of disclosures on provisions and contingencies made in the Standalone Financial Statements in accordance with Ind AS 37 - Provisions, Contingent Liabilities and Contingent Assets.

Further, there are several items of disputes pending in various appellate forums in respect of determination and quantification of liability towards direct and indirect taxes by the departments. Liabilities in respect of disputed demands are considered only as contingent liabilities pending the outcome of the decision of the appellate authorities. The total unpaid amount of disputed liabilities on account of Direct and Indirect taxes (including land tax) is Rs. 1,566.74 Crore.

2. Project activities of Bithnok and BTPSE project:

Our audit procedures performed included the following:

Accuracy of impairment provisions in respect of exploration and evaluation assets and projects under "Capital work in progress" which involves critical judgment of the management in respect of feasibility of ongoing projects.

• We obtained the details of project activities of Bithnok and BTPSE project from the management;

The Standalone Financial Statements include relevant disclosures that identify and explain the amounts arising from such feasibility study. Refer Note 5 to the Standalone Financial Statements.

• Noted that the total project cost comprise of land amounting to Rs. 194.75 Crore, capital advances of Rs. 129.25 Crore and CWIP of Rs. 50.66 Crore; and

Further, an aggregate amount of Rs. 374.66 Crore towards land, capital advance and CWIP relate to Bithnok and BTPSE which are currently on hold, on account of cancellation of contract by the end customer.

• Reviewed the basis of provision of Rs. 70.62 Crore made as at 31st March, 2023.

3. Expected Credit Loss on Trade Receivables

Our audit procedures performed included the following:

Ind AS 109 - Financial instruments (Ind AS 109) requires the Company to provide for impairment of its financial instruments (designated as amortized cost or fair value through other comprehensive income) using the expected credit loss (ECL) approach. Such ECL allowance is required to be measured considering the guiding principles mentioned in the Standard.

• We understood the process of ECL estimation and tested the design and operating effectiveness of key controls around data extraction and validation;

In the process of applying such principles and other requirements of the Standard, a significant degree of judgment has been applied by the management. The ECL in respect of trade receivables represents managements best estimate of the loss allowance. The ECL allowance is computed based on a simplified model considering ageing of trade receivables and also trend of collection of dues.

• We, having regard to profile and the background of the customers, collection of dues and the measures of the Govt(s) in regard to settlement of dues by such customers, understood the methodology used by the management to arrive at their ECL provision and examined certain assumptions used by the Company;

The calculation of ECL allowance is a complex area considering the profile and background of customers and requires management to make significant assumptions on customer payment behaviour and other relevant risk characteristics when assessing the historical information and estimating the level and timing of expected future cash flows.

• We also tested the arithmetical accuracy and assessed the judgments used in the managements model used to calculate provision for credit losses; and

The provision for ECL on trade receivables amounts to Rs. 196.55 Crore as at 31st March, 2023. Refer Note 10(a)(c) of the Standalone Financial Statements.

• We assessed the disclosures included in the Ind AS Financial Statements with respect to such allowance/ estimate are in accordance with the requirements of Ind AS 109 and Ind AS 107 - Financial Instruments: Disclosures.

4. Property, Plant & Equipment and Intangible Assets

Our audit procedures performed included the following:

Property, Plant and Equipment and Intangible Assets represent significant balances recorded in the Balance Sheet in the Standalone Financial Statements.

• We evaluated the assumptions made by management in the determination of carrying values and useful lives to ensure that these are consistent with the principles of Indian Accounting Standards (Ind AS) 16 Property, Plant and Equipment and (Ind AS) 38 Intangible Assets;

There are areas where management judgement impacts the carrying amount of property, plant and equipment, intangible assets and their respective depreciation / amortization rates.

These includes the decision to capitalise or expense costs; the timeliness of the capitalization of the assets; useful life 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.

• We assessed whether the carrying values and the useful lives were reasonable by challenging managements judgements through comparing the useful lives prescribed in Schedule II to the Companies Act, 2013, rates/ guidelines prescribed by Central Electricity Regulatory Commission (CERC), guidelines issued by Ministry of New and Renewable Energy (MNRE) and the useful lives of certain assets as per the technical estimate of the management;

Due to the materiality in the context of Balance Sheet of the Company and the level of judgement and estimates required, we consider this to be as area of significance and considered to be a key audit matter.

