REC Ltd. இன் முடிவுகள்

Mar 31, 2023

REC LimitedReport on the Audit of Standalone Ind AS Financial Statements Opinion

We have audited the standalone Ind AS financial statements of REC Limited ("the Company") which comprise the Balance Sheet as at 31^st March, 2023, and the Statement of Profit and Loss (including Other Comprehensive Income) and the Statement of Change in Equity and the Statement of Cash Flows for the year then ended and notes to the standalone Ind AS financial statements including a summary of significant accounting policies and other explanatory information (hereinafter referred to as "the Standalone Ind AS Financial Statements").

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 & fair view in conformity with the accounting principles generally accepted in India, of the state of the affairs of the Company as at 31^st March 2023, and its Profit (including other comprehensive income), changes in equity and cash flow for the year ended on that date.

Basis for Opinion

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 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 together with the ethical requirements that are relevant to our audit of the standalone Ind AS 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

We draw attention to Note No. 47.1.3 to the standalone Ind AS Financial Statements regarding the provision of impairment allowance in respect of its loan assets and Letters of Comfort. In this regard, we have relied upon the basis of determination of impairment allowance in so far as it relates to technical aspects/parameters considered by independent agency and management judgement for ascertaining impairment allowance as management overlay.

Our opinion is not modified in respect of above matter.

Key Audit Matters

Key audit matters ("KAM") 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 following matters described below to be the key audit matters to be communicated in our report:

S. No.	Key Audit Matter	Auditor''s Response
1.	Impairment allowance of Loan Assets -	We have applied following audit procedures in this regard
	(Refer Note No. 47.1.3 to the Standalone Ind AS Financial Statements read with accounting policy No. 3.11) The Company follows a Board approved methodology wherein assessment for allowance is carried out by an external agency for impairment based on certain	a). According to the provisions of Ind AS 109 "Financial Instruments", we have obtained the report of the external agency and verified the criterion/framework with various regulatory updates alongwith Company''s internal guidelines and procedures in respect of the impairment allowance.
	criterion/framework classifying the assets into various stages depending upon credit risk and level of evidence of impairment. Impairment allowance is measured as product of the	b) Verification of loan assets on test check basis covering substantial part of total loans with respect to monitoring thereof for recovery/ performance aspects and assessment of the loan impairment considering management perception on the same.
	Probability of Default, Exposure at Default and Loss Given Default being the key parameters for assessing the impairment allowance.	c) Recoveries are verified applying the standard audit procedures to ascertain level of stress. Loan balances are confirmed and quality of the borrower is evaluated and tested with key control parameters.

S. No.	Key Audit Matter	Auditor''s Response
	The key indicators underlying for assessment of impairment allowance are appraised on an ongoing basis by the management. Further the management has adopted a methodology which in addition to the model adopted as above is further analyzed on case-to-case basis and wherever impairment impact needs to be changed the same is considered in the financial statements. In view of the significance of the amount of loan assets in the standalone Ind AS Financial Statements i.e 90.79 % of total assets, the audit procedure for impairment of loan assets has been considered as Key Audit Matter in our audit.	d) Assessment of impairment based upon performance of the loan assets is carried out on the basis of relevant evidence on record provided to us. e) We have discussed with the management wherever underlying weakness is observed and management assessment is carried out in detail in such cases. f) Components and calculations in the study for impairment allowance carried out by external agency are relied upon by us and test checks are carried out for the same. Such components are credit rating of borrowers (including ratings issued by Ministry of Power), calculation of probability of default/loan given defaults etc. Our audit procedure in the same are limited in view of reliance on report of the external agency. g) Further, the Management, pursuing a Board approved methodology reviews the impairment allowance in the report of the external agency and enhanced/reduced the impairment on case to case basis as management overlay. We have obtained a detailed analysis from the management for such changes. Our audit procedure in this regard is constrained by the management appraisal and we have relied upon the same.

Information Other than the Standalone Ind AS Financial Statements and Auditor''s Report thereon

The Company''s Board of Directors are responsible for the other information. The other information comprises the Directors'' report, Corporate Governance report, Business responsibility report and Management Discussion and Analysis etc. in the Annual report but does not include the standalone Ind AS financial statements and our report thereon. Such other information is expected to be made available to us after the date of this Auditor''s Report.

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 identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone Ind AS 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 therein, we are required to communicate the matter to those charged with governance.

Management''s Responsibility for the Standalone Ind AS Financial Statements

The Company''s management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance (including other comprehensive income), changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended ("Ind AS"). 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone Ind AS financial statements, management and Board of Directors are 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 Board of Directors is 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 standalone Ind AS 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 Ind AS 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 standalone Ind AS 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 financial controls relevant to the audit in order to design audit procedure 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 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 standalone Ind AS 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 Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the 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.

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, and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanation given to us, we give in the Annexure-A, a statement on the matters specified in paragraph 3 and 4 of the Order, to the extent applicable.

2. On the basis of information and explanations given to us by the company we are enclosing our report in Annexure-B on the directions/ sub-directions issued by Comptroller and Auditor General of India in terms of Section 143(5) of the Act.

3. 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 books of accounts.

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Ind AS specified under Section 133 of the Act read with relevant rules.

e) Vide Notification No. G.S.R. 463(E) dated 5 June, 2015 issued by Ministry of Corporate Affairs, Government Companies have been exempted from applicability of the provisions of Section 164(2) of the Companies Act, 2013.

f) With respect to the adequacy of the internal financial controls over financial reporting of the company and operative effectiveness of such controls , refer to our separate report in "Annexure-C";

g) Pursuant to Notification no. GSR463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, provisions of Section

197 of the Act are not applicable to the government companies.

h) 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 standalone Ind AS financial statements - Refer Note 42 to the standalone Ind AS financial statements;

(ii) According to the information and explanations given to us the Company did not have any long term contracts including derivative contracts for which there are any material foreseeable losses;

(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

(iv) (a) The Management has represented (refer Note 9.5) that, to the best of its knowledge and belief, no funds (which are 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 entity ("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 (refer Note 9.5), that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) 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, 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) of the Companies (Audit and Auditors) Rules, 2014 as amended and provided under (a) and (b) above, contain any material misstatement.

(v) The interim dividend declared and paid during the year by the company till the date of this report is in compliance with section 123 of the Companies Act, 2013

(vi) Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 with respect to using accounting software for maintaining its books of account which has certain features e.g. edit log etc. as enumerated in aforesaid proviso is applicable to the Company with effect from 1^st April 2023. Therefore, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended 31^st March 2023.

M/s S.K. Mittal & Co. M/s O.P. Bagla & Co. LLP.

Chartered Accountants, Chartered Accountants,

ICAI Firm Registration: 001135N ICAI Firm Registration: 000018N/N500091

Name : S. Murthy Name : Atul Aggarwal

Designation : Partner Designation : Partner

Membership Number : 072290 Membership Number : 092656

UDIN : 23072290BGYVDK8429 UDIN : 23092656BGUFNH3625

Place : Mumbai

Date : 17^th May 2023

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Mar 31, 2022

Report on the Audit of Standalone Ind AS Financial Statements Opinion

We have audited the standalone Ind AS financial statements of REC Limited ("the Company") which comprise the Balance Sheet as at 31^st March, 2022, and the Statement of Profit and Loss (including Other Comprehensive Income) and the Statement of Change in Equity and the Statement of Cash Flows for the year then ended and notes to the standalone Ind AS financial statements including a summary of significant accounting policies and other explanatory information (hereinafter referred to as "the Standalone Ind AS Financial Statements").

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 & fair view in conformity with the accounting principles generally accepted in India, of the state of the affairs of the Company as at 31^st March 2022, and Profit (including other comprehensive income) and changes in equity and its cash flow for the year ended on that date.

Basis for Opinion

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 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 together with the ethical requirements that are relevant to our audit of the standalone Ind AS 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

1. We draw attention to Note No. 48.1.3 to the standalone Ind AS Financial Statements regarding, the provision of impairment allowance in respect of its loan assets and Letters of Comfort. In this regard, we have relied upon the basis of determination of impairment allowance, in so far as it relates to technical aspects/parameters considered by independent agency appointed by the company and management judgement for ascertaining impairment allowance as management overlay.

