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HFCL Ltd.

BSE: 500183 Sector: Telecom
NSE: HFCL ISIN Code: INE548A01028
BSE 00:00 | 30 Jul 75.20 3.55
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OPEN 72.60
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VOLUME 599682
52-Week high 95.70
52-Week low 11.30
P/E 34.03
Mkt Cap.(Rs cr) 9,696
Buy Price 0.00
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Sell Price 0.00
Sell Qty 0.00
OPEN 72.60
CLOSE 71.65
VOLUME 599682
52-Week high 95.70
52-Week low 11.30
P/E 34.03
Mkt Cap.(Rs cr) 9,696
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

HFCL Ltd. (HFCL) - Auditors Report

Company auditors report

To the Members of HFCL Limited

(formerly Himachal Futuristic Communications Limited)

Report on the Audit of the Standalone Financial Statements

1. Opinion

We have audited the accompanying standalone financial statements ofHFCL Limited (formerly Himachal Futuristic Communications Limited) ("theCompany”) which comprise the balance sheet as at March 31 2020 the statement ofProfit and Loss (including other comprehensive income) the statement of changes in equityand the statement of cash flows for the year then ended and notes to the financialstatements including a summary of significant accounting policies and other explanatoryinformation.

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ("the Act”) in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2020and profit (including other comprehensive income) changes in equity and its cash flowsfor the year ended on that date.

2. Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing(SAs) specified under section 143(10) of the Companies Act 2013. Our responsibilitiesunder those Standards are further described in the Auditor's Responsibilities for theAudit of the Financial Statements section of our report. We are independent of the Companyin accordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rulesthereunder and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

3. Emphasis of Matter

We draw attention to Note 41 of the standalone financial statementswhich describes management Rs s assessment of the impact of the outbreak of COVID-19pandemic on its business operations and financial results. The said assessment made by themanagement is highly dependent upon the circumstances as they evolve in subsequent period.

Our opinion is not modified in respect of this matter.

4. Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.

