Independent Auditors Report

Transcription

1 M/s. P.B. VIJAYARAGHAVAN & CO., M/S. CHANDRAN & RAMAN, Chartered Accountants, Chartered Accountants, 14/27, Caedral Garden Road, Paragon 2, Dr. Radhakrishnan Salai, Nungambakkam, nd 2 Street, Mylapore, Chennai Chennai Report on e We have audited e accompanying consolidated financial statements of M/s. NEYVELI LIGNITE CORPORATION LIMITED (hereinafter referred to as e Holding Company )and its subsidiaries (e Holding Company and its subsidiaries togeer referred to as e Group )its associates and jointly controlled entities, st comprising of e Consolidated Balance Sheet as at 31 March, 2016, e Consolidated Statement of Profit and Loss, e Consolidated Cash Flow Statement for e year en ended, and a summary of e significant accounting policies and oer explanatory information (hereinafter referred to as e consolidated financial statements ). Management s Responsibility for e The Holding Company s Board of Directors is responsible for e preparation of ese consolidated financial statements in terms of e requirements of e Companies Act, 2013 (hereinafter referred to as e Act ) at give a true and fair view of e consolidated financial position, consolidated financial performance and consolidated cash flows of e Group including its Associates and Jointly controlled entities in accordance wi e accounting principles generally accepted in India, including e Accounting Standards specified under Section 133 of e Act, read wi Rule 7 of e Companies (Accounts) Rules, The respective Board of Directors of e companies included in e Group and of its associates and jointly controlled entities are responsible for maintenance of adequate accounting records in accordance wi e provisions of e Act for safeguarding e assets of e Group and for preventing and detecting frauds and oer irregularities; e selection and application of appropriate accounting policies; making judgments and estimates at are reasonable and prudent; and e design, implementation and maintenance of adequate internal financial controls, at were operating effectively for ensuring e accuracy and completeness of e accounting records, relevant to e preparation and presentation of e financial statements at give a true and fair view and are free from material misstatement, wheer due to fraud or error, which have been used for e purpose of preparation of e consolidated financial statements by e Directors of e Holding Company, as aforesaid. Auditor s Responsibility Independent Auditors Report To The Members of Neyveli Lignite Corporation Limited Our responsibility is to express an opinion on ese consolidated financial statements based on our audit. While conducting e audit, we have taken into account e provisions of e Act, e accounting and auditing standards and matters which are required to be included in e audit report under e provisions of e Act and e Rules made ereunder. We conducted our audit in accordance wi e Standards on Auditing specified under Section 143(10) of e Act. Those Standards require at we comply wi eical requirements and plan and perform e audit to obtain reasonable assurance about wheer e consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about e amounts and e disclosures in e consolidated financial statements. The procedures selected depend on e auditor s judgment, including e assessment of e risks of material misstatement of e consolidated financial statements, wheer due to fraud 111

2 or error. In making ose risk assessments, e auditor considers internal financial control relevant to e Holding Company s preparation of e consolidated financial statements at give a true and fair view in order to design audit procedures at are appropriate in e circumstances. An audit also includes evaluating e appropriateness of e accounting policies used and e reasonableness of e accounting estimates made by e Holding Company s Board of Directors, as well as evaluating e overall presentation of e consolidated financial statements. We believe at e audit evidence obtained by us and e audit evidence obtained by e oer auditors in terms of eir reports referred to in sub-paragraph (a) of e Oer Matters paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on e consolidated financial statements. Opinion In our opinion and to e best of our information and according to e explanations given to us, e aforesaid consolidated financial statements give e information required by e Act in e manner so required and give a true and fair view in conformity wi e accounting principles generally accepted in India, of e consolidated st state of affairs of e Group, its associates and jointly controlled entities as at 31 March, 2016, and eir consolidated profit and eir consolidated cash flows for e year ended on at date. Emphasis of Matter We draw attention to e following matters in e Notes to e financial statements: a) Note No: 23(A)(1)(i) to e financial statements regarding adoption of normal corporate tax rate instead of Minimum Alternate Tax rate for calculation of Return on Equity in tariff fixation under Central Electricity Regulatory Commission (CERC) regulation. b) Note No: 23(A)(1)(ii) to e financial statements regarding e review order of Central Electricity Regulatory Commission (CERC) dated for refund of additional profit earned by sale of lignite to outside agencies over and above 85% capacity utilisation factor of Mine II Expansion and refund of incentive for e excess generation of power over and above e contemplated PLF in TPS II due to inclusion of pooled price of Mine II Expansion. c) Note No: 23(A)(1)(iii) to e financial statements regarding e order of e Central Electricity Regulatory Commission (CERC) dated regarding disallowance of interest during construction period of Barsingsar Thermal Power Station. d) Note No: 25(d) to e financial statements regarding Power tariff at final adjustment will be made in e accounts on receipt of Central Electricity Regulatory Commission (CERC) order, which is not ascertainable at is stage. Our opinion is not modified in respect of ese matters. Oer Matters We did not audit e financial statements of TWO (2) subsidiaries, and ONE (1) jointly controlled entities, st whose financial statements reflect total assets of ` 8, crore as at 31 March, 2016, total revenues of ` 1, crore and net cash flows amounting to ` crore for e year ended on at date, as considered in e consolidated financial statements. The consolidated financial statements also include e Group s share st of net loss of ` crore for e year ended 31 March, 2016, as considered in e consolidated financial statements, in respect of THREE (3) associates, whose financial statements have not been audited by us. These financial statements have been audited by oer auditors whose reports have been furnished to us by e Management and our opinion on e consolidated financial statements, in so far as it relates to e amounts and disclosures included in respect of ese subsidiaries, jointly controlled entities and associates, and our report in terms of sub-sections (3) and (11) of Section 143 of e Act, insofar as it relates to e aforesaid subsidiaries, jointly controlled entities and associates, is based solely on e reports of e oer auditors. 112