2. We draw attention to Note No. 50 of the standalone Ind AS Financial Statements regarding the impact of COVID-19 pandemic on the Company. Management is of the view that there are no reasons to believe that the pandemic will have any significant impact on the ability of the company to continue as a going concern. Nevertheless, the impact in sight of evolvement of pandemic in future period is uncertain and could impact the impairment allowance in future years.

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters ("KAM") 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 following matters described below to be the key audit matters to be communicated in our report:

S. No.	Key Audit Matter	Auditor''s Response
1.	Impairment allowance of Loan Assets -	We have applied following audit procedures in this regard
	(Refer Note No. 48.1.3 to the Standalone Ind AS Financial Statements read with accounting policy No. 3.11) The Company follows a Board approved methodology wherein assessment for allowance is carried out by an external agency for impairment based on certain	a). According to the provisions of Ind AS 109 "Financial Instruments", we have obtained the report of the external agency and verified the criterion/framework with various regulatory updates alongwith Company''s internal guidelines and procedures in respect of the impairment allowance.
	criterion/framework classifying the assets into various stages depending upon credit risk and level of evidence of impairment. Impairment allowance is measured as product of the	b) Verification of loan assets on test check basis covering substantial part of total loans with respect to monitoring thereof for recovery/ performance aspects and assessment of the loan impairment considering management perception on the same.
	Probability of Default, Exposure at Default and Loss Given Default being the key parameters for assessing the impairment allowance.	c) Recoveries are verified applying the standard audit procedures. Loan balances are confirmed and quality of the borrower is evaluated and tested with key control parameters.

S. No.	Key Audit Matter	Auditor''s Response
	The key indicators underlying for assessment of impairment allowance are appraised on an ongoing basis by the management. Further the management has adopted a methodology which in addition to the model adopted as above is further analyzed on case to case basis and wherever impairment impact need to be changed the same is considered in the financial statements. Since the company is a Non-Banking Finance Company (NBFC) involved in business of financing and if any of the key parameter/criteria/assumptions mentioned as above is applied improperly, it can result in impacting the carrying value of loan assets materially either individually or collectively. In view of the significance of the amount of loan assets in the standalone Ind AS Financial Statements i.e 90.62% of total assets, the audit procedure for impairment of loan assets has been considered as Key Audit Matter in our audit.	d) Assessment of impairment based upon performance of the loan assets is carried out on the basis of available documents comprising loan papers, financial data, valuation reports, progress report, periodical financial information, information on public domain, procedure applied by the management e.g. inspection of loans, physical verification, assessing borrower past records etc. Recoveries in the loan assets are verified to ascertain level of stress thereon and impact as impairment allowance on financial statement. e) We have discussed with the management wherever underlying weakness is observed and management assessment is carried out in detail in such cases. f) Components and calculations in the study for impairment allowance carried out by external agency are relied upon by us and test checks are carried out for the same. Such components are credit rating of borrowers, calculation of probability of default/loan given defaults etc. Our audit procedure in the same are limited in view of reliance on report of the external agency. g) Further, the Management, pursuing a Board approved methodology reviews the impairment allowance in the report of the external agency and enhanced/reduced the impairment on case to case basis as management overlay. We have obtained a detailed analysis from the management for such changes. Our audit procedure in this regard is constrained by the management appraisal and we have relied upon the same. h) Comparison of ECL with the amount of provisioning as required in terms of Income Recognition, Assets classification and provisioning norms (IRACP) of Reserve Bank of India in pursuance of RBI Notification No. DOR (NBFC).CC.PD. No.109/22.10.106/2019-20 dated 13th March 2020.
2.	Fair valuation of Derivative Financial Instruments (Refer Note No. 8 to the standalone Ind AS Financial Statements read with accounting policy No. 3.10) To mitigate the Company''s exposure to foreign currency risk and interest rate risk, non-INR cash flows are monitored and derivative contracts are entered into in accordance with the Company''s board approved risk management policies and RBI guidelines. The Company has applied hedge accounting requirements as per Ind AS 109 ''Financial Instruments'' wherein certain derivative contracts have been designated as hedging instruments in ''Cash flow hedge'' relationships. These arrangements have been entered into to mitigate foreign currency exchange risk and interest rate risk arising from certain debt instruments denominated in foreign currency. The derivatives are measured at fair value as per Ind AS 109. Mark to market gain/loss on these derivatives are recognised in the other comprehensive income for cash flow hedges. In view of significance and impact on financial statements we have identified it as a key audit matter.	We have applied following audit procedure in this regard a) Discussing and understanding management''s perception and studying policy of the company for risk management. Motive of derivative transactions are studied and observed underlying exposure is not more than the volume of derivatives. b) Verification of fair value of derivative in terms of Ind AS 109. c) Testing the accuracy and completeness of derivative transactions. d) Evaluation of management''s key internal controls over classification, valuation, and valuation models of derivative instruments. e) Obtained details of various financial derivative contracts as outstanding as on 31st March 2022. f) Verification of underlying assumptions in estimating the fair valuation arrived at for those financial derivative contracts. g) We also obtained confirmations from the banks with whom such financial derivative contracts have been entered into and independently compared the valuation so arrived at by the contracting banks. h) Additionally, we have verified the accounting of gain/loss on mark to market basis in the other comprehensive income for cash flow hedges. i) Assessing whether the financial statement disclosures appropriately reflect the Company''s exposure to derivatives valuation risks with reference to the requirements of the prevailing accounting standards and Reserve Bank of India Guidelines.

Information Other than the Standalone Ind AS Financial Statements and Auditor''s Report thereon

The Company''s management and Board of Directors are responsible for the other information. The other information comprises the Directors'' report, Corporate Governance report, Business responsibility report and Management Discussion and Analysis etc. in the Annual report but does not include the standalone Ind AS financial statements and our report thereon. Such other information is expected to be made available to us after the date of this Auditor''s Report.

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 identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone Ind AS financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read such other information if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Management''s Responsibility for the Standalone Ind AS Financial Statements

The Company''s management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance (including other comprehensive income), changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended ("Ind AS"). 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone Ind AS financial statements, management and Board of Directors are 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 Board of Directors is 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 standalone Ind AS 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 Ind AS 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 standalone Ind AS 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 financial controls relevant to the audit in order to design audit procedure 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 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 standalone Ind AS 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 Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the 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.

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, and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanation given to us, we give in the Annexure-A, a statement on the matters specified in paragraph 3 and 4 of the Order, to the extent applicable.

2. On the basis of information and explanations given to us by the company we are enclosing our report in Annexure-B on the directions/ sub-directions issued by Comptroller and Auditor General of India in terms of Section 143(5) of the Act.

3. 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 books of accounts.

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Ind AS specified under Section 133 of the Act read with relevant rules.

e) Vide Notification No. G.S.R. 463(E) dated 5 June, 2015 issued by Ministry of Corporate Affairs, Government Companies have been exempted from applicability of the provisions of Section 164(2) of the Companies Act, 2013.

f) With respect to the adequacy of the internal financial controls over financial reporting of the company and operative effectiveness of such controls , refer to our separate report in "Annexure-C";

g) Pursuant to Notification no. GSR463(E) dated 5^th June 2015 issued by the Ministry of Corporate Affairs, provisions of Section 197 of the Act are not applicable to the government companies.

h) 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 standalone Ind AS financial statements - Refer Note 43 to the standalone Ind AS financial statements;

(ii) According to the information and explanations given to us the Company did not have any long term contracts including derivative contracts for which there are any material foreseeable losses;

(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

(iv) (a) The Management has represented (refer Note 9.5) that, to the best of its knowledge and belief, no funds (which are 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 entity ("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 (refer Note 9.5), that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) 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, 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) of the Companies (Audit and Auditors) Rules, 2014 as amended and provided under (a) and (b) above, contain any material misstatement.

(v) The dividends (Interim and Final) declared and paid during the year by the company till the date of this report is in compliance with section 123 of the Companies Act, 2013

M/s S.K. Mittal & Co. M/s O.P. Bagla & Co. LLP.