Key Audit Matters Response to Key Audit Matters
1 Customer contracts - accuracy of revenue recognition valuation of contract assets work in progress (WIP) trade and other receivables and accuracy of contract liabilities Our procedures included among others obtaining an understanding of the project execution processes and relevant controls relating to the accounting for customer contracts.
For the year ended March 31 2020 revenue from customer contracts amounts to INR 3547.30 Crores whereas as at March 31 2020 contract assets amount to INR 18.16 Crores contract liabilities to INR 33.16 Crores the balance of work in progress (WIP) amounts to INR 119.26 Crores and retention amounts to INR 309.99 Crores For the revenue recognized throughout the year we tested selected key controls including results reviews by management for their operating effectiveness and performed procedures to gain sufficient audit evidence on the accuracy of the accounting for customer contracts and related financial statement captions.
These procedures included reading significant new contracts to understand the terms and conditions and their impact on revenue recognition. We performed enquiries with management to understand their risk assessments relating to customer contracts.
The application of the revenue accounting standard (Ind AS 115 Revenue from Contracts with Customers) involves certain key judgements relating to identification of distinct performance obligations determination of transaction price of the identified performance obligations the appropriateness of the basis used to measure revenue recognized over a period. Additionally revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
On a sample basis we reconciled revenue to the supporting documentation validated costs tested the mathematical accuracy of calculations and the adequacy of accounting of customer contracts.
Refer Notes 31 to the Standalone Financial Statements. We further performed testing on a sample basis to confirm the appropriate application of revenue recognition policies and to verify valuation of WIP balances. This included reconciling accounting entries to supporting documentation. When doing this we specifically put emphasis on those transactions occurring close before or after the balance sheet date to obtain sufficient evidence over the accuracy of cut-off.
During order fulfillment contractual obligations may need to be reassessed. In addition change orders or cancelations have to be considered. As a result total estimated contract costs may exceed total contract revenues and therefore require write-offs of contract assets receivables and the immediate recognition of the expected loss as a provision. We further reviewed samples of contracts with unbilled revenues to identify possible delays in achieving milestones which require change in estimated efforts to complete the remaining performance obligations.
Based on our knowledge gained through contract and project reviews and also considering the impact of COVID-19 we assessed the need for and the accuracy of provisions and deductions in revenue for variable consideration for expected liquidated damages.
Regarding the revenue recognized at a point in time (PIT) the risks include inappropriate revenue recognition from revenue being recorded in the wrong accounting period or at amounts not justified as well as overstated WIP that requires impairment adjustments. Performed analytical procedures and test of details for reasonableness of incurred and estimated efforts.
Our procedures did not identify any material exceptions.
2 Valuation of accounts receivable - risk of credit losses Our audit incorporated the following activities:
Company has a concentration of credit exposure on a number of major customers mainly Government and large organisation. Some of these major customers are facing difficult business conditions. In order to avoid significant credit losses proper monitoring and management of credit risk is key factor. Accounts receivable is a significant item in the Company's standalone financial statements amounting to INR 1665.59 crores as of March 312020 and provisions for impairment of receivables is an area which is influenced by management Rs s -estimates and judgment. The provision for impairment of receivables amounted to INR 7.35 crores as at March 312020. • Assessing and updating our understanding of internal controls over financial reporting with respect to credit risk;
• Assessment of the Company's credit policy outlining authority for approving and responsibility to manage credit limits;
• Understanding the related industry Rs s external factors and impact of COVID-19
• Inquiries with committee in order to understand and assess governance and follow-up/monitoring of key customers;
• Analytical procedures and inquiries with Business Area;
Refer to the Note 15 - Trade receivables.
• Detailed testing and assessment of receivables to ensure these are in line with Ind AS with a focus on significant new provisions.
We had a particular focus in our audit on how Company manage credit risk for key customers with respect to credit insurance and procedures for credit management. We also assessed and challenged management Rs s assumptions and adherence to Company's accounting policies with respect to provisions for impairment of receivables.
The level of the provision made against accounts receivables and accrued balances was deemed appropriate and corresponds to the risks identified.
3 Recoverability of Other Advances Our audit procedures involve the following activities:
As at March 31 2020 current financial assets include INR 523.52 crores in respect of Advances to vendors and sub-contractors and are pending to be adjusted/settled. • Assessing and updating our understanding of internal controls over financial reporting with respect to advances given;
• Assessment of the Company's procurement policy outlining authority for approving and responsibility to manage vendor advances;
Management exercises significant judgment when determining whether to record any impairment loss on advances
• Inquiries with management in order to understand and assess governance and follow-up/monitoring of key vendors;
As the carrying amount of Other Advances accounts for a relatively high proportion of assets there would be a material impact on the financial statements if such advances cannot be settled on schedule or fail to be recovered /settled. Therefore we regard the recoverability of Other Advances as a key audit matter.
• Analytical procedures and inquiries with Business Area;
• Obtain balance confirmations from selected parties to ensure existence thereof
Refer Note 19 to the Standalone Financial Statements. • Review of Purchase orders and/or agreements for selected parties and enquire management regarding reasons for unsettled advances as on date.
We agree with management Rs s view that there is no reduction in the value of the advances outstanding in the books.
4 Recoverability relating to Goods and Services Tax recoverable: Our audit procedure involves the following activities:
As at March 31 2020 under other current assets indirect taxes recoverable include INR 135.10 crores in respect of GST Input Tax credit receivables. • Assessing and updating our understanding of internal control over financial reporting with respect to recording of invoices of suppliers
• Reviewing the management continuing process for reconciliation updation and follow up with the vendors.
The Company has accounted for input credit on material and services received from suppliers and is carrying out continuous process of reconciliation.
We have relied upon the management Rs s assessment.
We focused on management Rs s estimate of getting input tax credit which involves significant judgment.
Refer Note 21 to the Standalone Financial Statements.
5 Recoverability and Contingencies relating to other Indirect tax matters We performed the following substantive procedures:
• Understanding the process of estimation recording and reassessing tax provisions and contingencies.
As at March 31 2020 "Indirect Tax Recoverable” includes INR 19.56 crores in respect of Commercial taxes recoverable which are pending adjudication.
• Involving tax specialists to assist in analyzing the judgements used to determine provisions for tax matters
The Company has open/pending tax assessments in various states. The determination of provisions and contingent liabilities arising from the open tax assessments make this a particular area of significant judgement. • We have involved our internal experts to review the nature of the amounts recoverable the sustainability and the likelihood of recoverability upon final resolution.
We focused on management Rs s assessment of the likely outcome and quantification of tax exposures which involves significant judgement. • Inspection the correspondence with tax authorities.
• Inspecting reports on open tax assessments prepared by the Company and other appropriate documentation considered necessary to understand the position and conclusions made by the Company.
Refer Note 21 to the Standalone Financial Statements.
We also assessed the adequacy of the Company's financial statements disclosure in respect of the tax positions and contingent liabilities.
We agree with management Rs s evaluation.

