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 :
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Auditors' Response
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1.
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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.
A high level of judgment is required in estimating the amount of provisioning. The Company's assessment is supported by the facts of matter, their own judgment, experience and independent legal advice wherever considered necessary. Accordingly, unexpected adverse outcomes which may significantly impact the reported profit and net assets are disclosed.
A sum of ^ 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.
Included in the above, is a sum of ^ 5,297.57 Crore that has been considered by the Company towards contingent liability which includes claims of third party's 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.
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 ^ 1,566.74 Crore.
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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;
• We evaluated management's judgements in respect of estimates of provisions, exposures and contingencies;
• In understanding and evaluating management's judgements, we have utilized our internal tax experts;
• 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
• 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.
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2.
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Project activities of Bithnok and BTPSE project:
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.
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Our audit procedures performed included the following:
• We obtained the details of project activities of Bithnok and BTPSE project from the management;
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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.
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Noted that the total project cost comprise of land amounting to ^ 194.75 Crore, capital advances of ^ 129.25 Crore and CWIP of ^ 50.66 Crore; and
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Further, an aggregate amount of ^ 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.
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Reviewed the basis of provision of ^ 70.62 Crore made as at 31st March, 2023.
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Key Audit Matter
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Auditors' Response
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3.
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Expected Credit Loss on Trade Receivables
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.
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 management's 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.
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.
The provision for ECL on trade receivables amounts to ^ 196.55 Crore as at 31st March, 2023. Refer Note 10(a)(c) of the Standalone Financial Statements.
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Our audit procedures performed included the following:
• We understood the process of ECL estimation and tested the design and operating effectiveness of key controls around data extraction and validation;
• 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;
• We also tested the arithmetical accuracy and assessed the judgments used in the management's model used to calculate provision for credit losses; and
• 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.
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Property, Plant & Equipment and Intangible Assets
Property, Plant and Equipment and Intangible Assets represent significant balances recorded in the Balance Sheet in the Standalone Financial Statements.
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.
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.
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Our audit procedures performed included the following:
• 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;
• We assessed whether the carrying values and the useful lives were reasonable by challenging management's 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;
• 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;
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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;
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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
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We have observed that the management has regularly reviewed the aforesaid judgments and there are no material changes.
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Information Other than the Standalone Financial Statements and Auditors' Report Thereon
The Company's 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 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 (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 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 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 Company's 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 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 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 ^ 3,406.85 Crore as at March 31, 2023 and total income of ^ 2,589.15 Crore for the year ended 31st March, 2023, total net profit before tax of ^ 949.16 Crore for the year ended 31st March, 2023 and total comprehensive income of ^ 917.21 Crore for the year ended 31st March, 2023 and net cash inflows of ^ 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 (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-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 Company's 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
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