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Hindustan Construction Company Ltd.

BSE: 500185 Sector: Infrastructure
NSE: HCC ISIN Code: INE549A01026
BSE 00:00 | 01 Feb 18.30 -0.85
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NSE 00:00 | 01 Feb 18.25 -0.85
(-4.45%)
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OPEN 19.25
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VOLUME 7998860
52-Week high 22.70
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OPEN 19.25
CLOSE 19.15
VOLUME 7998860
52-Week high 22.70
52-Week low 10.54
P/E
Mkt Cap.(Rs cr) 2,769
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Hindustan Construction Company Ltd. (HCC) - Auditors Report

Company auditors report

To the Members of Hindustan Construction Company Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

1. We have audited the accompanying standalone financial statements of HindustanConstruction Company Limited and its joint operations (together referred to as‘the Company?) as listed in Annexure I which comprise the Balance Sheet as at31 March 2022 the Statement of Profit and Loss (including Other Comprehensive Income)the Statement of Cash Flow and the Statement of Changes in Equity for the year then endedand a summary of the significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according tothe explanations given to us and based on the consideration of the reports of otherauditors on the separate financial statements/ financial information of the jointoperations as referred to in paragraph 16 of the Other Matters section below except forthe possible effects of the matters described in the Basis for Qualified Opinion sectionof our report the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 (‘the Act?) in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards (‘Ind AS?)specified under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 and other accounting principles generally accepted in India of thestate of affairs of the Company as at 31 March 2022 and its loss (including othercomprehensive income) its cash flows and the changes in equity for the year ended on thatdate.

Basis for Qualified Opinion

3. As stated in:

a) Note 34 to the standalone financial statements the Company?sinvestments in subsidiaries as at 31 March 2022 includes non-current investment andcurrent investments in HCC Infrastructure Company Limited (‘HICL?) its whollyowned subsidiary amounting to Rs. 1214.65 crore and Rs. 350 crore respectively statedat cost and considered fully recoverable by the management on the basis of factors statedin the aforesaid note including a valuation performed by an independent valuer.

The subsidiary?s consolidated net worth as at 31 March 2022 issubstantially eroded and during the current year there has been significant decline inthe actual results of certain key underlying assumptions considered for valuation purposesin earlier periods. The management believes that such decline is temporary in nature whichdoes not have any material adverse impact on the fair valuation of such investmentdetermined as above as at 31 March 2022. However in the absence of sufficient appropriateevidence to support management?s estimates of such future assumptions we are unableto comment upon the adjustments if any that are required to the carrying value of theaforesaid investment and consequential impact if any on the accompanying standalonefinancial statements.

b) Note 27.1 to the standalone financial statements the Company hasaccounted for managerial remuneration paid/ payable to Whole Time Directors (includingChairman and Managing Director) of the Company aggregating Rs. 41.07 crore for thefinancial years ended 31 March 2020 31 March 2021 and 31 March 2022 in excess of thelimits prescribed under Section 197 of the Act in respect of which approvals from theshareholders have been obtained as prescribed however prior approval from the lenders ofthe Company in accordance with Section 197 has not been obtained by the Company.

Our audit report dated 23 June 2021 on the standalone financialstatements for the year ended 31 March 2021 was also qualified in respect of this matter.

c) Note 17.4 to the standalone financial statements the Company?scurrent borrowings other current financial liabilities and liabilities of disposal groupheld for sale as at 31 March 2022 include balances amounting to Rs. 49.67 crore Rs.320.55 crore and Rs. 2.85 crore respectively in respect of which confirmations from therespective banks/ lenders have not been received. Further confirmations from banks havenot been received for balances with banks (included under cash and cash equivalents) andearmarked balances/ deposits with banks (included under bank balances other than cash andcash equivalents) as at 31 March 2022 amounting to Rs. 2.18 crore and

Rs. 0.95 crore respectively. In the absence of such confirmations fromthe banks/ lenders or sufficient and appropriate alternate audit evidence we are unableto comment on the adjustments if any that may be required to the carrying value of theaforementioned balances in the accompanying standalone financial statements.

Our audit report dated 23 June 2021 on the standalone financialstatements for the year ended 31 March 2021 was also qualified in respect of this matter.

d) Note 9.1 to the standalone financial statements the Company hasrecognised net deferred tax assets amounting to Rs. 741.74 crore as at 31 March 2022mainly on account of carried forward unused tax losses unused tax credits and othertaxable temporary differences on the basis of expected availability of future taxableprofits for utilization of such deferred tax assets. However in view of the continuedlosses incurred by the Company and pending the implementation of the resolution plan asreferred to in Note 2(v) of the accompanying standalone financial statements we areunable to obtain sufficient appropriate audit evidence with respect to the currentprojections prepared by the management and therefore are unable to comment on anyadjustments that may be required to the carrying value of aforesaid net deferred taxassets as at 31 March 2022.

Our audit report dated 23 June 2021 on the standalone financialstatements for the year ended 31 March 2021 was also qualified in respect of this matter.

4. We conducted our audit in accordance with the Standards on Auditingspecified under section 143(10) of the Act. Our responsibilities under those standards arefurther described in the Auditor?s Responsibilities for the Audit of the StandaloneFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (‘ICAI?) together with the ethical requirements that are relevant to ouraudit of the financial statements under the provisions of the Act 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 and that obtained by the other auditors in terms of their reports referred to inparagraph 16 of the Other Matters section below is sufficient and appropriate to providea basis for our qualified opinion.

Key Audit Matters

5. Key audit matters are those matters that in our professionaljudgment and based on the consideration of the reports of the other auditors as referredto paragraph 16 below were of most significance in our audit of the standalone financialstatements of the current period. These matters were addressed in the context of our auditof the financial statements as a whole and in forming our opinion thereon and we do notprovide a separate opinion on these matters.

6. In addition to the matters described in the Basis for QualifiedOpinion section we have determined the matters described below to be the key auditmatters to be communicated in our report.

