To the Members of NMDC Steel Limited
Report on the Audit of Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of NMDC Steel Limited {hereinafter referred to as "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 Cash flow statement for the year then ended, and notes to Ihe financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as the "financial statements").
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid 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 ol the Act read with 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 financial performance including other comprehensive income, its Cash Flow and the changes in equity for the year ended on that date.
Basis for opinion
Wc conducted our audit of the Ind AS financial statements in accordance with the standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the audit of the Ind AS financial statements section of our report. We are independent of the company in accordance with the code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of Ind AS financial statements under the provisions of the Act and the Rules made there under, and wc have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAfs code of Ethics. Wc believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that. In our professional judgment, were of most significance in our audit of the financial statements ol the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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S.No.
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Key Audit Matters
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How our audit addressed the key audit matters
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1
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Demerger:
The Demerger Scheme of Arrangement between NMDC Limited ( Demerged Company) and NMDC Steel Limited (Resulting Company) and their respective shareholders and creditors ("the Scheme") pursuant to the provisions of Sections 230-232 of the Companies Act, 2013 ("Act") and the other applicable provisions thereof and applicable rules thereunder (hereinafter referred to as the "Scheme"), involving Demerger of the Demerged undertaking from Demerged Company to the Resulting Company has been duly sanctioned by the Ministry of Corporate Affairs ("MCA") vide its order dated October 6, 2022 ("Order").
NMDC Limited received the MCA Order dated 06.10.2022 on 11th October 2022 and filed the same with the concerned Registrar of Companies on 13th October 2072. Hence, the scheme is operative from 13th October 2022. The Appointed Date of the Scheme is April 1, 2021. Accordingly, with effect from the Appointed Date, the business of NMDC Iron & Steel Plant at Nagarnar has been transferred from NMDC Limited and vested into NMDC Steel Limited (N5L).
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Our audit procedures included the following:
We have reviewed the Order of MCA dt.06.10.2022 Authorising the scheme, and noted appointed day and effective date of implementation of the scheme.
We obtained necessary information from the Management about the transfer of Assets, Liabilities and employee services related aspects.
Based on the above procedures performed, we did not identify any significant exceptions in the implementation of the scheme.
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2
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Capital Work-in progress: (Refer Note No.-2.2 of the financial statements) Capital Work-in progress (CWIP) as on 31.03.2023 in the books is 19,545.23 Crores, out of which Incidental Expenditure During Construction (IEDC) amounts to 3,342.97
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Our audit procedures included the following:
We obtained an understanding and evaluation of the system of internal control over the capital work in progress with reference to identification and testing of key controls.
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Crores. Since the amount involved Is substantial and the original schedule date of completion has passed, inappropriate classification of IEDC could result in material misstatement of CWIP, hence this is a key audit matter.
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We have assessed the progress of the project and examined the management view on delay in project completion.
We also assessed the intention and ability of the management to carry forward and bring the asset to its state of intended use.
Based on the above procedures performed, we did not identify any significant exceptions in the management's assessment of Capital Work in Progress.
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3
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SEBI (LODR) regulations compliance:
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Our audit procedures includes the following:
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The Company does not complied with
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We obtained the information from the
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regulations number 17,18,19,20, and 21 of
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management relating to composition of board
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SEBI LODR regulations, 2015 relating to
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and status of constitution of various
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constitution of Audit Committee, N and RC, Risk Management Committee,
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committees.
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Stakeholder Relationship committee and
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Based on the above procedures performed, we
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Ideal composition of BOD due to non-
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did not identify any significant exceptions in
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appointment of Independent Director.
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the management’s explanation relating to non-
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Hence this is a key audit matter Para.
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appointment of Independent Director
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4
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Litigations, claims and contingencies:
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In view of the significance of the matter we applied the following audit procedures in this
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Refer note: 2.31 of the summary of
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area, among others to obtain sufficient audit
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significant accounting policies and notes to the standalone financial statements.
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evidence:
• Evaluating the design and testing the
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The Company undergoes disputes.
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operating effectiveness of controls relating
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lawsuits, claims, governmental and / or
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to identification and evaluation of litigation
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regulatory inquiries, tax and commercial
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and claims and measurement of provisions.
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disputes arising from time to time in the
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contingent liabilities, and disclosures
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ordinary course of business.
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thereof.
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Most of the claims involve complex Issues.
