We have audited the accompanying standalone financial
statements of HFCL LIMITED (“the Company"), which
comprise the Balance Sheet as at March 31,2026, 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 then ended, and notes to the financial
statements, including a summary of material 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, and based on the
consideration of reports of the branch auditors, 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, 2026, and its profit,
total 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 ICAI's Code of Ethics. We believe that the audit evidence
obtained by us along with the consideration of audit reports of
the branch auditors referred to in the Other Matters paragraph
below, is sufficient and appropriate to provide a basis for our
audit opinion on the standalone 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. We have determined the matters described below
to be the key audit matters to be communicated in our report
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S. No. Key Audit Matters
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Auditor's Response
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1. Customer contracts - Accuracy of revenue
recognition, valuation of contract assets, work-in¬
progress (WIP), trade and other receivables, and
accuracy of contract liabilities
For the year ended March 31, 2026, revenue from
customer contracts amounts to I 4,527.54 Crore whereas
as at March 31,2026, contract assets amount to I 905.67
Crore, the balance of work-in-progress (WIP) amounts to
I 142.32 Crore and retention amounts to I 172.82 Crore.
The application of the revenue accounting standard
(Ind AS 115, Revenue from Contracts with Customers)
involves certain key judgements relating to
identification of distinct performance obligations,
determination of transaction price of the identified
performance obligations, the appropriateness of the
basis used to measure revenue recognized over a
period. Additionally, revenue accounting standard
contains disclosures which involves collation of
information in respect of disaggregated revenue
and periods over which the remaining performance
obligations will be satisfied subsequent to the balance
sheet date.
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Auditor's Response
Our audit procedures in this area included, inter alia, the
following:
• Obtained an understanding of the Company's project
execution processes and evaluated the design,
implementation, and operating effectiveness of
key internal controls relating to the accounting for
customer contracts;
• Tested selected key management review controls over
revenue recognition throughout the year to assess their
operating effectiveness;
• Read the terms and conditions of significant new and
modified contracts to assess their impact on revenue
recognition, including identification of performance
obligations, variable consideration, and transaction
price allocation;
• Conducted enquiries with management regarding risk
assessment processes relating to contract fulfilment and
revenue accounting;
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S. No. Key Audit Matters
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Auditor's Response
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(Refer Notes 31 to the standalone financial statements).
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• On a sample basis, reconciled recognised revenue to
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During order fulfilment, contractual obligations are
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underlying supporting documentation, validated direct
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subject to reassessment due to change orders, scope
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and indirect costs, and tested the mathematical accuracy
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modifications, or contract cancellations. As a result,
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of cost-to-completion calculations;
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total estimated contract costs may exceed total
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• Tested the appropriateness of the revenue recognition
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contract revenues and therefore require write-offs
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policies applied on a sample of contracts and verified
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of contract assets, receivables and the immediate
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the valuation of WIP balances through reconciliation of
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recognition of the expected loss as a provision.
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accounting entries to supporting documentation;
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Regarding the revenue recognized at a point in time
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• Applied heightened scrutiny to transactions recorded
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(PIT), the principal risks relate to incorrect period-cut-
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in the period immediately preceding and following the
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off, unjustified revenue recognition, and overstatement
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balance sheet date to obtain sufficient evidence on the
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of WIP balances requiring impairment adjustments.
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accuracy of cut-off;
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Given the scale of revenue, the degree of management
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• Reviewed a sample of contracts with unbilled revenue
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judgment involved, and the potential for material
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to identify potential delays in milestone achievement
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misstatement in related financial statement captions,
this area was identified as a Key Audit Matter.
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requiring revision to estimated efforts;
• Performed analytical procedures and tests of detail
to assess the reasonableness of incurred costs and
completion estimates.
Our procedures did not identify any material exceptions.
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2. Valuation of accounts receivable - risk of credit
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Our audit procedures in this area included, inter alia, the
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losses
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following:
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The Company has a concentration of credit exposure
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• Assessing and updating our understanding of internal
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on a number of major customers predominantly
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controls over financial reporting with respect to
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Government and large organisation. certain of whom
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credit risk;
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operate in challenging business environments. In order
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• Assessment of the Company's credit policy outlining
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to avoid significant credit losses, proper monitoring
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authority for approving and responsibility to manage
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and management of credit risk is key factor. Accounts
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credit limits;
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receivable is a significant item in the Company's
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• Conducted Inquiries with senior management and the
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standalone financial statements amounting to
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relevant governance committee in order to understand
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I 2,118.94 Crore and the provision for impairment of
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and assess governance and follow-up/monitoring of
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receivables amounted to I 36.54 Crore as at March 31,
2026.
