MMTC Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

We have audited the accompanying financial statements of MMTC 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 financial statements including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the financial statements”), in which are incorporated the financial statements for the year ended on that date audited by the Branch Auditors of the Company’s Regional and sub-regional Offices at Mumbai, Vizag, Chennai, Hyderabad and Bhubaneshwar(SRO).

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 of the Act read with the Companies (Indian Accounting Standards) Rules, 2021, as amended, thereof (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2023, the profit and total comprehensive income(Comprising of net profit and total comprehensive income), changes in equity and its cash flows for the year ended on that date.

Basis of Qualified Opinion

1. We draw attention to note no 40(f)(a) of the accompanying financial statement, which states that the liability @1.5% of profit before tax (“PBT”) for the year in respect of scheme for retirees prior to 01.01.2007 (closed group) has not been recognised even though the Company has reported PBT of INR. 1279.16 crore (P.Y. 120.60 crore), on the basis of affordability. Also, the Company has not provided form PRMBS (open group) @ 4.5% of Basic and DA for serving employees. During the previous year provision in respect of retirees after 01.01.2007 pertaining to FY 2019-20 and 2020-21 had been withdrawn due to loss during these previous years. The management will review the above in the next financial year. The non-recognition of provision according to the schemes above constitutes a departure from the accounting standards as prescribed under section 133 of the Act. An amount of INR. 19.18 crore (P.Y. 1.81 crore) (1.5% of PBT) and INR. 1.63 crore (P.Y. 3.29 crore) (4.5% of Basic and DA) estimated by the management, should have been provided as per the accounting standards. Accordingly, the provision for PRMBS would have been increased by INR. 20.81 crore (P.Y. 5.10 crore) and net income and shareholders’ fund would have been reduced by the given amount.

We conducted our audit of the 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 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 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 ICAI’s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the 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 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. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the standalone Ind AS financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone Ind AS financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone Ind AS financial statements.

Emphasis of Matters

Restructuring and default in loan repayment

We draw attention to Note No. 29 of the accompanying financial Statements, which states that Consequent upon receipts of divestment proceeds from NINL on 4.7.2022 an amount of INR. 2551.44 crore as on 31.3.2022 have been paid towards principal and normal agreed interest upto 31.3.2022. An amount of Rs. 106.41 crore out of which Rs. 63.68 crore pertains to interest from 01.04.2022 to 31.03.2023 & remaining amount of Rs. 42.73 crore relates to additional interest and other charges under RTR subject to final settlement with banks. The matter is now closed with State Bank of India and Punjab & Sind Bank. Other lender banks are also taking up their matter with appropriate authorities. The management is of the view that the remaining banks shall take into consideration the concession if any and no addition provision is required to be made.

Our opinion is not modified in respect of the above matter.

Non-compliance of regulation 33 of SEBI and section 49 of the Act

We draw attention to Note No. 34 (vii) to the accompanying financial statements, which states that the Company has created a contingent liability of INR 0.07 crore (P.Y. 0.07 crore) on account of demand raised by Stock Exchange Board of India (SEBI) in relation to non-compliance of regulation 33 of SEBI. The management is in the process of having these demands waived and thus no provision has been made in the financial statements.

Our opinion is not modified in respect of the above matter.

Non-compliance of Section 149 of the Act

We draw attention to Note No. 34 (vii) to the accompanying financial statements, which states that an amount of INR.

0.01 crore is included for non-compliance of appointment of Independent Director within the stipulated time. The management is in the process of receiving an approval from the concerned ministry, thus no provision has been made in the financial statements

Our opinion is not modified in respect of the above matter.

Write-off of Foreign Debtors

We draw attention to Note No. 36 (n) to the accompanying financial statements, which states that an amount of INR. 0.10 crore on account of foreign debtors outstanding for more than twenty years was written off with the approval of the Board of directors of the Company during the year and the provisions created earlier for bad and Doubtful Debts/Claims/Loans were withdrawn. The management of the Company is under the process of taking an opinion on the FEMA guidelines through an expert and action (if any) will be taken accordingly.

Our opinion is not modified in respect of the above matter.

