Report on the Audit of the Standalone Financial
Statements
Opinion
1. We have audited the accompanying standalone financial statements of Tata Steel Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2023, and 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 then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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 accounting principles generally accepted in India, of the state of affairs of the Company as at March 31,2023 and total comprehensive income (comprising of profit and other comprehensive income), changes in equity and its cash flows for the year then ended.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the "Auditor's Responsibilities for the Audit of the Standalone 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 together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
4. We draw your attention to Note 6(iv) to the standalone financial statements which states that the ability of Tata Steel Europe (TSE), the step-down subsidiary of T Steel Holdings Pte. Ltd. (TSH), a subsidiary of the Company, to continue as a going concern is dependent on the outcome of measures taken as stated therein and the availability of future funding requirements, which may have a consequential impact on the carrying amount of investments of 119,684.89 crore in TSH as at March 31, 2023.
Our Opinion is not modified in respect of the above matter.
Key audit matters
5. Key audit matters are those matters that, in our professional judgement, were of most significance 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 financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Key audit matter
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How our audit addressed the key audit matter
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Assessment of litigations and related disclosure of
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Our audit procedures included the following:
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contingent liabilities
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•
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We understood, assessed and tested the design and
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[Refer to Note 2 (c) to the standalone financial statements-
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operating effectiveness of key controls surrounding
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"Use of estimates and critical accounting judgements -
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assessment of litigations relating to the relevant laws
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Provisions and contingent liabilities", Note 35 (A) to the
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and regulations;
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standalone financial statements "Contingencies" and Note 36 to the standalone financial statements - "Other significant litigations"]
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•
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We have reviewed the legal and other professional expenses and enquired with the management for recent developments and the status of the material
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As at March 31, 2023, the Company has exposures towards litigations relating to various matters as set out in the aforesaid Notes. Significant management judgement is required to assess such matters to determine the probability of occurrence of material outflow of economic resources and whether a provision should be recognised or a disclosure
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•
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litigations which were reviewed;
We performed our assessment on a test basis on the underlying calculations supporting the contingent liabilities/other significant litigations disclosed in the standalone financial statements;
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should be made. The management judgement is also
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•
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We used auditor's experts/specialists to gain an
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supported with legal advice in certain cases as considered
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understanding and to evaluate the disputed tax
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appropriate. As the ultimate outcome of the matters are
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matters;
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uncertain and the positions taken by the management are based on the application of their best judgement, related legal advice including those relating to interpretation of laws/
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•
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We considered external legal opinions, where relevant, obtained by management;
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regulations, it is considered to be a Key Audit Matter.
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We evaluated management's assessments by understanding precedents set in similar cases and assessed the reliability of the management's past estimates/judgements;
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We evaluated management's assessment around those matters that are not disclosed or not considered as contingent liability, as the probability of material outflow is considered to be remote by the management; and
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•
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We assessed the adequacy of the Company's disclosures.
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Based on the above work performed, the assessment
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in
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respect of litigations and related disclosures relating
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to
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contingent liabilities/other significant litigations in
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the standalone financial statements is considered to be reasonable.
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Key audit matter
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How our audit addressed the key audit matter
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Assessment of carrying value of investments in Non-
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Our audit procedures included the following:
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Convertible Redeemable Preference Shares and Equity Shares of Tata Steel Long Products Limited (TSLP) and
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• We obtained an understanding from the management,
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Neelachal Ispat Nigam Limited (NINL), subsidiaries respectively
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assessed and tested the design and operating effectiveness of the Company's key controls over the impairment assessment of investments.
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[Refer to Note 2(c) to the standalone financial statements
- "Use of estimates and critical accounting judgements
- Impairment", Note 2(m) to the standalone financial statements - "Investments in subsidiaries, associates and joint
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• We evaluated the appropriateness of the Company's accounting policy in respect of impairment assessment of investments in subsidiaries.
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ventures" and Note 6 to the standalone financial statements
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• We evaluated the Company's process regarding
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- "Investments", Note 2(n)(I) to the standalone financial
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impairment assessment by involving auditor's valuation
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statements - "Financial assets", Note 6(v) to the standalone
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experts, where considered necessary, to assist in assessing
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financial statements]
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the appropriateness of the impairment assessment
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The Company's investment in 0.01% non-convertible, non-
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model, underlying assumptions relating to discount rate,
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cumulative redeemable preference shares (NCRPS) in its
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terminal value etc.
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subsidiary Tata Steel Long Products Limited (TSLP) and
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• We evaluated the cash flow forecasts/ incremental
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equity investment in its step-down subsidiary Neelachal
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cash flows by comparing them to the budgets and our
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Ispat Nigam Limited (NINL) amounts to 113,983.08 crore and 1396.69 crore respectively.