Chartered Accountants, Chartered Accountants,

ICAI Firm Registration: 001135N ICAI Firm Registration: 000018N/N500091

Name : S. K. Mittal Name : Rakesh Kumar

Designation : Partner Designation : Partner

Membership Number : 008506 Membership Number : 087537

UDIN : 22008506AIYJDD9001 UDIN : 22087537AIYGLA6237

Place : Gurugram

Date : 13^th May 2022

---

Mar 31, 2021

Report on the Audit of Standalone Ind AS Financial Statements

Opinion

We have audited the standalone Ind AS financial statements of REC Limited (“the Company”) which comprise the balance sheet as at 31st March, 2021, and the statement of profit and loss (including other comprehensive income) and the statement of change in equity and the statement of cash flows for the year then ended and notes to the standalone Ind AS financial statements including a summary of significant accounting policies and other explanatory information (hereinafter referred to as “the Standalone Ind AS Financial Statements”).

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 & fair view in conformity with the accounting principles generally accepted in India, of the state of the affairs of the Company as at 31st March 2021, and profit (including other comprehensive income) and changes in equity and its cash flow for the year ended on that date.

Basis for Opinion

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 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 together with the ethical requirements that are relevant to our audit of the standalone Ind AS 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

1.    We draw attention to Note No. 47.1.3 to the standalone Ind AS Financial Statements regarding, the provision of impairment allowance in respect of its loan assets and Letters of Comfort. In this regard, we have relied upon the basis of determination of impairment allowance as mentioned above, in so far as it relates to technical aspects/parameters considered by independent agency and management judgement for ascertaining impairment allowance as management overlay.

2.    We draw attention to Note No. 49 of the standalone Ind AS Financial Statements regarding the impact of COVID-19 pandemic on the Company. Management is of the view that there are no reasons to believe that the pandemic will have any significant impact on the ability of the company to continue as a going concern. Nevertheless, the impact in sight of evolvement of pandemic in future period is uncertain and could impact the impairment allowance in future years.

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters (“KAM”) 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 following matters described below to be the key audit matters to be communicated in our report:

S. No.	Key Audit Matter	Auditor's Response
1.	Impairment allowance of Loan Assets -	We have applied following audit procedures in this
Â	(Refer Note No. 47.1.3 to the Standalone Ind AS Financial	regard
Â	Statements read with accounting policy No. 3.10)	According to the provisions of Ind AS 109 “Financial
Â	The Company follows a Board approved methodology wherein assessment for allowance is carried out by an external agency for impairment based on certain criterion/framework classifying the assets into various	Instruments”, we have obtained the report of the third party and verified the criterion/framework with various regulatory updates alongwith Company's internal guidelines and procedures in respect of the impairment allowance.
Â	stages depending upon credit risk and level of evidence of	Verification of loan assets with respect to monitoring thereof
Â	impairment.	for recovery/performance aspects and assessment of the
Â	Impairment allowance is measured as product of the	loan impairment.
Â	Probability of Default, Exposure at Default and Loss	Recoveries are verified applying the standard audit
Â	Given Default being the key parameters for assessing the	procedures. Loan balances are confirmed and quality
Â	impairment allowance.	of the borrower is evaluated and tested with key control
Â	The key indicators underlying for assessment of impairment	parameters.
Â	allowance are appraised on an ongoing basis by the	Assessment of performance of the loan assets is carried
Â	management. Further the management has adopted a methodology which in addition to the model adopted as above is further analyzed on case to case basis and wherever impairment impact need to be changed the same is considered in the financial statements.	out on the basis of available documents comprising loan papers, financial data, valuation reports, progress report, periodical financial information, information on public domain, procedure applied by the management e.g. inspection of loans, physical verification, assessing borrower past records etc. Recoveries in the loan assets are verified to ascertain level of stress thereon and impact
Â	Since the company is an non banking finance company	as impairment allowance on financial statement.
Â	involved in business of financing and if any of the key parameter/criteria/assumptions mentioned as above is applied improperly, it can result in impacting the carrying value of loan assets materially either individually or	We have discussed with the management wherever underlying weakness is observed and management assessment is carried out in detail in such cases.
Â	collectively. In view of the significance of the amount of	Components and calculations in the study for impairment
Â	loan assets in the standalone Ind AS Financial Statements	allowance carried out by third party are relied upon by us and
Â	i.e. 91.26 % of total assets, the impairment of loan assets	test checks are carried out for the same. Such components
Â	thereon has been considered as Key Audit Matter in our	are credit rating of borrowers, calculation of probability of
Â	audit.	default/loan given defaults etc. Our audit procedure in the same are limited in view of not sharing certain parameters of study being considered confidential by such third party.
Â	Â	Further, the Management, pursuing a board approved methodology reviews the impairment allowance in the report of the third party and modified the impairment on case to case basis. We have obtained a detailed analysis from the management for such modification. Our audit procedure in this regard is constrained by the management appraisal and we have relied upon the same.
Â	Â	Verification of the amount maintained as Impairment reserve in terms of Income Recognition, Assets classification and provisioning norms (IRACP) of Reserve Bank of India in pursuance of RBI Notification No. DOR (NBFC).CC.PD. No.109/22.10.106/2019-20 dated 13th March 2020.

S. No.	Key Audit Matter	Auditor's Response
2.	Fair valuation of Derivative Financial Instruments (Refer Note No. 9 to the standalone Ind AS Financial Statements read with accounting policy No. 3.9) To mitigate the Company's exposure to foreign currency risk and interest rate risk, non-INR cash flows are monitored and derivative contracts are entered into in accordance with the Company's board approved risk management policies and RBI guidelines.	We have applied following audit procedure in this regard Discussing and understanding management's perception and studying policy of the company for risk management. Motive of derivative transactions are studies and observed underlying exposure is not more than the volume of derivatives. Verification of fair value of derivative in terms of Ind AS 109.
Â	The derivatives are measured at fair value as per Ind AS 109.	Testing the accuracy and completeness of derivative transactions.
Â	The Company has applied hedge accounting requirements as per Ind AS 109 'Financial Instruments' wherein certain derivative contracts have been designated as hedging instruments in 'Cash flow hedge' relationships. These arrangements have been entered into to mitigate foreign currency exchange risk and interest rate risk arising from certain debt instruments denominated in foreign currency.	Evaluation of management's key internal controls over classification, valuation, and valuation models of derivative instruments. Obtained details of various financial derivative contracts as outstanding/ pending for settlement as on 31st March 2021 from the Company.
Â	Hedge accounting has resulted in significant impact on financial statements coupled with complexity of its accounting/assumptions and numerous parameters therein for establishing hedge relationship. Mark to market gain/ loss on these derivatives are recognised in the other comprehensive income.	Verification of underlying assumptions in estimating the fair valuation arrived at for those financial derivative contracts. Reliance on reports evaluating the appropriateness of the valuation methodologies applied and testing the same on sample basis for the derivative instruments.
Â	In view of facts of the matter we have identified it as a key audit matter.	We also obtained confirmations from the banks with whom such financial derivative contracts have been entered into and independently compared the valuation so arrived at by the contracting banks.
Â	Â	Additionally, we have verified the accounting of gain/loss on mark to market basis in the other comprehensive income.
Â	Â	Assessing whether the financial statement disclosures appropriately reflect the Company's exposure to derivatives valuation risks with reference to the requirements of the prevailing accounting standards and Reserve Bank of India Guidelines.

S. No.	Key Audit Matter	Auditor's Response
3.	Modified audit procedures carried out in light of COVID-19 outbreak	We have applied following audit procedures in this regard
Â	(Refer Note No. 49 to the standalone Ind AS Financial Statements) The SARS-COV-2 virus responsible for Covid-19 continues to spread across the Globe including India, which has resulted in a decline in economy activity and volatility in global and Indian financial markets. To curb the spread of COVID-19 pandemic, nation-wide lockdown and travel restrictions were imposed by various state Governments/local authorities during the financial year and our period of audit. Since the access to audit evidence in person/ physically was disrupted due to the unprecedented situation, the audit had to be conducted with modified audit procedures. We have identified such modified audit procedures as a key audit matter.	In scenario of lockdown and severe spread of the pandemic, the company facilitated carrying out audit remotely as physical access was restricted. As the physical access was not possible, necessary records/ reports/ documents/ certificates were made available to us by the company through digital medium/ emails and other application softwares. To this extent, the audit process was carried out on the basis of such documents, reports and records made available to us which were relied upon by us as audit evidence for conducting the audit and reporting for the year under audit. We modified our audit procedures as follows : a. Carried out the verification of scanned copies of the documents, certificates and the related records made available to us through emails.
Â	Â	b.	Making inquiries and gathering necessary audit evidence through video conferencing, dialogues and discussions over phone calls/ conference calls, emails and other similar communication channels.
Â	Â	c.	Resolution of our audit observations telephonically/ through emails instead of a face to face interaction with the designated officials.
Â	Â	d.	The situation of lockdown due to pandemic, may have impacted working/reporting etc. of other professional e.g. third party agency submitting report of impairment allowance, independent valuers, internal auditors etc. and we have relied upon the same.
Â	Â	e.	Certain information/explanations we have relied upon during our audit were provided to us through verbal assertions by the company.
Â	Â	f.	In entire communication through various modes as mentioned hereinabove the records of the company which is confidential have been sent and, though utmost care has been taken as explained to us by encrypting such data, there are possibility of damage to such data in different ways. We have informed the company in this regard.