Key audit matter How our audit addressed the key audit matter
(a) Assessment of going concern basis of accounting (Refer note 2(v) to the standalone financial statements) Our audit procedures included but were not limited to the following in relation to assessment of appropriateness of going concern basis of accounting:
The Company has incurred net loss of Rs. 153.10 crore during the year ended 31 March 2022 and as of that date has accumulated losses aggregating Rs. 2485.10 crore resulting in substantial erosion of its net worth. Obtained an understanding of the process followed by management for identifying events or conditions that could impact the Company?s ability to continue as a going concern and process followed to assess the corresponding mitigating factors existing against such events or condition.
During the year the Company continued to default on payment to its lenders as explained in aforesaid note and has overdue payments to operational creditors out of which certain operational creditors have also applied before the National Company Law Tribunal (‘NCLT?) for debt resolution under the Insolvency and Bankruptcy Code 2016 none of which has been admitted so far. Also obtained an understanding around the methodology adopted by the Company to assess their future business performance including the preparation of a cash flow forecast for the business;
While the above factors indicate doubt on the Company?s ability to continue as a going concern however as detailed in aforesaid note the Company has taken into consideration the following mitigating factors in its assessment for going concern basis of accounting in preparation of the accompanying standalone financial statements: Evaluated the design and tested the operating effectiveness of key controls relating to management?s assessment of going concern as above;
Expected successful implementation of the resolution plan with the lenders; Obtained from the management the projected cash flows for the next twelve months basis their future approved business plans;
Time bound monetization of certain non-core assets; and Tested the appropriateness of the key assumptions used by the management that had the most material impact on the cash flow forecasts and discussed these assumptions with the management and with those charged with governance.
Company?s business plan for the next twelve months. Management has prepared future cash flow forecasts to assess its ability to operate as a going concern for a period of at least 12 months from the date of financial statements and concluded that the going concern basis of accounting used for preparation of the accompanying standalone financial statements is appropriate with no material uncertainty over going concern. Performed independent sensitivity analysis to test the impact of the variations on the cash flows due to change in the key assumptions;
We have considered the assessment of management?s evaluation of going concern basis of accounting as a key audit matter due to the pervasive impact thereof on the standalone financial statements and the significant judgements and assumptions that are inherently subjective and dependent on future events involved in preparation of cash flow projections and determination of the overall conclusion by the management. Inspected the relevant underlying documents for assessing the appropriateness of projected cash flow for the next 12 months;
Evaluated the management?s assessment of the successful implementation of the resolution plan basis current status of requisite approvals from lenders reading of the minutes of the meetings held and understanding obtained from the management; and
Assessed the appropriateness and adequacy of the disclosures made by the management in respect of going concern in accordance with the applicable accounting standards.
(b) Uncertainties relating to recoverability of unbilled work-in-progress (contract assets) unbilled work-in-progress (included under assets of disposal group held for sale) and current trade receivables (Refer note 35 of the standalone financial statements) Our audit procedures included but were not limited to the following:
The Company as at 31 March 2022 has unbilled work- in-progress (contract assets) unbilled work-in-progress (included under assets of a disposal group held for sale) and current trade receivables amounting to Rs. 909.12 crore Rs. 223.43 crore and Rs. 277.03 crore respectively which represent various receivables in respect of closed/ substantially closed/ suspended/ terminated projects where the Company is currently under negotiations/ discussions/ arbitration/ litigation with the customers. Obtained an understanding of the management process and evaluated the design and tested the effectiveness of key internal financial controls for assessing the recoverability of unbilled work-in-progress (contract assets) unbilled work-in-progress (included under assets of a disposal group held for sale) and trade receivables.
Further non-current trade receivables current trade receivables and trade receivables (included under assets of a disposal group held for sale) as at 31 March 2022 includes Rs. 187.59 crore and Rs. 487.14 crore and Rs. 2283.06 crore respectively representing claims awarded in arbitration (including interest thereon) in favour of the Company which have subsequently been challenged by the customers in higher courts. Discussed extensively with management regarding steps taken for recovering the amounts;
Management based on contractual tenability of the claims/ receivables progress of the negotiations/ discussions/ arbitration/ litigation and relying on the legal opinion obtained from independent legal counsel has determined that no provision is required to be recognised for the aforementioned receivables Assessed the reasonability of judgements exercised and estimates made by management with respect to the recoverability of these receivables and validated them with corroborating evidence;
Considering the materiality of the amounts involved uncertainty associated with the outcome of the negotiations/ discussions/ arbitration/ litigation and significant management judgement involved in its assessment of recoverability this was considered to be a key audit matter in the audit of the standalone financial statements. Verified contractual arrangements to support management?s position on the tenability and recoverability of these receivables.
Further the aforementioned matter relating to recoverability of above discussed receivables as fully explained in Note 35 to the standalone financial statements is also considered fundamental to the understanding of the users of financial statements. Obtained an understanding of the current period developments for respective claims/ arbitration awards pending at various stages of negotiations/ discussions/ arbitration/ litigation and corroborated the updates with relevant underlying documents.
Reviewed the legal and contractual experts? note and/ or legal opinion from independent legal counsel obtained by the management with respect to certain contentious matters; and
Evaluated the appropriateness and adequacy of the disclosures in the standalone financial statements in accordance with the applicable accounting standards.
(c) Recognition of contract revenue margin and contract costs (Refer note 2(xxii) to the standalone financial statements) Our audit procedures to address this key audit matter included but were not limited to the following:
The Company?s revenue primarily arises from construction contracts which by its nature is complex given the significant judgements involved in the assessment of current and future contractual performance obligations. Evaluated the appropriateness of the Company?s accounting policy for revenue recognition in accordance with Ind AS 115 – Revenue from contracts with customers;
The Company recognizes contract revenue and the resultant profit/ loss on the basis of stage of completion determined based on the proportion of contract costs incurred at balance sheet date relative to the total estimated costs of the contract at completion. The recognition of contract revenue and the resultant profit/ loss therefore rely on estimates in relation to forecast revenue and forecast contract costs. Obtained an understanding of the Company?s processes and evaluated the design and tested the operating effectiveness of key internal financial controls with respect to estimation of forecasted contract revenue and contracts costs;
(c) Recognition of contract revenue margin and contract costs (Refer note 2(xxii) to the standalone financial statements) For a sample of contracts performed the following procedures:
These contract estimates are reviewed by the management on a periodic basis. In doing so the management is required to exercise judgement in its assessment of the revenue on contracts which may also include variable considerations that are recognised when the recovery of such consideration is highly probable. The judgment is also required to be exercised to assess the completeness and accuracy of forecast costs to complete. - inspected the underlying documents such as customer contract/ agreement and variation orders if any for the significant contract terms and conditions;
Changes in these judgements and the related estimates as contracts progress can result in material adjustments to revenue and margins. As a result of the above judgments complexities involved and material impact on the related financial statement elements this area has been considered a key audit matter in the audit of the standalone financial statements. - evaluated the identification of performance obligations of the contract;
- obtained an understanding of and evaluated the reasonableness of the assumptions applied in determining the forecasted revenue and cost to complete;
- tested the existence and valuation of variable consideration with respect to the contractual terms and conditions and inspected the correspondence with customers; and
- reviewed the legal and contracting experts? note and/ or legal opinion from independent legal counsel obtained by the management with respect to certain contentious matters;
For cost incurred to date tested samples to appropriate supporting documents and performing cut-off procedures;
Tested the forecasted cost by obtaining executed purchase orders/ agreements/ relevant documents and evaluated the reasonableness of management judgements/ estimates; and
Evaluated the appropriateness and adequacy of the disclosures related to contract revenue and costs in the standalone financial statements in accordance with the applicable accounting standards.