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• Obtained a list of ongoing litigations from
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The Company, assisted by their legal
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the Company's legal department. We
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counsel assessment to make provision or
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selected a sample of significant litigations
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disclose a contingency on a case-to-case
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and evaluated the Company's assessment
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basis considering the underlying facts of each litigation. The Company’s conclusions
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thereof by:
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may result in an incorrect disclosure or
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i. making enquiries with the In-house
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provision in the books of account considering the aforesaid assessment
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legal department of the company;
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involves significant judgment to be
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ii. verifying correspondence, orders and
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exercised by the Company based on
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appeals in respect of open litigation;
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current developments. Further, unexpected adverse outcomes could also
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and
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significantly impact the Company's
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iii. reviewed legal opinions obtained by
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reported results.
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the Company.
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This area is significant to our audit, since
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• Qvaluating the adequacy of provision and
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the accounting and disclosure for
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disclosures given in Note 2.31 to
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litigations, claims and contingencies is complex and judgmental.
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standalone financial statements
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Information Other than the Financial Statements and Auditor's Report Thereon
I he Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Board's’ Report including Annexures to Board's Report, Business Responsibility Report, Corporate Governance and Shareholder's information but does not include the financial statements and our auditor's report thereon.
Our opinion on the 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 financial statements, our responsibility is to read the other Information and, in doing so, consider whether the other information is materially Inconsistent with the financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Ind AS and other accounting principles generally accepted in India.
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 arc 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibility for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Ind AS 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on basis of these Ind AS financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the Ind AS financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may Involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has 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 dlsdosuras made by management.
• Conclude 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 financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality Is the magnitude of misstatements in the financial statements that. Individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (I) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current year ended 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.
Other Matters
We did not audited the financial statements / information of NMDC Iron & Steel Plant, Nagarnor for the FY 2021-22, since the amounts disclosures of demerged undertaking for the FY 2021-22 were part of financial statements of NMDC Limited, which were duly audited and reported by C & AG appointed qualified Chartered Accountants. Our opinion in so far as it relates to the amounts and disclosure included in respect of the demerged undertaking for the FY 2021-22 is based solely on the report of such NMDC Limited Auditors.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. 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 Balance Sheet, the Statement of Profit and Loss (including other comprehensive income). Statement of changes in equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books of account.
d) In our opinion, the aforesaid financial statements comply with the Ind AS specified under Section 133 of the Act.
e) The provisions of Section 164(2) of the Act, in respect of disqualification of directors are not applicable to the company, being a Government company in terms of notification no: -G.S.R.463(F> dated 5th June 2015 issued by Ministry of Corporate Affairs, Government of India.
0 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 -A."
2. 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, as amended in our opinion and to the best of our information and according to the explanations given to us:
a) The Company has disclosed the impact of pending litigations on its financial position in its Financial Statements - Refer Note 2.31 to the financial statements.
b) The company has made provisions, as required under the applicable lav/ or accounting standards, for material foreseeable losses, if any, on long-term contracts.
c) There are no amounts which are required to be transferred, to the Investor Education and Protection Fund by the Company.
d)
(i) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes of accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries"), v/ith the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified In any manner whatsoever by or on behalf of the company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(ii) The management has represented, that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the company from any person(s) or entity(ics), including foreign entities ("Funding Parties"), with the understanding, whether recorded in v/riting or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner v/hatsoever 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
(iii) Based on such audit procedures as considered reasonable and appropriate In the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) contain any material mis-statement.
c) No dividend has been declared / paid during the year, accordingly provisions of section 123 of the Act, are not applicable.
3. As required by the Companies (Auditor's Report) Order, 2020 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
4. With respect to the other matters to be included in the auditor's report in accordance with the requirements of Section 197(16) of the Act, as amended:
We are informed that the provisions of section 197 read with Schedule V of the Act, relating to managerial remuneration arc not applicable to the company, being a Government Company, in terms of Ministry of Corporate Affairs notification no- G.S.R.(E) 5th June 2015.
5. We are enclosing our report in terms of section 143(5) of the Act, on the basis of such checks of books and records of the company as we consider appropriate and according to the information and explanations given to us, in "Annexure-C" on the directions issued by the Comptroller & Auditor General of India.
N G Rao & Associates Chartered Accountants FRN: 009399S
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Partne^
M.No. 207300 Place: Hyderabad
UDIN: 23207300BGVDRH4232 Date: 24,h July, 2023
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