Information Other than the Standalone Ind AS Financial Statements and Auditor's Report thereon

The Company's management and Board of Directors are responsible for the other information. The other information comprises the Directors' report, Corporate Governance report, Business responsibility report and Management Discussion and Analysis etc. in the Annual report but does not include the standalone Ind AS financial statements and our report thereon. Such other information is expected to be made available to us after the date of this auditor's report.

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 identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone Ind AS financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read such other information if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Management's Responsibility for the Standalone Ind AS Financial Statements

The Company's management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance (including other comprehensive income), changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended (“Ind AS”). 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone Ind AS financial statements, management and Board of Directors are 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 Board of Directors is 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 standalone Ind AS 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 Ind AS 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 standalone Ind AS 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 financial controls relevant to the audit in order to design audit procedure 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 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 standalone Ind AS 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 Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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 subject to our audit procedures as referred in para 3 of key audit matters here in above.

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.

Report on Other Legal and Regulatory Requirements

1.    As required by the Companies (Auditor's Report) Order, 2016 (“the order”), issued by the Central Government of India in terms of sub-section(11) of section 143 of the Act, and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanation given to us, we give in the Annexure-A, a statement on the matters specified in paragraph 3 and 4 of the Order, to the extent applicable.

2.    On the basis of information and explanations given to us by the company we are enclosing our report in Annexure-B on the directions/sub-directions issued by Comptroller and Auditor General of India in terms of Section 143(5) of the Act,.

3.    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 books of accounts.

d)    In our opinion, the aforesaid standalone Ind AS financial statements comply with the Ind AS specified under Section 133 of the Act read with relevant rules.

e)    Vide Notification No. G.S.R. 463(E) dated 5 June, 2015 issued by Ministry of Corporate Affairs, Government Companies have been exempted from applicability of the provisions of Section 164(2) of the Companies Act, 2013.

f)    With respect to the adequacy of the internal financial controls with reference to the Standalone Ind AS Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure-C”;

g)    Pursuant to Notification no. GSR463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, provisions of Section 197 of the Act are not applicable to the government companies.

h)    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 Ind AS financial statements - Refer Note 42.1 to the standalone Ind AS financial statements;

(ii)    The Company does not have any long term contracts including derivative contracts for which there are any material foreseeable losses;

(iii)    There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

M/s S.K. Mittal & Co.    M/s O.P. Bagla & Co. LLP.

Chartered Accountants,    Chartered Accountants,

ICAI Firm Registration: 001135N    ICAI Firm Registration: 000018N/N500091

Name : S. Murthy    Name : Atul Aggarwal

Designation : Partner    Designation : Partner

Membership Number : 072290    Membership Number : 092656

UDIN : 21072290AAAADD8391    UDIN : 21092656AAAACQ8265

Place : New Delhi Date : 28^th May 2021

---

Mar 31, 2018

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Rural Electrification Corporation Limited (“the Company”), which comprise the Balance Sheet as at 31st March 2018, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone 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 financial statements that give a true and fair view of the financial position, financial performance 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, read with Rule 7 of the Companies (Accounts) Rules, 2014 and MCA General Circular No.15/2013 dated 13th September 2013. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the standalone financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the standalone financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

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 Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of Balance Sheet, of the state of affairs of the Company as at 31st March 2018,

(b) In the case of Statement of Profit & Loss, of the profit for the year ended on that date,

(c) In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in the Annexure-A, a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. We are enclosing our report in terms of Section 143 (5) of the Act, on the basis of such checks of the books and records of the Company as we have considered appropriate and according to the information and explanations given to us, in Annexure B on the directions and sub-directions issued by Comptroller and Auditor General of India.

3. 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, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and MCA General Circular No. 15/2013 dated 13 September, 2013.

(e) Vide Notification No. G.S.R. 463(E) dated 5 June, 2015 issued by Ministry of Corporate Affairs, Government Companies have been exempted from applicability of the provisions of Section 164(2) of the Companies Act, 2013.

(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-C”; and

(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, 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 21.1 to the standalone financial statements;

(ii) The Company does not have any such long term contracts including derivative contracts for which there are any material foreseeable losses;

(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

ANNEXURE-A TO THE INDEPENDENT AUDITOR’S REPORT

Referred to in Paragraph 1 under ‘Report on Other Legal and Regulatory Requirements’Section of Our Report of Even Date on the Accounts of Rural Electrification Corporation Limited for the Year ended on 31st March 2018

(i) (a) The Company has maintained fixed assets records to show full particulars including quantitative details and situation of its fixed assets.

(b) According to the information and explanations given to us, the company has the policy of verifying the fixed assets in a phased manner. Discrepancies arising from such physical verification have been suitably accounted for in the books of accounts. In our opinion, the periodicity of physical verification is reasonable having regard to the size of the company and the nature of its assets.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company except for the following:

(Rs.in Crores)

Particulars	No. of cases	Gross Block	Net Block	Remarks
Freehold Land	1	45.92	45.92	Conveyance Deed by Haryana Urban Development Authority is yet to be executed.
Building	1	4.59	2.26	Conveyance Deed by Standing Committee of Public Enterprises is yet to be executed.

(ii) The company being Non-Banking Financial Company (NBFC), does not have any inventory; as such this clause is not applicable.

(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to any Companies, firms or other parties covered in register maintained under section 189 of the Companies Act, 2013. Accordingly, clause 3(iii)(a), (b) and (c) of the Order are not applicable.

(iv) In our opinion and according to information & explanations given to us with respect to the provisions of Section 185 of the Act, the Company has not granted a loan to any of its directors during the year.

Further, in our opinion and according to information & explanations given to us, the Company, being a Non-Banking Financial Company (NBFC), is exempt from the provisions of Section 186 of the Act and the relevant rules in respect of loans and guarantees. In respect of the investments, the Company has complied with the provisions of section 186 (1) of the Act.

(v) According to the information and explanations given to us, the Company has not accepted any deposits from public to which the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Rules framed thereunder, apply.

(vi) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records for the products/services of the Company under Companies (Cost Records and Audit) Rules, 2014, read with Companies (Cost Records and Audit) Amendment Rules, 2014 prescribed by the Central Government under Section 148 of the Companies Act, 2013. Accordingly, this clause of the order is not applicable to the Company.

(vii) (a) The Company is generally regular in depositing undisputed statutory dues including Provident Fund, employees’State Insurance, Income-tax, Sales-tax, Service Tax, Goods & Service Tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities. There were no undisputed statutory dues in arrears as at 31st March, 2018 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the disputed statutory dues aggregating to Rs.39.60 crores have not been deposited on account of matters pending before appropriate authorities as detailed below:

(Rs.in Crores)

Name of Statute	Nature of Dues	Amount Disputed	Amount paid/ refund adjusted	Net Amount Unpaid	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	Income Tax and Interest	21.35	5.28	16.07 *	AY 2008-09 AY 2010-11 AY 2011-12 AY 2012-13	Income Tax Appellate Tribunal, Delhi
Income Tax Act, 1961	Income Tax and Interest	55.85	41.97	13.88	AY 2011-12, AY 2012-13, Ay 2013-14, AY 2014-15 A/Y 2015-16	Commissioner of Income Tax (Appeals), Delhi

Income Tax Act, 1961	Fringe Benefit Tax	0.48	-	0.48	AY 2008-09	Commissioner of Income Tax (Appeals), Delhi
Income Tax Act, 1961	Income Tax and Interest	17.06	8.31	8.75 *	AY 1999-00 AY 2003-04 AY 2004-05	Supreme Court
Income Tax Act, 1961	Tax Deducted at Source	0.06	-	0.06	FY 2007-08 to 2017-18	CPC, TDS
Chapter V of Finance Act, 1994	Service Tax, Penal Interest u/s 73(4A)	0.36	-	0.36	FY 2008-09	CESTAT, Delhi
	Total	95.16	55.56	39.60

* Rs.24.82 Crore though received by the Company as refund due to appeal effects of favorable decisions of various appellate forums, is however being considered as unpaid on account of further appeals made by the Income Tax Department to higher authorities.