Information other than the Financial Statements and Auditor?sReport thereon

7. The Company?s Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Board ReportReport on Corporate Governance and Management Discussion and Analysis Report but does notinclude the standalone financial statements and our auditor?s report thereon.

Our opinion on the standalone financial statements does not cover theother information and we do 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 in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. As described in the Basis forQualified Opinion section above the modifications pertain to recoverability of exposurein a wholly owned subsidiary excess managerial remuneration accrued/ paid to whole timedirectors (including chairman and managing director) non-receipt of confirmations frombanks/ financial institutions and realisability of deferred tax assets. Accordingly weare unable to conclude whether or not the other information is materially misstated withrespect to these matters.

Responsibilities of Management and those Charged with Governance forthe Standalone Financial Statements

8. The accompanying standalone financial statements have been approvedby the Company?s Board of Directors. The Company?s Board of Directors areresponsible for the matters stated in section 134(5) of the Act with respect to thepreparation and presentation of these standalone financial statements that give a true andfair view of the financial position financial performance including other comprehensiveincome changes in equity and cash flows of the Company in accordance with the Ind ASspecified under section 133 of the Act and other accounting principles generally acceptedin India. This responsibility also includes maintenance of adequate accounting records inaccordance 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 financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

9. In preparing the financial statements the Board of Directors areresponsible 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 the Board of Directors either intend to liquidate the Companyor to cease operations or has no realistic alternative but to do so.

10. Those Board of Directors are also responsible for overseeing theCompany?s financial reporting process.

Auditor?s Responsibilities for the Audit of the StandaloneFinancial Statements

11. Our objectives are to obtain reasonable assurance about whether thefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor?s report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with Standards on Auditing 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 financial statements.

12. As part of an audit in accordance with Standards on Auditingspecified under section 143(10) of the Act we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control;

Obtain an understanding of internal control relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3) (i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system with reference to financialstatements in place 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 Board of Directors? 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?sreport to the related disclosures in the 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 conditionsmay cause the Company to cease to continue as a going concern;

Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation;

Obtain sufficient appropriate audit evidence regarding the financialinformation of the Company and its joint operations or business activities within theCompany to express an opinion on the financial statements. We are responsible for thedirection supervision and performance of the audit of financial statements of theCompany of which we are the independent auditors. For the joint operations included inthe standalone financial statements which have been audited by other auditors such otherauditors remain responsible for the direction supervision and performance of the auditscarried out by them. We remain solely responsible for our audit opinion.

13. 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.

14. We also provide those charged with governance with a statement thatwe have 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. 15. From thematters communicated with those charged with governance we determine those matters thatwere of most significance in the audit of the financial statements of the current periodand are therefore the key audit matters. We describe these matters in our auditor?sreport unless law or regulation precludes public disclosure about the matter or when inextremely rare circumstances we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.

Other Matters

16. We did not audit the financial statements/ information of seven (7)joint operations included in the standalone financial statements of the Company whosefinancial statements/ information reflects total assets and net liabilities of Rs. 159.41crore and Rs. 51.66 crore respectively as at 31 March 2022 and the total revenues ofRs. 195.07 crore total net loss after tax of Rs. 2.18 crore total comprehensive loss ofRs. 2.18 crore and cash flows (net) of Rs. 3.48 crore for the year ended on that date asconsidered in the standalone financial statements/information. These financial statements/information have been audited by other auditors whose audit reports have been furnishedto us by the management and our opinion on the standalone financial statements in so faras it relates to the amounts and disclosures included in respect of these jointoperations and our report in terms of sub-section (3) of section 143 of the Act in so faras it relates to the aforesaid joint operations is based solely on the reports of suchother auditors.

Further of these joint operations financial statements/ informationof four (4) joint operations have been prepared in accordance with accounting standards(‘AS?) issued by the ICAI. The Company?s management has converted thefinancial statements/ information of such joint operations in accordance with Ind AS. Wehave audited these conversion adjustments made by the Company?s management. Ouropinion on the standalone financial statements in so far as it relates to the balancesand affairs of such joint operations is based on the report of other auditors and theconversion adjustments prepared by the management of the Company and audited by us.

Our opinion above on the standalone financial statements and ourreport on other legal and regulatory requirements below are not modified in respect ofthe above matters with respect to our reliance on the work done by and the reports of theother auditors.

17. The accompanying standalone financial statements include thefinancial information of one (1) joint operation which have not been reviewed/ auditedand whose financial information reflects total assets and net liabilities of Rs. 0.13crore and Rs. 2.97 crore as at 31 March 2022 and total revenues of Rs. 0.07 crore totalnet profit after tax of Rs. 0.04 crore total comprehensive income of Rs. 0.04 crore andcash flows of Rs. 0.04 crore for the year then ended as considered in the standalonefinancial statements. Our opinion on the standalone financial statements in so far as itrelates to the amounts and disclosures included in respect of this joint operation andour report in terms of sub-section (3) of section 143 of the Act in so far as it relatesto the aforesaid joint operation is based solely on such unreviewed/ unaudited financialstatements / information. According to the information and explanations given to us by themanagement this financial information is not material to the Company. Our opinion aboveon the standalone financial statements and our report on other legal and regulatoryrequirements below are not modified in respect of the above matter with respect to ourreliance on the aforesaid financial statements/ information certified by the management.

