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NLC India Ltd.

BSE: 513683 Sector: Infrastructure
NSE: NLCINDIA ISIN Code: INE589A01014
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OPEN 53.55
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VOLUME 377283
52-Week high 73.90
52-Week low 46.25
P/E 7.91
Mkt Cap.(Rs cr) 7,807
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 53.55
CLOSE 54.10
VOLUME 377283
52-Week high 73.90
52-Week low 46.25
P/E 7.91
Mkt Cap.(Rs cr) 7,807
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

NLC India Ltd. (NLCINDIA) - Auditors Report

Company auditors report

To

The Members of NLC INDIA LIMITED (Formerly Neyveli Lignite CorporationLimited)

Report on theAudit of the Standalone Financial Statements

Opinion

We have audited the accompanying Standalone Financial Statements of NLCINDIA LIMITED (Formerly Neyveli Lignite Corporation Limited) ("theCompany") which comprise the Balance Sheet as at March 312020 the Statement ofProfit and Loss (including other Comprehensive income) the Cash Flow Statement and theStatement of Changes in Equity for the year then ended and a summary of the significantaccounting policies and other explanatory information hereinafter referred to asStandalone Financial Statements.

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid Standalone Financial Statements give theinformation required by the Companies Act 2013 ("Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsprescribed under Section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended ("Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 312020the Profit (Including Other Comprehensive Income) the changes in Equity and its cashflows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards onAuditing(SAs) specified under section 143(10) of the Act. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theStandalone Financial Statements section of our report. We are independent of the Companyin accordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of theStandalone Financial Statements under the provisions of the Act and the Rules thereunderand we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

We draw attention to the following matters in the Notes to theStandalone Financial Statements:

1. Without qualifying our opinion attention is invited to Note 22 ofthe Standalone Financial Statements in respect of pending liabilities to DISCOMS subjectto CERC Orders. The true up petition is filed with CERC in the third quarter of FY2019-2020.

2. Without qualifying our opinion attention is drawn to Note 23(c) ofthe Standalone Financial Statements regarding Deferred Tax Liability materialized for'218.94 crore (for Thermal Plants) upto March 312019 which has not been considered asrevenue pending reconciliation and confirmation from the beneficiaries.

3. Without qualifying our opinion attention is invited to Note 49 A(i) of the Standalone Financial Statements on the requirement of loss allowance forexpected credit losses.

4. Without qualifying our opinion attention is drawn to Note 59 of theStandalone Financial Statements regarding material impact on the business of the Companydue to the COVID-19 pandemic.

Ouropinion on the Standalone Financial Statements is not modified inrespect of the above matters.

Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the Standalone Financial Statements of thecurrent period. These matters were addressed in the context of our audit of the StandaloneFinancial Statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.

The following have been considered as Key Audit Matters:

Sl No' KeyAudit Matters Auditor's Response
1. Revenue recognition on sale of power to entities (DISCOMS) and the disclosure requirements under IndAS 114 "Regulatory DeferralAccounts"and INDAS 115 "Revenue from Contracts". - We have assessed the application of the provisions of Ind AS 114 and Ind As 115 in respect of the Company's revenue recognition policy for sale of power
The Central Electricity Regulatory Commission (CERC)/ State Electricity Regulatory Commission (SERC) determine the tariff rates to be charged by the Company for the sale of thermal power. Tariff rates for sale of thermal power are determined by CERC for a block period of 5 years. The tariff for Thermal power plant includes Lignite Transfer Price which is determined in accordance with the Lignite Transfer Price guidelines issued by NLCIL. - We have verified the accounting of revenue in accordance with the CERC Tariff Regulations Orders Circulars Guidelines and the Company's internal circulars and procedures in respect of recognition and measurement of revenue from sale of energy comprising of capacity and energy charges
- It is observed that the consideration of various items under "Net movement in Regulatory Deferral Account Balances" and the treatment in the audited accounts are in compliance with the accounting principles laid down in IndAS 114
Pending disposal of petition and approval of CERC tariff rates for the tariff period 2019-2024 the beneficiaries are currently billed in accordance with the approved tariff rate of the previous tariff period i.e. 2014-2019. The differential Income/Expenses to the extent of the operations and maintenance parameters as prescribed by the guidelines for tariff period 2019-2024 are recognised under "Regulatory Deferral Account".
Based on the above procedure performed the recognition measurement and adequacy of disclosure of revenue as per Ind AS 114 and Ind AS 115 for FY 2019-20 are considered to be adequate and reasonable.
Refer Note 30 of the Standalone Financial Statements.
2. Assessment of provisions and contingent liabilities in respect of certain litigations including direct and indirect taxes various claims filed by other parties not acknowledged as debt. In view of the significance of the matter we applied the following key audit procedures:
- Testing the design and operating effectiveness of controls relating to taxation and contingencies.
A high level of judgment is required in estimating the amount of provisioning. The Company's assessment is supported by the facts of matter their own judgment experience and independent legal advice wherever considered necessary. Accordingly unexpected adverse outcomes which may significantly impact the reported profit and net assets are disclosed.
- We evaluated management's judgements in respect of estimates of provisions exposures and contingencies.
- In understanding and evaluating management's judgements we deployed our tax specialists considered third party advice received by the Company wherever applicable the status of

