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NELCO Ltd.

BSE: 504112 Sector: Telecom
NSE: NELCO ISIN Code: INE045B01015
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OPEN 600.00
PREVIOUS CLOSE 606.95
VOLUME 5569
52-Week high 968.55
52-Week low 353.00
P/E 122.17
Mkt Cap.(Rs cr) 1,355
Buy Price 0.00
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Sell Price 0.00
Sell Qty 0.00
OPEN 600.00
CLOSE 606.95
VOLUME 5569
52-Week high 968.55
52-Week low 353.00
P/E 122.17
Mkt Cap.(Rs cr) 1,355
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

NELCO Ltd. (NELCO) - Auditors Report

Company auditors report

TO

THE MEMBERS OF

NELCO LIMITED

Report on the Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying standalone Ind AS financial statements of NelcoLimited ('the Company') which comprise the Balance sheet as at March 31 2022 theStatement of Profit and Loss including the statement of Other Comprehensive Income theCash Flow Statement and the Statement of Changes in Equity for the year then ended andnotes to the standalone Ind AS financial statements including a summary of significantaccounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ('the Act') in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at March 31 2022 its profitincluding other comprehensive income its cash flows and the changes in equity for theyear ended on that date.

Basis for opinion

We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Standalone Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the 'Code of Ethics'issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion on the standalone Ind AS financial statements.

Emphasis of matter

Note 47 to the standalone Ind AS financial statements regarding the Company's claim tocarry forward of input tax credit balances availed under the CENVAT/ Service Tax/ SalesTax act upon transition to The Goods and Services Tax Act (GST) and the Company's claimto set-off such input tax credit availed against GST payable. The Company based onexternal legal advice obtained has filed a petition with courts in this regard.

Our opinion is not modified in respect of this matter.

Key audit matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 31 2022. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. In addition to the matter describedin the 'Emphasis of matter' section we have determined the matters described below to bethe key audit matters to be communicated in our report. For each matter below ourdescription of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying standalone Ind AS financialstatements.

Key audit matters How our audit addressed the key audit matter
Assessment of Accounting pursuant to Scheme approval by NCLT and DOT (as described in Note 29 to the standalone Ind AS financial statements). Our audit procedures included the following:
We obtained and read the documents filed by the Company with the Registrar of Companies including
Pursuant to provisions of Section 230-232 of the Companies Act 2013 the Board of Directors of the Company on September 1 2017 approved the scheme as follows: the NCLT order/DOT Order with respect to the merger of TNSL with Nelco and transfer of discontinued operations to NNPL based on which the Scheme became effective;
transferbywayofslumpsaleonagoingconcernbasis for a lump sum consideration to its wholly owned subsidiary Nelco Network Products Ltd (NNPL) of the following: Tested the underlying workings prepared by management for merger of TNSL with Nelco including the workings prepared for restatement of comparative figures for Previous year as required by Appendix C to Ind AS 103;
a) Integrated Security and Surveillance Solution ('ISSS') business and
b) Very Small Aperture Terminals ('VSAT') hardware business and allied services consisting of network management project management infrastructure services turnkey solutions for satellite communication systems and co-location services to customers other than Tatanet Services Ltd (TNSL); and Tested the underlying workings prepared by management for transfer of assets and liabilities pertaining to discontinued operations as per the Scheme; Assessed accounting in accordance with Scheme and as per applicable accounting standards;
Tested the underlying workings for revised tax computations read independent opinion obtained by the management on taxation matters relating to the revised tax computations and involved tax specialist for review of independent opinion
the amalgamation of TNSL with the Companythrough a composite scheme of Arrangement and Amalgamation (Proposed Scheme).
The proposed scheme was approved by NCLT on November 2 2018 and approved by Department of Telecommunications on June 9 2021. Assessed the disclosures in the standalone Ind AS financial statements for compliance with disclosure requirements
During the year the Scheme has been accounted for as follows:
Accounting for transfer of discontinuing operations to NNPL in accordance with IND AS 105; and
Accounting for merger of TNSL with the Company as business combination of entities under common control in accordance with Appendix C of IND AS 103 'Business Combination' and accordingly all the comparative periods presented in the financial statements have been restated to include the effect of this merger.
The Scheme has a significant impact on the standalone financial statements of the Company including revenue profit tax reserve and comparative figures basis which the same is considered as a key audit matter for the year.
The Company's disclosures are included in Note 29 to the standalone financial statements which outlines the scheme accounting.
Assessment of contingent liabilities provision for litigations {as described in Note 2.1(f) to the standalone Ind AS financial statements) Our audit procedures included the following:
As at March 31 2022 the Company held provisions of ?117 lakhs and disclosed contingent liabilities (to the extent not provided for) of ?1608 lakhs in respect of certain tax and other litigations. • We obtained an understanding and evaluated processes and controls designed and implemented by the management for assessment of litigations.
The Company faces inquiries from tax authorities and regulatory authorities during tax assessment and legal proceedings during the normal course of business. There is a high level of management judgement required in estimating the probable outflow of economic resources and the level of provisioning and the disclosures required. The management's assessment is supported by legal opinions from independent tax consultants and legal experts obtained by the management. • We obtained the list of taxation and other litigation matters communications with the authorities and vendors inspecting the supporting evidence and critically assessing management's evaluation through discussions and inquiries made with the management on both the probability of outcome and the magnitude of potential outflow of economic resources;
We considered this to be a key audit matter as the outcome of the litigations/ inquiries is uncertain including ensuring compliances with the various regulations and the positions taken by the management are based on the application of material judgement advice from tax consultants and legal experts and interpretation of law. The ultimate outcome of the litigations/inquiries could be differentfrom the conclusion reached by the management and may significantly impact the Company's financial position. • Where relevant we read and relied upon the most recent legal opinion obtained by management from independent tax consultants and external legal experts to assess development in all pending cases against the Company;
The Company's disclosures are included in Note 2.1(f) and Note 37 and 40 to the financial statements which outlines the accounting policy for contingent liabilities and details of pending direct and indirect tax litigation disclosed as contingent liabilities. • We read recent orders received from the tax and regulatory authorities and the Company's responses to such communications and assessed the current status of the litigations against the Company.
• We obtained direct confirmations from tax consultants where considered relevant;
For tax matters we involved our tax specialists to assess management's application and interpretation of tax legislation affecting the Company and to consider the quantification of exposures and settlements arising from the disputes with the tax authorities in the various tax jurisdictions.