5. Other Information

The Company's Board of Directors is responsible for the preparation ofother information. The other information comprises the information included in the in theManagement Discussion and Analysis Board Rs s Report including Annexures to Board Rs sReport Business Responsibility Report Corporate Governance and Shareholder Rs sInformation but does not include the financial statements and our Auditor's reportthereon. The other information comprising the above documents is expected to be madeavailable to us after the date of this Auditor's report.

Our opinion on the standalone financial statements does not cover theother information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of our audit or otherwise appears to bematerially misstated.

When we read the other information comprising the above documents ifwe conclude that there is a material misstatement therein we are required to communicatethe matter to those charged with governance and take necessary actions as per applicablelaws and regulations.

6. Management Rs s Responsibility for the Standalone FinancialStatements

The Company's Board of Directors is responsible for the matters statedin Section 134(5) of the Companies Act 2013 ("the Act”) with respect to thepreparation of these standalone financial statements that give a true and fair view of thefinancial position financial performance total comprehensive income changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Indian Accounting Standards specified under Section 133of the Act. This responsibility also includes maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statement that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing theCompany's financial reporting process.

7. Auditor's Responsibilities for the Audit of the Standalone FinancialStatements

Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an Auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal financial controls relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under Section 143(3X0 of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management Rs s use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our Auditor's report tothe related disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our Auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.

Materiality is the magnitude of misstatements in the standalonefinancial statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the financial statements may beinfluenced. We consider quantitative materiality and qualitative factors in (i) planningthe scope of our audit work and in evaluating the results of our work; and (ii) toevaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalonefinancial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our Auditor's report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

8. Report on Other Legal and Regulatory Requirements

A. 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 of the Companies Act 2013 we give in the "Annexure-A” astatement on the matters specified in paragraphs 3 and 4 of the Order.

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

(a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.

(b) In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books.

(c) In respect of the branch abroad we have been furnished managementcertified financial information comprising of revenue of Rs 7.87 crore and assetsof Rs 7.56 crore and same have been considered by us in the standalone financialstatements.

(d) the balance sheet the statement of profit and loss including othercomprehensive income the statement of cash flows and the statement of changes in equitydealt with by this Report are in agreement with the books of account.

(e) In our opinion the aforesaid standalone financial statementscomply with the Indian Accounting Standards specified under Section 133 of the Act readwith relevant rules issued thereunder.

(f) On the basis of the written representations received from thedirectors as on 31st March 2020 taken on record by the

Board of Directors none of the directors is disqualified as on 31stMarch 2020 from being appointed as a director in terms of Section 164 (2) of the Act.

(g) With respect to the adequacy of the internal financial controlsover financial reporting of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B”

(h) With respect to the other matters to be included in the Auditor'sReport in accordance with the requirements of Section 197(16) of the Act as amended inour opinion and to the best of our information and according to the explanations given tous the remuneration paid by the Company to its directors during the year is in accordancewith the provisions of Section 197 of the Act.

(i) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 inour opinion and to the best of our information and according to the explanations given tous:

i) The Company has disclosed the impact of pending litigations on itsfinancial position in its financial statements - Refer Note 46 to the financialstatements;

ii) The Company has made provision as required under the applicablelaw or accounting standards for material foreseeable losses if any on long-termcontracts including derivative contracts - Refer Note 46 to the financial statements;

iii) There were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Company.

For S. Bhandari & Co. For Oswal Sunil & Company
Chartered Accountants Chartered Accountants
Firm Registration No. 000560C Firm Registration No. 016520N
(P. D. Baid) (Sunil Bhansali)
Partner Partner
Membership No: 072625 Membership No: 054645
UDIN: 20072625AAAAAR4009 UDIN: 20054645AAAAAJ2974
Place: Jaipur Place: New Delhi
Date: June 05 2020 Date: June 05 2020

ANNEXURE 'A' TO THE INDEPENDENT AUDITORS Rs REPORT

(Referred to in "Paragraph-A” under Rs Report on Other Legaland Regulatory Requirements Rs section of our report to the Members of HFCL Limited(formerly Himachal Futuristic Communications Limited) of even date)

1. In respect of the Company's fixed assets we report that:

(a) The Company has maintained proper records showing full particularsincluding quantitative details and situations of its Fixed Assets (property plant andequipment).

