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Rural Electrification Corporation Ltd.

BSE: 532955 Sector: Financials
NSE: RECLTD ISIN Code: INE020B01018
BSE 15:56 | 23 Feb 139.95 3.15
(2.30%)
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137.30

HIGH

140.15

LOW

137.25

NSE 15:58 | 23 Feb 140.30 3.65
(2.67%)
OPEN

137.00

HIGH

140.50

LOW

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OPEN 137.30
PREVIOUS CLOSE 136.80
VOLUME 325493
52-Week high 223.80
52-Week low 136.00
P/E 5.39
Mkt Cap.(Rs cr) 27,639
Buy Price 139.95
Buy Qty 732.00
Sell Price 0.00
Sell Qty 0.00
OPEN 137.30
CLOSE 136.80
VOLUME 325493
52-Week high 223.80
52-Week low 136.00
P/E 5.39
Mkt Cap.(Rs cr) 27,639
Buy Price 139.95
Buy Qty 732.00
Sell Price 0.00
Sell Qty 0.00

Rural Electrification Corporation Ltd. (RECLTD) - Auditors Report

Company auditors report

To

The Members

Rural Electrification Corporation Limited New Delhi

The Revised Report is issued in supersession of our earlier Audit Report dated 30 May2017 at the instance of the Comptroller & Auditor General (C&AG) of India inorder to make it more clarificatory particularly in respect of the reporting requirementsof the Companies (Auditor's Report) Order 2016 and Clause (i) of sub-section 3 of theSection 143 of the Companies Act 2013 pertaining to reporting on Internal FinancialControls. Further we confirm that there is no change in the true & fair view of thefinancial statements as expressed in earlier report and also none of the figures haveundergone any change in the financial statements of the Company as at 31 March 2017.

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of RuralElectrification Corporation Limited ("the Company") which comprise the BalanceSheet as at 31 March 2017 the Statement of Profit and Loss the Cash Flow Statement forthe year then ended and a summary of the significant accounting policies and otherexplanatory information.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparationand presentation of these standalone financial statements that give a true and fair viewof the financial position financial performance and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 and MCA General Circular No. 15/2013 dated 13 September2013. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the standalone financial statements. The procedures selected depend onthe auditor's judgment including the assessment of the risks of material misstatement ofthe standalone financial statements whether due to fraud or error. In making those riskassessments the auditor considers internal financial control relevant to the Company'spreparation of the standalone financial statements that give a true and fair view in orderto design audit procedures that are appropriate in the circumstances. An audit alsoincludes evaluating the appropriateness of the accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the standalone financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:

(a) In the case of Balance Sheet of the state of affairs of the Company as at 31March2017

(b) In the case of Statement of Profit & Loss of the profit for the year ended onthat date

(c) In the case of Cash Flow Statementof the cash flows for the year ended on thatdate.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Companies Act 2013 we give in the Annexure-A a statement on the matters specifiedin paragraphs 3 and 4 of the Order.

2. We are enclosing our report in terms of Section 143 (5) of the Act on the basis ofsuch checks of the books and records of the Company as we have considered appropriate andaccording to the information and explanations given to us in Annexure B on the directionsand sub-directions issued by Comptroller and Auditor General of India.

3. As required by section 143(3) of the Act we report that:

(a) We have sought and obtained all the information and explanations which to the bestof 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 theCompany so far as it appears from our examination of those books.

(c) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.

(d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 and MCA General Circular No. 15/2013 dated 13 September2013.

(e) Vide Notification No. G.S.R. 463(E) dated 5 June 2015 issued by Ministry ofCorporate Affairs Government Companies have been exempted from applicability of theprovisions of Section 164(2) of the Companies Act 2013.

(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure-C"; and

(g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 financialposition in its standalone financial statements - Refer Note 25.1 to the standalonefinancial statements;

(ii) The Company does not have any such long-term contracts including derivativecontracts for which there are any material foreseeable losses;

(iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

(iv) The Company has provided requisite disclosures in the standalone financialstatements as to holdings as well as dealings in specified bank notes during the periodfrom 8 November 2016 to 30 December 2016. Based on audit procedures and relying on themanagement representation we report that the disclosures are in accordance with books ofaccount maintained by the management. Refer Note 13.1 to the standalone financialstatements.

For Raj Har Gopal & Co. For A.R & Co.
Chartered Accountants Chartered Accountants
Firm Regn. No. 002074N Firm Regn. No. 002744C
(Shrey Gupta) (Anil Gaur)
Partner Partner
M. No. 522315 M. No.017546
Place : New Delhi
Date : 17th July 2017

ANNEXURE-A TO THE INDEPENDENT AUDITOR'S REPORT

Referred to in Paragraph 1 under ‘Report on Other Legal and RegulatoryRequirements' Section of Our Report of Even Date on the

Accounts of Rural Electrification Corporation Limited for the Year ended on 31 March2017

(i) (a) The Company has maintained fixed assets records to show full particularsincluding quantitative details and situation of its fixed assets.

