Report on the Audit of the Standalone Financial Statements Opinion
We have audited the accompanying Standalone Financial Statements of Hindustan Copper Limited (“the Company”), which comprise the Balance Sheet as at March 31,2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and notes to the Standalone Financial Statements including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the 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 (“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 31,2023 and its profit (including Other Comprehensive Income), changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Financial Statements 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 “Auditor's 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 made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Financial Statements.
Emphasis of Matter
We draw attention to the following matters:
a) Note No. 40 (1)(i) of the accompanying Standalone Financial Statements which describes the uncertainty related to the outcome of the lawsuits filed and demands raised against the Company by various parties and Government authorities;
b) Note No. 40(5) of the accompanying Standalone Financial Statements which states that the Lease agreement for Rakha Mining Lease at the Indian Copper Complex was valid up to 28.08.21. It is also to be noted that the Lease agreement for Kendadih mines expire on 02.06.23. Application for renewal for both the lease agreements have been submitted as per regulations, and is currently under process.
c) Note 40(5) of the Standalone Financial Statements which states that the mined-out ore kept at pit top of Surda mine has not been transported to the Concentrator Plant since July 2022, due to non-issuance of challan/permit by State Authorities, Jharkhand due to non-receipt of Surda Lease Deed, which is under process. Consequently the vendor bills are lying unprocessed and further extraction of ore is currently not happening.
d) Note No.40(6) the accompanying Consolidated Financial Statements wherein the Company has made assessment of possible impairment loss during the year with respect to Plant and Machinery at the Nickel Plant and Moubhandar Plant, having book value of '5,649.07. The study revealed that the fair market value of the specified Plant and Machinery as on 31st March 2023, was higher than their Book value and consequently there was no requirement to recognize any Impairment Loss during the year, as per provisions of Ind AS 36
e) Note No.40 (7) of the accompanying Standalone Financial Statements which states that the title deeds for freehold
and leasehold land and building acquired in respect of Gujarat Copper Project (GCP) with book value of '4,756.01 Lakh (PY:-'5,026.13 Lakh) as at March 31,2023 are yet to be executed in favor of the Company;
f) Note No.40 (9) of the accompanying Standalone Financial Statements wherein, balances under the head Claims Recoverable, Loans & Advances, Deposits from and with various parties and certain balances of trade receivables, trade payables and other current liabilities have not been confirmed as at March 31,2023, although letters have been sent by the Company seeking confirmation of balances. Consequential impact upon receipt of such confirmation / reconciliation / adjustments of such balances, if any is not ascertainable at this stage.
Our opinion is not modified in respect of these 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 year ended March 31,2023. 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. We have determined the matters described below to be the key audit matters to be communicated in our report.
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No.
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Key Audit Matters
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Auditor’s Response
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1.
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Adjustment of revenue and DroDer aDDlication of Ind AS 115 “Revenue from Contracts with Customers”
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Principal Audit Procedures
We have assessed the application of the provisions of Ind AS 115, in respect of the Company's revenue recognition and appropriateness of the estimated adjustments in the process
We have selected transactions on sample basis and tested for identification of contracts, involving disagreements relating to grade mismatch , evaluation of the satisfaction of the performance obligation , and checking for the adjustment to the revenue due to variation in the transaction price
Audit Conclusion
No material exceptions identified.
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in respect of accuracy of revenue recognition and adjustments for the ore quality variances involving critical estimates
Referred in Note 2.5 of the Standalone Financial Statements
The revenue recognized by the Company in any particular contract , is as per the contract terms. There are subsequent adjustments made to the initial transaction price for a) the difference in LME rate considered during the initial transaction and the Quotational Period b) for mismatch in the grade of the Ore.
The variation in the contract price for mismatch of grade of the ore, if not settled mutually between the parties to the contract is referred to third party testing.
The final adjustment to revenue is then made basis the outcome of the findings of the third party
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2.
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Provisions recognized and Contingent liabilities
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Principal Audit Procedure
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disclosed with respect to certain legal and tax
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Our audit procedures relating to provisions recognized and contingencies disclosed regarding certain legal and tax matters included the followings:
Ý Understanding and evaluating the design and operating effectiveness of controls over the recognition, measurement, presentation and disclosures made in the Standalone Financial Statements in respect of these matters;
Ý Obtaining details of legal and tax matters, inspecting the supporting documents to evaluate management's assessment of probability of outcome and the magnitude of potential loss, and testing related to provisions and disclosures in the Standalone Financial Statements
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matters
The Company and its jointly controlled entity is subject to a number of legal, regulatory and tax cases for which final outcome cannot be easily predicted and which could potentially result in significant liabilities.
Management's disclosures with regards to contingent liabilities are presented in Note No.40 (1) (i) to the Standalone Financial Statements.
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Key Audit Matters
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Auditor’s Response
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The assessment of the risks associated with the litigations is based on complex assumptions. This requires use of judgment to establish the level of provisioning, increases the risk that provisions and contingent liabilites may not be approprlately provided against or adequately disclosed.
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Ý Reviewing orders and other communication from regulatory authorities and management responses thereto;
Ý Reviewing management expert's legal advice and opinion as applicable, obtained by the company's management for evaluating certain legal matters and evaluating competence and capabilities of the experts; and
Ý Using auditor's own judgment in evaluating certain significant and complex direct and indirect tax matters
Audit Conclusion
No material exceptions identified
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3.