Other Information

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the Performance Highlights Report on Corporate GovernanceDirectors' Report Management Discussion and Analysis Report and Business ResponsibilityReport but does not include the standalone Ind AS financial statements and our auditor'sreport thereon. The Performance Highlights Report on Corporate Governance Directors'Report Management Discussion and Analysis Report and Business Responsibility Report isexpected to be made available to us after that date of this auditor's report.

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

In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information identified above when it becomes availableand in doing so consider whether such other information is materially inconsistent withthe financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.

Responsibilities of Management for the Standalone Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended by the Companies (IndianAccounting Standards) Second Amendment Rules 2019. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Company and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and the design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone Ind AS financial statements that give atrue and fair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative 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 Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial 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. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone Ind AS 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 standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

- Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.

- Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management. Conclude on theappropriateness of management's use of the going concern basis of accounting and based onthe audit evidence obtained whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Company's ability to continue as a goingconcern. If we conclude that a material uncertainty exists we are required to drawattention in our auditor's report to the related disclosures in the financial statementsor if such disclosures are inadequate to modify our opinion. Our conclusions are basedon the audit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the Company to cease to continue as a going concern.

- Evaluate the overall presentation structure and content of the standalone Ind ASfinancial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves 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 also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships 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 Ind AS financialstatements for the financial year ended March 31 2022 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2020 ('the Order') issued bythe Central Government of India in terms of sub-section (11) of section 143 of the Act wegive in the 'Annexure 1' a statement on the matters specified in paragraphs 3 and 4 of theOrder.

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

(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;

(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

(c) The Balance Sheet the Statement of Profit and Loss including the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;

(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended by the Companies (Indian AccountingStandards) Second Amendment Rules 2019;

(e) On the basis of the written representations received from the directors as on March31 2022 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2022 from being appointed as a director in terms of Section 164 (2) of theAct;

(f) With respect to the adequacy of the internal financial controls with reference tothese standalone Ind AS financial statements and the operating effectiveness of suchcontrols refer to our separate Report in RsAnnexure 2' to this report;

(g) In our opinion the managerial remuneration for the year ended March 31 2022 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofsection 197 read with Schedule V to the Act;

(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous;

i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone Ind AS financial statements ' Refer Note 40 to the standaloneInd AS financial statements;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;

