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Indian Railway Catering & Tourism Corporation Ltd.

BSE: 542830 Sector: Services
NSE: IRCTC ISIN Code: INE335Y01020
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VOLUME 307784
52-Week high 1278.60
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P/E 152.83
Mkt Cap.(Rs cr) 64,924
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OPEN 810.00
CLOSE 794.35
VOLUME 307784
52-Week high 1278.60
52-Week low 267.19
P/E 152.83
Mkt Cap.(Rs cr) 64,924
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Indian Railway Catering & Tourism Corporation Ltd. (IRCTC) - Auditors Report

Company auditors report

To the Members of

M/s Indian Railway Catering and Tourism Corporation Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of M/sIndian Railway Catering and Tourism Corporation Limited (‘the Company') whichcomprise the balance sheet as at 31 March 2020 the statement of profit and loss(including other comprehensive income) the statement of cash flows and the statement ofchanges in equity for the year then ended and a summary of the significant accountingpolicies and other explanatory information (herein after referred to as "standaloneInd AS financial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements read along with ouraudit report give the information required by the Act in the manner so required and give atrue and fair view in conformity with the in conformity with the Indian AccountingStandards prescribed under section 133 of the Act read with the Companies (IndianAccounting Standards) Rules 2015 as amended ("Ind AS") and other accountingprinciples generally accepted in India of the state of affairs of the Company as at March31 2020 the profit and total comprehensive income changes in equity and its cash flowsfor the year ended on that date.

Basis of opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial 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 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 ICAI's Code of Ethics. That our opinion is based on sufficientand appropriate audit evidence that we obtained during the course of our Audit.

Key Audit Matter

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matter described below to be thekey audit matter to be communicated in our report.

a. That with regards to the Ind Accounting Standard 115 on Revenue from Contract withCustomers the company is in receipt of integration charges from booking agents (NonRefundable one time fees) for providing connectivity with the IRCTC Portal for railwayticket booking along with the annual maintenance charges which may vary based on volume ofticket bookings etc. The management is of the opinion that the agreement with the partiesfor integration charges is generally for one to three years and subsequently the annualmaintenance contract is renewed but without any integration charges. And that since therenewal is unilateral at the option of IRCTC such integration charges shall not bedeferred as income beyond initial contract period of one to three years.

In our opinion the contract for integration charges and annual maintenance contractare not distinct contracts therefore Income of integration charges (one time nonrefundable fees) shall be amortized over the expected contract period instead ofrecognizing revenue at one time. Further past trend has indicated that there is hardly anycase where the contract was not renewed by IRCTC. Accordingly in our view the one timeintegration charges shall be recognized as revenue over the estimated contract period(estimated 20 years based on past trend) rather than accruing the entire amount as incomebased on initial contract of one to three years.

Deferment of such integration charges in terms of above based on the past informationcompiled by the management is estimated to cause overstatement of revenue by H 6.33 Croresduring the financial year ended 31st March 2020 and other equity comprising of reservesand surplus as at 31st March 2020 by H 37.74 Crores

Information Other than the Financial Statements and Auditor's Report Thereon

a. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard's Report including Annexures to Board's Report Business Responsibility ReportCorporate Governance and Shareholder's Information but does not include the standalonefinancial statements and our auditor's report thereon.

b. Our opinion on the standalone financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

c. In connection with our audit of the standalone financial statements ourresponsibility 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.

d. When we read the Other Information if we conclude that there is a materialmisstatement therein we shall communicate the matter to those charged with governance.That such information is pending for approval on the date of audit report.

e. Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors are responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company in accordance with the accounting principlesgenerally accepted in India including the Indian Accounting Standards (Ind AS) prescribedunder Section 133 of the Act read with relevant rules issued thereunder.

The responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalone IndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

Those Board of Directors are also responsible for overseeing the company's financialreporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional 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 in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act 2013 we are also responsible for expressing our opinion onwhether the company has adequate internal financial controls system in place and theoperating effectiveness of such controls.

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

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit. We alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

1. Report on other Legal & Regulatory Requirements

As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the Annexure A a statement on the matters specified in the paragraphs3 and 4 of the Order.