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Assessment of indication of impairment and the
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Principal Audit Procedures
Our audit procedures related to assessment of indication
of impairment and recoverable amounts of these CGUs
included the followings:
• Understanding and evaluating the design and operating effectiveness of controls for identification and assessment of any potential impairment, including determining the carrying amount and recoverable amount of the CGUs;
• Relying on the report of external agency appointed solely for evaluating the assessment of impairment at plants this year and
• Using auditor's own judgments/assessment for testing appropriateness of the method and model used for determining the recoverable amount, and mathematical accuracy of the models' calculations
• Testing related presentation and disclosures in the Standalone Financial Statements.
Audit Conclusion
No material exceptions identified
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recoverable amount of cash aeneratina units
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(CGUs)
Refer Note40(6) of the accompanying Standalone Financial Statements.
There is an assessment done by the Company at the end of each reporting period for any indication that an asset may be impaired.
Based on such indications, impairment testing was performed by the management with the help of an independent third party, in accordance with the requirements of Ind AS 36 “Impairment of Assets” for their Nickel Plant and the Moubhandar Plant situated in Ghatshila
Based on the report submitted by the independent third party, no need was identified for making any Impairment Provisions for the FY 2022-23
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4.
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Valuation of employees’ defined benefit obligations and other lona term benefits
The company has recognized long-term employee benefit liabilities and defined benefit obligations, (net of planned plan asset against funded gratuity obligation) in the Standalone Financial Statements. The valuation of employee benefit obligations is dependent on market conditions and assumptions made. The key audit matter specifically relates to the following key assumptions, like Discount rate, Life expectancy and Inflation forecasts. The setting of these assumptions is complex, and involves the exercise of significant judgment on the part of the Management along with the external Actuarial Specialists.
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Our audit procedures relating to the valuation of employees defined benefit obligations and other long term benefits included the following :
• In testing the valuation, we have examined the reports of external actuarial specialists to review the key actuarial assumptions, and the methodology adopted for the calculation of the liability
• We evaluated the assumption made by the management and the Actuary to ensure that they are consistent with the principles of Ind AS 19
Audit Conclusion
Based on the above procedures, we are satisfied that the methodology and assumptions applied in relation to determining the liabilities are acceptable
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Information Other than the Standalone Financial Statements and Auditor’s Report Thereon
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Report of the Board of Directors, Management Discussion and Analysis Report, Report on CSR activities, Business Responsibility Report, Corporate Governance Report and other annexure to Directors Report including Shareholder's Information, but does not include the Standalone Financial Statements and our auditor's report thereon. The Report of the Board of Directors including annexures and other related statements forming part of the Company's annual report is expected to be made available to us after the date of our this auditor report.
Our opinion on the Standalone Financial Statements does not cover the other information and we do not express any form of assurance or conclusion thereon.
In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information 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. If based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.
If, based on the Report of the Board of Directors including annexures and other related statements which form part of the annual report and made available to us after the date of this audit report, we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance
Responsibility of Management and Those Charged with Governance for the Standalone Financial Statements
The Company's 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 Indian 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 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 Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financial reporting process.
Auditor’s 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 auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone 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 financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on
whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the Standalone 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 auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
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 auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1) As required by the Companies (Auditor's 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 A”, a statement on the matters specified in paragraphs 3 and 4 of the 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 except as reported in Clause (c) of the “Emphasis of Matters” paragraph above;
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;
c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the books of account.
d) In our opinion, the aforesaid Standalone Financial Statements comply with the Ind AS specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
e) In pursuance to the Notification No. G.S.R 463(E) dated 05-06-2015 issued by Ministry of Corporate Affairs, Section 164(2) of the Act regarding disqualification of Directors, is not applicable to the Company, since it is a Government Company;
f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure B”.
g) As per Notification No. GSR 463(E) dated 05-06-2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 of the Act is not applicable to the Government Companies.
Accordingly, reporting in accordance with requirement of provisions of Section 197(16) of the Act is not applicable on the Company.
h) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements-[Refer Note No. 40(1) to the accompanying Standalone Financial Statements];
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.
iv. (a) The management has represented that, to the best of their knowledge and belief, other than as disclosed in the notes to accounts, no funds have been have been advanced or loaned or invested ( either from borrowed funds or share premium or any other source or kind of funds) by the Company to or any other person(s) or entity(ies) , including foreign entities (“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, other than as disclosed in the notes to accounts, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (“Funding Parties”) , with the understanding, whether recorded in writing or otherwise, that the Company shall, whether directly or indirectly, lend or invest in other persons or entities, identified in any manner whatsoever by, or on behalf of the Funding Party, (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
(c) Based on such audit procedures, we have considered reasonable and appropriate in the circumstances , nothing has come to our notice that has caused us to believe that the representation under sub-clause (a) and (b) contain any mutual misstatement,
3) As required under Section 143(5) of the Act, we give in the “Annexure C”, a statement on the directions and subdirections issued by the Comptroller and Auditor General of India in respect of the Company.
4) The dividend declared or paid during the year by the Company is in compliance with Section 123 of the Companies Act 2013,
For Ghoshal and Ghosal
Chartered Accountants (Firm's Registration No.FRN 304013E)
CA Siddhartha Pal Partner
Place: Kolkata (Membership No.059017)
Date: 19-05-2023 UDIN: 23059017BGXJVS1641
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