M/s. P.B. VIJAYARAGHAVAN & CO., M/s. CHANDRAN & RAMAN,,, 14/27, Caedral Garden Road, Paragon No. 2, Dr. Radhakrishnan Salai, Nungambakkam, nd 2 Street, Mylapore, Chennai - 600 034. Chennai 600 004. To The Members of M/s. Independent Auditors Report NEYVELI LIGNITE CORPORATION LIMITED Report on e Financial Statements We have audited e accompanying standalone financial statements of M/s. NEYVELI LIGNITE st CORPORATION LIMITED ( e Company ), which comprise e Balance Sheet as at 31 March, 2016, e Statement of Profit and Loss, e Cash Flow Statement for e year en ended, and a summary of e significant accounting policies and oer explanatory information. Management's Responsibility for e Standalone Financial Statements The Company s Board of Directors is responsible for e matters stated in Section 134(5) of e Companies Act, 2013 ( e Act ) wi respect to e preparation of ese financial statements at give a true and fair view of e financial position, financial performance and cash flows of e Company 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, 2014. This responsibility also includes maintenance of adequate accounting records in accordance wi e provisions of e Act for safeguarding e assets of e Company and for preventing and detecting frauds and oer irregularities; selection and application of appropriate accounting policies; making judgments and estimates at are reasonable and prudent; and 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. Auditor's Responsibility Our responsibility is to express an opinion on ese standalone financial statements based on our 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about e amounts and e disclosures in e financial statements. The procedures selected depend on e auditor s judgment, including e assessment of e risks of material misstatement of e financial statements, wheer due to fraud or error. In making ose risk assessments, e auditor considers internal financial control relevant to e Company s preparation of e financial statements at give a true and fair view in order to design audit procedures at are appropriate in e 69
circumstances. An audit also includes evaluating e appropriateness of e accounting policies used and e reasonableness of e accounting estimates made by e Company s Directors, as well as evaluating e overall presentation of e financial statements. We believe at e audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on e standalone financial statements. Opinion In our opinion and to e best of our information and according to e explanations given to us, e aforesaid standalone 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 state of affairs of st e Company as at 31 March, 2016, and its profit and its cash flows for e year ended on at date. Emphasis of Matters We draw attention to e following matters in e Notes to e financial statements: a) Note No: 24(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: 24(A)(1)(ii) to e financial statements regarding e review order of Central Electricity Regulatory Commission (CERC) dated 21.01.2016 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: 24(A)(1)(iii) to e financial statements regarding e order of e Central Electricity Regulatory Commission (CERC) dated 14.03.2016 regarding disallowance of interest during construction period of Barsingsar Thermal Power Station. d) Note No: 26(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 Matter We did not audit e financial statements of ONE (1) branch included in e standalone financial statements of e st company whose financial statement reflects a total assets of ` 1821.20 crore as at 31 March 2016 and total revenue of ` 435.98 crore for e year ended on at date, as considered in e standalone financial statements. The financial statements of is branch has been audited by e branch auditor whose report has been furnished to us, and our opinion in so far as it relates to e amounts and disclosures included in respect of is branch, is based solely on e report of such branch auditor. Our opinion is not modified in respect of is matter. Report on oer Legal and Regulatory Requirements 1. As required by e Companies (Auditor s Report) Order, 2016 ( e Order ) issued by e Central Government of India in terms of sub-section (11) of Section 143 of e Act, we give in Annexure - I a statement on e matters specified in e paragraph 3 and 4 of e Order, to e extent applicable. 2. As required by Section 143 (3) of e Act, we report at: 70
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. b) In our opinion, proper books of account as required by law have been kept by e Company so far as it appears from our examination of ose books. c) The report on accounts of e branch office of e company audited U/s.143(8) of e Act by e branch auditor has been sent to us and has been properly dealt wi by us in preparing is report. d) The Balance Sheet, e Statement of Profit and Loss, and e Cash Flow Statement dealt wi by is Report are in agreement wi e books of account. e) In our opinion, e aforesaid standalone financial statements comply wi e Accounting Standards specified under Section 133 of e Act, read wi Rule 7 of e Companies (Accounts) Rules, 2014. f) As per e Notification No. G.S.R. 829(E) dated 21.10.2003, 