• We compared the useful lives of each class of asset in the current year to the previous year to determine whether there were any significant changes in the useful lives of assets;

• We tested the controls in place over the property, plant and equipment and intangible assets, evaluated the appropriateness of capitalisation policies, performed tests of details on costs capitalised and assessed the timeliness of capitalisation including decapitalisation of assets retired from active use and the application of the asset life;

• In performing these substantive procedures, we assessed the judgements made by management including the nature of underlying costs capitalised; the appropriateness of asset lives applied in the calculation of depreciation and amortization; and

• We have observed that the management has regularly reviewed the aforesaid judgments and there are no material changes.

Information Other than the Standalone Financial Statements and Auditors Report Thereon

The Companys Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Directors Report including Annexures to Directors Report and Business Responsibility & Sustainability Report, but does not include the Standalone Financial Statements, Consolidated Financial Statements and our Auditors report thereon. The other information is expected to be made available to us after the date of this Auditors report.

Our opinion on the Standalone Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

On receipt of other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and we shall:

(a) If the material misstatement is corrected, perform necessary procedure to ensure the correction; or

(b) If the material misstatement is not corrected after communicating the matter to those charged with governance, take appropriate action considering our legal rights and obligations, to seek to have the uncorrected material misstatement appropriately brought to the attention of users for whom this Auditors report is prepared.

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

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance (including Other Comprehensive Income), changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Ind AS. 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 Financial Statements, the Board of Directors 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 Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

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

Auditors Responsibilities for the audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.

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

• Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the Standalone Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the Company and its branches to express an opinion on the Standalone Financial Statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the Standalone Financial Statements of which we are the independent auditors. For the branches included in the Standalone Financial Statements, which have been audited by the branch auditors, such branch auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion. Our responsibilities in this regard are further described in the section titled Other Matter in this audit report.

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

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

We did not audit the financial statements of two (2) Branches located at Talabira and Barsingsar, included in the Standalone Financial Statements of the Company whose financial statements reflect total assets of Rs. 3,406.85 Crore as at March 31, 2023 and total income of Rs. 2,589.15 Crore for the year ended 31st March, 2023, total net profit before tax of Rs. 949.16 Crore for the year ended 31st March, 2023 and total comprehensive income of Rs. 917.21 Crore for the year ended 31st March, 2023 and net cash inflows of Rs. 4.72 Crore for the year ended 31st March, 2023. The financial statements of these Branches have been audited by the branch auditors whose reports have been furnished to us and our opinion in so far as it relates to the amounts and disclosures included in respect of these Branches, is based solely on the report of such branch auditors and the procedures performed by us as stated under Auditors Responsibilities for the Audit of the Standalone Financial Statements section above.

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 terms of sub-section (11) of section 143 of the Act, we give in "Annexure-I" a statement on the matters specified in paragraphs 3 and 4 of the said Order, to the extent applicable.

2. 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;

c. The reports on the accounts of the Branch Offices of the Company audited under Sec 143(8) of the Act by the Branch Auditors have been sent to us and have been properly dealt with by us in preparing this report;

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

e. In our opinion, the aforesaid Standalone Financial Statements comply with the Ind AS;

f. The matter described in the "Material Uncertainty Related to Going Concern" paragraph above, in our opinion, may not have an adverse effect on the functioning of the Company;

g. The Company being a Government Company, the provisions of Sec 164(2) of the Act relating to disqualification of directors is not applicable in view of the Notification No: G.S.R, 463(E) dated June 05, 2015, issued by the Ministry of Corporate Affairs;

h. There is no qualification, reservation or adverse remark relating to the maintenance of accounts and other matters connected therewith;

i. With respect to adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, we give our report in "Annexure-II". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting with reference to Standalone Financial Statements;

j. The Company being a Government Company, the provisions of Sec 197 of the Act relating to managerial remuneration is not applicable in view of the Notification No: G.S.R, 463(E) dated 5th June, 2015, issued by the Ministry of Corporate Affairs. Accordingly, reporting in accordance with requirement of provisions of section 197(16) of the Act is not applicable to the Company; and

k. With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements - Refer to Note 49 to Standalone Financial Statements;

ii. The Company has long term contracts for coal mining, power sale, project execution etc. However as at 31st March, 2023, there were no material foreseeable losses on those contracts. The Company did not have any derivative contracts as at 31st March, 2023;

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

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

(b) The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

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

v. (a) The final dividend paid by the Company during the year, which pertains to previous year 2021-22 is in accordance with Section 123 of the Act, to the extent it applies to payment of dividend;

(b) The interim dividend declared and paid by the Company during the year is in accordance with Section 123 of the Act; and

(c) The Board of Directors of the Company have proposed final dividend for the year 2022-23 which is subject to the approval of the Members at the ensuing Annual General Meeting. The amount of dividend proposed is in accordance with section 123 of the Act, as applicable.