Report on Other Legal and Regulatory Requirements

18. As required by section 197(16) of the Act based on our audit wereport in paragraph 3(b) of the Basis for Qualified Opinion section that the Company hasnot paid or provided remuneration to its directors during the year in accordance with theprovisions of and limits laid down under section

197 read with Schedule V to the Act.

19. As required by the Companies (Auditor?s Report) Order 2020(‘the Order?) issued by the Central Government of India in terms of section143(11) of the Act we give in the Annexure II a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.

20. Further to our comments in Annexure II as required by section143(3) of the Act based on our audit and on the consideration of the reports of otherauditors as referred to in paragraph 16 above we report to the extent applicable that:

a) we have sought and except for the matters described in the Basis forQualified Opinion section obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit of theaccompanying standalone financial statements;

b) except for the possible effects of the matters described in theBasis for Qualified Opinion section in our opinion proper books of account as requiredby law have been kept by the Company so far as it appears from our examination of thosebooks;

c) the standalone financial statements dealt with by this report are inagreement with the books of account;

d) except for the possible effects of the matters described in theBasis for Qualified Opinion section in our opinion the aforesaid standalone financialstatements comply with Ind AS specified under section 133 of the Act;

e) the matters described in paragraphs 3(a) and 3(d) under the Basisfor Qualified Opinion section and paragraphs 6(a) and 6(b) under Key Audit Matterssection in our opinion may have an adverse effect on the functioning of the Company;

f) on the basis of the written representations received from thedirectors and taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2022 from being appointed as a director in terms of section164(2) of the Act;

g) the qualification relating to the maintenance of accounts and othermatters connected therewith are as stated in the Basis for Qualified Opinion section;

h) With respect to the adequacy of the internal financial controls withreference to financial statements of the Company as on 31 March 2022 and the operatingeffectiveness of such controls refer to our separate Report in Annexure III wherein wehave expressed a modified opinion; and

i) With respect to the other matters to be included in theAuditor?s Report in accordance with rule 11 of the Companies (Audit and Auditors)Rules 2014 (as amended) in our opinion and to the best of our information and accordingto the explanations given to us and based on the consideration of the reports of otherauditors as referred to in paragraph 16 above:

i. the Company as detailed in Note 18.1 33A(i) (ii) (iii) (iv) 34and 35 to the standalone financial statements has disclosed the impact of pendinglitigations on its financial position as at 31 March 2022;

ii. as detailed in Note 19.1 to the standalone financial statementshas made provision as at 31 March 2022 as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts;

iii. There were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Company during the year ended 31 March 2022;

iv. (a) The management has represented that to the best of itsknowledge and belief as disclosed in Note 46(v) of the Standalone Financial Statements nofunds have been advanced or loaned or invested (either from borrowed funds or securitiespremium or any other sources or kind of funds) by the Company to or in any person orentity including foreign entities (‘the intermediaries?) with theunderstanding whether recorded in writing or otherwise that the intermediary shallwhether directly or indirectly lend or invest in other persons or entities identified inany manner whatsoever by or on behalf of the Company (‘the UltimateBeneficiaries?) or provide any guarantee security or the like on behalf the UltimateBeneficiaries;

(b) The management has represented that to the best of its knowledgeand belief as disclosed in Note 46(vi) to Standalone Financial Statements no funds havebeen received by the Company from any person or entity including foreign entities(‘the Funding Parties?) with the understanding whether recorded in writing orotherwise that the Company shall whether directly or indirectly lend or invest in otherpersons or entities identified in any manner whatsoever by or on behalf of the FundingParty (‘Ultimate Beneficiaries?) or provide any guarantee security or the likeon behalf of the Ultimate Beneficiaries; and (c) based on such audit procedures performedas considered reasonable and appropriate in the circumstances nothing has come to ournotice that has caused us to believe that the management representations under subclauses(a) and (b) above contain any material misstatement.

v. The Company has not declared or paid any dividend during the yearended 31 March 2022.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm?s Registration No.: 001076N/N500013
Shashi Tadwalkar
Partner
Membership No.: 101797
UDIN: 22101797AIVRMQ5916
Place: Pune
Date: 12 May 2022

Annexure I to the Independent AudItor?s report

List of joint operations included in the Standalone FinancialStatements

Sr. No. Name of the entity

1. Kumagai – Skanska – HCC - Itochu Group

2. HCC - L&T Purulia Joint Venture

3. Alpine - Samsung - HCC Joint Venture

4. Alpine - HCC Joint Venture

5. HCC Samsung Joint Venture CC 34

6. Nathpa Jhakri Joint Venture

7. HCC VCCL Joint Venture

8. HCC - HDC Joint Venture

Annexure II referred to in Paragraph 19 of the IndependentAuditor?s Report of even date to the members of Hindustan Construction CompanyLimited on the standalone financial statements for the year ended 31 March 2022

In terms of the information and explanations sought by us and given bythe Company and the books of account and records examined by us in the normal course ofaudit and to the best of our knowledge and belief we report that:

(i) (a) (A) The Company has maintained proper records showing fullparticulars including quantitative details and situation of property plant and equipmentand right of use assets.

(B) The Company has maintained proper records showing full particularsof intangible assets.

(b) The Company has a regular program of physical verification of itsproperty plant and equipment and right of use assets under which the assets arephysically verified in a phased manner over a period of three (3) years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. In accordance with this program certain property plant and equipment and rightof use assets were verified during the year and no material discrepancies were noticed onsuch verification.

(c) The title deeds of all the immovable properties held by the Company(other than properties where the Company is the lessee and the lease agreements are dulyexecuted in favour of the lessee) are held in the name of the Company. (d) The Company hasnot revalued its Property Plant and Equipment and Right of Use assets or intangibleassets during the year.

(e) No proceedings have been initiated or are pending against theCompany for holding any benami property under the Benami Transactions (Prohibition) Act1988 (45 of 1988) and rules made thereunder. Accordingly reporting under clause 3(i)(e)of the Order is not applicable to the Company.

(ii) (a) The management has conducted physical verification ofinventory at reasonable intervals during the year. In our opinion the coverage andprocedure of such verification by the management is appropriate and no discrepancies of10% or more in the aggregate for each class of inventory were noticed.

(b) The Company has a working capital limit in excess of Rs. 5 croresanctioned by banks based on the security of current assets. The quarterly returns /statements in respect of the working capital limits have been filed by the Company withsuch banks and such returns / statements are in agreement with the books of account of theCompany for the respective periods which were subject to audit/review except for thefollowing.