(b) Fixed Assets (Property Plant and equipment) of the company arephysically verified according to a phased program designed to cover all items over aperiod of three years which in our opinion is reasonable. Pursuant to the programphysical verification of the Fixed Assets (Property Plant and equipment) was carried outduring the year by the management and no material discrepancies were noticed on suchphysical verification.

(c) According to the information and explanation given to us the titledeeds of immovable properties are held in the name of the Company except the following:

Particular of Assets Gross Value of Assets WDV of Assets Remark
Leasehold Land at Solan 2829496/- 2069265/- Refer Note No.3 to Balance Sheet

2. As per the information furnished the Inventories have beenphysically verified by the management at reasonable intervals during the year. Alsophysical verification of inventory has been carried out by the management subsequent tothe year-end due to the lockdown restrictions imposed by the Government of India for whichroll back procedures have been performed to determine the existence and conditions ofinventory as at year-end. In our opinion having regard to the nature and location ofstocks the frequency of physical verification is reasonable. No material discrepancy werenoticed on such physical verification.

3. In respect of the loans secured or unsecured granted by theCompany to companies firms Limited Liability Partnerships or other parties covered inthe register maintained under Section 189 of the Companies Act 2013:

a) During the year the Company has granted unsecured to one companycovered in the register maintained under Section 189 of the Companies Act 2013.

b) In respect of opening balances and loans given during the year theschedule of repayment of principal and payment of interest has been stipulated andrepayments or receipts of principal amounts and interest have been regular as perstipulations.

c) There is no overdue amount remaining outstanding as at the balancesheet date.

4. In our opinion and according to the information and explanationsgiven to us the Company has in respect of loans investments guarantees and securitycomplied with the provisions of Section 185 and 186 of the Companies Act 2013.

5. According to the information and explanation given to us theCompany has not accepted any deposits within the directives issued by the Reserve Bank ofIndia and the provisions of Section 73 to 76 or any other relevant provisions of theCompanies Act 2013. Hence the provisions of clause 3(v) are not applicable to theCompany.

6. Pursuant to the rules made by the Central Government themaintenance of Cost Records have been prescribed u/s. 148(1) of the Companies Act 2013.We are of the view that prima facie the prescribed accounts and records have beenmaintained. We have not however made a detailed examination of the records with a viewto determine whether they are accurate or complete.

7. According to the information and explanations given to us inrespect of statutory dues:

(a) Undisputed statutory dues including provident fund employees Rsstate insurance duty of custom value added tax cess have generally been regularlydeposited with the appropriate authorities except delay in depositing of Goods andServices Tax (GST) and Income Tax.

There were no undisputed amounts outstanding in respect of providentfund employees Rs state insurance income-tax goods and services tax service tax dutyof custom value added tax cess and other material statutory dues as at March 31 2020for a period of more than six months from the date they became payable.

(b) According to the records of the Company the dues of Sales Tax/VAT Income Tax Excise Duty Custom Duty and Service Tax which has not been deposited onaccount of disputes and the forum where the dispute is pending are as under :

Name of the statute Nature of dues Amount in Rs Period to which the amount relates Forum where dispute is pending Remarks
Value Added Tax Act Sales Tax 23742719/- 1997-98 & 1998-99 Hon'ble High Court of Punjab & Haryana. Rs 5000000/- Paid
Delhi Value Added Tax Act Sales Tax 21076837/- 2009-10 & 2010-11 Addl. Commissioner Department of Trade & Taxes New Delhi Rs 1600000/- Paid
Custom Tariff Act Custom Duty 19754154/- 2001-02 & 2003-04 Supreme Court New Delhi Liability of Rs 19754154/- already paid by Company under protest
Central Excise Tariff Act Excise Duty 8217348/- 2005-06 Central Excise and Service Tax Appellate Tribunal Mumbai Provision already made amounting to Rs 4725005/-
Mumbai Value Added Tax Sales Tax 36996738/- 2014-15 Joint Commissioner of Sales Tax (Appeal) Mumbai -
Delhi Value Added Tax Act Sales Tax 1227714/- 2015-16 Asst. VATO Department of Trade & Taxes New Delhi Application filed for adjustment with refund due
Mumbai Value Added Tax Sales Tax 9824593/- 2013-14 Joint Commissioner of Sales Tax (Appeal) Mumbai Rs 2389741/- Paid
Finance Act 1994 Service Tax 38726339/- 2017-18 Asst. Commissioner (Circle-11) Audit-II New Delhi Rs 10000000/- Paid

8. According to the information and explanations given to us andrecords examined by us the Company has not defaulted in repayment of dues to banks ordebenture holders as at the Balance Sheet date. Company hasn Rs t taken any loan/borrowingfrom Financial Institution or Government.