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

3. As required by Sec 143(5) of the Act, our comments in regard to the directions and sub-directions issued by the Comptroller and Auditor General of India is given in "Annexure - III".

4. During the year, the Company has not complied with the requirements relating to the composition of the Board with respect to independent directors, as required under Regulation 17(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

For R.Subramanian and Company LLP,

For Manohar Chowdhry & Associates,

Chartered Accountants,

Chartered Accountants,

Firm Regn. No. 004137S/S200041

Firm Regn. No. 001997S

R. Kumarasubramanian

M.S.N.M.Santosh

Partner

Partner

M No. 021888

M No. 221916

UDIN: 23021888BGSROQ2278

UDIN: 23221916BGXUSU7521

Place: Chennai

Date: 19th May, 2023

Annexure-I to Independent Auditors Report on the Standalone Financial Statements

With reference to Annexure-I referred to in paragraph 1 in Report on Other Legal and Regulatory Requirements of the Independent Auditors Report to the members of the Company on the standalone financial statements for the year ended March 31, 2023, we report that:

(i) (a) (A) The Company is maintaining proper records showing full particulars, including quantitative details of Property, Plant and Equipment (PPE) except for situation of PPE which was not available for majority of the items.

(B) The Company is maintaining proper records showing full particulars of intangible assets.

(b) The Company has conducted physical verification of PPE in the previous year which is in accordance with their planned programme of verifying them once in two years which is reasonable having regard to the size of the Company and the nature of its assets.

(c) As informed by the management, the Company is in possession of Title deeds/Assignment deeds/ GOs in respect of immovable properties. However, in view of substantial volume of land documents held by the Company and reconciliation of the same with the PPE register which is in progress, verification of the title deeds was rendered difficult. It was also observed on test check of available documents that there were instances of title deeds still lying in the name of previous owner. We have been informed that the management is in process of making submissions to the concerned authorities for updating its name in the revenue records for the properties where the title deeds are still in the name of the previous owners. In view of this, the title deeds of the lands cannot be directly linked with the PPE register maintained by the Company.

As per expert legal opinion furnished to us, the ownership of the land acquired between the incorporation of the Company until the year 1977 and between the years 1997 to 2001 is subject to conditions attached by Government of Tamil Nadu in the respective assignment deeds.

Immovable properties of land, whose title deeds have been deposited with banks as security for term loans have been verified by us based on the documents provided to us by the Company relating to registration of charges with Ministry of Corporate Affairs.

(d) According to the information and explanations provided to us, the Company has not revalued its Property, Plant and Equipment (including Right of Use assets) or intangible assets during the year ended 31st March, 2023 and accordingly, reporting on clause 3(i)(d) of the Order is not applicable to the Company.

(e) According to the information and explanations provided to us, there are no proceedings initiated or are pending against the Company for holding any benami property under the Prohibition of Benami Property Transactions Act, 1988 and rules made thereunder and accordingly, reporting on clause 3(i)(e) of the Order is not applicable to the Company.

(ii) (a) According to the information and explanation provided to us, the physical verification of inventory have been conducted at reasonable intervals by the Stock verification team under Perpetual Inventory System on continuous basis. In our opinion, the coverage and the procedure of such verification by the management is appropriate. Discrepancies of 10% or more in aggregate for each class of inventory were not noticed on such physical verification.

(b) The Company has been sanctioned working capital limits in excess of five Crore rupees in aggregate from bank during the year on the basis of security of current assets of the Company. There are few instances noticed wherein the quarterly returns/statements filed with the bank are not in agreement with the books of account of the Company. However, considering the drawing power and the limits utilised by the Company during the year, the differences are not significant warranting detailed comments.

(iii) 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 made investments in and granted unsecured loans during the year to a subsidiary Company and employees.