(viii) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the company has not defaulted in repayment of loans or borrowing to a financial institution, bank, government or dues to debenture holders as at the Balance Sheet date.

(ix) The company did not raise any money by way of initial public offer or further public offer and term loans during the year. Accordingly, paragraph 3 (ix) of the order is not applicable.

(x) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India and according to the information and explanations given to us, we have neither come across any instance of any material fraud by the Company or on the Company by its officers or employees, noticed or reported during the year, nor have we been informed of any such case by the Management.

(xi) According to the information and explanations given to us, Central Government has exempted the Government Companies from the provisions of Section 197. Accordingly, this clause of the Order is not applicable to the Company.

(xii) According to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, this clause of the Order is not applicable to the Company.

(xiii) According to the information and explanations given to us and on the basis of our examination of the records of the Company, transactions with the related parties are in compliance with section 177 and 188 of the Act where applicable and the necessary disclosures have been made in the standalone financial statements etc., as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with them. Accordingly, this clause of the Order is not applicable.

(xvi) According to the information and explanations given to us and based on our examination of the records of the Company, the Company, being a NBFC, is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. The registration as required has been duly obtained and registration number issued to the Company is 14.000011.

For G.S. Mathur & Co. For A.R. & Co.

Chartered Accountants Chartered Accountants

Firm Regn No. 008744N Firm Regn. No. 002744C

S.C. Choudhary Aakansha Nigam

Partner Partner

M. No.082023 M. No.416425

Place : New Delhi

Date : 28th May 2018

---

Mar 31, 2017

To,

The Members,

Rural Electrification Corporation Limited New Delhi

The Revised Report is issued in supersession of our earlier Audit Report dated 30 May 2017, at the instance of the Comptroller & Auditor General (C&AG) of India in order to make it more clarificatory, particularly in respect of the reporting requirements of the Companies (Auditor''s Report) Order, 2016 and Clause (i) of sub-section 3 of the Section 143 of the Companies Act 2013 pertaining to reporting on Internal Financial Controls. Further, we confirm that there is no change in the true & fair view of the financial statements as expressed in earlier report and also none of the figures have undergone any change in the financial statements of the Company as at 31 March 2017.

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Rural Electrification Corporation Limited (“the Company”), which comprise the Balance Sheet as at 31 March 2017, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone 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 financial statements that give a true and fair view of the financial position, financial performance 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, read with Rule 7 of the Companies (Accounts) Rules, 2014 and MCA General Circular No. 15/2013 dated 13 September 2013. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the standalone financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the standalone financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

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 Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of Balance Sheet, of the state of affairs of the Company as at 31March 2017,

(b) In the case of Statement of Profit & Loss, of the profit for the year ended on that date,

(c) In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

1. As required by the Companies (Auditor''s Report) Order, 2016 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in the Annexure-A, a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. We are enclosing our report in terms of Section 143 (5) of the Act, on the basis of such checks of the books and records of the Company as we have considered appropriate and according to the information and explanations given to us, in Annexure B on the directions and sub-directions issued by Comptroller and Auditor General of India.

3. 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, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and MCA General Circular No. 15/2013 dated 13 September, 2013.

(e) Vide Notification No. G.S.R. 463(E) dated 5 June, 2015 issued by Ministry of Corporate Affairs, Government Companies have been exempted from applicability of the provisions of Section 164(2) of the Companies Act, 2013.

(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-C”; and

(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, 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 25.1 to the standalone financial statements;

(ii) The Company does not have any such long-term contracts including derivative contracts for which there are any material foreseeable losses;

(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

(iv) The Company has provided requisite disclosures in the standalone financial statements as to holdings as well as dealings in specified bank notes during the period from 8 November 2016 to 30 December 2016. Based on audit procedures and relying on the management representation we report that the disclosures are in accordance with books of account maintained by the management. Refer Note 13.1 to the standalone financial statements.

Referred to in Paragraph 1 under ‘Report on Other Legal and Regulatory Requirements’ Section of Our Report of Even Date on the Accounts of Rural Electrification Corporation Limited for the Year ended on 31 March 2017

(i) (a) The Company has maintained fixed assets records to show full particulars including quantitative details and situation of its fixed assets.

(b) According to the information and explanations given to us, the company has the policy of verifying the fixed assets in a phased manner. Discrepancies arising from such physical verification have been suitably accounted for in the books of accounts. In our opinion, the periodicity of physical verification is reasonable having regard to the size of the company and the nature of its assets.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company except for the following:

(Rs, in Crores)

Particulars	No. of cases	Gross Block	Net Block	Remarks
Freehold Land	1	45.92	45.92	Conveyance Deed by Haryana Urban Development Authority is yet to be executed.
Building	1	4.59	2.32	Conveyance Deed by Standing Committee of Public Enterprises is yet to be executed.

(ii) The company being Non-Banking Financial Company (NBFC), does not have any inventory; as such this clause is not applicable.

(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to any Companies, firms or other parties covered in register maintained under section 189 of the Companies Act, 2013. Accordingly, clause 3(iii)(a), (b) and (c) of the Order are not applicable.

(iv) In our opinion and according to information & explanations given to us with respect to the provisions of Section 185 of the Act, the Company has granted a loan to one of its whole-time directors during the year. However, the provisions of Section 185 are not applicable to such loan since it forms part of the conditions of service extended by the Company to all its employees.

Further, in our opinion and according to information & explanations given to us, the Company, being a Non-Banking Financial Company (NBFC), is exempt from the provisions of Section 186 of the Act and the relevant rules in respect of loans and guarantees. In respect of the investments, the Company has complied with the provisions of section 186 (1) of the Act.

(v) According to the information and explanations given to us, the Company has not accepted any deposits from public to which the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Rules framed thereunder, apply.

(vi) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records for the products/services of the Company under Companies (Cost Records and Audit) Rules, 2014, read with Companies (Cost Records and Audit) Amendment Rules, 2014 prescribed by the Central Government under Section 148 of the Companies Act, 2013. Accordingly, this clause of the order is not applicable to the Company.

(vii) (a) The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees'' State

Insurance, Income-tax, Sales-tax, Service Tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities. There were no undisputed statutory dues in arrears as at 31 March, 2017 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the disputed statutory dues aggregating to Rs,19.49 crores have not been deposited on account of matters pending before appropriate authorities as detailed below:

(Rs, in Crores)

Name of Statute	Nature of Dues	Amount Disputed	Amount paid/ refund adjusted	Net Amount Unpaid	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	Income Tax and Interest	24.85	6.3	18.55*	AY 2005-06, AY 2006-07, AY 2008-09 to AY 2012-13	Income Tax Appellate Tribunal, Delhi
Income Tax Act, 1961	Income Tax and Interest	42.54	42.54		AY 2008-09, AY 2011-12, Ay 2013-14, AY 2014-15	Commissioner of Income Tax (Appeals), Delhi

Name of Statute	Nature of Dues	Amount Disputed	Amount paid/ refund adjusted	Net Amount Unpaid	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	Fringe Benefit Tax	0.48		0.48	AY 2008-09	Commissioner of Income Tax (Appeals), Delhi
Income Tax Act, 1961	Income Tax and Interest	14.37	14.37		AY 1999-00 to AY 2002-03, AY 2004-05	Supreme Court
Income Tax Act, 1961	Tax Deducted at Source	0.1	-	0.1	FY 2007-08	CPC, TDS
Chapter V of Finance Act, 1994	Service Tax, Penal Interest u/s 73(4A)	0.36	-	0.36	FY 2008-09	CESTAT, Delhi
	Total	82.7	63.21	19.49

* Rs, 18.55 crores though received by the Company as refund due to appeal effects of favorable decisions of various appellate forums, is

however being considered as unpaid on account of further appeals made by the Income Tax Department to higher authorities.