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

iv. (a) The management has represented that to the best of its knowledge and beliefno funds have been advanced or loaned or invested (either from borrowed funds or sharepremium or any other sources or kind of funds) by the company to or in any other person(s)or entity(ies) including foreign entities ('Intermediaries') with the understandingwhether recorded in writing or otherwise that the Intermediary shall whether directlyor indirectly lend or invest in other persons or entities identified in any mannerwhatsoever by or on behalf of the company ('Ultimate Beneficiaries') or provide anyguarantee security or the like on behalf of the Ultimate Beneficiaries;

(b) The management has represented that to the best of its knowledge and belief nofunds have been received by the company from any person(s) or entity(ies) includingforeign entities ('Funding Parties') with the understanding whether recorded in writingor otherwise that the company shall whether directly or indirectly lend or invest inother persons or entities identified in any manner whatsoever by or on behalf of theFunding Party ('Ultimate Beneficiaries') or provide any guarantee security or the like onbehalf of the Ultimate Beneficiaries; and

(c) Based on such audit procedures that were considered reasonable and appropriate inthe circumstances nothing has come to our notice that has caused us to believe that therepresentations under sub-clause (a) and (b) contain any material misstatement.

v. The dividend paid during the year by the Company is in compliance with section 123of the Act. As stated in note 11(iii) to the standalone financial statements the Board ofDirectors of the Company have proposed final dividend for the year which is subject to theapproval of the members at the ensuing Annual General Meeting. The amount of dividenddeclared is in accordance with section 123 of the Act to the extent it applies todeclaration of dividend.

Annexure 1 referred to in clause 1 of paragraph on the report on 'Other Legal andRegulatory Requirements' of our report of even date

Re: Nelco Limited (the 'Company')

In terms of the information and explanations sought by us and given by the company andthe books of account and records examined by us in the normal course of audit and to thebest of our knowledge and belief we state that:

(i) (a) (A) The Company has maintained proper records showing full particularsincluding quantitative details and situation of property plant and equipment.

(B) The Company has maintained proper records showing full particulars of intangibleassets.

(b) All property plant and equipment except for equipment's given on lease installedat the customer premises were physically verified by the management of the Company in thecurrent year in accordance with a planned programme of verifying them once in a yearwhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. No material discrepancies were noticed on such verification.

(c) The title deeds of all the immovable properties (other than properties where theCompany is the lessee and the lease agreements are duly executed in favour of the lessee)are held in the name of the Company.

(d) The Company has not revalued its Property Plant and Equipment (including right ofuse assets) or Intangible assets during the year ended March 31 2022.

(e) There are no proceedings initiated or are pending against the Company for holdingany benami property under the Prohibition of Benami Property Transactions Act 1988 andrules made thereunder.

(ii) (a) Consequent to transfer of discontinued operations pursuant to the schemereferred in note 29 the Company's business does not require maintenance of inventoriesand accordingly the requirement to report on clause 3(ii)(a) of the Order is notapplicable to the Company.

(b) As disclosed in note 15 and 44 to the standalone financial statements the Companyhas been sanctioned working capital limits in excess of ` five crores in aggregate frombanks and/or financial institutions during the year on the basis of security of currentassets of the Company. The quarterly returns/statements filed by the Company with suchbanks and financial institutions are in agreement with the books of accounts of theCompany.

(iii) During the year the Company has provided guarantee to company as follows:

Particulars Guarantees
Aggregate amount granted/ provided during the year Rs 27 crores
- Subsidiary Nelco Network Products Limited
Balance outstanding as at balance sheet date in respect of above cases Rs 27 crores

(iv) The Company has not advanced loans to directors including the entities in whichthey are interested to which provisions of section 185 of the Act apply and hence notcommented upon. In our opinion and according to the information and explanations given tous provisions of section 186 of the Act in respect of investments loans securities andguarantees given have been complied with by the Company.

(v) The Company has neither accepted any deposits from the public nor accepted anyamounts which are deemed to be deposits within the meaning of sections 73 to 76 of theCompanies Act and the rules made thereunder to the extent applicable. Accordingly therequirement to report on clause 3(v) of the Order is not applicable to the Company.

(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records undersection 148(1) of the Companies Act 2013 related to the manufacture of Very smallaperture terminals (VSAT) and service of Internet service provider services and are ofthe opinion that prima facie the specified accounts and records have been made andmaintained. We have not however made a detailed examination of the same.

(vii) (a) The Company has generally been regular in depositing with appropriateauthorities undisputed statutory dues including goods and services tax provident fundemployees' state insurance income-tax duty of custom cess and other material statutorydues are applicable to it. The provisions relating to sales tax service tax value addedtax and duty of excise are not applicable to the Company. According to the information andexplanations given to us and based on audit procedures performed by us no undisputedamounts payable in respect of these statutory dues were outstanding at the year end fora period of more than six months from the date they became payable.