(a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, during the year, the Company has provided loans to a subsidiary Company and employees as follows:

Particulars

Loans Crore)

Aggregate amount granted/ provided during the year

Subsidiary

100.00

Others - Employees

25.81

Balance outstanding as at balance sheet date in respect of above cases

Subsidiary

Others - Employees

18.25

(b) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the investments made and the terms of the loans provided during the year are not prejudicial to the interest of the Company.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, in the case of loan to subsidiary, the schedule of repayment of principal and payment of interest have been stipulated and the repayments have been regular. In the case of loans to employees, the terms of the loans are governed by the Companys policies. The principal and interest have generally been regularly recovered at periodical intervals as laid down in such policies.

(d) According to the information and explanations given to us and on the basis of our examination of the records of the Company, there are no material overdue amounts as at the Balance Sheet date. Accordingly, reporting under clause 3(iii)(d) of the Order is not applicable.

(e) According to the information and explanations given to us and on the basis of our examination of the records of the Company, there were no cases where the loans have been renewed or extended or fresh loans granted to settle the overdues of existing loans given to the same parties in respect of loans which had fallen due during the year.

(f) 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 granted any loan which is repayable on demand or without specifying any terms or period of repayment. Accordingly, reporting under the other requirements of clause 3(iii)(f) is not applicable.

(iv) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the loans given, investments made and guarantee provided by the Company are in compliance with the provisions of Section 185 and 186 of the Act read with Ministry of Corporate Affairs notification number G.S.R. 463(E) dated 5th June, 2015.

(v) 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 accepted any deposits or amounts which are deemed to be deposits during the year. Accordingly, clause 3(v) of the Order is not applicable.

(vi) We have reviewed the cost records maintained by the Company as specified by the Central Government under Section 148(1) of the Act and are of the opinion that the prescribed cost records have been maintained. We have also reviewed the most recent cost audit report made available to us for the Financial Year 2021-22 and did not notice any adverse comments on the maintenance of cost records.

(vii) (a) Based on the information and explanations given to us and on the basis of our examination of the records of the Company, undisputed statutory dues including Provident Fund, Income-tax, Goods and Services Tax, Customs Duty, Royalty, Cess and other material statutory dues applicable to it, have generally been regularly deposited by the Company with the appropriate authorities.

According to the information and explanations given to us and on the basis of our examination of the records of the Company, no undisputed amounts payable in respect of Provident Fund, Income-tax, Goods and Services Tax, Customs Duty, Royalty, Cess and other material statutory dues were in arrears as at 31st March, 2023, for a period of more than six months from the date they became payable, except in the case of Royalty and Income Tax (TDS) dues as mentioned here below:

Statement of Arrears of Statutory Dues Outstanding for more than six Months:

Name of the statute

Nature of the dues

Demand Amount (Rs. in Crore)*

Period to which the amount relates

Due date Date of Payment

Remarks

Mines and Mineral (Development and Regulation) Act, 1957

Royalty

8.86

FYs 2009-10 to 2013-14

- -

This is on account of truing up order for the tariff period 2009-14

0.02

FY 2007-08

- -
0.005

FY 2008-09

- -

These are the dues as appearing in the TDS reconciliation analysis and correction enabling system (TRACES) portal and not accounted in books

0.0004

FY 2009-10

- -
0.005

FY 2010-11

- -

Income Tax Act, 1961

Income Tax (TDS)

0.003

FY 2011-12

- -
0.0004

FY 2012-13

- -
0.00001

FY 2013-14

- -
0.00001

FY 2017-18

- -
0.00002

FY 2022-23

- -

(b) According to the information and explanations given to us, there are no dues of Provident Fund, Income-tax, Goods and Services Tax, Customs Duty, Royalty, Sales Tax, Service tax, Duty of Customs, Value Added Tax, Cess and other Statutory dues which have not been deposited as on 31st March, 2023 on account of any dispute except as reported below:

Independent Auditors Reports

Name of the statute

Nature of the dues

Demand Amount (Rs. in Crore)* Amt Deposited under protest (Rs. in Crore)

Period to which the amount relates

Forum where dispute is Pending

0.008

FY 2007-08

Deputy Commissioner of Income Tax (TDS)

Income Tax (TDS)

0.009

FY 2008-09

0.09 0.09

FY 2003-04

High court

0.93 -

FY 2006-07

CIT (A)

