Basis of Opinion
We have audited the accompanying standalone financial statements of NMDC Steel Limited ("the Company"), which comprise the standalone balance sheet as at March 31, 2024, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of material accounting policies and other explanatory information (hereinafter referred to as "Standalone Financial Statements").
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 Indian accounting standards prescribed under section 133 of the Act, ("Ind AS") and the other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024 and its loss, total comprehensive income, the changes in equity and its cash flows for the year ended on that date.
We conducted our audit of the standalone financial statements 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 ('ICAI') 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 ICAI's code of ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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. We have determined the matters described below to be the key audit matters to be communicated in our report.
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S.No.
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Key Audit Matters
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How our audit addressed the key audit matters
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1
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Property, Plant & Equipment (including capital
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Our audit procedures included the following:
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work in progress)
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Obtained an understanding of the management's process of
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•
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Refer note: 2.1.1 and 2.2 to the standalone financial statements
As at 31 March 2024, the Company has Property,
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recording the transactions pertaining to capital expenditure incurred by the Company and evaluated the accounting policies adopted by the Company in accordance with the requirements of Ind AS16.
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Plant and Equipment (PPE) and Capital Work-
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in-progress (CWIP) with carrying values of
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•
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Tested the design and operating effectiveness of the controls
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Rs. 20,230.36 crores and Rs.1,214.89 crores
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put in place by the management in relation to the above
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respectively. Refer note 1.3 (iii) (a) & 1.3 (iii)
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process.
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(b) for the accounting policies adopted by the Company for recognition and measurement of
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•
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Tested the amounts capitalized during the year, on a sample
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PPE and CWIP. Determination of the carrying
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basis, by inspecting supporting documents and evaluating
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values and their respective depreciation
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whether assets capitalized satisfied the recognition criteria.
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and amortization amounts of PPE requires
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•
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Obtained the Asset Evaluation and Capitalization Report
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considerable management judgement. These
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(AECR) prepared by the external technical expert appointed
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include the decisions to capitalize or expense
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by management which covers extensive details and workings,
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costs, the annual asset life review, the timeliness
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with respect to Componentization of PPE and also includes
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of the capitalization of assets and the use of management's assumptions and estimates for
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the useful life of the various assets.
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the determination and measurement of assets retired from active use, in accordance with the requirements of Ind AS 16 - Property, Plant and Equipment.
The carrying value of CWIP also includes balances pertaining to packages and other assets which the management intends to complete the same with in next financial year.
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•
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Reviewed the management's judgments concerning the determination of the appropriate useful life used in depreciation calculations. These judgments are based on technical assessments conducted by both internal management and external experts as necessary. Additionally, we evaluated the appropriateness of long-standing Capital Work in Progress (CWIP) balances related to packages and other assets.
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•
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Evaluated the appropriateness and adequacy of the related
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Considering the significance of the amounts involved in the context of the balance sheet of the Company and the level of judgements and
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disclosures in the standalone financial statements in accordance with the applicable accounting standards.
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estimates required, we consider this to be a key audit matter in the current year audit.
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Based on the above procedures performed, we did not identify any significant exceptions in the management's assessment of PPE and Capital Work in Progress.
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2
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Inventory:
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Our audit procedures included the following:
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Refer note: 2.7 to the standalone financial
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•
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Obtained an understanding of the management's process
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statements
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for physical verification of inventory - Raw materials and By-
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The various categories of inventory comprise of Raw Material (RM), Work-in progress (WIP), Finished Goods (FG) and stores & spares. The Management has appointed an external technical expert to carry out the physical verification of
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•
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products.
We were present during the physical verification of raw material & by-products and observed the process performed by the external technical expert.
Obtained the report provided by the external technical expert
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Raw materials which consists of Coal, Iron Ore
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•
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and Coke products (by-products). The team of external technical expert have carried out the
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from the management and analysed the same with respect to the quantity deviations.
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physical verification of the said categories of
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•
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Compared the quantity deviations of the Inventory physically
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inventory from 21.03.2024 to 04.04.2024 with the
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verified with the deviation levels (Norms for shortages) as
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objective to quantify the actual physical stock
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recommended by the company and found to be within the set
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available at various locations within the plant.
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levels as compared with the industry standards.
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Based on the report provided by the external
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Based on the above procedures performed, we did not identify any
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technical expert, the Company has given the
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significant exceptions in the management's process of physical
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necessary effect in the standalone financial
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verification.
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statements with respect to deviation between the physical stock and book stock.
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Considering the significance of the amounts involved in the context of the statement of profit and loss of the Company and the level of judgements, we consider this to be a key audit matter in the current year audit.