2. As required by section 143(3) of the Act we report hereunder along withemphasis on some matters. Our Opinion is not modified on such matters.

a. We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit except for thirdparty confirmations including balances payable/receivable from railways. Further the partywise receivables and payables as per sub-ledgers in the ERP system could not be reconciledwith the corresponding ledger balances as per ERP System.

b. In our opinion the internal control as well as the internal audit system is notcommensurate with the size of the company and the nature of it's operations. There is animmediate need to develop stronger MIS for periodical closure and review of operations atzonal level and of various business segments which could reduce the errors and omissionsobserved during the course of audit.

c. That with regards to the convenience charges (formally known as service charges)received on the online ticketing booking amounting to H 349.64 Crores up to March31 2020 reliance has been placed on the management representation that unlike theprevious arrangement with the Indian Railways there is no obligation upon the company toshare the service charges earned with the Indian Railways. In our opinion that referencewas made to the Railway Board that restoration of convenience charges is must to recoverthe infrastructure cost whereas the Internet Ticketing Division has reasonable highoperating margins as per Note No.59 to the financial statements.

d. That in our opinion the railways share of 15% needs to be provided on the revenuefrom portion of supply of food from the base kitchens operated by IRCTC in terms of theCatering Policy 2017 the same being in the nature of revenue from departmentally managedunits. The same shall result in increase in expenses to the tune of H2.96 Crores for thefinancial year under consideration. Further the railway share on trains operated underpartial unbundling model in previous financial years amounting to H18.49 Crores notprovided for pending clarification from the Railways may reduce the retained earnings ofthe company.

e. That in our opinion in terms of the catering policy there is a need to do a yearlyassessment of the sales to review and reassess the license fee for static units but nosuch information/revision was shared with us. Also Trade receivable includes licenseeswith significant increase in credit risk and also those which are credit impaired onaccount of legal disputes yet renewals as well as new business arrangement are conductedwith such parties without settling pending disputed claims. In our opinion there is a needto fully adapt the e-tendering system and to reduce the number of limited tenders floatedduring the year for having a wider range of qualified vendors associated with the company.

f. In our opinion immediate measures need to be taken to upgrade the current ERPsystem along with adequate training to the staff for reducing manually compiled reportsand timely delivery of integrated financial data during course of audit. This shall alsorequire identification and reconciliation of the legacy transactions the balances of whichis stated to have been existing since the migration of data from earlier financial systemto present financials maintained in Oracle apart from legacy transactions pertaining tothe period of transfer of operations from/to railways.

Further reconciliation between the transactions executed through 3rd partyapplications/portals as well as manual data with the financial information posted in thebooks of accounts could not be made and accordingly reliance was placed on informationavailable on records and verified on test check basis as per the financial books. In ouropinion the data posting between all the 3rd party application/ portals needs to be fullyautomated & documented for verification.

g. That the bank balances reflected in the financial statements have been stated as perthe books of accounts and are subject to posting of financial payments and receiptscrystallized in the company bank accounts but which are pendingconfirmations/reconciliations. Further the transaction by transaction reconciliation couldnot be made for some of the bank accounts being handled at Internet Ticketing division ofthe company on account of voluminous ticket booking and cancellation transactions onbehalf of railways. (Refer to Note No. 38)

h. That the company is in the process of reconciling the liabilities under GST as wellas the credit admissibility with the returns filed. That financial implications of thesame shall be assessed once the reconciliation activity for the previous years iscompleted. That as represented to us the assessment of carry forward liability on accountof various provisions including reverse charge mechanism on payment to railwaysreimbursement claims etc. is being done and suitable corrective measures shall be takenbased on directions from the Legal consultant in due course of time.

i. In our opinion proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books.

j. the balance sheet the statement of profit and loss including other comprehensiveincome the statement of cash flows and the statement of changes in equity dealt with bythis Report are in agreement with the books of account

k. In our opinion the aforesaid standalone Ind AS financial statements comply with theIndian Accounting Standards specified under Section 133 of the Act read with relevant ruleissued thereunder except as stated hereunder:

i. That with regards to the Ind Accounting Standard 31 on Interest in Joint Ventureson account of the ongoing litigation with M/s Cox & Kings Ltd. in respect of jointventure company M/s Royale India Rail Tours Limited for which the financial have not beenprepared since 2010-11 and hence the company is neither filing the consolidated financialstatements nor the disclosures have been made regarding the financial position of suchjoint venture company.