Name of the Bank (Nature of Current Assets offered as Security) Working capital limit sanctioned Quarter End Particulars Amount disclosed as per Statement Amount as per books of accounts Difference Remarks/ reason if any
ICICI Bank Punjab National Bank Indian Bank Union Bank of 1101.65 30 June 2021 Inventory and Unbilled work- in-progress 2160.21 2741.38 (581.17) Difference is mainly on account of arrangement with banks/ financial institution which requires the
India Canara Bank State Bank of India IDBI Bank Limited Jammu & Trade Receivables 2410.07 4285.78 (1875.71) Company to submit the details of inventory trade receivable unbilled work-in-progress
1101.65 30 September 2021 Inventory and 2205.14 2796.76 (591.62)
Kashmir Bank Standard Chartered Bank Bank of Baroda Federal Bank DBS Bank Unbilled work- in-progress Trade Receivables 1631.4 3800.76 (2169.36) excluding projects executed as joint operations and projects which are completed / closed/ suspended/ terminated etc.
1101.65 31 December 2021 Inventory and Unbilled work- in-progress 2287.09 2989.2 (702.11)
Trade Receivables 2287.09 3961.1 (2247.32)

(iii) (a) The Company has not provided any loans or provided anyadvances in the nature of loans or guarantees or security to any other entity during theyear. Accordingly reporting under clause 3(iii)(a) of the Order is not applicable to theCompany.

(b) In our opinion and according to the information and explanationsgiven to us the investments made guarantees provided security given and terms andconditions of the grant of all loans and advances in the nature of loans and guaranteesprovided are prima facie not prejudicial to the interest of the Company.

(c) In respect of loans and advances in the nature of loans granted bythe Company the schedule of repayment of principal and payment of interest has beenstipulated and the repayments/receipts of principal and interest are regular.

(d) The Company has granted loans or advances in the nature of loanswhich had fallen due during the year and such loans or advances in the nature of loanswere renewed/extended during the year. The details of the same has been given below:

Name of the statute Nature of loan Total loan amount Nature of extension (i.e. renewed/ extended/ fresh loan provided) Aggregate amount of overdues of existing loans renewed or extended or settled by fresh loans Percentage of the aggregate to the total loans or advances in the nature of loans granted during the year
HCC Infrastructure Company Limited ICD 1562.41 Renewal 1562.41 Nil
Maan Township Developers Limited ICD 19.12 Renewal 19.12 Nil
HRL Township Developers Limited ICD 0.41 Renewal 0.41 Nil
Highbar Technologies Limited ICD 2.39 Renewal 2.39 Nil
HCC Mauritius Investment Limited ICD 39.37 Renewal 39.37 Nil
HCC Mauritius Enterprises Limited ICD 123.17 Renewal 123.17 Nil

(e) The Company has not granted any loan or advance in the nature ofloan which is repayable on demand or without specifying any terms or period of repayment.

(iv) In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of sections 186 of the Act inrespect of loans investments guarantees and security as applicable. Further theCompany has not entered into any transaction covered under Section 185. (v) In ouropinion and according to the information and explanations given to us the Company hasnot accepted any deposits or there is no amount which has been considered as deemeddeposit within the meaning of sections 73 to 76 of the Act and the Companies (Acceptanceof Deposits) Rules 2014 (as amended). Accordingly reporting under clause 3(v) of theOrder is not applicable to the Company.

(vi) The Central Government has specified maintenance of cost recordsunder sub-section (1) of section 148 of the Act in respect of the products of the Company.We have broadly reviewed the books of account maintained by the Company pursuant to theRules made by the Central Government for the maintenance of cost records and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.

(vii) (a) In our opinion and according to the information andexplanations given to us undisputed statutory dues including goods and services taxprovident fund employees? state insurance income-tax sales-tax service tax dutyof custom duty of excise value added tax cess and other material statutory dues asapplicable have not been regularly deposited with the appropriate authorities and therehave been significant delays in a large number of cases. Further no undisputed amountspayable in respect thereof were outstanding at the year-end for a period of more than sixmonths from the date they became payable except for the following:

Name of the statute Nature of dues Amount (Rs. crore) Period to which the amount relates Due Date Date of Payment Remarks if any
The Income Tax Act of the Tax Deducted at 0.02 May 2021 10 June 2021 22 April 2022
Kingdom of Bhutan 2001 Source- Contract Income for Non 0.03 May 2021 10 June 2021 04 May 2022
Bhutanese firms 0.01 June 2021 10 July 2021 22 April 2022
0.00* June 2021 10 July 2021 Unpaid
0.01 July 2021 10 August 2021 22 April 2022
0.03 July 2021 10 August 2021 Unpaid
0.01 August 2021 10 September 2021 25 April 2022
0.06 August 2021 10 September 2021 Unpaid
Tax Deducted at 0.11 February 2021 10 March 2021 04 May 2022
Source - Contract 0.11 March 2021 10 April 2021 04 May 2022
Income for Bhutanese firms 0.01 April 2021 10 May 2021 04 May 2022
0.00* May 2021 10 June 2021 22 April 2022
0.15 May 2021 10 June 2021 Unpaid
0.00* June 2021 10 July 2021 22 April 2022
0.05 June 2021 10 July 2021 04 May 2022
0.00* July 2021 10 August 2021 22 April 2022
0.05 July 2021 10 August 2021 Unpaid
0.02 August 2021 10 September 2021 25 April 2022
0.03 August 2021 10 September 2021 Unpaid
Tax Deducted at Source- Rental Income 0.00* August 2021 10 September 2021 25 April 2022
Tax Deducted at Source- Income 0.00* August 2021 10 September 2021 25 April 2022
from Other 0.00* August 2021 10 September 2021 Unpaid
Sources Tax Deducted at 0.00* January 2021 10 February 2021 Unpaid
Source- Salary Income 0.05 April 2021 10 May 2021 04 May 2022
0.02 May 2021 10 June 2021 25 April 2022
0.07 May 2021 10 June 2021 04 May 2022
0.02 June 2021 10 July 2021 25 April 202
0.06 June 2021 10 July 2021 04 May 2022
0.02 July 2021 10 August 2021 25 April 202
0.06 July 2021 10 August 2021 04 May 2022
0.02 August 2021 10 September 2021 25 April 2022
0.07 August 2021 10 September 2021 04 May 2022