The following have been considered as Key Audit Matters:

Sl. KeyAudit Matters No. Auditor's Response
Asum of' 9811.51 crore have been considered by the Company towards contingent liability and commitments representing claims of third parties. Refer Note 52 of the Standalone Financial Statements. recent and current tax assessments and enquiries the outcome of previous claims judgmental positions taken in tax returns and developments in the tax environment.
- Additionally we also evaluated the adequacy of disclosures on provisions and contingencies made in the Standalone Financial Statements in accordance to IndAS37.
Included in the above is a sum of '1153.89 crore that has been considered by the company towards contingent liability which includes claims of third party's compensation for land acquisition. The company has not accepted the said claims which are contested in legal proceedings and are pending for disposal by the appellate authorities.
Further there are several items of disputes pending in various appellate forums in respect of determination and quantification of liability towards direct and indirect taxes by the departments. Liabilities in respect of disputed demands are considered only as contingent liabilities pending the outcome of the decision of the appellate authorities. The total unpaid amount of disputed liabilities on account of Direct and Indirect taxes (including Land tax) is ' 232.24 crore vide Note 7(b) to Companies (Auditor's Report) Order 2016.
3. Accuracy of impairment provisions in respect of exploration and evaluation assets and projects under "Capital work in progress" which involves critical judgment of the management in respect of feasibility of ongoing projects We have obtained the details of project activities of Bithnokand BTPSE project from the management.
We noted that Company has incurred capital expenditure of' 349.13 crore and '168.13 crore in Bithnok and BTPSE project respectively which includes payment towards land of '176.92 crore and CapitalAdvanceof' 261.72 crore.
The Standalone Financial Statements include relevant/disclosures that identify and explain the amounts arising from such feasibility study. Refer Note 6 to the Standalone Financial Statements.
We have obtained management reply that discussions are underway with Rajasthan Government and M/s. Reliance Infrastructure Limited (EPC Contractor) for revival of the project.
Further an aggregate amount of ' 517.26 crore towards land capital advance and CWIP relate to Bithnokand BTPSE which are currently on hold.
We have also ensured that since the project is on hold since June 2017 capitalisation of project costs are also put on hold and expenses incurred in the current have been charged to Profit and Loss Account of 2019-20.
4. Accounting of Surcharge Accounting of surcharge was examined by us to ensure that all the material amounts of surcharge accounted by the Company as income were in accordance with the terms and conditions of the contracts entered into by the Company with DISCOMS.
Due from entities (DISCOMS) for any delay in the settlement of claims due to the Company results in levy of surcharge in accordance with the terms and conditions of the agreement entered into for the sale of power. For the FY 2019-20 the Company has recognized a sum of ' 840.41 crore as surcharge under other income. Refer Note 24f to the Standalone Financial Statements.

Information Other Than the Standalone Financial Statements andAuditor'sReport Thereon

The Company's management and Board of Directors is responsible for theother information in the Annual Report comprising of the Director's report and itsannexures but does not include the Standalone Financial Statements and our auditor'sreport thereon. The Director's report is expected to be made available to us after thedate of this auditors' report.

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 identified above when it becomesavailable and in doing so consider whether the other information is materiallyinconsistent with the Standalone Financial Statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated.

When we read the Director's report if we conclude that there is amaterial misstatement therein we are required to communicate the matter to those chargedwith governance and take necessary actions as required under applicable laws andregulations.

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

The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation and presentation of theseStandalone Financial Statements that give a true and fair view of the financial positionfinancial performance (including Other Comprehensive Income) changes in equity and cashflows of the Group in accordance with the accounting principles generally accepted inIndia including the accounting Standards specified under section 133oftheAct. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Group and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Standalone FinancialStatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the Standalone Financial Statements management and Boardof Directors of the Company is responsible for assessing the Company's ability to continueas a going concern disclosing as applicable matters related to going concern and usingthe going concern basis of accounting unless management Board of Directors of the Companyeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.