Further in view of the termination of the joint venture agreements the company is ofthe view that M/s Cox & Kings Ltd cannot invoke arbitration clause in relation to thereliefs sought. Consequential financial impact if any could not be ascertained. (Refer toNote 37.3 & 45)

ii. That with regards to the Ind Accounting Standard 37 on Provisions ContingentLiabilities and Contingent Assets

The commissioner of VAT vide order dated 23rd March 2006 had levied VAT on on-boardcatering services in train treating the same as sales. The plea of the company was notaccepted by the Appellate Tribunal as well as by the Hon' Delhi High Court and SLP is nowpending at the Hon' Supreme Court. The company as a prudent policy has been providing VATliability but only net of corresponding VAT Input and service tax being paid since onlyone of the taxes may be applicable. Such VAT Input amounting to H11.19 Crores have beenstated as balance due from statutory authorities as other current asset. In case theruling goes against the company the entire VAT liability (on gross or net basis) alongwith the interest (as levied) may have to be deposited and a separate service tax refundapplication may be required to be filed and obtained separately. (Refer to Note 37.4).

l. On the basis of written representations received from the directors as on March 312020 and taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164(2) of theAct.

m. With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls the reportingrequirement have been reported in Annexure B.

n. That as required by Section 143(5) of the Act and as per the directions issued bythe Comptroller and Auditor General of India refer to our report in Annexure C

o. With respect to the other matters included in the Auditor's Report in accordancewith Rule 11 of the Companies (Audit & Auditors) Rules 2014 in our opinion and to ourbest of our information and according to the explanations given to us:

a. The Company has represented and disclosed the impact of pending litigations on itsfinancial position in its Ind AS financial statements (Refer to Note No.37.2 37.3 &37.4)

b. The company had not entered into any long term contracts including derivativecontracts

c. There were no amount which was required to be transferred to Investor education& Protection fund by the company.

For Serva Associates
Chartered Accountants
FRN: 000272N
C.A.Nitin Jain
(Partner)
Membership Number: 506898 Place: Delhi
UDIN: 20506898AAAADL2014 Date: July 10 2020

Annexure ‘A' to the Independent Auditors' Report

As referred to in the Auditors' Report of even date to the members of M/s IndianRailway Catering and Tourism Corporation Limited on the Ind AS financial statementsfor the year ended March 31 2020

(i) (a) The company has maintained records showing full particulars includingquantitative details and situation of fixed assets however the asset number wiseidentification is not available.

(b) As represented to us all the assets have been physically verified by the managementduring the year at regular intervals according to a program of verification. In ouropinion the manner of physical verification needs to be elaborated and formalized. Nomaterial discrepancies have been reported on such verification.

(c) The title deeds of immovable properties are held in the name of the company.

(ii) The physical verification of inventory has been conducted at reasonable intervalsby the company & no material discrepancies were reported on physical verification ofthe inventory during the year. The inventory has been taken as quantified valued andcertified by the management.

(iii) The company has not granted any loan secured or unsecured to companies firmsLimited liability partnerships (LLP) or other parties covered in the register maintainedunder section 189 of the Companies Act and hence provisions para (iii) are not applicable.

(iv) The company has not given/advances any loans to directors and parties coveredunder Section 185 or loans and advances under Section 186 of the Companies Act 2013 andhence the provisions of paragraph (iv) are not applicable to the company.

(v) The company has not accepted any deposits and hence para (v) is not applicable.

(vi) According to the information and explanations given to us in our opinion themaintenance of cost records have not been prescribed for the company by the CentralGovernment under subsection (1) of section 148 of the Companies Act though the same havebeen made voluntarily by the company.

(vii) (a) The company is regular in depositing with appropriate authorities undisputedstatutory dues deducted/accrued in the books of accounts including Income Tax Goods andservice Tax Cess and other statutory dues applicable to it. According to the informationand explanations given to us no undisputed amounts payable in respect of provident fundemployees state insurance income tax Goods and Service Tax cess and other statutorydues were in arrears which was payable as at 31st March'2020 for a period of more than sixmonths from the date they become payable. However the liabilities under GST are subject toreconciliation as stated in our report above and such liability if any could not beassessed.