3 Our opinion on e consolidated financial statements, and our report on Oer Legal and Regulatory Requirements below, is not modified in respect of e above matters wi respect to our reliance on e work done and e reports of e oer auditors. Report on Oer Legal and Regulatory Requirements 1. As required by Section 143(3) of e Act, we report, to e extent applicable, at: (a) We have sought and obtained all e information and explanations which to e best of our knowledge and belief were necessary for e purposes of our audit of e aforesaid consolidated financial statements. (b) (c) (d) (e) (f) In our opinion, proper books of account as required by law relating to preparation of e aforesaid consolidated financial statements have been kept so far as it appears from our examination of ose books and e reports of e oer auditors. The Consolidated Balance Sheet, e Consolidated Statement of Profit and Loss, and e Consolidated Cash Flow Statement dealt wi by is Report are in agreement wi e relevant books of account maintained for e purpose of preparation of e consolidated financial statements. In our opinion, e aforesaid consolidated financial statements comply wi e Accounting Standards specified under Section 133 of e Act, read wi Rule 7 of e Companies (Accounts) Rules, As per e Notification G.S.R. 829(E) dated , issued U/s. 620(1) of e Companies Act, 1956 and read wi Section 465(2) of Companies Act,2013, Sub-section (2) of Section 164 of e Companies Act, 2013 is not applicable to Government Companies. Wi respect to e adequacy of internal financial control systems and e operating effectiveness of such controls, we give our Report in Annexure I. (g) Wi respect to e oer matters to be included in e Auditor s Report in accordance wi Rule 11 of e Companies (Audit and Auditor s) Rules, 2014, in our opinion and to e best of our information and according to e explanations given to us: i. The consolidated financial statements disclose e impact of pending litigations on e consolidated financial position of e Group, its associates and jointly controlled entities Refer Note 23 to e consolidated financial statements. ii. iii. The Group, its associates and jointly controlled entities did not have any material foreseeable losses on long-term contracts including derivative contracts. There has been no delay in transferring amounts, required to be transferred, to e Investor Education and Protection Fund by e Holding Company and its subsidiary companies, associate companies and jointly controlled companies incorporated in India. 2. As required by section 143(5) of e Companies Act, 2013, our comments in regard to e directions and sub-directions issued by e Comptroller and Auditor General of India is given in Annexure II For M/s. P.B. VIJAYARAGHAVAN & CO., Chartered Accountants Firm Regn S For M/s. CHANDRAN & RAMAN Chartered Accountants Firm Regn S Place : Chennai Date : P.B. Srinivasan S. Pattabiraman Partner Partner M.: M.:

4 Annexure I to Independent Auditors Report Report on e Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of e Companies Act, 2013 ( e Act ) In conjunction wi our audit of e consolidated financial statements of e Company as and for e year ended March 31, 2016, We have audited e internal financial controls over financial reporting of M/S. NEYVELI LIGNITE CORPORATION LIMITED (hereinafter referred to as e Holding Company ) and its subsidiary companies, its associate companies and jointly controlled companies, which are companies incorporated in India, as of at date. Management s Responsibility for Internal Financial Controls The respective Board of Directors of e Holding Company, its subsidiary companies, its associate companies and jointly controlled companies, which are companies incorporated in India, are responsible for establishing and maintaining internal financial controls based on e internal control over financial reporting criteria established by e Company considering e essential components of internal control stated in e Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by e Institute of Chartered Accountants of India. These responsibilities include e design, implementation and maintenance of adequate internal financial controls at were operating effectively for ensuring e orderly and efficient conduct of its business, including adherence to company s policies, e safeguarding of its assets, e prevention and detection of frauds and errors, e accuracy and completeness of e accounting records, and e timely preparation of reliable financial information, as required under e Companies Act, Auditors Responsibility Our responsibility is to express an opinion on e Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance wi e Guidance Note on Audit of Internal Financial Controls over Financial Reporting (e Guidance Note ) and e Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of e Companies Act, 2013, to e extent applicable to an audit of internal financial controls, bo applicable to an audit of Internal Financial Controls and, bo issued by e Institute of Chartered Accountants of India. Those Standards and e Guidance Note require at we comply wi eical requirements and plan and perform e audit to obtain reasonable assurance about wheer adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about e adequacy of e internal financial controls system over financial reporting and eir operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing e risk at a material weakness exists, and testing and evaluating e design and operating effectiveness of internal control based on e assessed risk. The procedures selected depend on e auditor s judgement, including e assessment of e risks of material misstatement of e financial statements, wheer due to fraud or error. We believe at e audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on e Company s internal financial controls system over financial reporting. Meaning of Internal Financial Controls over Financial Reporting A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding e reliability of financial reporting and e preparation of financial statements for external purposes in accordance wi generally accepted accounting principles. A company's internal financial control over financial reporting includes ose policies and procedures at (1) pertain to e maintenance of records 114