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S.No.
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Key Audit Matters
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How our audit addressed the key audit matters
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3
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Restatement - Prior period errors:
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Our audit procedures included the following:
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Refer note: 2.1, 2.1.2, 2.14.2, 2.15.2, and 2.27 to the
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• Obtained an understanding of the nature of errors identified
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standalone financial statements and 2.32.12 to the
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by management and the relevant financial implication for each
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notes to accounts
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error.
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The Company has discovered the errors
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• Understanding the relevant accounting policy followed by the
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pertaining to prior periods which includes the
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management and discussed the necessary measures taken
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effect of mistakes in applying accounting policies, recognition of elements of financial statements
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by management for rectification of said errors.
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and misinterpretations of facts and the relevant
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• Detailed discussion at various levels of the management to
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errors discovered have been corrected in the
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understand the implications on the treatment of the errors.
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current financial year. Considering the accounting
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• Performed necessary audit procedures to ensure the errors
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policy adopted by the company and the DCCO, the management is of the view that effect of such
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has been dealt accordingly.
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errors discovered during the period is not material
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• Considering the materiality level and other facts and
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and accordingly restatement of the standalone
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circumstances in the present case, the errors discovered are
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financial statements is not required in this regard.
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less than the set level of materiality.
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Considering the significance of the matter and in
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Based on the above procedures performed, we did not identify
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the context of the relevant provisions of Ind AS,
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any significant exceptions in the management's explanation for the
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we consider this to be a key audit matter in the current year audit.
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implications of the errors discovered during the year.
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4
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SEBI (LODR) regulations non-compliance:
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Our audit procedures included the following:
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The Company has not complied with the
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• Obtained the relevant information from the management with
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regulation number 17,18,19,20, and 21 of
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respect to the composition of Board and status of constitution
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SEBI LODR regulations, 2015 relating to ideal composition of Board of Directors due to
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of various committees.
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non-appointment of Independent Director,
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• Reviewed the minutes of the Board meeting wherein the non-
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constitution of Audit Committee, Nomination
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compliance with the said regulations of the SEBI LODR have
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and Remuneration Committee, Stakeholder
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been taken note by the Board.
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Relationship committee and Risk Management
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Based on the above procedures performed, we did not identify any
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Committee, respectively.
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significant exceptions in the management's explanation relating to
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Considering the non-compliances involved with SEBI LODR regulations as mentioned above, we consider this to be a key audit matter.
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non- appointment of Independent Director.
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5
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Litigations, claims and contingencies:
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Our audit procedures included the following:
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Refer note: 2.31 to the standalone financial
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In view of the significance of the matter applied the following audit
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statements
The Company is subject to number of legal
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procedures in this area, among others to obtain sufficient audit evidence:
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lawsuits, claims, governmental and/or regulatory
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• We evaluated the design and tested the operating
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inquiries, tax and commercial disputes arising
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effectiveness of controls in place for the determination and
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from time to time in the ordinary course of
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recognition of provisions and disclosures for litigation and
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business for which the final outcome cannot be
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claims. We determined that we could rely on these controls
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easily predicted.
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for the purposes of our audit;
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Most of the claims involve complex issues. The
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• Reviewing minutes of the meeting of those charged with
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Company makes the assessment either to make
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governance and correspondence between the entity and its
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provision or disclose a contingency on a case-to-case basis considering the underlying facts
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external legal counsel, where necessary.
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of each litigation. The Company's conclusions
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• Obtained a list of ongoing litigations from the management.
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may result in incorrect disclosure or provision in
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We selected a sample of significant litigations and evaluated
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the books of account considering the aforesaid
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the Company's assessment thereof by:
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assessment involving significant judgment to
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i) making enquiries with the officers and the relevant
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be exercised by the Company based on current developments. Further, unexpected adverse
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section in-charge of the company;
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outcomes could also significantly impact the
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ii) verifying correspondence, orders and appeals in
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Company's reported results.
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respect of open litigation; and
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This area is significant to our audit, since the
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• Evaluating the adequacy of disclosures given in Note 2.31
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accounting and disclosure for litigations, claims
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standalone financial statements
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and contingencies is complex and judgmental.
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Based on the above procedures performed, we did not identify any significant exceptions in the management's explanation relating to litigation, claims and contingencies.
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We draw attention to:
1. Note No. 2.32.1 to the accompanying statement, as per the Scheme of Arrangement the staff and workmen of the Demerged company (NMDC Limited) are deemed to be the employee of
the resulting company (NMDC Steel Limited). NMDC Limited maintains the said workmen and staff posted in the company on roll and raise an invoice for their salary and the same are treated as Operational and Maintenance expenses in the books of the company. This arrangement will be continued till any final decision is taken by the board of directors in this regard.
