To

The Members NMDC Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of NMDC Limited("the Company") which comprise the Balance Sheet as at March 31 2020 theStatement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year then ended and notes tothe Standalone financial statement including a summary of significant accounting policiesand other explanatory information (hereinafter referred to as the "standalonefinancial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2020 and its profit othercomprehensive income changes in equity and its cash flows for the year ended on thatdate.

Basis for Opinion

We conducted our audit in accordance with the standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone financialstatements section of our report. We are independent of the Company in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India("ICAI") together with the ethical requirements that are relevant to our auditof the financial statements under the provisions of the Act and the Rules made thereunder and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the ICAI's Code of Ethics. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our audit opinion on thestandalone financial statements

Key Audit Matters

Key audit matters are those matters that in our professional judgement 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 matters described below to bethe key audit matters to be communicated in our report.

Emphasis of Matter

We draw your attention to the followings forming part of the financial statementswithout modifying our opinion in respect of:

1. Note No: 2.34.7 regarding Demand notice for Rs.1623.44 crores having been served onBaildila project by the District Collector South Bastar Dantewada pursuant to judgmentof Honorable Supreme court of India with reference to writ petition (Civil No.114 of 2014dated 2^nd August 2017) and the company having paid an adhoc amount of Rs.600Crores under protest and filed writ petition in the Hon'ble High court of BilaspurChattisgarh. The case is in the hearing stage as explained in the said note.

2. Note No.2.34.11 on the Management's assessment of the impact of covid-19 pandemicand the resultant lockdown in Financial Year (FY) 2019-2020 which resulted in a loss insale of revenue and Profit Before Tax (PBT) given in the said note. Further managementassessed that no operational disruptions are anticipated in FY 2020-21.Except for scaledown in operations no material risks are anticipated necessitating their provisioning inthe accounts for FY 2019-2020.

3. Note No: 2.34.12 regarding exceptional items as directed by the Government ofKarnataka in respect of Donimalai project supplementary lease deed was executed forKumaraswamy mines for the period from 18.10.1972 to 17.10.2022 and renewal of Miningleases in respect of Bailadila sector for the period from 2015 to 2035. It is alsomentioned in the said Note regarding capitalization of certain assets which has an impactof Depreciation relating to previous years.

4. Note No: 2.34.14 on test of impairment of investment in Legacy Iron Ore Ltd (LIOL)though there is a difference between the net assets of the company and the marketcapitalization as at the year end NMDC felt that test of market capitalization forimpairment of Exploration and Evaluation (E&E) assets may not be appropriate as theinvestment was made to maximize the cash flow by exploring the mines in line with the coreactivity and to reach main objective of NMDC. As such no impairment of investment in LIOLis felt necessary as explained in the said note.

5. Note No: 2.34.15 regarding test of impairment of investment and Loan to NeelachalIspat Nigam Ltd (NINL) Cabinet Committee on Economic Affairs (CCEA) had accorded inprinciple approval for strategic disinvestment of 100% shareholding of NMDC and otherPublic Sector Undertakings (PSUs) along with transfer of Management control to a StrategicBuyer and as per the loan agreement dated 30^th December 2019 the loan amountoutstanding along with interest shall be paid back to NMDC as first charge from thedisinvestment proceeds as per the applicable laws before payment of other liabilities ofNINL. As such no impairment of investment and Loan to NINL is felt necessary as explainedin the said note.

Our opinion is not modified in respect of these matters.

Information Other than the Standalone Financial Statements and Auditor's ReportThereon

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 Report and Shareholder Information but does not include thestandalone financial statements and our auditor's report thereon.

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

In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Management's Responsibility for the Standalone 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 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 Indian Accounting Standards (Ind-AS) prescribed under section 133 ofthe Act read with the Companies (Indian Accounting Standards) Rules 2015 as amendedand other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone financial statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

In preparing the financial statements the Board of Directors 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 unlessthe Board of Directors either intends to liquidate the Company or to cease operations orhas no realistic alternative but to do so.

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

Auditor's Responsibility for the Audit of the Standalone 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 standalone 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 standalonefinancial 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 financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)0) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness 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 exists we are required to draw attention inour auditor's report to the related disclosures in the standalone financial statements orif such disclosures are inadequate to modify our opinion. Our conclusions are based onthe audit evidence obtained up to the date of our auditor's report. However future eventsor conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

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 withthose charged with governance we determine those matters that were of most significancein the audit of the standalone financial statements of the current period and aretherefore the key audit matters. We describe these matters in our auditor's report unlesslaw or regulation precludes public disclosure about the matter or when in extremely rarecircumstances we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.

Other Matter

We did not audit the financial statements and other financial information of 6 branchesincluded in the accompanying standalone financial statements of the Company whosefinancial statements/financial information reflect total assets of Rs.24570.51 Crores asat March 31 2020 and total revenues of Rs. 11693.82 Crores for the year ended on thatdate. The financial statements and other financial information of these branches have beenaudited by the branch auditors whose reports have been furnished to us and our opinion inso far as it relates to the amounts and disclosures included in respect of these branchesis based solely on the report of such branch auditors. Our opinion is not qualified inrespect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143 (3) of the Act based on our audit 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 and proper returnsadequate for the purposes of our audit have been received from the branches not visited byus.

c) The reports on the accounts of the branch offices of the Company audited underSection 143(8) of the Act by branch auditors have been sent to us and have been properlydealt with by us in preparing this report.

d) The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) Statement of changes in equity and the Cash Flow Statement dealt with by thisReport are in agreement with the books of account and with the returns received from thebranches not visited by us.

e) In our opinion the aforesaid standalone financial statements comply with the IndianAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

f) The provisions of Section 164(2) of the Act in respect of disqualification ofdirectors are not applicable to the company being a Government company in terms ofnotification no:- G.S.R.463(E) dated 5th June 2015 issued by Ministry of CorporateAffairs Government of India.

g) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure -A".

h) With respect to the other matters to be included in the auditor's report inaccordance with the requirements of Section 197(16) of the Act as amended:

We are informed that the provisions of section 197 read with Schedule V of the Actrelating to managerial remuneration are not applicable to the company being a GovernmentCompany in terms of Ministry of Corporate Affairs notification no-G.S.R. (E) 5th June2015.

i) 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 2014as 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 Financial Statements - Refer Note 2.31 to the financialstatements.

ii. The company has made provisions as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts.