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understanding of the internal and external factors.
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The Company accounts for investment in NCRPS of Tata Steel Long Products Limited initially at fair value and subsequently at amortised cost. Contractual cash flows from the NCRPS represent the principal (112,700 crore) plus accrued interest
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• We checked the mathematical accuracy of the impairment model and agreed the relevant data with the latest budgets, actual past results and other supporting documents, as applicable.
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(11,283.08 crore) aggregating to 113,983.08 crore as on March
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• We assessed the sensitivity analysis and evaluated whether
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31, 2023. These investments have been made in TSLP for
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any reasonably foreseeable change in assumptions could
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acquisition of NINL at a consideration of 112,100 crore and
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lead to impairment.
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for meeting the fund requirements/obligations of NINL.
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• We have discussed the key assumptions and sensitivities
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The above equity investment in NINL is carried at cost.
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with those charged with governance.
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Where an indication of impairment exists, the carrying value of investment is assessed for impairment and where
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• We evaluated the appropriateness of the disclosures
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made in the standalone financial statements.
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applicable an impairment provision is recognised.
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The impairment assessment for such investments have been
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Based on the above procedures performed, we did not
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carried out by the management in accordance with Ind AS 36
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identify any significant exceptions in the management's
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and Ind AS 109, as applicable. The key inputs and judgements
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assessment in relation to the carrying value of investments
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involved in the impairment of unquoted investments include:
• Cash flows forecast/incremental cash flows including assumptions on capacity expansion
• Discount rates
• Terminal growth rate
• Economic and entity specific factors incorporated in the
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in aforesaid subsidiaries.
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valuation.
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The accounting for above investments is a Key Audit Matter as the determination of recoverable value for impairment assessment involves significant management judgement and estimates.
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Other Information
6. The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Integrated Report, Board's Report along with its Annexures and Financial Highlights included in the Company's Annual report (titled as 'Tata Steel Integrated Report & Annual Accounts 2022-23') but does not include the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone 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 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 in the 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 Financial Statements
7. The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone 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 Accounting Standards specified under Section 133 of the Act. 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
8. In preparing the standalone 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
Financial Statements
9. Our objectives are to obtain reasonable assurance about whether the standalone 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 standalone financial statements.
10. As part of an audit in accordance with SAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone 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 Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to standalone financial statements 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 standalone 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 standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
11. 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.
12. 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.
13. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone 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.
Report on other legal and regulatory requirements
14. 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 B a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
15. 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.
(c) The Balance Sheet, the Statement of Profit and Loss (including other comprehensive income), the Statement of Changes in Equity and the Statement of cashflows dealt with by this Report are in agreement with the books of account.
(d) I n our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors, taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023, from being appointed as a director in terms of Section 164(2) of the Act.
(f) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A".
(g) 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 as on March 31, 2023 on its financial position in its standalone financial statements - Refer Note 35(A) and 36 to the standalone financial statements;
ii. The Company was not required to recognise a provision as at March 31, 2023 under the applicable law or accounting standards, as it does not have any material foreseeable losses on long-term contracts (including derivative contracts).
(c) Based on such audit procedures that we considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.
v. The dividend declared and paid during the year by the Company is in compliance with Section 123 of the Act, except for dividend amounting to ?4.16 crore, which has been paid subsequently without depositing the amount to a separate bank account. [Also refer note C(i) to the standalone financial statements]
vi. As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 (as amended), which provides for books of account to have the feature of audit trail, edit log and related matters in the accounting software used by the Company, is applicable to the Company only with effect from financial year beginning April 1, 2023, the reporting under clause (g) of Rule 11 of the Companies (Audit and Auditors) Rules, 2014 (as amended), is currently not applicable.
16. The Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.
For Price Waterhouse & Co Chartered Accountants LLP
Firm Registration Number: 304026E/E-300009
Subramanian Vivek
Partner
Place: Mumbai Membership Number 100332
Date: May 2, 2023 UDIN: 23100332BGYVTL5217
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended March 31, 2023 except for amount aggregating to ?6.72 crore, which according to the information and explanations provided by the management is held in abeyance due to dispute/ pending legal cases.
iv. (a) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the Notes to the standalone financial statements, 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(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries [Refer Notes 6(xi) and 7(iv) to the standalone financial statements];
(b) The management has represented that, to the best of its knowledge and belief, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries [Refer Notes 6(xii) and 7(v) to the standalone financial statements]; and
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