Report on the Audit of the Standalone Ind AS Financial Statements
Opinion
We have audited the accompanying standalone Ind AS financial statements of IRCON INTERNATIONAL LIMITED ("the company") which comprise the Balance Sheet as at 31st March, 2023, the statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information in which are incorporated the Returns for the year ended on that date audited by branch auditors of the Company's branches at Algeria, Bangladesh and Sri Lanka Region.
We have audited the financial statements of the three (3) foreign branches situated at South Africa, Malaysia and Sri Lanka (Indian part) for the year ended 31st March, 2023. However, we have not visited any foreign branch and the relevant information for the audit purpose was provided to us by the management at corporate level.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules,2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2023, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Ind AS financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Ind AS Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India
(ICAI) together with the independence requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act,2013 and the Rules made there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence obtained by us and other auditors in terms of their reports referred to it "Other Matter" paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Ind AS financial Statements.
Emphasis of Matters
We draw attention to the following notes on the Standalone Ind AS Financial Statements being matters pertaining to Ircon International Limited requiring emphasis by us.
a) Refer note no. 47 of the Standalone Financial Statements regarding certain modifications in the existing Significant Accounting Policy relating to Property, plant and equipment. As explained by the management, there is no financial impact due to such aforesaid modifications on the Company's profitability.
b) Refer foot Note no. (iii) of note no 8.1 of the Standalone Financial Statements wherein it is mentioned that the Financials Statements of one of the Jointly controlled entities, Indian Railway Stations Development Corporation Limited (IRSDC) have been prepared on liquidation basis and that the Company does not foresee any impairment in the value of investments held by the Company in IRSDC.
Our opinion is not modified in respect of the above matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Ind AS Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone Ind AS Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Key Audit Matter
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How our audit addressed the matter
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a) Revenue Recognition in terms of Ind AS 115
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Our audit procedures included considering the
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"Revenue from Contracts with Customers”
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appropriateness of the Company's revenue recognition
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Accounting Standard on Revenue which
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accounting policies and assessing compliance with the
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prescribes five steps revenue recognition model.
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policies in terms of the applicable accounting standards.
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The Company recognizes revenue for a performance
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Evaluated the effectiveness of control over the
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obligation satisfied over time after estimating its
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preparation of information that are design to ensure the
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progress towards complete satisfaction of the
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completeness and accuracy
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performance obligation. The recognition of revenue
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Selected a sample of contracts, and tested the
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requires assessments and judgments to be made
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operating effectiveness of the internal control, relating
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on changes in work scope, claims (compensation,
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to identification of the distinct performance obligations
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rebates etc.) and other payments to the extent
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and satisfaction of performance obligations. We also
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performance obligation is satisfied. The company
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examined costs included within WIP balances on a sample
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measures the performance obligation by applying
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basis and tested their recoverability through comparing
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input method. In the contracts where performance
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the net realizable values as per the agreements with
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obligation cannot be measured by input method, the output method is applied, which faithfully
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estimated cost to complete.
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depict the Company's performance towards
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We performed following substantive procedures over
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complete satisfaction of the performance obligation.
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revenue recognition with specific focus on whether there is single performance obligation or multiple
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During order fulfillment, contractual obligations
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performance obligations in the contract and whether
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may need to be reassessed. In addition, change
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the performance obligation is being satisfied over the
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orders or cancelations have to be considered. As a result, total estimated project costs may exceed
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period of time or at a point in time:
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total contract revenues and therefore require
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• Read, analyzed and identified the distinct
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immediate recognition of the expected loss.
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performance obligations in these contracts.
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Ind AS 115 requires entities to exercise judgement,
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• Compared these performance obligations with that
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taking into consideration all of the relevant facts
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identified and recorded by the Company.
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and circumstances when applying each step of
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• Considered the terms of the contracts to verify
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the model to contracts with their customers.
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the transaction price used to allocate to separate
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The Further Explanation why we consider this as a
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performance obligations.
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Key Audit Matter is as follows:
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• Checked whether the performance obligation is
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The application of the revenue accounting standard
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being satisfied over the period of time or at a point
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involves certain key judgements relating to
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in time.
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identification of distinct performance obligations,
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• Performed analytical procedures for reasonableness
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determination of transaction price of the identified performance obligations, the appropriateness of the basis used to measure revenue recognized at a point in time or over time. Additionally, revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
For details refer Note No. 39 to the Standalone Ind AS Financial Statements.
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of revenues disclosed
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Key Audit Matter
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How our audit addressed the matter
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Contingent Liabilities
Contingent Liabilities There are a number of litigations pending before various forums against the Company and the management's judgement is required for estimating the amount to be disclosed as contingent liability. We identified this as a key audit matter because the estimates on which these amounts are based involve a significant degree of management judgement in interpreting the cases. (Refer Note No. 37 of the Standalone Financial Statements, read with the Accounting Policy No. 2.2.16).
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We have obtained an understanding of the Company's procedure in respect of estimation and disclosure of contingent liabilities and adopted the following audit procedure:
• Reviewing the current status and material developments of legal matters.
• Examining recent orders from competent authorities and/or communication received from various authorities, judicial forums and follow-up action thereon.
• Review and analysis of evaluation of the contentions of the company through discussions, collection of details of the subject matter under consideration, the likely outcome and consequent potential outflows on those issues.
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System Environment and internal Controls
The Company is having SAP system in place and only FI-CO & Payroll module is Implemented and other system like inventory, MM Module etc. is under the process of implementation Further, the SAP project system module (PS) is required to generate the projects invoices with integration support.