The Board of Directors is also responsible for overseeing the Company'sfinancial reporting process.

Auditor's Responsibility for the audit of the Standalone FinancialStatements

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

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional scepticism throughoutthe audit.

We also:

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

• Obtain an understanding of internal financial control relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Companies Act 2013 we are also responsiblefor expressing our opinion on whether the Company has adequate internal financial controlssystem 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 management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the Standalone Financial Statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of theStandalone Financial Statements including the disclosures and whether the StandaloneFinancial Statements represent the underlying transactions and events in a mannerthatachieves fair presentation.

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 duringouraudit.

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

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

Other Matter

1. We did not audit the Financial Statements of one (1) Branch includedin the Standalone Financial Statements of the Company which reflected total assets of'1559.56 crore as at March 312020 and a net profit of '149.44 crorefor the year ended onthat date. The Financial Statements of this Branch have been audited by the Branch auditorwhose report has been furnished to us and our opinion in so far as it relates to theamounts and disclosures included in respect of this Branch is based solely on the reportof such BranchAuditor.

2. Note 9 of the Standalone Financial Statements with regards toinventory "where due to Covid-19 related lockdown we were not able to physicallyobserve the physical verification of inventory that was carried out by the management atthe year end. Consequently we have performed alternate procedures to audit the existenceand condition of inventory as per the guidelines provided in SA 501 "Audit evidence-Specific consideration for stipulated items' which includes inspection of supportingdocumentation relating to purchases production sales physical verification performed bythe management and such other third party evidences where applicable and have obtainedsufficient appropriate audit evidence to issue our unmodified opinion on the StandaloneFinancial Statements."

Ouropinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 (theOrder) issued by the Central Government of India in terms of sub-section (11) of section143 of the Act we give in Annexure-I a statement on the matters specified in paragraphs 3and 4 of the said Order to the extent applicable.

2. As required by Section143(3)oftheAct we reportthat:

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

b. In ouropinion proper books of account as required by law have beenkept by the Company so far as it appears from ourexamination of those books.

c. The reports on accounts of the Branch Office of the Company auditedunder Sec 143(8) of the Act by the BranchAuditor have been sent to us and have beenproperly dealt with by us in preparing this report.

d. The Balance Sheet the Statement of Profit and Loss (including OtherComprehensive Income) Cash Flow Statement and the Statement of Changes in Equity dealtwith by this Report are in agreement with the books of accounts.

e. In our opinion the aforesaid Standalone Financial Statements complywith the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act readwith the Companies (Indian Accounting Standards) Rules 2015 as amended.

f. As per Notification No: G.S.R 463(E) dated June 05 2015 subsection(2) of Sec 164 of the Companies Act 2013 is not applicable to Government Companies.

g. With respect to adequacy of the internal financial control overfinancial reporting of the Company and the operating effectiveness of such controls wegive our report in Annexure-II. With reference to the standalone financial statements ourreport expresses an unmodified opinion on the effectiveness of the Company's internalfinancial controls overfinancial reporting.

h. As per Notification No. GSR 463(E) dated June 05 2015 issued bythe Ministry of Corporate Affairs Government of India Section 197 of the Act is notapplicable to the Government Companies. Accordingly reporting in accordance withrequirement of provisions of section 197(16) of the Act is not applicable on the Company.

i. With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit andAuditors) Rules 2014 asamended in ouropinion and to the best of our information and according to theexplanations given to us:

i. The Company has disclosed the impact of pending litigations on itsfinancial position in its Standalone Financial Statements - Refer to Note 52 to StandaloneFinancial Statements.

ii. The Company has long term contracts for coal mining power saleproject execution etc. However as at March 312020 there were no material foreseeablelosses on those contracts. The Company did not have any derivative contracts as at March312020.

iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company.

3. As required by Sec 143(5) of the Companies Act 2013 our commentsin regard to the directions and sub-directions issued by the Comptroller andAuditorGeneral of India is given inAnnexure III.