(b) The dues of income-tax sales-tax service tax value added tax goods and servicetax and cess have not been deposited on account of any dispute are as follows:

Name of the statute Nature of the dues Period to which the amount relates Amount ` ( in lacs) Amount paid under protest / Adjusted against refund (Rs in lacs) Forum where the dispute is pending
The Finance Act 1994 Service Tax FY 2001 to FY 2005 192 - Central Excise and Service Tax Appellate Tribunal
The Maharashtra Value Added Tax Act 2002 Value Added Tax FY 2009-10 65 9 Maharashtra Sales Tax Tribunal
The Central Sales Tax Act 1958 Sales Tax FY 2012-13 49 15 Joint Commissioner Sales tax (Appeals)
The Income Tax Act 1961 Income Tax FY 2010-11 497 528 Income Tax Appellate Tribunal
The Maharashtra Value Added Tax Act 2002 Sales Tax FY 2006-07 to FY 2010-11 3836 - Maharashtra Sales Tax Tribunal
Central Goods and Services Tax Act 2017 GST July 2017 to March 2019 103 - Assistant Commissioner CGST & C.Ex. Circle -VI
The Finance Act 1994 Service Tax April 2016 to June2017 407 - Commissioner CGST & C.Ex Belapur
The Finance Act 1994 Service Tax April 2016 to June 2017 640 - Commissioner CGST & C.Ex Belapur

(viii) The Company has not surrendered or disclosed any transaction previouslyunrecorded in the books of account in the tax assessments under the Income Tax Act 1961as income during the year. Accordingly the requirement to report on clause 3(viii) of theOrder is not applicable to the Company.

(ix) (a) The Company has not defaulted in repayment of loans or other borrowings or inthe payment of interest thereon to any lender.

(b) The Company has not been declared wilful defaulter by any bank or financialinstitution or government or any government authority.

(c) Term loans were applied for the purpose for which the loans were obtained.

(d) On an overall examination of the financial statements of the Company no fundsraised on short- term basis have been used for long-term purposes by the Company.

(e) On an overall examination of the financial statements of the Company the Companyhas not taken any funds from any entity or person on account of or to meet the obligationsof its subsidiaries associates or joint ventures. (f) The Company has not raised loansduring the year on the pledge of securities held in its subsidiaries joint ventures orassociate companies. Hence the requirement to report on clause (ix)(f) of the Order isnot applicable to the Company.

(x) (a) The Company has not raised any money during the year by way of initial publicoffer or further public offer or debt instruments hence reporting under clause 3(x)(a) isnot applicable to the Company and hence not commented upon.

(b) The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year under review and hencereporting requirements under clause 3(x) (b) are not applicable to the Company and notcommented upon.

(xi) (a) No fraud/material fraud by the Company or no fraud/ material fraud on theCompany has been noticed or reported during the year.

(b) During the year no report under sub-section (12) of section 143 of the CompaniesAct 2013 has been filed by cost auditor/ secretarial auditor or by us in Form ADT Rs 4 asprescribed under Rule 13 of Companies (Audit and Auditors) Rules 2014 with the CentralGovernment.

(c) As represented to us by the management there are no whistle blower complaintsreceived by the Company during the year.

(xii) The Company is not a Nidhi Company as per the provisions of the Companies Act2013 (as amended). Therefore the provisions of clause 3(xii) (a) (b) and (c) of theorder are not applicable to the Company and hence not commented upon.

(xiii) Transactions with the related parties are in compliance with sections 177 and188 of Companies Act 2013 where applicable and the details have been disclosed in thenotes to the financial statements as required by the applicable accounting standards.

(xiv) (a) The Company has an internal audit system commensurate with the size andnature of its business

(b) The internal audit reports of the Company issued till the date of the audit reportfor the period under audit have been considered by us.

(xv) The Company has not entered into any non-cash transactions with its directors orpersons connected with its directors and hence requirement to report on clause 3(xv) ofthe Order is not applicable to the Company.

(xvi) (a) The provisions of section 45-IA of the Reserve Bank of India Act 1934 (2 of1934) are not applicable to the Company. Accordingly the requirement to report on clause(xvi)(a) of the Order is not applicable to the Company.