5 at, in reasonable detail, accurately and fairly reflect e transactions and dispositions of e assets of e company; (2) provide reasonable assurance at transactions are recorded as necessary to permit preparation of financial statements in accordance wi generally accepted accounting principles, and at receipts and expenditures of e company are being made only in accordance wi auorisations of management and directors of e company; and (3) provide reasonable assurance regarding prevention or timely detection of unauorised acquisition, use, or disposition of e company's assets at could have a material effect on e financial statements. Inherent Limitations of Internal Financial Controls over Financial Reporting Because of e inherent limitations of internal financial controls over financial reporting, including e possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of e internal financial controls over financial reporting to future periods are subject to e risk at e internal financial control over financial reporting may become inadequate because of changes in conditions, or at e degree of compliance wi e policies or procedures may deteriorate. Opinion In our opinion, e Holding Company, its subsidiary companies, its associate companies and jointly controlled companies, which are companies incorporated in India, have, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on e internal control over financial reporting criteria established by e Company considering e essential components of internal control stated in e Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by e Institute of Chartered Accountants of India. Oer Matters Our aforesaid reports under Section 143(3)(i) of e Act on e adequacy and operating effectiveness of e internal financial controls over financial reporting insofar as it relates to TWO (2) subsidiary Companies and ONE (1) jointly controlled company, which are companies incorporated in India, is based on e corresponding reports of e auditors of such companies incorporated in India. For M/s. P.B. VIJAYARAGHAVAN & CO., Chartered Accountants Firm Regn S For M/s. CHANDRAN & RAMAN Chartered Accountants Firm Regn S Place : Chennai Date : P.B. Srinivasan S. Pattabiraman Partner Partner M.: M.:

6 Annexure II to Independent Auditors Report Comments in regard to e directions and sub-directions issued by e Comptroller and Auditor General of India 1. In respect of e Group, e holding Company has been acquiring land rough Government of Tamil Nadu. As per e legal opinion obtained by e Company as regards e clear title e position is as under Period during which land Statute under which e Mode of Nature of was acquired land was acquired acquisition ownership From incorporation to 1977 The Land Acquisition Assignment Conditional Act, 1894 Deeds Ownership 1978 to 1996 The Land Acquisition Government Absolute owner Act, 1894 Notifications of e land 1997 to 2001 The Tamil Nadu Acquisition Government Conditional of Land for Industrial Notifications Ownership Purposes Act, to The Tamil Nadu Acquisition Government Absolute owner of Land for Industrial Notifications of e land Purposes Act, 1997 In e case of subsidiaries and jointly controlled entity e Companies have clear title over e land owned by it. 2. During e year under audit, ere were no cases of waiver/write off of debts/loans/interest etc., in respect of e Group and of its associates and jointly controlled entity. 3. There are no cases of inventories lying wi ird parties or assets received as gifts/grants from e Government or oer auorities in respect of e Group and of its associates and jointly controlled entity. For M/s. P.B. VIJAYARAGHAVAN & CO., Chartered Accountants Firm Regn S For M/s. CHANDRAN & RAMAN Chartered Accountants Firm Regn S Place : Chennai Date : P.B. Srinivasan S. Pattabiraman Partner Partner M.: M.:

7 M/s. P.B. VIJAYARAGHAVAN & CO., M/S. CHANDRAN & RAMAN, Chartered Accountants, Chartered Accountants, 14/27, Caedral Garden Road, Paragon 2, Dr. Radhakrishnan Salai, Nungambakkam, nd 2 Street, Mylapore, Chennai Chennai Independent Auditors Report on e Abridged Financial Statements of Neyveli Lignite Corporation Ltd. To The Members of Neyveli Lignite Corporation Limited The accompanying abridged consolidated financial statements, which comprise e abridged consolidated balance sheet as at March 31, 2016, e abridged consolidated statement of profit & loss, and abridged consolidated cash flow statement for e year en ended, and related notes, are derived from e audited consolidated financial statements of NEYVELI LIGNITE CORPORATION LIMITED for e year ended March 31, We expressed an unmodified audit opinion on ose consolidated financial statements in our report dated May 26, Those consolidated financial statements, and e abridged consolidated financial statements, do not reflect e effects of events at occurred subsequent to e date of our report on ose financial statements. The abridged consolidated financial statements do not contain all e disclosures required by e Accounting Standards referred to in section 133 of e Companies Act, 2013 ( e Act ) applied in e preparation of e audited consolidated financial statements of Neyveli Lignite Corporation Limited. Reading e abridged consolidated financial statements, erefore, is not a substitute for reading e audited consolidated financial statements of Neyveli Lignite Corporation Limited. Management s Responsibility for e Summary Financial Statements Management is responsible for e preparation of a summary of e audited consolidated financial statements in accordance wi Accounting Standards referred to in section 133 of e Companies Act, 2013 ( e Act ) and accounting principles generally accepted in India. Auditor s Responsibility Our responsibility is to express an opinion on e abridged consolidated financial statements based on our procedures, which were conducted in accordance wi Standard on Auditing (SA) 810, Engagements to Report on Summary Financial Statements issued by e Institute of Chartered Accountants of India. Opinion In our opinion, e abridged consolidated financial statements derived from e audited consolidated financial statements of Neyveli Lignite Corporation Limited for e year ended March 31, 2016 are a fair summary of ose consolidated financial statements, in accordance wi Accounting Standards referred to in section 133 of e Companies Act, 2013 ( e Act ) and accounting principles generally accepted in India. 117