(viii) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the company has not defaulted in repayment of loans or borrowing to a financial institution, bank, government or dues to debenture holders as at the Balance Sheet date.

(ix) The company did not raise any money by way of initial public offer or further public offer and term loans during the year. Accordingly, paragraph 3 (ix) of the order is not applicable.

(x) According to the information and explanations given to us and as represented by the management and on the basis of our examination of the records of the Company, in accordance with the generally accepted auditing practices in India, we have been informed, that in one case of fraud involving an aggregate amount of Rs,0.59 crores towards fraudulent encashment through forged documents of money invested by one of the investors (Refer Note No. 3.7 to the standalone financial statements) and in another case of overcharging of bills of an aggregate amount of Rs,1.01 crores by an air travel agent (Refer Note No. 23.1 to the standalone financial statements), has been committed on the company during the year. The company has taken appropriate action in both the cases.

(xi) According to the information and explanations given to us, Central Government has exempted the Government Companies from the provisions of Section 197. Accordingly, this clause of the Order is not applicable to the Company.

(xii) According to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, this clause of the Order is not applicable to the Company.

(xiii) According to the information and explanations given to us and on the basis of our examination of the records of the Company, transactions with the related parties are in compliance with section 177 and 188 of the Act where applicable and the necessary disclosures have been made in the standalone financial statements etc., as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with them. Accordingly, this clause of the Order is not applicable.

(xvi) According to the information and explanations given to us and based on our examination of the records of the Company, the Company, being a NBFC, is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. The registration as required has been duly obtained and registration number issued to the Company is14.000011.

Sl. No.	Directions/ Sub-Directions	Action Taken	Impact on Standalone Financial Statements
A.	Directions
1.	Whether the company has clear title/ lease deeds for freehold and leasehold land respectivelyRs, If not, please state the area of freehold and leasehold land for which title/ lease deeds are not available.	The company has clear title/ lease deeds for freehold and leasehold land respectively. However, the formalities regarding registration of conveyance deed in respect of one freehold residential plot of land allotted to the Company amounting to Rs, 45.92 Crores and measuring 39,770 Sq. Mtrs. and one Land & Building amounting to Rs, 4.59 Crores and measuring 5,911.69 Sq. Mtrs. are yet to be executed.	The impact has already been mentioned in the ''Action TakenRs, column, which is not material.
2.	Whether there are any cases of waiver/ write off of debts/ loans/ interest etc. If yes, the reasons therefore and amount involved.	Delayed interest/ penal interest amounting to Rs,5.32 Crores has been waived off after the approval of the competent authority, including Rs,5.29 Crores waived in pursuance of Ujwal DISCOM Assurance Yojana (UDAY) launched by Ministry of Power (MoP). Prepayment premium of Rs,19.75 Crores has been waived. Further, no prepayment charge has been levied on the DISCOM debt so prepaid under UDAY scheme.	The impact has already been mentioned in the ''Action Taken'' column, which is not material.
3.	Whether proper records are maintained for inventories lying with third parties and assets received as gift/ grant(s) from the Government or other authorities.	The Company, being an NBFC, the clause with respect to inventories lying with third parties and assets received as gifts from Govt. and other authorities is not applicable.	NIL
B.	Sub-Direction
1.	In respect of provisioning requirements of all restructured, rescheduled or renegotiated loan, whether a system of periodical assessment of realizable value of securities available against all such loans is in place and adequate provision has been created during the year Rs, Any deficiencies in this regard may be suitably commented upon along with financial implication.	The company is following a system of periodical assessment of realizable value of securities available against all restructured, rescheduled or renegotiated loan based upon management assessment and review/ progress report of lenders engineers, lenders financial advisor and project monitoring group. No deficiency in this regard has been observed having financial implication. In our opinion the system of company needs improvement to be commensurate with the size and nature of its business. However, adequate provision as per significant accounting policies of the company has been created during the year on all such loans.	NIL

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Act

We have audited the internal financial controls over financial reporting of the Company as of 31 March 2017 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (''ICAI''). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that:

(1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the standalone financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material aspects, an adequate internal financial controls system, except (i) improvement in ERP system relating to classification of loans & advances as secured or unsecured, determination of non-performing assets in the ERP system, shift in the moratorium period due to structuring/restructuring, revalidation of the sanctions of loans and recording of non-entertaining/rejection/disposal of applications of the loans, (ii) strengthening of procedures for monitoring of utilization of funds disbursed to the borrowers, (iii) procedure for processing of the claims of travel agent, over financial reporting and such internal financial controls over financial reporting were operating effectively as of 31 March 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.

We have considered the areas of improvement identified which needs further strengthening as reported above in determining the nature, timing, and extent of audit tests applied in our audit of the 31 March 2017 standalone financial statements of the Company. However, these areas of improvement do not affect our opinion on the standalone financial statements of the Company.

For Raj Har Gopal & Co. For A.R & Co.

Chartered Accountants Chartered Accountants

Firm Regn. No. 002074N Firm Regn. No. 002744C

(Shrey Gupta) (Anil Gaur)

Partner Partner

M. No. 522315 M. No.017546

Place : New Delhi Date : 17^th July 2017

---

Mar 31, 2016

We have audited the accompanying standalone financial statements of Rural Electrification Corporation Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone 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 financial statements that give a true and fair view of the financial position, financial performance 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, read with Rule 7 of the Companies (Accounts) Rules, 2014 and MCA General Circular No. 15/2013 dated 13th September, 2013. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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.

Auditor''s Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

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 Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2016,

(b) In the case of Statement of Profit & Loss, of the Profit for the year ended on that date,

(c) In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to the following matter in the notes to the financial statements:- (a) Note No. 11.2.7 in respect of classification of one of the borrower account as standard asset in view of ad-interim order of Hon''ble High Court of Madras.

Our opinion is not modified in respect of above matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in the Annexure-A, a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. We are enclosing our report in terms of Section 143 (5) of the Act, on the basis of such checks of the books and records of the Company as we have considered appropriate and according to the information and explanations given to us, in Annexure B on the directions and sub-directions issued by Comptroller and Auditor General of India.

3. 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, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and MCA General Circular No. 15/2013 dated 13th September, 2013.

(e) Vide Notification No. G.S.R. 463(E) dated 5th June, 2015 issued by Ministry of Corporate Affairs, Government Companies have been exempted from applicability of the provisions of Section 164(2) of the Companies Act, 2013.

(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-C"; and

(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, 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 24.1 to the financial statements;

(ii) The Company does not have any such long-term contracts including derivative contracts for which there are any material foreseeable losses;

(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

ANNEXURE-A TO THE INDEPENDENT AUDITOR''S REPORT

Referred to in Paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' Section of Our Report of Even Date on the Accounts of Rural Electrification Corporation Limited for the Year ended on 31st March, 2016

(I) (a) The Company has maintained fixed assets records to show full particulars including quantitative details and situation of its fixed assets.

(b) According to the information and explanations given to us, the company has the policy of verifying the fixed assets in a phased manner but the physical verification of IT assets has not been completed during the year. Discrepancies arising from such physical verification have been suitably accounted for in the books of accounts. In our opinion, the periodicity of physical verification is reasonable having regard to the size of the company and the nature of its assets.

(c) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company except for the following:

(Rs. in Crores)

Particulars No. of cases Gross Block Net Block Remarks

1 Conveyance Deed by Haryana Urban Development Freehold Land 45.92 45.92 Authority is yet to be executed.

1 Conveyance Deed by Standing Committee of Public Building 4.59 2.39 Enterprises is yet to be executed.

(II) The company being Non Banking Financial Company (NBFC), does not have any inventory; as such this clause is not applicable.

(III) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to any Companies, firms or other parties covered in register maintained under section 189 of the Companies Act, 2013. Accordingly, clause 3(iii) (a), (b) and (c) of the Order are not applicable.

(IV) In our opinion and according to information & explanations given to us, the Company, being NBFC, is exempt from the provisions of Section 185 and 186 of the Act, and the relevant rules in respect of loans and guarantees. Further, in respect of the investments, the Company has complied with the provisions of section 185 and 186 of the Act.

(V) According to the information and explanations given to us, the Company has not accepted any deposits from public to which the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Rules framed thereunder, apply.

(VI) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records for the products/services of the Company under Companies (Cost Records and Audit) Rules, 2014, read with Companies (Cost Records and Audit) Amendment Rules, 2014 prescribed by the Central Government under Section 148 of the Companies Act, 2013. Accordingly, this clause of the order is not applicable to the Company.