* represents amount less than Rs. 50000

(b) According to the information and explanations given to us thereare no statutory dues referred in sub-clause

(a) which have not been deposited with the appropriate authorities onaccount of any dispute except for the following:

Name of the statute Nature of dues Gross Amount Amount paid under protest Period to which the amount relates to Forum where dispute is pending Remarks if any
The Income Tax Act 1961 Income Tax 15.54 15.54 AY 2008-09 to AY 2010-11 Income Tax Appellate Tribunal
2.45 2.45 AY 2015-16 Commissioner of Income Tax (Appeals)
36.46 - AY 2011-12 and AY 2015-16 Revisional Authority
The Central Sales Tax Act 1956 Entry Tax 2.63 1.50 Multiple Years from AY 2006-07 to AY 2011-12 Assessment Officer upto Commissioner Level
2.07 0.10 Multiple Years from AY 2006-07 to AY 2017-18 Appellate Tax Tribunal
Central Sales Tax 4.46 - AY 1996-97 to AY 2000-01 Appellate Tax Tribunal
Value Added Tax 76.81 2.10 Multiple Years from AY 2004-05 to AY 2017-18 Assessment Officer upto Commissioner Level
72.02 1.29 Multiple Years from AY 2005-06 to AY 2016-17 Appellate Tax Tribunal
3.84 - AY 2012-13 High Court
Goods and Services Tax Act 2017 GST 6.46 0.66 AY 2017-18 to 2019-20 Appellate Authority
The Finance Act 1994 Service Tax 0.10 0.01 Multiple Years from AY 2013- 14 to AY 2017-18 Assessment Officer upto Commissioner Level
27.64 1.07 Multiple Years from AY 2008-09 to AY 2014-15 CESTAT
44.18 - AY 2011-12 to 2012-13 Supreme Court

(viii) According to the information and explanations given to us notransactions were surrendered or disclosed as income during the year in the taxassessments under the Income Tax Act 1961 (43 of 1961) which have not been recorded inthe books of accounts.

(ix) (a) According to the information and explanations given to us theCompany has not defaulted in repayment of loans or other borrowings to any lender or inthe payment of interest thereon except for the below:

Nature of borrowing including debt securities Name of lender Amount not paid on due date (Rs. crore) Whether principal or interest No. of days delay or unpaid till the date of audit report Remarks if any
Debentures LIC 1.49 Principal 91-180 days
0.02 Interest
2.98 Principal 181-365 days
0.23 Interest
Term Loan Bank of Maharashtra 0.12 Principal 31 – 90 days
0.43 Interest
0.48 Principal 91-180 days
0.28 Interest
1.39 Principal 181-365 days
0.73 Interest
6.47 Principal >365 days
2.19 Interest
Term Loan Canara Bank 0.95 Principal 31-90 days
5.70 Interest
4.27 Principal 91-180 days
3.75 Interest
10.43 Principal 181-365 days
11.90 Interest
90.28 Principal >365 days
34.56 Interest
Term Loan Central Bank of India 0.28 Principal 31-90 days
0.82 Interest
0.79 Principal 91-180 days
0.54 Interest
2.55 Principal 181-365 days
1.73 Interest
11.22 Principal >365 days
6.22 Interest
Term Loan IDBI Bank 9.95 Principal 31-90 days
1.06 Interest
1.19 Principal 91-180 days
0.70 Interest
2.35 Interest 181-365 days
0.36 Interest >365 days
Term Loan Indian Overseas Bank 1.33 Interest 31-90 days
1.51 Principal 91-180 days
0.88 Interest
3.02 Principal 181-365 days
2.63 Interest
20.36 Principal >365 days
7.03 Interest
Term Loan Punjab National Bank 0.39 Interest 31-90 days
0.72 Principal 91-180 days
0.26 Interest
1.44 Principal 181-365 days
0.73 Interest
6.07 Principal >365 days
1.62 Interest
Term Loan State Bank of India 0.55 Principal 31-90 days
2.38 Interest
2.90 Principal 91-180 days
1.56 Interest
6.68 Principal 181-365 days
4.86 Interest
29.83 Principal >365 days
12.07 Interest
Term Loan Syndicate Bank 0.81 Principal 31-90 days
4.12 Interest
3.07 Principal 91-180 days
2.15 Interest
8.98 Principal 181-365 days
7.09 Interest
48.09 Principal >365 days
21.72 Interest
Term Loan Union Bank of India 0.66 Interest 31-90 days
0.77 Principal 91-180 days
0.43 Interest
1.54 Principal 181-365 days
1.42 Interest
9.08 Principal >365 days
4.48 Interest
Term Loan United Bank of India 0.99 Principal 31-90 days
4.62 Interest
4.74 Principal 91-180 days
3.04 Interest
11.45 Principal 181-365 days
9.27 Interest
73.58 Principal >365 days
25.06 Interest
Term Loan Federal Bank 0.15 Interest 31-90 days
0.39 Principal 91-180 days
0.10 Interest
0.89 Principal 181-365 days
0.29 Interest
3.98 Principal >365 days
0.89 Interest
Term Loan ICICI Bank 0.00* Interest >365 days
Term Loan SREI 0.35 Principal 31-90 days
2.94 Interest
3.48 Principal 91-180 days
1.85 Interest
5.35 Principal 181-365 days
5.48 Interest
39.52 Principal >365 days
14.88 Interest
Term Loan Asia Credit Opportunities 2.13 Interest 31-90 days
(Mauritius) Limited 0.45 Interest 91-180 days
1.95 Interest 181-365 days
72.04 Principal >365 days
7.48 Interest
Term Loan IFCI 0.63 Principal 31-90 days
2.34 Interest
2.40 Principal 91-180 days
1.54 Interest
7.32 Principal 181-365 days
3.99 Interest
36.08 Principal >365 days
12.07 Interest
Term Loan NABARD 0.17 Principal 31-90 days
0.49 Interest
0.37 Principal 91-180 days
0.32 Interest
2.24 Principal 181-365 days
0.93 Interest
9.76 Principal >365 days
2.52 Interest
Term Loan LIC 0.40 Principal 31-90 days
0.03 Interest
0.61 Principal 91-180 days
0.03 Interest
1.21 Principal 181-365 days
0.13 Interest
Working Capital Demand Loan Canara Bank 17.42 Principal >365 days
Working Capital Demand Loan IDBI Bank 94.13 Principal >365 days
1.32 Interest
Working Capital Demand Loan Punjab National Bank 192.41 Principal >365 days
Working Capital Demand Loan State Bank of India 90.99 Principal >365 days
31.71 Interest
Working Capital Demand Loan Federal Bank 15.20 Principal >365 days
3.05 Interest
Working Capital Demand Loan ICICI Bank 137.05 Principal >365 days
Working Capital Demand Loan Oriental Bank of Commerce 11.98 Principal >365 days
Working Capital Demand Loan Indian Bank 25.68 Principal >365 days
8.76 Interest
Working Capital Demand Loan Jammu & Kashmir 51.71 Principal >365 days
Cash credit Canara Bank 13.27 Principal >365 days
Cash credit IDBI Bank 106.18 Principal >365 days
2.79 Interest
Cash credit Punjab National Bank 53.05 Principal >365 days
Cash credit State Bank of India 77.75 Principal >365 days
78.51 Interest
Cash credit Union Bank of India 7.89 Principal >365 days
8.28 Interest
Cash credit Federal Bank 4.35 Principal >365 days
3.20 Interest
Cash credit ICICI Bank 10.65 Principal >365 days
Cash credit Oriental Bank of Commerce 120.91 Principal >365 days
Cash credit Indian Bank 15.22 Principal >365 days
12.46 Interest
Cash credit Jammu & Kashmir 70.19 Principal >365 days
Cash credit DBS Bank 0.47 Principal >365 days
1.18 Interest
Cash credit Bank of Baroda 13.81 Principal >365 days
12.56 Interest
Other Bank Loans Bank of Maharashtra 11.95 Principal >365 days
4.78 Interest
Other Bank Loans Canara Bank 31.31 Principal >365 days
9.46 Interest
Other Bank Loans Union Bank of India 49.05 Principal >365 days
12.47 Interest
Other Bank Loans ICICI Bank 10.73 Principal 91-180 days
1.02 Interest
59.49 Principal >365 days
19.88 Interest
Other Bank Loans Bank of Baroda 2.10 Principal >365 days
0.75 Interest