8 Emphasis of Matters We draw attention to e following matters in e Notes to e financial statements: a) Note No: 23(A)(1)(i) to e financial statements regarding adoption of normal corporate tax rate instead of Minimum Alternate Tax rate for calculation of Return on Equity in tariff fixation under Central Electricity Regulatory Commission (CERC) regulation. b) Note No: 23(A)(1)(ii) to e financial statements regarding e review order of Central Electricity Regulatory Commission (CERC) dated for refund of additional profit earned by sale of lignite to outside agencies over and above 85% capacity utilisation factor of Mine II Expansion and refund of incentive for e excess generation of power over and above e contemplated PLF in TPS II due to inclusion of pooled price of Mine II Expansion. c) Note No: 23(A)(1)(iii) to e financial statements regarding e order of e Central Electricity Regulatory Commission (CERC) dated regarding disallowance of interest during construction period of Barsingsar Thermal Power Station. d) Note No: 25(d) to e financial statements regarding Power tariff at final adjustment will be made in e accounts on receipt of Central Electricity Regulatory Commission (CERC) order, which is not ascertainable at is stage. Our opinion is not modified in respect of ese matters. For M/s. P.B. VIJAYARAGHAVAN & CO., For M/s. CHANDRAN & RAMAN Chartered Accountants Chartered Accountants Firm Regn S Firm Regn S Place : Chennai Date : P.B. Srinivasan S. Pattabiraman Partner Partner M.: M.:

9 Consolidated Significant Accounting Policies I. Principles of Consolidation The of e Group are prepared in accordance wi Accounting Standard -21 and Accounting Standard -27 Financial Reporting of Interests in Joint Ventures. The Financial statements of e Company and its subsidiaries have been combined on a line by line basis by adding togeer e book values of like items of assets, liabilities, income and expenses, after eliminating intra group balances and intra group transactions and adopting uniform accounting policies. The Financial Statements of e jointly controlled entity are proportionately consolidated. The share of interest in each item of Balance Sheet and Profit and Loss Account is separately shown. II. III. IV. Basis of Accounting The financial statements are prepared on accrual basis of accounting under historical cost convention, in accordance wi generally accepted accounting principles, accounting standards, e relevant provisions of e Companies Act, 2013 and Electricity Act, 2003 to e extent applicable. Fixed Assets 1. Fixed Assets are stated at historical cost less depreciation. Cost of acquisition is inclusive of taxes, duties, freight, installation and allocated incidental expenditure during construction / acquisition and necessary adjustments in e year of final settlement. Administrative overhead expenses attributable to construction of fixed assets incurred till ey are ready for eir intended use are identified and allocated on a systematic basis to e cost of related asset. 2. Land for mining in Tamilnadu is acquired in accordance wi and subject to e provisions of Land Acquisition Act 1894 and Tamilnadu Acquisition of Land for Industrial Purpose Act 1997 read wi e Right to fair Compensation and transparency in land Acquisition, Rehabilitation and Resettlement Act, Capitalisation of land is done wi reference to e date of taking over e physical possession of land. Depreciation 1. Depreciation is provided for under straight-line meod as indicated below: Description of Assets covered i. a) Assets of Thermal Power Stations and Wind Turbine Generators and Solar Power plant excluding vehicles oer an Ash Tippers. b) LEP assets Basis The Company follows e provisions of e Electricity Act The rates are prescribed by Central Electricity Regulatory Commission (CERC) pursuant to provisions of Electricity Act At residuary life of 15 years ii. Residential Buildings - III Class iii. Buildings : Non-residential Buildings Plant & Machinery : CME oer an dozers and pipe layers, Workshop machinery, pumps GWC &SWC pipes and Civil construction machinery. iv. Specialised Mining Equipment : Commissioned on or after v. Oer Assets and Specialised Mining Equipments commissioned before At rates prescribed by Department of Public Enterprises. At technically assessed rates. At technically assessed rates as approved by Ministry of Corporate Affairs in August At useful life prescribed in Schedule II of e Companies Act, Rates under (ii) and (iii) above are followed so long as ey are higher an e useful life covered under base (v).