The IT system in the company are not fully automated and manual interventions are in place in preparing and reporting of financial statements.
The Further Explanation why we consider this as a Key Audit Matter is as follows:
Our audit planning & procedures also includes the various reports which the system generates and without which it is difficult for us to collect the data of the various heads of the Balance sheet.
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Our procedures included but were not limited to:
• Discussing with management and IT department on the IT environment and consideration of the key financial processes to understand where IT systems were integral to the financial reporting process.
• Testing the design of the key IT controls relating to financial reporting systems of the company.
• We also tested the company's controls around system interfaces.
• We applied substantive audit procedures to ensure that areas where there are manual controls are operating effectively.
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Information Other than the Standalone Ind AS Financial Statements and Auditor's Report thereon
The Company's Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Company's annual report but does not include the Standalone Ind As financial statements and our auditor's report thereon.
Our opinion on the Standalone Ind AS financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone Ind AS financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the standalone financial statements or our knowledge obtained 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 material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation
and presentation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance, changes in equity and cash flows of the company in accordance with the accounting principles generally accepted in India, including the Indian accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015,as amended from time to time.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due 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 audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Standalone Ind AS financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Ind AS financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other Matters
• We did not audit the financial statements / financial information of three (3) foreign branches included in the standalone Ind AS financial statement of the company whose financial statements/financial information reflect total assets of ?515.86 Crores (Previous year ?577.99 Crores) as at 31st March 2023, total revenue of ?393.77 Crores (Previous Year ?444.69 crores) and total PBT of ?74.49 crores (previous year ?41.79 crores), for the year ended on that date, as considered in the standalone Ind AS financial statements. The financial statements/ information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosure included in respect of these branches, is based solely on the reports of such branch auditors.
• The financial statements include profit/(loss) of ?0.08 Crores (Previous Year ?0.09 Crores), the company's share in two (2) integrated joint operations (unincorporated) accounts which have been audited by other firms of chartered Accountants and profit/ (loss) of ?0.47 Crores (Previous Year ?0.42 Crores) the company's share in two (2) joint operations accounts
certified by the management for the year ended March 2023.
Our opinion 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, 2020 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the "Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
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 best of 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 the Company so far as it appears from our examination of those books and proper returns adequate for the purpose of our Audit has been received from branches not visited by us.
c. The reports on the accounts of branch offices of the Company audited under section 143(8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report.
d. The Balance Sheet, the Statement of Profit and Loss (including other comprehensive income), and the Cash Flow Statement and the Statement of Change in Equity dealt with by this Report are in agreement with the books of account.
e. In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act, read with The Companies (Indian Accounting standards) Rules, 2015.
f. Being a government company, provision of section 164(2) of the Act are not applicable pursuant to the notification No. G.S.R.463(E) dated 5 June 2015, issued by the Central Government of India.
g. With respect to the adequacy of the internal financial controls over financial reporting of the company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B”.
h. Being a government company, provision of section 197 of the Act are not applicable vide notification no. GSR 463 (E) dated 5th June 2015, issued by the Central Government of India.
i. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:
(i) The company has disclosed the impact of pending litigations on its financial position in its financial statements - refer Note 37 to the standalone Ind AS financial statements.
(ii) The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts -Refer Note No.19.2 to the standalone Ind AS financial statements. The Company did not have any derivative contracts for which there were any material foreseeable losses.
(iii) There were no amounts which were required to be transferred, to the Investor Education and Protection Fund by the Company.
(iv) a) The Management has represented that, to the best of its knowledge and belief, as disclosed in Note No. 46 to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Company or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
b) The Management has represented that, to the best of its knowledge and belief, as disclosed in Note No. 46 to the accounts, no funds have been received by the Company from any person or entity, including
foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Funding Party or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
c) Based on the audit procedures performed that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under subclause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
(v) As stated in Note No 2.2.15 to the standalone Ind AS financial statements
a) The final dividend proposed in the previous year, declared and paid by the company during the year is in accordance with section 123 of the Companies Act 2013 to the extent it applies to payment of divided.
b) The interim dividend declared and paid by the company during the year and until the date of this report is in accordance with section 123 of the Act.
c) The Board of Directors of the company have proposed final dividend for the current year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.
(vi) Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company and its branches with effect from April 01, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.
3. As required by Section 143(5) of the Act and as per directions issued by Comptroller and Auditor General of Indian, we report that:
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S. No
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Directions
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Auditor's Replies
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1.
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Whether the company has 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.
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The Company is using SAP S/4 Hana system for all its projects located in India and also in its foreign branches. As per information and explanation provided to us no accounting transactions have been processed outside the IT system except income billing for which no financial implication were observed.
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2.
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Whether there is any restructuring of an 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. Whether such cases are properly accounted for? (In case, lender is a government company, then this direction is also applicable for statutory auditor of lender company).
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No, the Company does not have any case of restructuring of an existing loan or cases of waiver/write off of debts/ loans/interest etc. made by a lender to the company.
However, the Company has given a loan to one of its subsidiary, Ircon PB Tollway Ltd. (IPBTL). On request of the subsidiary company, the holding company has waived off interest for the current year. However, the company has booked interest on the basis of fair valuation as per Ind AS amounting to ?18.73 crores.
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3.
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As reported by Sect. 143(5) whether funds (grants/ subsidy etc.) received/receivable for specific schemes from Central/State Government or its agencies were properly accounted for/utilized as per its term and conditions? List the cases of deviation
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According to the information and explanation given to us and as per examination of records, no funds have been received/ receivable for any specific scheme from central/state agencies during the financial year 2022-23.
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