*represents amount less than Rs. 50000

(b) According to the information and explanations given to us includingconfirmations received from banks/ financial institution and/or other lenders andrepresentation received from the management of the Company and on the basis of our auditprocedures we report that the Company has not been declared a willful defaulter by anybank or financial institution or other lender.

(c) In our opinion and according to the information and explanationsgiven to us the Company has not raised any money by way of term loans during the year andthere has been no utilisation during the current year of the term loans obtained by theCompany during any previous years. Accordingly reporting under clause 3(ix)(c) of theOrder is not applicable to the Company.

(d) In our opinion and according to the information and explanationsgiven to us the Company has not raised any funds on short term basis during the year orin any previous year. Accordingly reporting under clause 3(ix) (d) of the Order is notapplicable to the Company.

(e) According to the information and explanations given to us and on anoverall examination of the financial statements of the Company the Company has not takenany funds from any entity or person on account of or to meet the obligations of itssubsidiaries associates or joint ventures.

(f) According to the information and explanations given to us theCompany has not raised any loans during the year on the pledge of securities held in itssubsidiaries joint ventures or associate companies.

(x) (a) The Company has not raised any money by way of initial publicoffer or further public offer (including debt instruments) during the year. Accordinglyreporting under clause 3(x)(a) of the Order is not applicable to the Company.

(b) According to the information and explanations given to us theCompany has not made any preferential allotment or private placement of shares or (fullypartially or optionally) convertible debentures during the year. Accordingly reportingunder clause 3(x)(b) of the Order is not applicable to the Company.

(xi) (a) To the best of our knowledge and according to the informationand explanations given to us no fraud by the Company or on the Company has been noticedor reported during the period covered by our audit.

(b) No report under section 143(12) of the Act has been filed with theCentral Government for the period covered by our audit.

(c) According to the information and explanations given to us includingthe representation made to us by the management of the Company there are nowhistle-blower complaints received by the Company during the year.

(xii) The Company is not a Nidhi Company and the Nidhi Rules 2014 arenot applicable to it. Accordingly reporting under clause 3(xii) of the Order is notapplicable to the Company.

(xiii) In our opinion and according to the information and explanationsgiven to us all transactions entered into by the Company with the related parties are incompliance with sections 177 and 188 of the Act where applicable. Further the details ofsuch related party transactions have been disclosed in the standalone financialstatements as required under Indian Accounting Standard (Ind AS) 24 Related PartyDisclosures specified in Companies (Indian

Accounting Standards) Rules 2015 as prescribed under section 133 of theAct.

(xiv) (a) In our opinion and according to the information andexplanations given to us the Company has an internal audit system as required undersection 138 of the Act which is commensurate with the size and nature of its business.

(b) We have considered the reports issued by the Internal Auditors ofthe Company till date for the period under audit.

(xv) According to the information and explanation given to us theCompany has not entered into any non-cash transactions with its directors or personsconnected with them and accordingly provisions of section 192 of the Act are notapplicable to the Company.

(xvi) The Company is not required to be registered under section 45-IAof the Reserve Bank of India Act 1934. Accordingly reporting under clauses 3(xvi)(a)(b) and (c) of the Order are not applicable to the Company. Further based on theinformation and explanations given to us and as represented by the management of theCompany the Group as defined in Core Investment Companies (Reserve Bank) Directions2016) does not have any CIC.

(xvii) The Company has incurred cash losses in the current financialyear and in the immediately preceding financial years amounting to Rs. 59.46 crores andRs. 475.39 crores respectively. For the purpose of reporting under this clause whilearriving at the amount of cash losses the possible effects of the qualifications asdescribed in ‘Basis for Qualified Opinion? sections of the audit report on thefinancial statements for the current year and the audit report on the financial statementsof the immediately preceding financial year issued by us in respect of which we areunable to determine the effect thereof on the cash losses reported under this clause dueto lack of necessary information have not been taken into consideration.

(xviii) There has been no resignation of the statutory auditors duringthe year. Accordingly reporting under clause 3(xviii) of the Order is not applicable tothe Company.