10 2. A part of e asset having original cost more an 25% of e original cost of e whole of e asset is considered as significant part of e asset. Significant parts whose useful life is different from at of e whole of e asset, such significant part is determined separately and accordingly depreciated over its useful life. 3. Fixed assets relating to Research and Development are depreciated in a like manner as any oer fixed asset of e Company. 4. In e year of commissioning/retirement of assets, depreciation is calculated on pro-rata basis, based on e number of mons for which asset has been put to use. 5. Assets costing up to ` 5000/- are fully depreciated in e year in which ey are put to use. 6. Amortisation of Mine Development Account: Over burden removal costs are classified under mine development account till achievement of quantity para-meters as approved for each Project. Such amounts are amortised as depreciation on e basis of annual Lignite production to e total estimated mineable reserves, reckoning from e year in which regular lignite production is commenced after achievement of mine development. 7. Machinery Spares: Initial spares purchased along wi fixed assets are capitalised and depreciated along wi e asset. Insurance spares purchased subsequent to e commissioning of e fixed assets costing ` 50 lakh and above which can be used only in connection wi an item of Fixed Asset and whose usage are expected to be irregular are fully depreciated over e residual useful life of e Fixed Assets and if e spare is utilised, e carrying cost is fully charged as depreciation in e year of utilisation. V. Intangible Assets a. Computer Software: i. Application Software acquired for an amount more an ` 10 lakh are capitalised as intangible assets and amortised over a period of 5 years. ii. Computer Application Software acquired for an amount of less an `10 lakh are fully depreciated in e year in which it has been acquired b. Research & Development (Internally generated Projects): i. Expenditure incurred during e phase of research is charged to revenue. ii. Expenditure incurred during e phase of development is capitalised wi respect to each project and amortised over its useful life. VI. Inventory Valuation Inventories are valued at lower of cost and net realizable value. The basis of cost: i. Lignite: - At absorption cost, excluding share of common charges and social overhead. ii. iii. iv. Stores and Spares procured: - At weighted average acquisition cost. Fly ash brick at absorption cost. Waste product, used belts reconditioned, Stores and spares discarded for disposal, medicine and canteen stores are taken at NIL value. v. Goods in Transit including goods received but pending inspection/acceptance are valued at cost. vi. Fuel such as Light Diesel Oil, Heavy Furnace Oil, Coal are valued at weighted average cost basis. 120

11 VII. VIII. IX. Mine Closure Expenditure Concurrent mine closure expenses are accounted as and when incurred. The annual cost of final mine closure is calculated and accounted on e basis of guidelines for preparation of mine closure plan issued by Ministry of Coal. Prepaid Expenses Expenses are accounted under prepaid expenses only where e amounts relating to unexpired period exceed `1 crore in each case. Investments Long term investments are carried at cost. Provision is made for diminution if any, oer an temporary, in e value of such investments. X. Preliminary Project Expenditure Preliminary Project Expenditure includes expenditure on feasibility studies documentation of data, oer development expenditure, expenditure on exploratory works, technical know how etc., to be added to e capital cost of e project, as and when implemented. In case such projects are identified for transfer of business by e Govt. of India, e expenditure incurred will be recovered from e prospective buyer. If e projects are abandoned wi reference to Government orders or cannot be implemented such expenditures are charged to Profit & Loss Account in e respective years. XI. XII. XIII. Accounting for Grants i Government and oer grants received relating to depreciable fixed assets are treated as Deferred income and recognised in e Profit and Loss Account by allocating to income over e period in which e depreciation is charged. ii iii Grants relating to non-depreciable assets are credited to income over a period in which e cost of meeting e obligations attached to e grants is charged to income. Revenue grants to e extent utilised are accounted in Profit and Loss Account. Reserves and Surplus Interest Differential Reserve Interest Differential Reserve created as provided in e Loan Agreement entered into wi KfW has debt discharging effect, and is utilised in accordance wi e terms of e Loan Agreement and such utilisation is shown as widrawal from e Reserve. Employee Benefits Employee benefits are accounted as follows as per Accounting Standard 15 (Revised) 2005: i. Short term employee benefits such as wages, salaries, incentives, short term Leave Salary are fully provided for. ii. iii. iv. Long term employee benefits such as Leave salary are provided as per Department of Public Enterprises Guideline and actuarial valuation and also funded to trust. Post employment benefits such as Gratuity is treated as defined benefit plan and is accounted as per actuarial valuation. Contribution to gratuity is made to Gratuity Trust. Post Retirement Medical Benefit Scheme is treated as defined contribution scheme and accounted accordingly in respect of e employees retired prior to for which a separate reserve fund is created out of e accumulated reserve profit wi corresponding investments. v. Contribution to Provident Fund, Superannuation Fund which includes Post Retirement Medical Assistance are recognized in e Profit & Loss Account on e basis of actual liability and funded to trust. 121