Other Matters

1. We did not audit the financial statements/ financial information of 5 Regional Offices included in the standalone financial statements of the Company whose financial statements/financial information reflect total assets of INR. 375.47 crores as at March 31,2023 and total revenue of INR. 230.62 crores for the year ended on that date, as considered in the standalone financial statements. The financial statements/financial information 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.

2. The sub - regional office of Bhubaneshwar has provided a qualified opinion and has reported that the SRO has recognised income INR. 0.25 crore which arose due to forfeiture of eMd as the party failed to comply with terms and conditions of the tender. All the activities starting from floating of the tender, execution of the contract and the decision to cancel the lots allotted to the parties for failure to deposit the payment and forfeit the EMD pertain to FY 2021-22.

As the forfeiture pertains to FY 2021-22, such income is a prior period item in the Financial statement for FY 2022-23 which should have been disclosed as per the requirements of IND AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors. Such omission has decreased the loss of FY 2022-23 by INR. 0.25 crore and reduced the EMD amount under Other Financial liabilities in FY 2022-23. As per the requirements of INDAS 8 the said Miscellaneous Income of INR. 0.25 Crore., should have been corrected in the Financial statements retrospectively and accordingly Financial statements for FY 2022-23 and the comparative amount of the prior period should have been restated.

The accounting standard requires retrospective adjustment only if the amount is material. An amount of INR. 0.25 crore is material at the SRO level but in the standalone financial statements the given amount is not material and thus has been adjusted through Prior period errors provided in Note No. 48 of the accompanying financial statements.

Our opinion is not modified in respect of this matter.

3. The regional of Mumbai under Emphasis of matter para has reported that there is a dispute pertaining to Sada Lease Land, Goa due to which there is a retrospective change in the lease rentals from year 2005 to 2022. The change in the lease rentals has been debited to Profit & Loss Account in the following manner:

Lease Rent of earlier years - 274.83 lakhs

Interest on lease - 46.91 lakhs

Depreciation on ROU Assets - 0.85 lakhs

Further the lease rentals for the block of 2021-25 has not been revised. Last revision was made in the block of 2015-20. Subsequent to this period, revision has been pending as on date and the RO has recognized expenses based on the 2015-20 revision.

Our opinion is not modified in respect of this matter.

Management's Responsibilities for the 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 financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows 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 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 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 to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 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 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 the 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 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 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.

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 in terms of Section 143(11) of the Act, we give in “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143(3) of the Act, based on our audit we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit of the aforesaid financial statements.

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, the Cash Flow Statement and Statement of Changes in Equity dealt with by this report are in agreement with the books of account;

d) In our opinion, the aforesaid financial statements comply with the Ind AS specified under Section 133 of the Act, read with the companies (Indian accounting Standards) Rules, 2015 as amended;

e) Being a Government Company pursuant to the Notification No. GSR 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, Government of India, provisions of sub-section (2) of Section 164 of the Act, are not applicable to the Company;

f) 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 number G.S.R. 463 (E)dated 5th June, 2015 issued by Ministry of Corporate Affairs, section 197 of the Act regarding remuneration to director is not applicable to the Company, since it is a Government 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, as amended in our opinion and to the best of our information and according to the explanations given to us:

i. There are pending litigation including matters relating to sales tax, custom duty and excise duty which are disclosed as contingent liability - refer to Note 34 and 36 to the standalone financial statements, the impact of the same is unascertainable as the matters are sub-judice.

ii. The Company is not having any long-term contracts including derivative contracts for which there were any material foreseeable losses; and

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2023;

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 (Refer note 50 (e)).

(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 (Refer note 50(f))

(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. The Company has not declared or paid any dividend during the year ended 31 March 2023.

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 April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31,2023.

3. As required by CAG of India through directions, issued under Section143(5) of the Act, 2013 we give our report in the attached “Annexure C”.

For M.L. Puri & Co.

Place: New Delhi Chartered Accountants

Date: 30.05.2023 FRN: 002312N

UDIN: 23095584BGWCXK3321

CA R.C. Gupta

Partner

M.No.095584