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the company.

2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure B" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.

3. We are enclosing our report in terms of section 143(5) of the Act on the basis ofsuch checks of books and records of the company as we consider appropriate and accordingto the information and explanations given to us in "Annexure-C" on thedirections issued by the Comptroller & Auditor General of India.

(Referred to in paragraph 1(g) under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of NMDC Limited of even date)

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

We have audited the internal financial controls over financial reporting of NMDCLimited ("the Company") as of March 31^st' 2020 in conjunction withour audit of the standalone financial statements of the company for the year ended on thatdate.

Management's Responsibility for Internal Financial Controls

The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued 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 the respective 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 Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the internal financial controls overfinancial reporting of the Company based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India and the Standards on Auditing prescribed under section 143 (10) of the CompaniesAct 2013 to the extent applicable to an audit of internal financial controls. 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 was established and maintained and if suchcontrols 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 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 systemover financial reporting.

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 financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial 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.

Opinion

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2020 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

"ANNEXURE - B" TO THE AUDITORS' REPORT

(Referred to in paragraph 2 under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of NMDC Limited of even date)

(1) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The Company has a regular programme of physical verification of its fixed assets bywhich all the fixed assets are physically verified by the management over a period ofthree years. In our opinion the periodicity of the physical verification is reasonablehaving regard to the size of the company and the nature of fixed assets. In accordancewith this program certain fixed assets were verified during the year and no materialdiscrepancies have been noticed on such verification.

(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the company as to whether the title deeds of immovableproperties are held in the name of the company our observations are listed below:

(2) (a) The management has conducted the physical verification of inventory atreasonable Intervals.

(b) The discrepancies noticed on physical verification of the inventory as compared tobooks records which has been properly dealt with in the books of account were notmaterial.

(3) According to the information and explanations given to us and on the basis of ourexamination of the records of the company the company has not granted any loans securedor unsecured to companies firms Limited Liability Partnerships or other parties coveredin the register maintained under section 189 of the Companies Act 2013. Accordingly theprovisions of clause (3) (iii) (a) to (c) of the order are not applicable to the companyand hence not commented upon.

(4) In our opinion and according to the information and explanations given to us thecompany has complied with the provisions of section 185 and 186 of the Companies Act 2013in respect of grant of loans making investments and providing guarantees and securitiesas applicable.

(5) The Company has not accepted any deposits from the public and hence the directivesissued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any otherrelevant provisions of the Act and the Companies (Acceptance of Deposit) Rules 2015 withregard to the deposits accepted from the public are not applicable.

(6) The Central Government has prescribed the maintenance of cost records under section148(1) of the Act. Company is generally maintaining proper cost records as specified bythe Central Government under subsection (1) of section 148 of the Companies Act 2013.

(7) According to the information and explanations given to us in respect of statutorydues:

(a) The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income Tax Sales Tax Service TaxGoods and Service Tax Value Added Tax Customs Duty Excise Duty Cess and other materialstatutory dues applicable to it with the appropriate authorities except the following:

i. Donimalai Unit does not collect/remit GST on

a. Liquidated damage/penalty collected from the suppliers and

b. Interest received from Monitoring Committee.

ii. Also the branch could not deduct/remit TDS on commission charges levied byMonitoring Committee

(b) There were no undisputed amounts payable in respect of Provident Fund Employees'State Insurance Income Tax Sales Tax Service Tax Goods and Service Tax Value AddedTax Customs Duty Excise Duty Cess and other material statutory dues in arrears as atMarch 31 2020 for a period of more than six months from the date they became payable.

(c) According to the information and explanation given to us there are no dues ofincome tax sales tax duty of customs duty of excise value added tax goods andservices tax outstanding on account of any dispute except the following:

(8) In our opinion and according to the information and explanations given to us thecompany has not defaulted in repayment of loans and borrowing to any financialinstitution banks government or dues to debenture holders.

(9) The Company has not raised moneys by way of initial public offer or further publicoffer (including debt instruments) or term loans and hence reporting under clause 3 (ix)of the Order is not applicable to the Company.

(10) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company or no material fraud on the Company by its officersor employees has been noticed or reported during the year.

(11) In our opinion and according to the information and explanations given to us theCompany has paid/provided managerial remuneration in accordance with the requisiteapprovals mandated by the provisions of section 197 read with Schedule V to the Act.

(12) The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of theOrder is not applicable to the Company.

(13) In our opinion and according to the information and explanations given to us theCompany is in compliance with Section 177 and 188 of the Companies Act 2013 whereapplicable for all transactions with the related parties and the details of related partytransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.

(14) 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.

(15) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsDirectors or persons connected to its directors and hence provisions of section 192 of theCompanies Act 2013 are not applicable to the Company.

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

(Referred to in paragraph 3 under ‘Report on Other Legal and RegulatoryRequirements' section of our report to the Members of NMDC Limited of even date)

Report on the Directions of the Comptroller and Auditor General of India required undersub section 5 of Section 143 of the Companies Act 2013 ("the Act")