(VII) (a) The Company is generally regular in depositing undisputed statutory dues including Provident Fund, employees'' State Insurance, Income-tax, Sales-tax, Service Tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities. There were no undisputed statutory dues in arrears as at 31st March, 2016 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the disputed statutory dues aggregating to Rs. 0.96 crores have not been deposited on account of matters pending before appropriate authorities as detailed below:

(Rs. in Crores)

Name of Nature of Amount Amount Net Statute Dues Disputed paid/ refund Amount adjusted Unpaid

Income Tax Income Tax 22.35 22.35 - Act, 1961 and Interest

Income Tax Income Tax 12.08 12.08 - Act, 1961 and Interest

Income Tax Fringe 0.48 - 0.48 Act, 1961 Benefit Tax

Income Tax Tax Deducted 0.12 - 0.12 Act, 1961 at Source

Chapter V Service Tax, 0.36 - 0.36 of Finance Penal Interest Act, 1994 u/s 73(4A)

Total 35.39 34.43 0.96

Name of Staute Period to which the Forum where dispute is amount relates pending

Income Tax Act, 1961 AY 2005-06, AY 2006-07, Income Tax Appellate AY 2008-09 to AY 2011-12 Tribunal, Delhi

Income Tax Act, 1961 AY 2012-13, AY 2013-14 Commissioner of Income Tax (Appeals), Delhi

Income Tax Act, 1961 AY 2008-09 Commissioner of Income Tax (Appeals), Delhi

Income Tax Act, 1961 FY 2007-08 to FY 2015-16 CPC, TDS

Chapter V of Finance Act, 1994 FY 2008-09 to 2011-12 Commissioner of Service Tax (LTU), Delhi

(VIII) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the company has not defaulted in repayment of loans or borrowing to a financial institution, bank, government or dues to debenture holders as at the Balance Sheet date.

(IX) According to the in formation and explanations given to us and on the basis of our examination of the records of the Company, the Company has utilized the money raised by way of public offer of debt instruments during the year for the purposes for which they were raised. Further, no moneys were raised during the year through further public offer or term loans.

(X) According to the information and explanations given to us and on the basis of our examination of the records of the Company, no fraud by the company or any fraud on the company by its Officers or employees has been noticed or reported during the year.

(XI) According to the information and explanations given to us, Central Government has exempted the Government Companies from the provisions of Section 197. Accordingly, this clause of the Order is not applicable to the Company.

(XII) According to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, this clause of the Order is not applicable to the Company.

(XIII) According to the information and explanations given to us and on the basis of our examination of the records of the Company, transactions with the related parties are in compliance with section 177 and 188 of the Act where applicable and the necessary disclosures have been made in the financial statements etc., as required by the applicable accounting standards.

(XIV) According to the information and explanations given to us and on the basis of our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(XV) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, this clause of the Order is not applicable.

(XVI) According to the information and explanations given to us and based on our examination of the records of the Company, the Company, being a NBFC, is required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. The registration as required has been duly obtained and registration number issued to the Company is 14.000011.

We have considered the areas of improvement identified which needs further strengthening as reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2016 standalone financial statements of the Company. However, these areas of improvement do not affect our opinion on the standalone financial statements of the Company.

For Raj Har Gopal & Co. For A.R. & Co.

Chartered Accountants Chartered Accountants

Firm Regn. No. 002074N Firm Regn. No. 002744C

Gopal Krishan Pawan K Goel

Partner Partner

M. No. 081085 M. No. 072209

Place : New Delhi

Date : 27th May, 2016

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Mar 31, 2015

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Rural Electrification Corporation Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone 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 of these standalone financial statements that give a true and fair view of the financial position, financial performance 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, read with Rule 7 of the Companies (Accounts) Rules, 2014 and General Circular No. 15/2013 dated 13th September, 2013. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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.

Auditor''s Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

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 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 31st March, 2015, and its profit and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2015 ("the Order"), issued by the Central Government of India in terms of sub- section (11) of section 143 of the Companies Act, 2013, we give in the Annexure 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.

(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and General Circular No. 15/2013 dated 13th September, 2013.

(e) On the basis of the written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) 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 financial statements - Refer Note 23.1 to the financial statements;

(ii) The Company does not have any such long-term contracts including derivative contracts for which there are any material foreseeable losses;

(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

3. As required under the Section 143(5) of the Act, with respect to the directions issued by The Comptroller & Auditor General of India, we report that :

Sl. No. Directions Report

1. If the Company has been selected Though the Company has been selected for disinvestment of Govt. Shareholding only for disinvestment, a complete status during the FY 2014-15, the actual transaction by way of Offer for Sale (OFS) through report in terms of valuation of Assets Stock Exchanges happened only on 8th April, 2015. As per the transaction, The (including intangible assets and land) President of India, acting through Ministry of Power sold 4,93,72,950 (5.00%) Equity and Liabilities (including Committed Shares through OFS on 8th April, 2015. Accordingly, the process of 5% disinvestment & General Reserves) may be examined by the Govt. of India has been completed. However, no fresh issue of shares was made including the mode and present stage by the Company and accordingly, there was no need of valuation of Assets (including of disinvestment process. intangible assets and land) and Liabilities (including Committed & General Reserves).

However, in view of the materiality of the change in shareholding of the Govt. of India, adequate disclosure has also been made in the Notes to Accounts in Note No. 1.2.

2. Please report whether there are any During the FY 2014-15, penal interest on delayed payment aggregating to Rs. 0.01 cases of waiver-write off of debts/ Crore in respect of four borrowers was waived off on account of Bank Holiday on the loans interest etc. If yes, the reasons due date on account of State Assembly Elections in Haryana and Maharashtra. there for and the amount involved.

3. Whether proper records are The Company, being an NBFC, the clause with respect to inventories lying with third maintained for inventories lying with parties and assets received as gifts from Govt. and other authorities is not applicable. third parties & assets received as gift from Govt. or other authorities.

4. A report on age-wise analysis of pending legal/ arbitration cases including the reasons of pendency and existence/ effectiveness of a monitoring mechanism for expenditure on all legal cases (foreign and local) may be given. As per the information and explanations given to us, following cases are pending as at 31st March, 2015 with courts/ arbitrators/ taxation authorities:

Age-wise analysis No. of Reasons of pendency Amount where cases ascertain able (Rs. in Crores)

Court Cases

Year 1990-2000 3 Recovery matters before DRT. 55.47 Recovery Certificate issued and recovery is proceeding before Recovery Officer.

Year 2001-2010 20 Admitted and matter fixed for final 5.34 hearing.

Year 2011 onwards 18 Matters pending for admission and - those admitted are fixed for final hearing.

Arbitration Cases

Year 2010 onwards 2 In one case it is admitted before 3.75 the High Court and pending for final hearing. In other case the matter is at evidence stage.

Taxation Litigation Cases

Year 2010 onwards 17 Matters pending with different 50.20 taxation authorities/ courts for submissions/ remand report/ hearing or passing of the orders.

Total 60 114.76

The financial impact of the above cases, which is contingent upon the outcome of settlement of court/ arbitration/ taxation cases, wherever ascertainable, has also been disclosed in Notes to Accounts in Note No. 23.1 under the head ''Claims against the Company not acknowledged as debts''.

The Company has a suitable mechanism for monitoring the expenditure on all legal cases and the payment towards legal expenditure is duly regulated by the Delegation of Powers duly approved by the Competent Authority.

ANNEXURE TO THE INDEPENDENT AUDITOR''S REPORT

Referred to in paragraph 1 under ''report on other legal and regulatory requirements'' section of our report of even date on the accounts of Rural Electrification Corporation Limited for the year ended on 31st March, 2015

(i) (a) The Company has maintained fixed assets records to show full particulars including quantitative details and situation of its fixed assets.

(b) Some of the fixed assets were physically verified during the year by the Management in accordance with a programme of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(ii) The company being Non Banking Financial Company, does not have any inventory; as such this clause is not applicable.

(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to any Companies, firms or other parties covered in register maintained under section 189 of the Companies Act, 2013. Accordingly, clause 3(iii)(a) and 3(iii) (b) of the Order are not applicable.