(b) According to the information and explanations given to usthe company has thepolicy of verifying the fixed assets in a phased manner. Discrepancies arising from suchphysical verification have been suitably accounted for in the books of accounts. In ouropinion the periodicity of physical verification is reasonable having regard to the sizeof the company and the nature of its assets.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company except for the following:

Particulars No. of cases Gross Block Net Block Remarks
Freehold Land 1 45.92 45.92 Conveyance Deed by Haryana Urban Development Authority is yet to be executed.
Building 1 4.59 2.32 Conveyance Deed by Standing Committee of Public Enterprises is yet to be executed.

(ii) The company being Non-Banking Financial Company (NBFC) does not have anyinventory; as such this clause is not applicable.

(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to any

Companies firms or other parties covered in register maintained under section 189 ofthe Companies Act 2013. Accordingly clause 3(iii)(a) (b) and (c) of the Order are notapplicable.

(iv) In our opinion and according to information & explanations given to us withrespect to the provisions of Section 185 of the Act the Company has granted a loan to oneof its whole-time directors during the year. However the provisions of Section 185 arenot applicable to such loan since it forms part of the conditions of service extended bythe Company to all its employees.

Further in our opinion and according to information & explanations given to usthe Company being a Non-Banking Financial Company (NBFC) is exempt from the provisionsof Section 186 of the Act and the relevant rules in respect of loans and guarantees. Inrespect of the investments the Company has complied with the provisions of section 186(1) of the Act.

(v) According to the information and explanations given to us the Company has notaccepted any deposits from public to which the

provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act2013 and the Rules framed thereunder apply.

(vi) To the best of our knowledge and as explained the Central Government has notprescribed the maintenance of cost records for the products/services of the Company underCompanies (Cost Records and Audit) Rules 2014 read with Companies (Cost Records andAudit) Amendment Rules 2014 prescribed by the Central Government under Section 148 of theCompanies Act 2013. Accordingly this clause of the order is not applicable to theCompany.

(vii) (a) The Company is generally regular in depositing undisputed statutory duesincluding Provident Fund Employees' State

Insurance Income-tax Sales-tax Service Tax duty of customs duty of excise valueadded tax cess and any other statutory dues to the appropriate authorities. There were noundisputed statutory dues in arrears as at 31 March 2017 for a period of more than sixmonths from the date they became payable.

(b) According to the information and explanations given to us the disputed statutorydues aggregating to '19.49 crores have not been deposited on account of matters pendingbefore appropriate authorities as detailed below:

Name of Statute Nature of Dues Amount Disputed Amount paid/ refund adjusted Net Amount Unpaid Period to which the amount relates Forum where dispute is pending
Income Tax Act 1961 Income Tax and Interest 24.85 6.3 18.55* AY 2005-06 AY 2006-07 AY 2008-09 to AY 2012-13 Income Tax Appellate Tribunal Delhi
Income Tax Act 1961 Income Tax and Interest 42.54 42.54 AY 2008-09 AY 2011-12 Ay 2013-14 AY 2014-15 Commissioner of Income Tax (Appeals) Delhi
Income Tax Act 1961 Fringe Benefit Tax 0.48 0.48 AY 2008-09 Commissioner of Income Tax (Appeals) Delhi
Income Tax Act 1961 Income Tax and Interest 14.37 14.37 AY 1999-00 to AY 2002-03 AY 2004-05 Supreme Court
Income Tax Act 1961 Tax Deducted at Source 0.1 - 0.1 FY 2007-08 CPC TDS
Chapter V of Finance Act 1994 Service Tax Penal Interest u/s 73(4A) 0.36 - 0.36 FY 2008-09 CESTAT Delhi
Total 82.7 63.21 19.49

* ' 18.55 crores though received by the Company as refund due to appeal effects offavorable decisions of various appellate forums is

however being considered as unpaid on account of further appeals made by the Income TaxDepartment to higher authorities.

(viii) According to the information and explanations given to us and on the basis ofour examination of the records of the Company the company has not defaulted in repaymentof loans or borrowing to a financial institution bank government or dues to debentureholders as at the Balance Sheet date.

(ix) The company did not raise any money by way of initial public offer or furtherpublic offer and term loans during the year. Accordingly paragraph 3 (ix) of the order isnot applicable.

(x) According to the information and explanations given to us and as represented by themanagement and on the basis of our examination of the records of the Company inaccordance with the generally accepted auditing practices in India we have been informedthat in one case of fraud involving an aggregate amount of '0.59 crores towards fraudulentencashment through forged documents of money invested by one of the investors (Refer NoteNo. 3.7 to the standalone financial statements) and in another case of overcharging ofbills of an aggregate amount of '1.01 crores by an air travel agent (Refer Note No. 23.1to the standalone financial statements) has been committed on the company during theyear. The company has taken appropriate action in both the cases.

(xi) According to the information and explanations given to us Central Government hasexempted the Government Companies from the provisions of Section 197. Accordingly thisclause of the Order is not applicable to the Company.