12 XIV. XV. XVI. Allocation of Common Charges / Social Overhead Expenses These are allocated to production units based on salaries and wages of ese units. Prior period and Extra-ordinary items Prior Period and Extra-ordinary items are accounted in accordance wi Accounting Standard-5. Transactions arising out of errors or omissions exceeding ` 1 crore in each case are considered as material and accounted under Prior Period Transactions. Extraordinary items of value exceeding ` 1 crore in each case are considered as material and accounted for under Extra-ordinary items. Prior Period/Extra-ordinary items are not considered for stock valuation purposes. Significant events occurring after e Balance Sheet date Treatment of contingencies and significant events are in accordance wi Accounting Standard-4. For is purpose, event having an effect of ` 1 crore and above in value is considered as significant. XVII. Revenue Recognition a) Sale of power is accounted for by following Electricity Act 2003, where e tariff rates are approved by e Central Electricity Regulatory Commission constituted under e Electricity Act In case of power stations where e tariff rates are yet to be approved, provisional tariff rates, calculated on e basis of Ministry of Coal guidelines on lignite transfer price for energy charges and oer relevant CERC s norms and parameters for capacity charges, are adopted. b) Exchange differences on account of translation of foreign currency borrowings recoverable from or payable to e beneficiaries in subsequent periods as per CERC Tariff Regulations are accounted as Deferred foreign currency fluctuation asset/liability. The increase or decrease in depreciation/interest for e year due to e accounting of such exchange differences as per accounting policy no.xvii below is adjusted in depreciation/interest. c) Claims due from beneficiaries which do not fall wiin e tariff rate fixation norms (oer an reimbursement on account of Exchange Rate Variation on repayment of loans) is recognised as income in e year of incurring of e expenditure and final adjustments, if any, will be accounted on receipt of order from CERC. d) Revenue from sale of solar energy and wind energy is recognised in accordance wi e price agreed under e provisions of e power purchase agreement entered into wi Beneficiaries. Such revenue is recognised on e basis of actual units generated and transmitted. e) Sale of Lignite, in respect of e-auction sales has been reckoned to e extent of amount received and for oers on accrual basis. f) Claim towards insurance, surcharge on belated settlement of power bills and interest including delayed payment of income tax recoverable are accounted in e year of settlement and /or in e year of acceptance of e claim/ certainty of realisation as e case may be. g) Cash discounts for prompt payments are accounted as and when e related dues are settled. XVIII. Foreign Exchange transactions Exchange rate variations in foreign exchange transactions are accounted as per Accounting Standard-11 of Companies (Accounting Standards) Rules, 2006, and an option has been exercised to capitalise e exchange difference as per para 46 of Accounting Standard-11. XIX. Accounting for taxes on income Tax expense comprises of current and deferred tax. Current tax is e amount of tax payable in respect of taxable income for e period measured at e amount expected to be paid to e tax auorities in accordance wi e Indian Income-tax Act. Deferred tax is recognised on timing difference between 122

13 XX. XXI. XXII. accounting income and taxable income at originate in one period and are capable of being reversed in one or more subsequent periods, subject to consideration of prudence. Deferred tax is measured using e tax rates and e tax laws at have been enacted or substantively enacted by e Balance Sheet date. Deferred Tax Assets are reviewed at each Balance Sheet date. Borrowing Cost Borrowing costs (net of interest earned on temporary investments) specifically attributable to e assets are capitalised along wi e cost of such assets and where e borrowings are not specific, weighted average interest cost is capitalised to e qualifying assets. Oer borrowing costs are recognised as expenses in e period in which ey are incurred. Construction Projects 1. Capitalisation and Depreciation Provision A. Specialised Mining Equipment Successful completion of eight effective working hours on load test excluding minor stoppage is e criteria followed in respect of e assets covering Specialised Mining Equipment System namely Bucket Wheel Excavator, Conveyor, Tripper, Transfer Feeder and Spreader for capitalisation and commencement of depreciation charge and revenue recognition. The entire test shall be completed wiin twelve hours from e time of starting of e test including minor stoppages. B. Power Generation Unit Test and trial production for Thermal Power Generation unit commences from e date of synchronization and goes up to e date of commercial commissioning. Provisional take over date of e Turbo-generator pursuant to Seventy two hours full load operation is deemed as e date of commercial commissioning of e units. Depreciation charge commences from e date of commercial commissioning. Direct expenses and interest charges incurred during e test and trial run are capitalised and e power sale revenue earned during at period is abated to e capital cost of e project. C. Wind Turbine Generators (WTG) Each WTG will be capitalized on e date on which it is connected to grid based on e commissioning certificate issued by TANGEDCO. Depreciation charges will start from e date of capitalisation. D. Solar Project Solar Power Plant will be capitalised on e date on which it is connected to grid. 2. Net pre-commissioning income / expenditure are adjusted directly in e cost of related assets. Provisions and Contingent liability A provision is recognised when e company has a present obligation as a result of a past event and it is probable at an outflow of resources will be required to settle e obligation and in respect of which a reliable estimate can be made. Provisions are not discounted to present value and are determined based on best estimate required to settle e obligation at e balance sheet date. Contingent liability is not provided for in e accounts and are disclosed by way of notes. XXIII. Life Extension Programme of Thermal Stations Expenditure on Life Extension Programme (LEP) of Fixed Assets resulting in increased life and/or efficiency of an existing asset is added to e carrying cost of related asset and depreciated over e estimated life of e unit from e date of synchronisation. 123