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. g) Wi respect to e adequacy of internal financial control systems and e operating effectiveness of such controls, we give our Report in Annexure-II. h) Wi respect to e oer matters to be included in e Auditor s Report in accordance wi Rule 11 of e Companies (Audit and Auditors) Rules, 2014, in our opinion and to e best of our information and according to e explanations given to us: i. The Company has disclosed e impact of pending litigations on its financial position in its financial statements - Refer Note 24(A) to e financial statements; ii. iii. The company did not have any long-term contracts including derivative contracts for which ere were any material foreseeable losses. There has been no delay in transferring amounts, required to be transferred, to e Investor Education and Protection Fund by e Company. 3. 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-III. For M/s. P.B. VIJAYARAGHAVAN & CO., Firm Regn. No. 004721S For M/s. CHANDRAN & RAMAN Firm Regn No. 000571S Place : Chennai Date : 26.05.2016 P.B. Srinivasan S. Pattabiraman M.No.: 203774 M.No.: 014309 71
1) Fixed Assets Annexure - I to Independent Auditors' Report Statement of matters specified in Para 3 & 4 of e order referred to in sub-section (11) of section 143 a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. b) The Company has a policy of verifying all e fixed assets once in five years. For e cycle 2006-07 to 2010-11, physical verification of all e fixed assets has been carried out during e financial year 2010-11. Pending reconciliation of discrepancies observed on physical verification conducted during e financial year 2010-11 a sum of ` 0.41 crore has been provided for. For e cycle 2011-12 to 2015-16, e physical verification of fixed assets is in progress. Material discrepancies, if any, will be adjusted as and when determined. c) According to e information and explanations given to us, e Company is in possession of title deeds/assignment deeds/go s in respect of immovable properties, except as detailed below. However, due to e enormous volume of e documents held by e Company for acquisition of land, all e title deeds could not be fully verified. (` in crore) Gross Block Net Block Nature of Immovable Total No. Remarks, as on as on Property of cases if any 31.03.2016 31.03.2016 Building Leasehold 1 2.08 1.35 Registration of Lease Deed pending Building Freehold 1 26.25 25.94 Execution of Sale Deed is pending 2) Inventory The inventory has been physically verified during e year by e management. No material discrepancies were noticed. 3) Transactions wi parties covered by register referred to in section 189 The Company has granted unsecured loan to a subsidiary Company and to a Director of e Company covered by e register maintained under section 189 of e Companies Act, 2013. a) In our opinion, e terms and conditions of grant of e loans are not prejudicial to e interest of e Company. b) According to e information and explanations given to us, e schedule of repayment of principal and payment of interest has been stipulated while granting such loans and e repayment/receipts are regular. c) No amounts are overdue for more an 90 days. 4) Compliance wi section 185 & 186 in respect of Loans and Investments The Company has not advanced loans, given guarantees or security or made any investment in contravention of section 185 and/or section 186 of e Companies Act, 2013. 5) Public Deposits In our opinion and according to e information and explanations given to us, e Company has not accepted deposits from public and hence e provisions of sections 73 to 76 or any oer relevant provisions of e Companies Act and e rules made ere under are not applicable to e Company. 72
6) Maintenance of Cost Records The Central Government has prescribed e maintenance of cost records U/s. 148(1) of e Companies Act, 2013 in respect of Electricity Industry and Lignite. We have broadly reviewed e books of account maintained by e Company pursuant to e Rules made by e Central Government for e maintenance of cost records under section 148 of e Act, and are of e opinion at prima facie, e prescribed accounts and records have been made and maintained. 7) Statutory Dues a) The Company has generally been regular in depositing Provident Fund dues of its own employees. Based on e information and explanations given to us e Company has laid down system and procedures regarding deposit of PF and ESI dues relating to contractors workers. The company has generally been regular in depositing Income-tax, Sales Tax, Service Tax, duty of customs, duty of excise, value added tax, cess and any oer statutory dues to e appropriate auorities. Based on information and explanation given to us, no undisputed amounts payable in respect of Income Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Cess and any oer st statutory dues were outstanding as at 31 March 2016 for a period of more an six mons from e date ey became payable. b) According to e information and explanations given to us, ere are no dues of Income Tax, Sales Tax, Customs duty, Weal Tax, Excise Duty, Value Added Tax and Cess which have not been deposited on account of any dispute except as reported below: Name of e Statute