For M/s. PKKG BALASUBRAMANIAM & ASSOCIATES For M/s. R SUBRAMANIAN AND COMPANY LLP
Chartered Accountants Chartered Accountants
Firm Regn. No.001547S Firm Regn. No.004137S/S200041
SARADHAMANIGANESAN R. SUBRAMANIAN
Partner Partner
M No.027683 M No.008460
UDIN: 20027683AAAAAC8043 UDIN: 20008460AAAAAM2607
Place : Chennai
Date : June 23 2020

Annexure-I to Independent Auditors' Report

Statement of matters specified in Para 3 & 4 of the order referredto in sub-section (11) of section 143

The Annexure referred to in Paragraph 2 under the heading 'Report onOther Legal and Regulatory Requirements' of

our Report of even date:

1. Fixed Assets

a) The Company is maintaining proper records showing full particularsincluding quantitative details and situation of fixed assets.

b) The Company is having a regular programme of physical verificationof all fixed assets (Property Plant and Equipment) once in a period of 2 years which inour opinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were noticed on such verification.

c) The Company is in possession of title deeds/assignment deeds/GOs inrespect of immovable properties. However due to enormous volume of documents held by theCompany for acquisition of land all the title deeds could not be fully verified by us. Asper expert legal opinion the ownership of the land acquired between the incorporation ofthe Company to the year 1977 and between the years 1997 to 2001 is subject to conditionsattached by Govt.ofTamil Nadutothe respective assignmentdeeds.

2. Inventory

The inventory has been physically verified at reasonable intervals bythe management. No material discrepancies were noticed during such verification.

3. Transactions of loans with parties covered by register referred toin Section 189

The Company has granted unsecured loan to a subsidiary Company and to 2directors of the Company covered by the register maintained undersection 189 of theCompaniesAct 2013:

a) In our opinion the terms and conditions of grant of such loans arein our opinion prima facie not prejudicial to the interest of the Company.

b) According to the information and explanations given to us theschedule of repayment of principal and payment of interest has been stipulated whilegranting such loans and the repayment/receipts are regular.

c) No amounts are overdue for more than 90 days.

4. Compliance with section 185 & 186 in respect of Loans andInvestments

The Company has not advanced loans given guarantees or security ormade any investment in contravention of section 185 and/or section 186 ofthe CompaniesAct2013.

5. Public Deposits

In our opinion and according to the information and explanations givento us the Company has not accepted deposits from public and hence the provisions ofsections 73 to 76 or any other relevant provisions of the CompaniesAct and the rules madethere under are not applicable to the Company.

6. Maintenance of Cost Records

The Central Government has prescribed the maintenance of cost recordsU/S. 148(1) of the CompaniesAct 2013 in respect of Electricity Industry and Lignite. Wehave broadly reviewed the books of account maintained by the Company pursuant to the Rulesmade by the Central Government for the maintenance of cost records under section148oftheAct and are ofthe opinion that prima facie the prescribed accounts and recordshave been made and maintained.

7. Statutory dues

a) The Company has generally been regular in depositing Provident Funddues of its own employees. Based on the information and explanations given to us theCompany has laid down system and procedures regarding deposit of PF and ESI dues relatingto contractors' workers. The Company has generally been regular in

depositing Income-tax Duty of Customs Cess Goods and Service Tax andany other statutory dues to the appropriate authorities.

Based on information and explanation given to us no undisputed amountspayable in respect of Provident Fund Income Tax Customs Duty Cess Goods and ServiceTax and any other statutory dues were outstanding as at March 312020 for a period of morethan six months from the date they became payable.

b) According to the information and explanations given to us there areno dues of Income Tax or Sales Tax or Service tax or Duty of Customs or Duty of Excise orValue Added Tax Cess and Goods and Service Tax which have not been deposited as on March312020 on account of any dispute except as reported below:

Name of the Statute Nature of Dues Demand Amount (' in lakh) Amount Deposited under Protest (' in lakh) Period to which the amount relates Forum where dispute is pending
Customs Act 1969 Customs Duty 2685.00 983.00

-

CESTAT
Income Tax Act

Income Tax

49.40 0 FY 2007-08 Assessing officer
8.11 0 FY 2008-09 Assessing officer
3.95 0 FY 2009-10 Assessing officer
40.96 0 FY 2010-11 Assessing officer
85.22 0 FY2011-12 Assessing officer
1.33 0.27 FY2011-12 CIT(A)
2.31 0 FY 2012-13 Assessing officer
2.66 0.53 FY 2012-13 CIT(A)
0.15 0 FY 2013-14 Assessing officer
2.54 0.51 FY 2013-14 CIT(A)
0.21 0 FY 2014-15 Assessing officer
2.04 0.41 FY 2014-15 CIT(A)
0.07 0 FY 2015-16 Assessing officer
1.41 0.28 FY 2015-16 CIT(A)
0 0 FY 2016-17 Assessing officer
1.65 0.33 FY 2016-17 CIT(A)
0 0 FY 2017-18 Assessing officer
0 0 FY 2018-19 Assessing officer
9.01 0 FY 2019-20 Assessing officer
Finance Act 1994