14 ST BALANCE SHEET AS AT 31 MARCH, 2016 Note As at As at I. EQUITY AND LIABILITIES (1) Shareholders' Funds a) Share Capital 1 1, , b) Reserves and Surplus 2 13, , Minority Interest (2) Grants (3) Non-current Liabilities a) Long term borrowings 4 7, , b) Deferred tax liability - Net 5 1, , c) Oer Long term liabilities 6 1, (4) Current Liabilities a) Short Term Borrowings b) Trade payables 8 1, c) Oer current liabilities 9 1, , d) Short term provisions Total 29, , II. ASSETS (1) Non-current assets a) Fixed Assets (i) Tangible assets 11 16, , (ii) Intangible assets (iii) Capital work-in-progress 13 2, , (iv) Assets under development , , b) Long term loans and advances c) Oer Non-current assets (2) Current Assets a) Current Investments b) Inventories 18 1, c) Trade receivables 19 3, , d) Cash and Bank balances 20 3, , e) Short term loans and advances f) Oer current assets Total 29, , Notes to e Financial Statement and e Significant Accounting Policies annexed form an integral part of e Balance Sheet. For and on behalf of e Board K. VISWANATH RAKESH KUMAR SARAT KUMAR ACHARYA COMPANY SECRETARY CFO/DIRECTOR (FINANCE) CHAIRMAN AND MANAGING DIRECTOR Place: Chennai Date: This is e Balance Sheet referred to in our report of even date. For M/s. P.B. VIJAYARAGHAVAN & CO., For M/s. CHANDRAN & RAMAN Chartered Accountants Chartered Accountants Firm Regn S Firm Regn S P.B. Srinivasan S. Pattabiraman Partner Partner M.: M.: Place : Chennai Date :

15 ST PROFIT AND LOSS STATEMENT FOR THE YEAR ENDED 31 MARCH, 2016 Note For e year ended For e year ended I. Revenue from operations 25 7, , II. Oer income III. Total Revenue (I+II) 8, , IV. Expenses: Increase (-) / Decrease in stock Cost of fuel consumed Employee benefits expense 29 2, , Finance Cost Depreciation and amortisation expenses Oer Expenses 32 2, , Prior Period Adjustments(Net) , , Less: Expenses Capitalised Total expenses 6, , V. Profit before exceptional and extra-ordinary items and tax (III-IV) 1, , VI. Exceptional items VII. Profit before Extra-ordinary Items and tax (V+VI) 1, , VIII. Extra-ordinary Item IX. Profit before tax (VII+VIII) 1, , X. Profit from continuing operations before tax 1, , XI. i) Tax Expense: For current year Less: MAT Credit For previous year XII. XIII. ii) Deferred tax: For current year For previous year Profit for e period from continuing operation after Tax (X-XI) 1, , Profit from discontinuing operations before tax XIV Tax Expenses XV. Profit for e period from discontinuing operation after tax (XIII-XIV) XVI. Profit for e period 1, , XVII. Less: Share of Minority XVIII. Profit for e period of Group 1, , XIX. Earning Per Share Basic and Diluted (`) Notes to e Financial Statement and Significant Accounting Policies annexed form an integral part of Profit and Loss Statement. For and on behalf of e Board K. VISWANATH RAKESH KUMAR SARAT KUMAR ACHARYA COMPANY SECRETARY CFO/DIRECTOR (FINANCE) CHAIRMAN AND MANAGING DIRECTOR Place: Chennai Date: This is e Profit and Loss statement referred to in our report of even date. For M/s. P.B. VIJAYARAGHAVAN & CO., For M/s. CHANDRAN & RAMAN Chartered Accountants Chartered Accountants Firm Regn S Firm Regn S P.B. Srinivasan S. Pattabiraman Partner Partner M.: M.: Place : Chennai Date :

16 st CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH, 2016 A.CASH FLOW FROM OPERATING ACTIVITIES: For e year ended For e year ended Net Profit Before Tax 1, , Adjustments for: Less: Profit on Disposal of Asset Interest Income Add: Depreciation including prior period Oer non-cash charges Interest charged to P&L A/c , Operating Profit before working capital changes 2, , Adjustments for Trade and oer receivables: Sundry Debtors -1, Loans & Advances Inventories & oer current assets Trade Payables Cash flow generated from operations , Direct Taxes paid Cash flow before extra-ordinary items and P.P.T , Grants received Net Cash from operating activities , B.CASH FLOW FROM INVESTING ACTIVITIES: Purchase of Fixed Assets/ Preliminary expenses -1, , Sale of Fixed Assets/Projects From continuing operations Sale/Purchase of Investments Interest received Net Cash used in investing activities -1, C.CASH FLOW FROM FINANCING ACTIVITIES: Long term borrowings (Net) 1, Short Term Borrowings (Net) Interest paid Share Capital Purchased Dividend (including Dividend Tax) Net Cash used/received in financing activities , Net increase, decrease (-) Cash and cash equivalents Cash and cash equivalents as at e beginning of e year 3, , Cash and cash equivalents as at e end of e year 3, , NOTE : (-) INDICATES CASH OUTFLOW. 126