Rajasan Finance Act, 2006 The Central Excise Act, 1944 Amount Period to Forum Demand Nature of Deposited which where Amount e dues under protest e amount dispute is (` in lakh) (` in lakh) relates pending 8) Repayment of Loans The Company has not defaulted in repayment of loans or borrowing to a financial institution, bank, government or dues to debenture holders during e relevant financial year. 9) Raising of monies rough Public Offer and/or Term Loans 57.53 28.76 2008-09 173.73 63.28 2009-10 Land tax 173.73 86.86 2010-11 192.92 99.96 2011-12 192.92 99.96 2012-13 Customs Act Customs Duty 3237.21 733.98 - Finance Act, 1994 Service Tax Tax Board, Ajmer CESTAT 89.56 6.72 April 2009 CESTAT 10.18 - to June 2012 CEC(A) July 2012 51.34 3.85 CEC(A) to March 2014 April 2012 1.11 0.08 CEC(A) to June 2012 Nov 2011 Excise Duty 29.03 2.18 CEC(A) to Sep 2012 According to e information and explanations given to us, e monies raised by ways of issue of debt instruments and term loans were applied for e purposes for which ose were raised. 73
10) Frauds According to e information and explanations given to us no fraud by e Company or any fraud on e Company by its officers or employees has been noticed or reported during e year. 11) Managerial Remuneration According to e information and explanations provided to us, e total Managerial remuneration paid/provided by e Company is wiin e overall maximum limit as specified section 197 read wi Schedule V to e Companies Act, 2013 and accordingly requirements as to obtaining requisite approval is section does not arise. 12) Compliance wi Net Owned Funds Ratio & unencumbered term deposits The Company is not a Nidhi Company and hence e provisions para 3(xii) of e order referred to in Companies (Auditor s Report) Order, 2016 issued by e Central Government of India in terms of sub-section (11) of Section 143 of e Act does not apply to e Company. 13) Transaction wi Related Parties In our opinion all transactions wi e related parties are in compliance wi e provision of section 177 and 188 of Companies Act, 2013 wherever applicable and e details have been disclosed in e Financial Statements etc., as required by e applicable accounting standards. 14) Preferential Allotment or Private Placement The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during e year under review. 15) Non-cash transactions The Company has not entered into any non-cash transactions wi directors or persons connected wi him as referred to in section 192 of e Companies Act, 2013. 16) Registration wi Reserve Bank of India The Company is not carrying any activities which require registration under section 45-IA of e Reserve Bank of India Act, 1934. For M/s. P.B. VIJAYARAGHAVAN & CO., Firm Regn. No. 004721S For M/s. CHANDRAN & RAMAN Firm Regn No. 000571S Place : Chennai Date : 26.05.2016 P.B. Srinivasan S. Pattabiraman M.No.: 203774 M.No:. 014309 74
Annexure-II 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 ) We have audited e internal financial controls over financial reporting of M/s. NEYVELI LIGNITE CORPORATION LIMITED ( e Company ) as of March 31, 2016 in conjunction wi our audit of e standalone financial statements of e Company for e year ended on at date. Management s Responsibility for Internal Financial Controls The Company s management is 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 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, 2013. 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 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 75
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 Company has, 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 of India. Oer Matter We did not audit e Internal Financial Control over Financial Reporting of ONE (1) branch included in e standalone financial statements of e company. The adequacy of internal financial controls system over financial reporting and e operating effectiveness of such internal financial controls over financial reporting conducted by e branch auditor whose report has been furnished to us, and our opinion in so far as it relates to e amounts and disclosures included in respect of is branch, is based solely on e report of such branch auditor. Our opinion is not modified in respect of is matter. For M/s. P.B. VIJAYARAGHAVAN & CO., Firm Regn. No. 004721S For M/s. CHANDRAN & RAMAN Firm Regn No. 000571S Place : Chennai Date : 26.05.2016 P.B. Srinivasan S. Pattabiraman M.No.: 203774 M.No.: 014309 76
Annexure-III to Independent Auditors Report Comments in regard to e directions and sub-directions issued by e Comptroller and Auditor General of India 1. The 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, 1997 2001 to 31.03.2016 The Tamil Nadu Acquisition Government Absolute owner of Land for Industrial Notifications of e land Purposes Act, 1997 2. During e year under audit, ere were no cases of waiver/write off of debts/loans/interest etc. 3. There are no cases of inventories lying wi ird parties or assets received as gifts/grants from e Government or oer auorities. For M/s. P.B. VIJAYARAGHAVAN & CO., Firm Regn. No. 004721S For M/s. CHANDRAN & RAMAN Firm Regn No. 000571S Place : Chennai Date : 26.05.2016 P.B. Srinivasan S. Pattabiraman M.No.: 203774 M.No.: 014309 77