2. Note No. 2.34.10 to the accompanying statement, the company has valued the raw material, store
& spares and loose tools at cost and work-inprogress, finished goods at lower of cost or Net Realisable Value. The adjustment of Rs.
548.07 crores have been made to write down the marketable work-in-progress and finished goods to net realisable value, the same has been recognised under changes in Inventories of work-in-progress and finished goods respectively.
3. Note No. 2.32.4 to the accompanying statement, the company with regard to the Companies (Indian Accounting Standard) Rules 2023 notified vide MCA Notification dated 31st March 2023, the accounting policies of the company were reviewed and changes have been made accordingly as directed in the said notification. Certain addition to the accounting policies with respect to "Capital Works in Progress" and "Contingent liabilities" have been incorporated which the company determined necessary for the purpose of fair reporting.
4. Note No. 2.32.5 (C) to the accompanying statement, the company has intimated to the Stock exchanges where the company is listed vide letter reference No.18(5)/2024 - Sectt. dated 20.01.2024 regarding suspension of Director (Commercial) of the Company on the basis of the directions from the Ministry of Steel, Government of India. In view of the management, the matter is not likely to have a material impact on the operations of the Company and/or these financial results.
Our opinion is not modified in respect of the above matters.
Information other than the standalone financial statements and auditors' report thereon
The Company's Board of Directors is responsible for of the other information. The other information comprises the information included in the Management Discussion and Analysis, Board's Report including Annexures to Board's Report, Report on Corporate governance and Business responsibility report and Shareholder's information 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 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 financial statements
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 including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Ind AS prescribed under section 133 of the Act read with Companies (Indian Accounting Standard) Rules, 2015, as amended. 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 statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
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.
The Company's 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
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.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism 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 Companies Act, 2013, 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.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone 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 standalone 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 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
1. The audit of standalone financial statements for the corresponding year ended March 31, 2023 included in the Statement was carried out and reported by N G Rao & Associates who have expressed unmodified opinion vide their audit report dated May 23, 2023. Our opinion on the Statement is not modified in respect of this matter.
2. The company has complied with the provision of The Employees' Provident Funds and Miscellaneous Provisions Act, 1952, as applicable, for Nagarnar on pay scale employees through the trust maintained by NMDC Limited. However, where EPF is not deducted due to the wage limit criteria, the Act requires certain procedures to
be compiled with, which is not followed by the company in respect of Nagarnar Contractual employees.
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 Section 143(11) of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.
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;
(c) The balance sheet, the statement of profit and loss (including other comprehensive income), the statement of changes in equity and the cash flow statement dealt with by this report are in agreement with the relevant books of account;
(d) In our opinion, the aforesaid standalone financial statements comply with the Indian accounting standards specified under section 133 of the Act
(e) The Company being a government company, the requirement of obtaining written representations from the directors in accordance with the provisions of Section 164 (2) of the Act is not applicable vide MCA Notification G.S.R 464 (E) dated 5th June 2015.
(f) 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" Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting;
(g) The Company being a government company, the other matters to be included in the Auditor's Report in accordance with the requirements of section 197 (16) of the Act, as amended, in respect of whether the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act is not applicable;
(h) As per the Directions issued by the Comptroller and Auditor General of India in pursuance to Section 143(5) of the Act, on the basis of the information and explanations given to us and the records examined by us, we give in the "Annexure C" a statement on the matters specifically so directed.
(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, 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 standalone financial statements - Refer Note 2.31 to the standalone financial statements;
ii. The Company did not have any longterm contracts including 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, no funds (which were material either individually or in the aggregate) 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 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.
(b) The Management has represented that, to the best of its knowledge and belief, no funds (which were material either individually or in the aggregate) have been received by the Company from any person or entity, 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.
(c) Based on the audit procedures 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 sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
v. The Company has not declared or paid any dividends during the year and accordingly reporting on the compliance with section 123 of the Companies Act, 2013 is not applicable for the year under consideration.
vi. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of account for the financial year ended March 31, 2024 which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the
software. Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with. The company stores all financial information data on cloud storage, which is subscribed by NMDC Limited.
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from April 1, 2023, reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the financial year ended March 31, 2024.
For Sanjiv Shah & Associates
Chartered Accountants Firm's Registration Number: 003572S
CA Hitesh Jain
Partner
Membership Number: 232064
UDIN: 24232064BKHKAO4774
Place: Hyderabad Date: July 24, 2024
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