1.80 -

FY 2009-10

CIT (A)

1.88 -

FY 2011-12

CIT (A)

1.86 1.86

FY 2012-13

Assessing Officer

81.08 -

FY 2012-13

High court

89.96 -

FY 2012-13

High court

Income Tax Act

Income Tax

1.92 1.92

FY 2013-14

Assessing Officer

77.79 -

FY 2013-14

High court

42.97 -

FY 2013-14

High court

23.82 -

FY 2014-15

High court

2.38 23.14

FY 2016-17

CIT(A)

29.99 22.01

FY 2017-18

CIT(A)

12.01 -

FY 2019-20

CIT(A)

194.58 -

FY 2020-21

CIT(A)

0.90 0.07

Apr 2009 to Jun 2012

CESTAT

0.51 0.07

Jul 2012 to Mar 2014

CESTAT

8.53 -

Jul 2012 to Mar 2015

Supreme Court

3.67 -

Jul 2012 to Mar 2014

Supreme Court

0.26 0.03

Apr 2014 to Mar 2015

CESTAT

Finance Act, 1994

Service Tax

1.06 -

Jun 2008 to Mar 2012

CESTAT

0.73 0.07

Apr 2015 to Jun 2017

CESTAT

14.17 -

Apr 2015 to Jun 2017

Supreme Court

0.08 0.01

Apr 2015 to Jun 2017

CESTAT

38.55 -

Oct14 to Jun17

Madras High Court

4.49 -

FY 2015-16

Madras High Court

Tamilnadu VAT Act, 2006

Value added Tax

5.85 -

FY 2007-08

Madras High Court

Central Excise Act 1944

Clean Environment Cess and Excise Duty

179.00 -

As on 30-06-2017

Madras High Court

Tamilnadu VAT Act, 2006

Sales tax

468.38 112.43

FY 2011-12 to FY 2015-16

Madras High court

0.58 0.29

2008-09

Land Tax Assessing Officer

1.74 0.63

2009-10

Land Tax Assessing Officer

Rajasthan Finance Act, 2006

Land Tax

1.74 0.87

2010-11

Land Tax Assessing Officer

2.00 1.00

2011-12

Land Tax Assessing Officer

2.00 1.00

2012-13

Land Tax Assessing Officer

Customs Act, 1969

Custom Duty

14.82 9.83

FY 2006-07

Supreme Court

Mines and Mineral (Development and Regulation) Act, 1957

Royalty

429.92 -

March 2021-June 2022

District Collector, Cuddalore

*As appearing in the demand notice

(viii) According to the information and explanations provided to us, the Company has not surrendered or disclosed any transaction, previously unrecorded in the books of account, in the tax assessments under the Income Tax Act, 1961 as income during the year. Accordingly, the requirement to report on clause 3(viii) of the Order is not applicable to the Company.

(ix) (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 defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender.

(b) According to the information and explanations given to us and on the basis of our audit procedures, we report that the Company has not been declared 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 the examination of the records of the Company, the Company has not availed any term loans during the year.

(d) According to the information and explanations given to us and on an overall examination of the financial statements of the Company, we report that no funds raised on short-term basis have been used for long-term purposes by the Company.

(e) According to the information and explanations given to us and on an overall examination of the Standalone financial statements of the Company, the Company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associate or joint venture.

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

(x) (a) The Company has not raised any money during the year by way of initial public offer / further public offer (including debt instruments). Hence, the requirement to report on clause 3(x)(a) of the Order is not applicable to the Company.

(b) The Company has not made any preferential allotment or private placement of shares or convertible debentures (fully, partially or optionally convertible) during the year under audit. Hence, the requirement to report on clause 3(x)(b) of the Order is not applicable to the Company.

(xi) (a) According to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

(b) No report under section 143(12) of the Act has been filed by the auditors in Form ADT- 4 as prescribed under Rule 13 of Companies (Audit and Auditors) Rules, 2014 with the Central Government during the year.

(c) As represented to us by the management and according to the information given to us, there are no whistle-blower complaints received by the Company during the year.

(xii) The Company is not a Nidhi Company and therefore, the requirement to report on clause 3(xii) of the order is not applicable to the Company.