9. Based on our examinations of the records and information andexplanations given to us the term loans have been applied for the purpose for which theseare raised. However the company has not raised any money by way of initial public offer(IPO) or further public offer (FPO) (including debt instruments).

10. To the best of our knowledge and belief and according to theinformation and explanations given to us no fraud by the Company or on the Company by itsofficers or employees has been noticed or reported during the year..

11. According to the information and explanation given to us and thebooks of accounts verified by us the Managerial remuneration has been paid or provided inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith the Schedule V to the Companies Act 2013.

12. The Company is not a Nidhi company hence the provisions of clause3(xii) are not applicable to the Company.

13. According to the information and explanations given to us and basedon our examination of the records of the Company transactions with the related partiesare in compliance with Sections 177 and 188 of Companies Act 2013 where applicable anddetails of such transactions have been disclosed in the Financial Statements as requiredby the applicable accounting standards.

14. According to information and explanations given to us the Companyhas made preferential allotment of 1.00 crore Equity Shares on conversion of outstandingconvertible Warrants during the year. The requirement of Section 42 of Companies Act 2013have been complied with and the amount raised has been used for the purpose for which itwas raised.

15. According to the information and explanation given to us and thebooks of accounts verified by us the Company has not entered into any non-cashtransaction with directors or persons connected with him and hence the provision of clause3(xv) are not applicable to the Company.

16. The Company is not required to be registered under Section 45-IA ofthe Reserve Bank of India Act 1934 and hence the provision of clause 3(xvi) are notapplicable to the Company.

For S. Bhandari & Co. For Oswal Sunil & Company
Chartered Accountants Chartered Accountants
Firm Registration No. 000560C Firm Registration No. 016520N
(P. D. Baid) (Sunil Bhansali)
Partner Partner
Membership No: 072625 Membership No: 054645
UDIN: 20072625AAAAAR4009 UDIN: 20054645AAAAAJ2974
Place: Jaipur Place: New Delhi
Date: June 05 2020 Date: June 05 2020

ANNEXURE - B TO THE INDEPENDENT AUDITORS Rs REPORT OF EVEN DATE ON THESTANDALONE FINANCIAL STATEMENTS OF HFCL LIMITED (FORMERLY HIMACHAL FUTURISTICCOMMUNICATIONS LIMITED) AS ON 31ST MARCH 2020.

Report on the Internal Financial Controls over financial reportingunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")

TO THE MEMBERS OF HFCL LIMITED

(FORMERLY HIMACHAL FUTURISTIC COMMUNICATIONS LIMITED)

We have audited the internal financial controls over financialreporting of HFCL LIMITED (FORMERLY HIMACHAL FUTURISTIC COMMUNICATIONS LIMITED) ("theCompany”) as of March 31 2020 in conjunction with our audit of the Standalonefinancial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the guidance note on Audit of Internal financial control overFinancial Reporting issued by the Institute of Chartered Accountants of India. 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 the Company's policies the safeguardingof its 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.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on audit of Internal financial controls over financialreporting (the "Guidance Note”) and the standards on auditing as specified underSection 143 (10) of the companies act 2013 to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by Institute of Chartered Accountants of India. Those standards and theguidance note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate Internal financial controlsover financial reporting were established and maintained and if such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial control system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists testing and evaluating thedesign and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the Auditor's judgment including the assessment of therisks of material misstatement of the Standalone financial statements whether due tofraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the internal financial controlssystem over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A Company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with the generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the Company; (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition use ordisposition of the Company's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial Controls over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion to the best of our information and according to theexplanations given to us the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India.

For S. Bhandari & Co. For Oswal Sunil & Company
Chartered Accountants Chartered Accountants
Firm Registration No. 000560C Firm Registration No. 016520N
(P. D. Baid) (Sunil Bhansali)
Partner Partner
Membership No: 072625 Membership No: 054645
UDIN: 20072625AAAAAR4009 UDIN: 20054645AAAAAJ2974
Place: Jaipur Place: New Delhi
Date: June 05 2020 Date: June 05 2020