Service Tax

89.56 6.72 Apr 2009 to Jun 2012 CESTAT
51.34 7 Jul 2012 to Mar 2014 CESTAT
852.59 63.94 Jul 2012 to Mar 2015 CESTAT
366.59 27.49 Jul 2012 to Mar 2014 CESTAT
25.54 2.55 Apr 2014 to Mar 2015 CESTAT
9.24 0.92 Apr 2014 to Mar 2015 CESTAT
121.37 12.14 Apr 2014 to Mar 2015 CESTAT
205.62 - Jun 2008 to Mar 2012 CESTAT
72.83 5.46 Apr 2015 to Jun 2017 CEC (A)
1417.27 106.3 Apr 2015 to Jun 2017 CESTAT
8.05 0.6 Apr 2015 to Jun 2017 CEC (A)
Central Excise Act 1944 Clean Environment Cess and Excise Duty 17900.5 0 As on 30-06-2017 Writ petition filed before High Court
Rajasthan Finance Act 2006 Land Tax 57.53 28.76 2008-09 Land Tax Assessing Officer
Rajasthan Finance Act 2006 Land Tax 173.73 63.28 2009-10 Land Tax Assessing Officer
Rajasthan Finance Act 2006 Land Tax 173.73 86.86 2010-11 Land Tax Assessing Officer
Rajasthan Finance Act 2006 Land Tax 199.92 99.96 2011-12 Land Tax Assessing Officer
Rajasthan Finance Act 2006 Land Tax 199.92 99.96 2012-13 Land Tax Assessing Officer

Note:

The Company has deposited an amount of' 338.67 crore during this yearwith the Income Tax Department to avail the benefit of VSVS Scheme. However the processof application for opting the scheme were not complete as on March 312020.

8. Repayment of Loans

The Company has not defaulted in repayment of loans or borrowing to afinancial institution bank government or dues to debenture holders during the relevantfinancial year.

9. Raising of monies through Public Offer and/or Term Loans

According to the information and explanations given to us the Companyhas not raised any moneys by way of initial public offer or further public offer duringthe year. The moneys raised by way of debt instruments and term loans were applied for thepurposes for which those were raise.

10. Frauds

According to the information and explanations given to us no fraud bythe Company or any fraud on the Company having material impact on the Standalone FinancialStatements by its officers or employees has been noticed or reported during the year.

11. Managerial Remuneration

As per Notification No. GSR 463(E) dated 05.06.2015 issued by theMinistry of Corporate Affairs Government of India Section 197 of the Act is notapplicable to the Government Companies. Accordingly provisions of clause 3 (xi) of theOrder are not applicable to the Company.

12. Compliance with Net Owned Funds Ratio & unencumbered termdeposits

The Company is not a Nidhi Company and hence the provisions para 3(xii)of the order referred to in Companies (Auditor's Report) Order 2016 issued by the CentralGovernment of India in terms of subsection (11) of Section 143 of theAct do not apply tothe Company.

13. Transaction with Related Parties

In our opinion all transactions with the related parties are incompliance with the provision of section 177 and 188 of Companies Act 2013 whereapplicable and the details have been disclosed in the Standalone Financial Statementsetc. as required by the applicable accounting standards.

14. Preferential Allotment or Private Placement

The Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year underreview.

15. Non-cash transactions

The Company has not entered into any non-cash transactions withdirectors or persons connected with him as referred to in section 192 of the CompaniesAct2013.

16. Registration with Reserve Bank of India

The Company is not required to be registered under Section 45-IAof theReserve Bank of IndiaAct 1934.