(xii) According to the information and explanations given to us the Company is not aNidhi Company. Accordingly this clause of the Order is not applicable to the Company.

(xiii) According to the information and explanations given to us and on the basis ofour examination of the records of the Company transactions with the related parties arein compliance with section 177 and 188 of the Act where applicable and the necessarydisclosures have been made in the standalone financial statements etc. as required by theapplicable accounting standards.

(xiv) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with them. Accordingly this clause ofthe Order is not applicable.

(xvi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company being a NBFC is required to beregistered under section 45-IA of the Reserve Bank of India Act 1934. The registration asrequired has been duly obtained and registration number issued to the Company is14.000011.

For Raj Har Gopal & Co. For A.R & Co.
Chartered Accountants Chartered Accountants
Firm Regn. No. 002074N Firm Regn. No. 002744C
(Shrey Gupta) (Anil Gaur)
Partner Partner
M. No. 522315 M. No.017546
Place : New Delhi
Date : 17th July 2017

ANNEXURE-B TO THE INDEPENDENT AUDITOR'S REPORT

Referred to in Paragraph 2 under ‘Report on Other Legal and RegulatoryRequirements' Section of Our Report of Even Date on the Accounts of Rural ElectrificationCorporation Limited for the Year ended on 31st March 2017

Sl. No. Directions/ Sub-Directions Action Taken Impact on Standalone Financial Statements
A. Directions
1. Whether the company has clear title/ lease deeds for freehold and leasehold land respectively? If not please state the area of freehold and leasehold land for which title/ lease deeds are not available. The company has clear title/ lease deeds for freehold and leasehold land respectively. However the formalities regarding registration of conveyance deed in respect of one freehold residential plot of land allotted to the Company amounting to ' 45.92 Crores and measuring 39770 Sq. Mtrs. and one Land & Building amounting to ' 4.59 Crores and measuring 5911.69 Sq. Mtrs. are yet to be executed. The impact has already been mentioned in the 'Action Taken' column which is not material.
2. Whether there are any cases of waiver/ write off of debts/ loans/ interest etc. If yes the reasons therefore and amount involved. Delayed interest/ penal interest amounting to '5.32 Crores has been waived off after the approval of the competent authority including '5.29 Crores waived in pursuance of Ujwal DISCOM Assurance Yojana (UDAY) launched by Ministry of Power (MoP). Prepayment premium of '19.75 Crores has been waived. Further no prepayment charge has been levied on the DISCOM debt so prepaid under UDAY scheme. The impact has already been mentioned in the 'Action Taken' column which is not material.
3. Whether proper records are maintained for inventories lying with third parties and assets received as gift/ grant(s) from the Government or other authorities. The Company being an NBFC the clause with respect to inventories lying with third parties and assets received as gifts from Govt. and other authorities is not applicable. NIL
B. Sub-Direction
1. In respect of provisioning requirements of all restructured rescheduled or renegotiated loan whether a system of periodical assessment of realizable value of securities available against all such loans is in place and adequate provision has been created during the year? Any deficiencies in this regard may be suitably commented upon along with financial implication. The company is following a system of periodical assessment of realizable value of securities available against all restructured rescheduled or renegotiated loan based upon management assessment and review/ progress report of lenders engineers lenders financial advisor and project monitoring group. No deficiency in this regard has been observed having financial implication. In our opinion the system of company needs improvement to be commensurate with the size and nature of its business. However adequate provision as per significant accounting policies of the company has been created during the year on all such loans. NIL

ANNEXURE-C TO THE INDEPENDENT AUDITOR'S REPORT

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Act

We have audited the internal financial controls over financial reporting of the Companyas of 31 March 2017 in conjunction with our audit of the standalone financial statementsof the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (‘ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of standalone financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of standalone financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and

(3) Provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the standalonefinancial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material aspects an adequate internalfinancial controls system except (i) improvement in ERP system relating to classificationof loans & advances as secured or unsecured determination of non-performing assets inthe ERP system shift in the moratorium period due to structuring/restructuringrevalidation of the sanctions of loans and recording of

non-entertaining/rejection/disposal of applications of the loans (ii) strengthening ofprocedures for monitoring of utilization of funds disbursed to the borrowers (iii)procedure for processing of the claims of travel agent over financial reporting and suchinternal financial controls over financial reporting were operating effectively as of 31March 2017 based on the internal control over financial reporting criteria established bythe Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls over Financial Reporting issued bythe Institute of Chartered Accountants of India.

We have considered the areas of improvement identified which needs furtherstrengthening as reported above in determining the nature timing and extent of audittests applied in our audit of the 31 March 2017 standalone financial statements of theCompany. However these areas of improvement do not affect our opinion on the standalonefinancial statements of the Company.

For Raj Har Gopal & Co. For A.R & Co.
Chartered Accountants Chartered Accountants
Firm Regn. No. 002074N Firm Regn. No. 002744C
(Shrey Gupta) (Anil Gaur)
Partner Partner
M. No. 522315 M. No.017546
Place : New Delhi
Date : 17th July 2017