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key customers;
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• Performed analytical procedures and made specific
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The Company's trade receivables form a significant
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enquiries with business area management to
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portion of its financial assets. Under Ind AS 109, the
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assess trends in receivable ageing, collections, and
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Company is required to recognize impairment on
trade receivables using the Expected Credit Loss (ECL)
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overdue accounts;
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model. The determination of ECL involves significant
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• Performed detailed testing and assessment of receivables
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management judgment, including:
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to ensure these are in line with Ind AS 109 requirements,
with a focus on significant new provisions and write-offs.
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• Segmentation of trade receivables by risk profiles,
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We also assessed and challenged management's assumptions
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• Estimation of default rates and recovery rates
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and adherence to the Company's accounting policies with
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based on historical credit loss experience,
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respect to provisions for impairment of receivables.
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• Consideration of forward-looking information
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The level of the provision made against accounts receivables
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such as macroeconomic indicators,
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including credit impaired receivables and accrued balances
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• Evaluation of the aging of receivables and specific
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was deemed appropriate and commensurate with the
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overdue accounts.
Given the subjectivity inherent in the ECL estimation
process, the complexity of applying forward looking
assumptions and the material quantum of trade
receivables, this area was identified as a Key Audit
Matter. Refer Note 15 to the standalone financial
statements.
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identified credit risks.
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S. No. Key Audit Matters
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Auditor's Response
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3. Assessment of the carrying value of Intangible
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Our audit procedures in this area, which incorporated
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Assets (including intangible assets under
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appropriate materiality and sampling techniques, included,
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development)
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inter alia, the following:
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The Company incurs product development costs and
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• Understanding, evaluating and testing the design and
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capitalises such expenditure to the extent it qualifies
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operating effectiveness of the controls in respect of
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for recognition as an Intangible Asset (product
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the Company's processes for assessing the recoverable
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development). Such expenditure includes internal
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values of intangible assets (including intangible assets
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manpower costs, outsourced manpower costs and
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under development).
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other related expenses incurred on such development
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• Testing a sample of projects to ensure appropriate
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projects. Up to the stage the products are ready to
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capitalized on of qualifying costs.
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be put to use, the Company records the qualifying
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• Assessing whether sufficient future economic benefits
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expenditure as 'intangible assets under development'.
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are likely to flow from the projects to support the
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In accordance with Ind AS 36 - Impairment of Assets,
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values capitalized.
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the Company tests Intangible Assets for impairment
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• Analysing the reasonableness of key management
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whenever events or changes in circumstances indicate
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assumptions and estimates used in the impairment
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that the carrying amount may not be recoverable.
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analysis (e.g. forecasted revenue, margin percentages,
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Intangible assets under development are tested for
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etc.)
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impairment on an annual basis.
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• Reviewed management's expert reports and technical
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The determination of the recoverable values of
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assessments, as applicable, supporting the determination
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intangible assets (including intangible assets under
development) for carrying out impairment assessment
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of recoverable amounts.
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involves several key assumptions including discount
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• Assessed the adequacy of disclosure in standalone
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rates and future cash flow projections for ascertaining
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financial statement
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future economic benefits expected to be generated by
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Based on our procedures performed above, we noted the
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such assets.
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management's assessment of the carrying value of intangible
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The Company has carried out an impairment
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assets (including intangible assets under development), to
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assessment of intangible assets (including intangible
assets under development) and concluded that the
recoverable value is higher than the carrying amount
of such assets.
Accordingly, no adjustment to the carrying amount of
intangible assets (including intangibles assets under
development) is considered necessary as at March 31,
2026.
Given the degree of judgement inherent in impairment
assessment and in estimating the carrying values of
intangible assets (including intangible assets under
development), we identified assessment of carrying
value of intangible assets as a key audit matter. Refer
Note 5 & 6 to the standalone financial statements.
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be reasonable.