17 st CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH, 2016 As at As at DETAILS OF CASH AND CASH EQUIVALENTS: Cash in hand Cash at bank in current account* Cash at bank in deposit account* 3, , Total 3, , * Earmarked for - (i) Unpaid dividend account (ii) Endowment fund in e name of NLC schools (iii) Mine closure deposit (iv) PRMA Fixed deposit (v) Short term Deposits for lien for guarantee (vi) Government grants For and on behalf of e Board K. VISWANATH RAKESH KUMAR SARAT KUMAR ACHARYA COMPANY SECRETARY CFO/DIRECTOR (FINANCE) CHAIRMAN AND MANAGING DIRECTOR Place: Chennai Date: This is e Cash Flow Statement referred to in our report of even date. For M/s. P.B. VIJAYARAGHAVAN & CO., For M/s. CHANDRAN & RAMAN Chartered Accountants Chartered Accountants Firm Regn S Firm Regn S P.B. Srinivasan S. Pattabiraman Partner Partner M.: M.: Place : Chennai Date :

18 Notes to e Financial Statement 1 Share Capital As at As at a. Auorised 2,00,00,00,000 Equity Shares of `10/- each 2, , b. Issued, Subscribed and Paid-up 1,67,77,09,600 Equity shares of `10 each fully paid 1, , c. 1,50,99,38,640 (previous year 1,50,99,38,640) Equity Shares being 90.00% are (previous year 90%) held by e President of India. d. No new shares were issued during e current year and previous year. Hence ere is no change in number of shares outstanding as at e beginning and as at e end of e years. 2 Reserves and Surplus As at Additions Widrawal As at a. Profit and Loss Account 11, , , (Refer Note 40) - Share of interest in Joint Venture b. KfW Interest Differential Reserve: c. Contingency Reserve d. General Reserve 1, , e. Bond redemption reserve f. PRMA Reserve Fund Total 13, , , Grants As at As at a. USTDA Grant b. Fly Ash Housing Grant c. Plant Renovation Grant d. Safety Investigation System e. Oer Revenue Grants Total Long term Borrowings As at As at a. Secured i. Neyveli Bonds ii. Term Loans from Banks 3, , iii. Power Finance Corporation Ltd* 2, b Unsecured Foreign Currency loan from KfW-Germany## 8.77 Million Euro (8.98 Million Euro) - I Million Euro (60.26 Million Euro) - II Total 7, , ## Guaranteed by e Government of India. * Documents for registration is pending registration wi Sub-Registrar and registration of charges is also pending wi e Registrar of Companies. 128

19 Notes to e Financial Statement c. Neyveli Bonds 6000,8.83%,10 Years, Secured, Redeemable, Taxable, Non-convertible Bonds in e nature as Debentures of 10 lakh each secured by way of paripassu charge on e present and future fixed assets of Mine II Expansion Project, TS II Expansion Project, Barsingsar Mine and Thermal Power Station and exclusive charge on an immovable property. Redeemable on (wiout Put or Call Option). d. Rupee Term Loan of `3750 crore (RTL I `2500 crore and RTL II `1250 crore) was availed from a consortium lead by Canara Bank repayable over twenty equal bi-annual installments ending on August During e year e outstanding amount under is RTL amounting `1400 crore has been repaid to e consortium lead by Canara Bank by refinancing ` 1400 crore rough a common loan from SBI ( `467 crore), HDFC Bank ( ` crore) and ICICI Bank ( ` crore). Security - first pari-passu charge on e borrower s immovable assets of Mines II Expansion, TS II Expansion, Barsingsar Mines and TPS and pari-passu charge by way of hypoecation on e movable assets bo present and future pertaining to Mines II Expansion, TPS II Expansion, Barsingsar Mines and TPS. The existing repayment schedule is being maintained so at loan will be closed by August e. The term loan of `2500 crore from Bank of Baroda consortium is secured by a paripassu charge on project of e subsidiary financed and e Repayment of loan is Rescheduled to be repaid in twenty (20) equal half-yearly consecutive instalments starting from October f. The term loan of `937 crore from Bank of India Consortium loan is secured by a paripassu charge on project of e subsidiary financed and repayment in twenty equal half yearly consecutive instalments starting from August g. i) Term loan from Power Finance Corporation Ltd, secured by pari passu charge on project fixed assets of Neyveli New Thermal Power Station (NNTPS), repayable over 20 equal bi annual installments commencing from ii) The Rupee term loan of ` crore from M/s. Power Finance Corporation Ltd loan is secured by pari passu charge on project fixed assets of subsidiary and repayable in 20 equal half-yearly consecutive instalments as repayment schedule commenced from Jan h. Bi-annual equal repayment ( 0.44 Million) of Foreign Currency loan - I from KfW Germany, commenced from , ending on i. Bi-annual equal repayment ( 2.80 Million) of Foreign Currency loan -II from KfW Germany, commenced from , ending on Deferred Tax Liability (Net) As at As at a. Deferred tax Liability: Related to depreciation 1, , b. Deferred tax Asset: Provisions, etc Deferred tax Liability (Net) 1, , Oer Long term Liabilities As at As at a. Capital Purchase & Capital work-in-progress and oer Liabilities b. Mine Closure Liability c. Deferred Foreign Currency Fluctuation Liability Total 1, d. Pursuant to GOI guidelines on Mine closure, total Mine closure cost was approved by Ministry of Coal at a rate of 6 lakh per hectare for all e open cast Mines. The annual contribution, 5% p.a. is deposited in an Escrow account in e name of Coal Controller Escrow account NLC Ltd. Mine..., as stipulated by e Coal Controller. 129