(xiii) 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 section 177 and 188 of the Act, wherever applicable. The Company, being a government Company, transactions with other government companies are exempt from compliance of Section 188 of the Act, in terms of Notification No: G.S.R. 463(E). dated 5th June 2015, issued by Ministry of Corporate Affairs, Government of India. Details of such transactions have been disclosed in the Standalone Financial Statements as required by the applicable Ind AS.

(xiv) (a) According to the information and explanations provided to us and based on our examination of the records of the Company, in our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(b) The internal audit reports of the Company issued for the year under audit have been considered by us.

(xv) In our opinion and according to the information and explanations given to us, during the year, the Company has not entered into any non-cash transactions with its directors or directors of its subsidiary or associate Company, as applicable, or persons connected with them and hence provisions of section 192 of the Act, are not applicable.

(xvi) (a) According to the information and explanation provided to us and based on our examination of the records of the Company, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934).

(b) According to the information and explanation provided to us and based on our examination of the records of the Company, the Company has not conducted any Non-Banking Financial or Housing finance activities. Accordingly, clause 3(xvi)(b) of the Order is not applicable.

(c) According to the information and explanation provided to us and based on our examination of the records of the Company, the Company is not a Core Investment Company as defined in the regulations made by the Reserve Bank of India. Accordingly, clause 3(xvi)(c) of the Order is not applicable.

(d) According to the information and explanation provided to us and based on our examination of the records of the Company, the Group does not have any Core Investment Company. Accordingly, clause 3(xvi)(d) of the Order is not applicable.

(xvii) The Company has not incurred cash losses in the current and the immediately preceding financial year. Accordingly, clause 3(xvii) of the Order is not applicable.

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

(xix) According to the information and explanations given to us and on the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, our knowledge of the Board of Directors and management plans, though a material uncertainty related to Going Concern of the Company exists as at the Balance Sheet date, as far as it relates to availability of lands for mining, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report that the Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one year from the balance sheet date, will get discharged by the Company as and when they fall due. We also draw reference to the section "Material Uncertainty Related to Going Concern" in our main Audit Report.

(xx) (a) According to the information and explanations given to us and on the basis of the examination of the records of the Company, there are no amounts remaining unspent in respect of other than ongoing projects. Accordingly, clause 3(xx)(a) of the Order is not applicable.

(b) According to the information and explanation provided to us and based on our examination of the records of the Company, there are no amount remaining unspent under Section 135(5) of the Act, pursuant to any ongoing project. Accordingly, clause 3(xx)(b) of the Order is not applicable.

(xxi) Reporting under clause (xxi) of the Order is not applicable as the same is required to be reported only in case of consolidated financial statements.

For R.Subramanian and Company LLP,

For Manohar Chowdhry & Associates,

Chartered Accountants,

Chartered Accountants,

Firm Regn. No. 004137S/S200041

Firm Regn. No. 001997S

R. Kumarasubramanian

M.S.N.M.Santosh

Partner

Partner

M No. 021888

M No. 221916

UDIN: 23021888BGSROQ2278

UDIN: 23221916BGXUSU7521

Place: Chennai

Date: 19th May, 2023

Annexure-II to Independent Auditors Report on the Standalone Financial Statements

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 NLC India Limited ("the Company") as of 31st March, 2023 in conjunction with our audit of the Standalone Financial Statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Companys management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company, considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting, issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to 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 over financial reporting based on our audit. We have 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, to the extent applicable to an audit of internal financial controls, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis 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 authorisations of management and directors of the Company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the Companys assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

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

Opinion

In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material aspects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2023, based on the internal control over financial reporting criteria established by the Company, considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.

Other Matter

We did not audit the Internal Financial Control over Financial Reporting of two (2) branches included in the Standalone Financial Statements of the Company. The adequacy of internal financial controls system over financial reporting and the operating effectiveness of such internal financial controls over financial reporting in so far as it relates to the above two branches is solely based on the corresponding auditors reports of the respective branch auditors.

Our opinion is not modified in respect of this matter.

For R.Subramanian and Company LLP,

For Manohar Chowdhry & Associates,

Chartered Accountants,

Firm Regn. No. 004137S/S200041

Chartered Accountants,

Firm Regn. No. 001997S

R. Kumarasubramanian

Partner

M.S.N.M.Santosh

M No. 021888

Partner

UDIN: 23021888BGSROQ2278

M No. 221916

UDIN: 23221916BGXUSU7521

Place: Chennai

Date: 19th May, 2023