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Other Information
The 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 and Sustainability Report,
Corporate Governance and Shareholder's Information, but
does not include the financial statements and our auditors'
report thereon. The other information comprising the above
documents 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 will 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
and, in doing so, consider whether the other information
is materially inconsistent with the standalone financial
statements or our knowledge obtained during the course of
our audit, or otherwise appears to be materially misstated.
When we read the other information comprising the
above documents, if we conclude that there is a material
misstatement therein, we are required to communicate the
matter to those charged with governance and take necessary
actions as per applicable laws and regulations.
Management's Responsibility 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 (Ind AS) 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 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 statement 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,
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 is 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 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 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 controls
relevant to the audit in order to design audit procedures
that are appropriate in the circumstances. Under Section
143(3)0) 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.
• Obtain sufficient appropriate audit evidence regarding
the financial information of the foreign branches of
the Company. We are responsible for the direction,
supervision and performance of the audit of the
standalone financial statements of the Company of
which we are the independent auditors. For the foreign
branches included in the standalone financial statements,
which have been audited by other 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 Matters' 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 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 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
The Standalone Financial Statements includes financial
performance of three foreign branches which reflects total
assets of I 57.22 Crore as at March 31, 2026, total revenue of
I 75.55 Crore, Net Profit after tax of I (1.46) Crore and total
comprehensive income of I 1.87 Crore and net cash outflow
amounting to I 1.90 Crore for the year ended on 31st March
2026, which were audited by respective independent branch
auditors. The independent branch auditor's report on the
financial statements of these branches have been furnished
to us by the management and our opinion on the standalone
financial statements, in so far as it relates to the amounts and
disclosures included in respect of these branches and our
report in terms of sub-section (3) of section 143 of the Act, in
so far as it relates to the aforesaid foreign branches is solely
based on the report of such independent branch auditor's. Our
opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory
Requirements
A. 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 the “Annexure-A" a statement on the
matters specified in paragraphs 3 and 4 of the Order.
B. 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.
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 foreign branch
offices audited by independent branch auditors
have been furnished to us by the management of
the Company and have been properly dealt with by
us in preparing this report.
d) The Standalone Balance Sheet, the Standalone
Statement of Profit and Loss including Other
Comprehensive Income, the Standalone Statement
of Cash Flows and Standalone Statement of
Changes in Equity 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 specified under
Section 133 of the Act, read with relevant rules
made thereunder.
f) On the basis of the written representations received
from the directors as on March 31, 2026, taken
on record by the Board of Directors, none of the
Directors is disqualified as on March 31, 2026 from
being appointed as a director in terms of Section
164 (2) of the Act.
g) 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". Our report expresses an unmodified opinion
on the adequacy and operating effectiveness of
the Company's internal financial controls with
reference to standalone financial statements.
h) 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, in our opinion and to the best of our
information and according to the explanations
given to us, the remuneration paid by the Company
to its directors during the year is in accordance with
the provisions of Section 197 of the Act.
i) 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. The Company has disclosed the impact of
pending litigations on its financial position
in its standalone financial statements - Refer
Note 47 to the standalone financial statements;
ii. The Company has made provision, as required
under the applicable law or accounting
standards, for material foreseeable losses,
if any, on long-term contracts including
derivative contracts - Refer Note 47 to the
standalone financial statements;
iii. There has been no delay in transferring
amount, 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;
(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 declared and paid
by the Company during the year is in
accordance with Section 123 of the Act,
as applicable.
(b) As stated in Note 42 to the standalone
financial statements, the Board of
Directors of the Company have proposed
final dividend for the year 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. Based on our examination which included
test checks and as explained in Note 63 to
the Standalone Financial Statements, the
company has used an accounting software
including software operated by third party,
for maintaining its books of account which
has a feature of recording audit trail (edit log)
facility and the same has operated throughout
the year for all relevant transactions recorded
in the respective software and during the
course of our audit we did not come across any
instance of audit trail feature being tampered
with. Such audit trails are preserved as per the
statutory requirement for record retention.
For S Bhandari & Co LLP For Oswal Sunil & Company
Chartered Accountants Chartered Accountants
Firm Registration Firm Registration
No. 000560C/C400334 No. 016520N
(J.S.P. Bansal) (Nawin K Lahoty)
Partner Partner
Membership No.: 070980 Membership No.: 056931
UDIN: 26070980CFKING6581 UDIN: 26056931JEDKAY9751
Place: New Delhi Place: New Delhi
Date: April 30, 2026 Date: April 30, 2026
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