For M/s. PKKG BALASUBRAMANIAM & ASSOCIATES For M/s. R SUBRAMANIAN AND COMPANY LLP
Chartered Accountants Chartered Accountants
Firm Regn. No.001547S Firm Regn. No.004137S/S200041
SARADHAMANIGANESAN R. SUBRAMANIAN
Partner Partner
M No.027683 M No.008460
UDIN: 20027683AAAAAC8043 UDIN: 20008460AAAAAM2607
Place : Chennai
Date : June 23 2020

Annexure-II to Independent Auditors' Report

Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financialreporting of M/s. NLC INDIA LIMITED (formerly Neyveli Lignite Corporation Limited)("the Company") as of March 31 2020 in connection with our audit of theStandalone 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 andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India (ICAI).These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to 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 CompaniesAct 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls overfinancial reporting based on our audit. We have conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the CompaniesAct 2013 tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the ICAI. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsoverfinancial reporting was established and maintained and if such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls overfinancialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the Standalone Financial Statements whetherdue to fraudor error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system overfinancial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company's internal financial control overfinancial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Standalone Financial Statements for external purposes inaccordance with generally accepted accounting principles. A Company's internal financialcontrol over financial reporting includes those policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of theCompany;

(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of Standalone Financial Statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of theCompany are being made only in accordance with authorisations of management and directorsof the Company; and

(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the Company's assets thatcould have a material effect on the Standalone Financial Statements.

Inherent Limitations of Internal Financial Controls over FinancialReporting

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

Opinion

In our opinion to the best of our information and according to theexplanations given to us the Company has in all material aspects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated intheGuidance Note onAudit of InternalFinancial Controls Over Financial Reporting issued bythe ICAI.

Other Matter

We did not audit the Internal Financial Control over FinancialReporting of one (1) branch included in the Standalone Financial Statements of theCompany. The adequacy of internal financial controls system over financial reporting andthe operating effectiveness of such internal financial controls over financial reportingconducted by the branch auditor whose report has been furnished to us and our opinion inso far as it relates to the amounts and disclosures included in respect of this branch isbased solely on the report of such branch auditor. Ouropinion is not modified in respectof this matter.

For M/s. PKKG BALASUBRAMANIAM & ASSOCIATES For M/s. R SUBRAMANIAN AND COMPANY LLP
Chartered Accountants Chartered Accountants
Firm Regn. No.001547S Firm Regn. No.004137S/S200041
SARADHAMANIGANESAN R. SUBRAMANIAN
Partner Partner
M No.027683 M No.008460
UDIN: 20027683AAAAAC8043 UDIN: 20008460AAAAAM2607
Place : Chennai
Date : June 23 2020

Annexure-III to Independent Auditors' Report Comments in regard to thedirections and sub-directions issued by the Comptroller and Auditor General of India

Directions u/s 143(5) of the Companies Act 2013 Auditor's reply on action taken on the directions Impact on Standalone financial statement
1. Whether the Company has a system in place to process all the accounting transactions through IT system? If Yes the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications if any may be stated The Company has implemented SAP ERP system for recording of its financial transactions other than Inventory management and Payroll processing. During the year the Company continued to use the Material Management software for recording Inventory and Payroll Accounting for employee salary. For integration of the entire system the Company is in the process of implementing Material Management Payroll Accounting Project Management Salesand Distribution and Plant Maintenance modules of SAP. Our examination of records did not reveal any transactions not coming within the purview of IT systems stated above. NA
2. Whether there is any restructuring of any existing loan or cases of waiver/ write off of debts/loans/ interest etc. made by a lender to the Company due to the Company's inability to repay the loan? If yes the financial impact may be stated. During the year under audit there were no cases of waiver/ write of/restructuring of any debt/loan/interest etc. NA
3. Whether funds received / receivable for specific schemes from Central / State agencies were properly accounted for / utilized as per its terms and conditions? List the cases of deviation. The Company has received ' 6.77 crore as grants for various schemes from Central / State agencies and the same have been properly accounted for and utilised as per the terms and conditions stipulated. NA
4. WhetherProperadjustmentswere carried out for unbilled revenue on receipt of CERC orders The total unbilled revenue as at March 31 2020 is ' 809.73 crore.
In consideration to the billing cycle the above amount includes Energy charges and Capacity charges of' 696.19 crore for the month of March 2020 billed in the subsequent month.
In accordance to the approved orders received from CERC the remaining balance of ' 113.54 crore pertain to recoveries pending made from the beneficiaries subject to the finalisation of the Company's accounts NA
The tariff differential amount (Awaiting CERC approval) is considered under Regulatory deferral Account Balance.

 

For M/s. PKKG BALASUBRAMANIAM & ASSOCIATES For M/s. R SUBRAMANIAN AND COMPANY LLP
Chartered Accountants Chartered Accountants
Firm Regn. No.001547S Firm Regn. No.004137S/S200041
SARADHAMANI GANESAN R. SUBRAMANIAN
Partner Partner
M No.027683 M No.008460
UDIN: 20027683AAAAAC8043 UDIN: 20008460AAAAAM2607
Place : Chennai
Date : June 23 2020

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