(xix) According to the information and explanations given to us and onthe basis of the financial ratios ageing and expected dates of realisation of financialassets and payment of financial liabilities other information accompanying the standalonefinancial statements our knowledge of the plans of the Board of Directors and managementand based on our examination of the evidence supporting the assumptions nothing has cometo our attention which causes us to believe that any material uncertainty exists as onthe date of the audit report that Company is not capable of meeting its liabilitiesexisting at the date of balance sheet as and when they fall due within a period of oneyear from the balance sheet date. We however state that this is not an assurance as tothe future viability of the company. We further state that our reporting is based on thefacts up to the date of the audit report and we neither give any guarantee nor anyassurance that all liabilities falling due within a period of one year from the balancesheet date will get discharged by the Company as and when they fall due.

(xx) According to the information and explanations given to usalthough the Company fulfilled the criteria as specified under section 135(1) of the Actread with the Companies (Corporate Social Responsibility Policy) Rules 2014 however inthe absence of average net profits in the immediately three preceding years there is norequirement for the Company to spend any amount under sub-section (5) of section 135 ofthe Act. Accordingly reporting under clause 3(xx) of the Order is not applicable to theCompany.

(xxi) The reporting under clause 3(xxi) of the Order is not applicablein respect of audit of standalone financial statements of the Company. Accordingly nocomment has been included in respect of said clause under this report.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm?s Registration No.: 001076N/N500013
Shashi Tadwalkar
Partner
Membership No.: 101797
UDIN: 22101797AIVRMQ5916
Place: Pune
Date: 12 May 2022

Annexure III to the Independent AudItor?s report

Annexure III to the Independent Auditor?s Report of even date tothe members of Hindustan Construction Company Limited on the standalone financialstatements for the year ended 31 March 2022

Independent Auditor?s Report on the internal financial controlswith reference to financial statements under Clause (i) of Sub-section 3 of Section 143 ofthe Companies Act 2013 (‘the Act?)

1. In conjunction with our audit of the standalone financial statementsof Hindustan Construction Company Limited (‘the Company?) as at and for the yearended 31 March 2022 we have audited the internal financial controls with reference tofinancial statements of the Company as at that date.

Responsibilities of Management and Those Charged with Governance forInternal Financial Controls

2. The Company?s Board of Directors is responsible forestablishing and maintaining internal financial controls based on internal control overfinancial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls over Financial Reporting (‘the Guidance Note?) issued by the Instituteof Chartered Accountants of India (‘the ICAI?). These responsibilities includethe design implementation and maintenance of adequate internal financial controls thatwere operating effectively for ensuring the orderly and efficient conduct of theCompany?s business including adherence to the Company?s policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.

Auditor?s Responsibility for the Audit of the Internal FinancialControls with Reference to Financial Statements

3. Our responsibility is to express an opinion on the Company?sinternal financial controls with reference to financial statements based on our audit. Weconducted our audit in accordance with the Standards on Auditing issued by the ICAIprescribed under Section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to financial statements and the Guidance Noteissued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wereestablished and maintained and if such controls operated effectively in all materialrespects.

4. Our audit involves performing procedures to obtain audit evidenceabout the adequacy of the internal financial controls with reference to financialstatements and their operating effectiveness. Our audit of internal financial controlswith reference to financial statements includes obtaining an understanding of suchinternal financial controls assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor?s judgementincluding the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our qualified opinion on the Company?sinternal financial controls with reference to financial statements.

Meaning of Internal Financial Controls with Reference to FinancialStatements

6. A company?s internal financial controls with reference tofinancial statements is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. Acompany?s internal financial controls with reference to financial statements includethose policies and procedures that (1) pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company?s assets that could havea material effect on the financial statements.

Inherent Limitations of Internal Financial Controls with Reference toFinancial Statements

7. Because of the inherent limitations of internal financial controlswith reference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

Qualified opinion

8. According to the information and explanations given to us and basedon our audit the following material weaknesses have been identified as at 31 March 2022:a) The Company did not have an appropriate internal control system with respect tocompliance with the provisions of section 197 of the Companies Act 2013 relating toobtaining prior approval from lenders for payment/accrual of remuneration exceeding thespecified limits as explained in Note 27.1 to the standalone financial statements whichhas resulted in a material misstatement in the value of Company?s employee benefitexpenses financial assets and its resultant impact on the loss after tax and the otherequity including levy of fine if any on account of such non-compliance.

b) The Company?s internal financial controls system with respectto assessing the recoverability of deferred tax assets as explained in Note 9.1 to thestandalone financial statements as per Ind AS 12 ‘Income taxes? were notoperating effectively which could lead to a material misstatement in the carrying valueof deferred tax assets and its resultant impact on loss other equity and relateddisclosures in respect thereof as at and for the year ended 31 March 2022.

c) The Company?s internal financial control system towardsestimating the value in use of its investment in subsidiary to assess the requirement ofrecognising an impairment loss as laid down under Ind AS 109 ‘financialinstruments? were not operating effectively which could potentially result in amaterial misstatement in the carrying value of investments and dues recoverable from suchsubsidiary and its consequential impact on the earnings other equity and relateddisclosures in the standalone financial statements.

9. A ‘material weakness? is a deficiency or a combination ofdeficiencies in internal financial controls with reference to financial statements suchthat there is a reasonable possibility that a material misstatement of the company?sannual or interim financial statements will not be prevented or detected on a timelybasis.

10. In our opinion except for the possible effects of the materialweakness described in paragraph 8(a) above on the achievement of the objectives of thecontrol criteria the Company has in all material respects adequate internal financialcontrols with reference to financial statements as at 31 March 2022 based on internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note issued by the ICAIand except for the effects/ possible effects of the material weaknesses described inparagraph 8(b) and 8(c) above on the achievement of the objectives of the controlcriteria the Company?s internal financial controls with reference to financialstatements were operating effectively as at 31 March 2022

11. We have considered the material weaknesses identified and reportedabove in determining the nature timing and extent of audit tests applied in our audit ofthe standalone financial statements of the Company as at and for the year ended 31 March2022 and these material weaknesses have affected our opinion on the standalone financialstatements of the Company and we have issued a qualified opinion on the standalonefinancial statements.

For Walker Chandiok & Co LLP
Chartered Accountants
Firm?s Registration No.: 001076N/N500013
Shashi Tadwalkar
Partner
Membership No.: 101797
UDIN: 22101797AIVRMQ5916
Place: Pune
Date: 12 May 2022

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