(b) According to the information and explanation given to us the statutory dues whichhave not been deposited on account of dispute with the authorities apart is as under:

Name of the statue Name of the Dues Period to which amount pertains Amounts in Lakhs Fourum where dispute is pending Remarks
ENTRY TAX Assessment Interest & Penalty 2011-12 to 2012- 13 0.90 High Court Hearing in Process
Service Tax Tax on Renting Agent Business catering etc 01.04.2007 to 31.03.2012 7902.16 CESTAT Hearing in Process
Service Tax On charter coach booking April 2016 to June 2017 48.44 Commissioner Hearing in Process
Service Tax Tax on Renting Agent Business catering etc 2012-13 upto June 2017 23.05 CESTAT Hearing in Process
Service Tax Demands on catering tour operations goods transportation etc. 2014-15 177.87 High Court/Tribunal/ Appellate Authority Hearing in Process
Service Tax On Sale of Package Drinking Water 2008-09 to 2012-13 38.57 CESTAT/Commissioner (Appeals) Hearing in Process
VAT Demand on Mobile Catenng Services 2008-09 to June 2017 8251.01 Supreme Court Hearing in Process
VAT Assessment Interest & Penalty 2005-06 & 2008-09 373.30 Jt. Comm. of Sales Tax (Appeal) Hearing in Process
VAT ITC Denial demand on Mobile Catering 2010-11 to 2012- 13 161.70 Tribunal Hearing in Process
VAT Bihar Demand on Mobile Catering Services 200809 to 2011-12 915.80 Supreme Court Hearing in Process
VAT Bihar Demand on Mobile Catering Services 2011-12 73.24 High Court/ Tribunal/ Appellate Authority Hearing in Process
VAT Delhi Assessment Interest & Penalty 2012-13 77.74 VATO SPL OHA Hearing in Process
VAT Delhi & CST Assessment Interest & Penalty 2009-10 to 2010-11 599.38 Special Commissioner (DVAT) Hearing in Process
VAT Delhi & CST Assessment Interest & Penalty 2013-14 to 2015- 427.97 DVAT OHA Hearing in Process
16
VAT Jharkhand Penalty 2010-11 to 2012- 13 46.31 ADC Hearing in Process
VAT Jharkhand Demand 2010-11 to 2012- 13 40.03 High Court/ Tribunal/ Appellate Authority Hearing in Process
VAT Kerela Pertaining to Denial of Compounding Rate 2014-15 47.57 ACTO Hearing in Process
VAT Odisha Assessment Interest & Penalty 2011-12 to 2013-14 147.56 Commissioner Tribunal Hearing in Process
VAT Odisha Demand on Mobile Catering Services 2011-12 to 2012- 13 14.11 Tribunal Hearing in Process
VAT Rajasthan Assessment Interest & Penalty 2005-06 to 2016-17 32.56 ACTO Hearing in Process
VAT UP Assessment Interest & Penalty 2008-09 17.08 Commissioner (UPVAT) Hearing in Process
TOTAL 19416.34

(viii) In our opinion and according to the information and explanations given to usthe company has not defaulted in repayment of dues against the borrowings made from Banks.No borrowings have been made from other financial institutions or debentures.

(ix) The company has not raised any money by way of Initial Public Offer (IPO) orfurther public offer (including debt instruments). As per the decision of Government ofIndia to disinvest the shareholding by 12.6% of paid up share capital of company theinitial public offer was held on 30th September 2019 and the shares of the Company werelisted on NSE and BSE on 14th October 2019. Accordingly 2.016 Crores (Two Crores oneLakh sixty thousand total share) shares i.e. 12.6% of total capital having face value ofH10/- each were offered to public through offer for sale out of which 1.6 Lakhs sharewere reserved for employees (approx. 0.79% of total issue). No term loans were taken bythe company.

(x) During the course of our examination of the books and records of the companycarried out in accordance with the generally accepted auditing practices in India andaccording to the representations made to us 2 cases of frauds were detected during theyear and are under investigation however on account of the directions given by the RailwayBoard details of the same were not shared and hence we are unable to comment on themateriality and the financial implications of the same on the company. Further details onfrauds (if any) where investigation was concluded during the year was also not shared withus during the course of audit.

(xi) As per Notification dated 05.06.2015 Section 197 of the Act is not applicable incase of a Government Company. Accordingly paragraph 3 (xi) of the Order is notapplicable.