(b) The Company has not conducted any Non Banking Financial or Housing Financeactivities without obtaining a valid certificate of Registration (CoR) from the ReserveBank of India as per the Reserve Bank of India Act 1934.

(c) The Company is not a Core Investment Company (CIC) as defined in the regulationsmade by Reserve Bank of India (RBI). Accordingly the requirement to report on clause3(xvi) of the Order is not applicable to the Company.

(d) The Group has six Core Investment Company as part of the Group.

(xvii) The Company has not incurred cash losses in the current financial year andimmediately preceding financial year.

(xviii) There has been no resignation of the statutory auditors during the year andaccordingly requirement to report on Clause 3(xviii) of the Order is not applicable to theCompany.

(xix) On the basis of the financial ratios disclosed in note 42 to the standalonefinancial statements ageing and expected dates of realization of financial assets andpayment of financial liabilities other information accompanying the financial statementsour knowledge of the Board of Directors and management plans and based on our examinationof the evidence supporting the assumptions nothing has come to our attention whichcauses us to believe that any material uncertainty exists as on the date of the auditreport that Company is not capable of meeting its liabilities existing at the date ofbalance sheet as and when they fall due within a period of one year from the balance sheetdate. We however state that this is not an assurance as to the future viability of theCompany. We further state that our reporting is based on the facts up to the date of theaudit report and we neither give any guarantee nor any assurance that all liabilitiesfalling due within a period of one year from the balance sheet date will get dischargedby the Company as and when they fall due.

(xx) (a) In respect of other than ongoing projects there are no unspent amounts thatare required to be transferred to a fund specified in Schedule VII of the Companies Act(the Act) in compliance with second proviso to sub section 5 of section 135 of the Act.This matter has been disclosed in note 43 to the standalone financial statements.

(b) There are no unspent amounts in respect of ongoing projects that are required toboth transferred to a special account in compliance of provision of sub section (6) ofsection 135 of Companies Act. This matter has been disclosed in note 43 to the standalonefinancial statements.

(xxi) There are no qualifications or adverse remarks by the respective auditors in theCompanies (Auditors Report) Order (CARO) reports of the companies included in theconsolidated financial statements. Accordingly the requirement to report on clause 3(xxi)of the Order is not applicable to the Holding Company.

Annexure 2 to the Independent Auditor's Report of even date on the Standalone Ind ASFinancial Statements of Nelco Limited

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 NelcoLimited ('the Company') as of March 31 2022 in conjunction with our audit of thestandalone Ind AS financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's Management is responsible for establishing 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'). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to the Company's policies the safeguarding of its assetsthe prevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Companies Act 2013.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements based on our audit. We conducted our audit in accordance with the Guidance Noteon Audit of Internal Financial Controls Over Financial Reporting (the 'Guidance Note') andthe Standards on Auditing as specified under section 143(10) of the Act to the extentapplicable to an audit of internal financial controls both issued by ICAI. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting with reference to these standalone Ind ASfinancial statements was established and maintained and if such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls over financial reporting with reference to thesestandalone Ind AS financial statements and their operating effectiveness.

Our audit of internal financial controls over financial reporting included obtaining anunderstanding of internal financial controls over financial reporting with reference tothese standalone Ind AS financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of thestandalone Ind AS financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls overfinancial reporting with reference to these standalone Ind AS financial statements.

Meaning of Internal Financial Controls Over Finanical Reporting With Reference to theseStandalone Ind AS Financial Statements

A company's internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles.

A company's internal financial control over financial reporting with reference to thesestandalone Ind AS financial statements includes those policies and procedures that

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

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and

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

Inherent Limitations of Internal Financial Controls Over Financial Reporting WithReference to Standalone Ind AS Financial Statements

Because of the inherent limitations of internal financial controls over financialreporting with reference to these standalone Ind AS financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto standalone Ind AS financial statements to future periods are subject to the risk thatthe internal financial control over financial reporting with reference to these standaloneInd AS financial statements may become inadequate because of changes in conditions orthat the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects adequate internal financialcontrols over financial reporting with reference to these standalone Ind AS financialstatements and such internal financial controls over financial reporting with reference tothese standalone Ind AS financial statements were operating effectively as at March 312022 based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote issued by the ICAI.

For S.R. Batliboi & Associates LLP
Chartered Accountants
ICAI Firm Registration Number: 101049W/E300004
per Vineet Kedia
Partner
Membership Number: 212230
UDIN: 2212230AHUJPW5341
Place of Signature: Mumbai
Date: April 26 2022

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