(xii) The company is not a nidhi company & hence paragraph (xii) of the order isnot applicable.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the standalone Ind AS financial statements as requiredby the applicable accounting standard.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly paid convertible debentures and hence reportingunder clause 3 (xiv) of the Order is not applicable to the Company.

(xv) The company has not entered into non-cash transactions with directors or personsconnected with him. Accordingly paragraph (xv) of the order is not applicable.

(xvi) The company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.

For Serva Associates
Chartered Accountants
FRN: 000272N
C.A.Nitin Jain
(Partner)
Membership Number: 506898 Place: Delhi
UDIN: 20506898AAAADL2014 Date: July 10 2020

Annexure ‘B' to the Auditors' Report

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act)

We have audited the internal financial controls over financial reporting of M/s IndianRailway Catering and Tourism Corporation Limited ("the Company") as of 31stMarch 2020 in conjunction with our audit of the standalone Ind AS financial statements ofthe Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

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

Auditors' Responsibility

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

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

We believe that the audit evidence we have obtained subject to our comments reported ininherent limitations below are sufficient and appropriate to provide a basis for our auditopinion on the Company's internal financial controls system over financialreporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of Ind AS financial statements for external purposes in accordance withgenerally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that 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 Ind ASfinancial statements in accordance with 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; and (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 Ind ASfinancial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate. We have broadlyreviewed the operating procedures and identification of potential risks involved asdocumented by the management. Effort has been made to cover substantially the entirebusiness of the company yet owing to multiple geographical locations & Covid-19induced movement restriction the testing of the risks control measures was restricted tolimited samples selected. However we have considered the limitation reported above indetermining the nature timing & extent of audit test applied in our audit of Ind ASfinancial statements of the company and the limitations do not affect our opinion on theInd AS financial statements of the Company.

Opinion

In our opinion suitable measures needs to be taken for adapting system controlprocedures as against the manual control procedures being followed for over allstrengthening of the financial control system. That reliance has been placed on suchmanual control procedures along with management representations including suitablemeasures being taken in the updated ERP System under implementation. We have performed thetesting of internal financial controls over financial reporting at the Corporate level andsubject to the above the same were principal operating effectively as at 31st March 2020based on the internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India.

For Serva Associates
Chartered Accountants
FRN: 000272N
C.A.Nitin Jain
(Partner)
Membership Number: 506898 Place: Delhi
UDIN: 20506898AAAADL2014 Date: July 10 2020

Annexure ‘C' to the Auditors' Report

Report under Section 143(5) of the Act and as per the directions issued by theComptroller and Auditor General of India on Financials of M/s Indian Railway Catering andTourism Corporation Limited for the Financial Year ended 31st March 2020

Directions under Section 143(5) of the Companies Act 2013 applicable.

1. Whether the company has system in place to process all the accounting transactionsthrough lT system? If yes the implications of processing of accounting transactionsoutside lT system on the integrity of the accounts along with the financial implicationsif any may be stated.

Reply: Yes however the current version of the ERP system (Oracle) is not being usedas end to end integrated accounting system since most of the information and calculationsis being prepared in Excel Sheets or third party applications and uploaded/posted manuallyin the Financial Accounting Module.

That IT system upgradations is in process and as represented to us under mentionedlimitations shall be duly addressed in the upgraded system

a. master data reconfiguration

b. reconciliation of legacy transactions

c. inoperative & redundant ledger accounts profit centers/ departments

d. integration issues including correcting the mapping of tax codes as well assubledger accounts &

e. User controls & adequate staff training

2. Whether there is any restructuring of an existing loan or cases of waiver/write offof debts/loans/interest etc. made by a lender to the company due to the company'sinability to repay the loan? lf yes the financial impact may be stated.

Reply: Not Applicable

3. Whether funds received/receivable for specific schemes from central/state agencieswere properly accounted for/ utilized as per its term and conditions? List the cases ofdeviation.

Reply: With regards to the government grant received in previous years the same hasbeen accounted for in terms of the applicable Ind AS. No new grant has been receivedduring the year.

For Serva Associates
Chartered Accountants
FRN: 000272N
C.A.Nitin Jain
(Partner)
Membership Number: 506898 Place: Delhi
UDIN: 20506898AAAADL2014 Date: July 10 2020

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