(iv) In our opinion and according to information & explanations given to us, internal controls for purchase of fixed assets and for the financial services are generally commensurate with the size of the Company and the nature of its business. However, in certain areas internal control needs further strengthening like monitoring and supervision of loans given to various SEBs/ DISCOMS/ TRANSCOS/ GENCOS including obtaining search reports for charges created against the loans given and physical verification of assets charged to REC as security after Commercial Operations Date. During the course of audit, we have not come across any major failure in internal control system.

(v) According to the information and explanations given to us, the Company has not accepted any deposits from public to which the provisions of Sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Rules framed thereunder, apply.

(vi) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records for the products/services of the Company under Companies (Cost Records and Audit) Rules, 2014, read with Companies (Cost Records and Audit) Amendment Rules, 2014 prescribed by the Central Government under Section 148 of the Companies Act, 2013. Accordingly, this clause of the order is not applicable to the Company.

(vii) (a) The Company is generally regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income-tax, wealth tax, service tax, custom duty and other material statutory dues applicable to it. There were no undisputed statutory dues in arrears as at 31st March, 2015 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the disputed Statutory dues aggregating to Rs. 2.80 crores that have not been deposited on account of matters pending before appropriate authorities are detailed below:

(Rs. in crores)

Name of Nature of Dues Amount Amount Net Statute Disputed paid/ refund Amount adjusted Unpaid

Income Tax Income Tax and 8.15 8.15 - Act, 1961 Interest

Income Tax Penalty u/s 0.07 - 0.07 Act, 1961 271(1) (c)

Income Tax Fringe Benefit 0.48 - 0.48 Act, 1961 Tax

Income Tax Income Tax and 21.14 20.95 0.19 Act, 1961 Interest

Income Tax Tax Deducted at 0.47 - 0.47 Act, 1961 Source

Income Tax Tax Deducted at 1.23 - 1.23 Act, 1961 Source

Chapter V of Service Tax, 0.36 - 0.36 Finance Act, Penal Interest u/s 1994 73(4A)

Total 31.90 29.10 2.80

Name of Statute Period to which the Forum where dispute is amount relates pending

Income Tax Act, 1961 AY 2008-09 Commissioner of Income Tax (Appeals), Delhi

Income Tax Act, 1961 AY 2005-06 Commissioner of Income Tax (Appeals), Delhi

Income Tax Act, 1961 AY 2008-09 Commissioner of Income Tax (Appeals), Delhi

Income Tax Act, 1961 AY 2003-04, AY 2006-07, Income Tax Appellate AY 2009-10 , AY 2010-11, Tribunal, Delhi AY 2011-12

Income Tax Act, 1961 FY 2012-13 Commissioner of Income Tax (Appeals), Delhi

Income Tax Act, 1961 FY 2007-08 to FY 2014-15 CPC, TDS

Chapter V of Finance Act, 1994 FY 2008-09 to 2011-12 Commissioner of Service Tax (LTU), Delhi

(c) The amounts required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder has been transferred to such fund within the prescribed time.

(viii) The Company does not have any accumulated losses as at 31st March, 2015. The Company has also not incurred cash losses during the year covered by our audit and in the immediate preceding financial year. Accordingly, this clause of the Order is not applicable.

(ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank and debenture holders as at the Balance Sheet date.

(x) In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year. Accordingly, this clause of the Order is not applicable to the Company.

(xi) To the best of our knowledge and according to the information and explanations given to us, the term loans raised during the year were applied for the purpose for which the loans were obtained.

(xii) To the best of our knowledge and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the year.

For Raj Har Gopal & Co. For P. K. Chopra & Co.

Chartered Accountants Chartered Accountants

Firm Regn. No. 002074N Firm Regn. No. 006747N

Gopal Krishan K. S. Ponnuswami

Partner Partner

M. No. 081085 M. No. 070276

Place : New Delhi

Date : 27th July, 2015

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Mar 31, 2014

1. We have audited the accompanying financial statements of RURAL ELECTRIFICATION Corporation Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2014, and the Statement of profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and OTHER explanatory information.

2. Management''s RESPONSIBILITY for the FINANCIAL Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This RESPONSIBILITY includes the design, IMPLEMENTATION and maintenance of internal CONTROL relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatements, whether due to fraud or error.

3. Auditor''s RESPONSIBILITY

Our RESPONSIBILITY is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the INSTITUTE of Chartered Accountants of India. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal CONTROL relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal CONTROL. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is suffcient and appropriate to provide a basis for our audit opinion.

4. Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principals generally accepted in India:

(a) in the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2014;

(b) in the case of Statement of profit and Loss, of the profit for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

5. Report on OTHER Legal and Regulatory Requirements

(i) As required by the Companies (Auditors'' Report) Order, 2003 ("the Order") issued by the CENTRAL Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

(ii) As required by section 227(3) of the Act, we report that:

a. we have 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 appears from our examination of those books;

c. the Balance Sheet, Statement of profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

d. in our opinion, the Balance Sheet, Statement of profit and Loss and Cash Flow Statement comply with the Accounting Standards referred to in sub- section (3C) of Section 211 of the Companies Act, 1956;

e. vide Notifcation No. 2/5/2001-CL.V dated 22.03.2002 of the Department of Company Affairs, Government of India, Government Companies have been exempted from applicability of the provisions of Section 274(1) (g) of the Companies Act, 1956.

f. Since the CENTRAL Government has not issued any notifcation as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

ANNExURE TO THE INDEPENDENT AUDITOR''S REPORT REFERRED TO IN PARAGRAPH 5(i) OF OUR REPORT OF EVEN DATE ON THE ACCOUNTS OF RURAL ELECTRIFICATION CORPORATION LIMITED FOR THE YEAR ENDED ON 31st MARCH, 2014

(i) (a) The Company has maintained fixed assets records to show full particulars including quantitative details and situation of its fixed assets.

(b) The Company has a phased manner of physical verifcation of its fixed assets, which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this programme, substantial assets were physically verifed by the management during the year. Discrepancies noticed on such verifcation have been properly dealt with in the books of account.

(c) In our opinion and according to the explanations given to us, during the year, the Company has not disposed off substantial part of fixed assets; therefore going concern is not affected. Hence, this clause of the order is not applicable.

(ii) The company being Non Banking FINANCIAL Company, does not have any inventory; as such this clause is not applicable.

(iii) (a) According to the information and explanations given to us, the Company has not granted any LOANS secured or unsecured to any Corporation, firm or OTHER parties covered in register maintained under section 301 of Companies Act, 1956. Accordingly, clause 4(iii)(a), 4(iii) (b), 4(iii)(c) and 4(iii)(d) of the order are not applicable.

(b) According to the information and explanations given to us, the Company has not taken any LOANS, secured or unsecured, from any Corporation, firm, or OTHER parties covered in the register maintained under section 301 of the Companies Act 1956. Accordingly clause 4(iii)(e), the clause 4(iii)(f) and 4(iii)(g) of the order are not applicable.

(iv) In our opinion and according to information & explanations given to us, internal CONTROLs for purchase of fixed assets and for the financial services are generally commensurate with the size of the Company and the nature of its BUSINESS. However, in certain areas internal CONTROL needs further strengthening like monitoring and supervision of LOANS given to various SEBs/ DISCOMS/ TRANSCOS/ GENCOS including obtaining search reports for charges created against the LOANS given and physical verifcation of assets charged to REC as security after Commercial Operations Date.

(v) According to information and explanations given to us, the Company has not entered into any contract with the Companies or Entities covered u/s 301 of the Companies Act, 1956. Accordingly, this clause of the order is not applicable.

(vi) According to the information and explanations given to us, the Company has not accepted any deposit from public to which the provisions of Sections 58A and 58AA or any OTHER relevant provisions of the Companies Act, 1956 and the Rules framed there under, apply.

(vii) In our opinion, the Company has an internal audit system generally commensurate with its size and nature of its BUSINESS.

(viii) To the best of our knowledge and as explained, the CENTRAL Government has not prescribed the maintenance of cost records under clause (d) of sub section (1) of section 209 of the Companies Act, 1956, for the products/services of the Company. Accordingly, this clause of the order is not applicable to the Company.

(ix) (a) The Company is generally regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, investor''s education protection fund, employees state insurance, income tax, wealth tax, service tax, custom duty and OTHER material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, service tax, wealth tax were in arrears as at 31st March, 2014 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of income tax, wealth tax, service tax, sales tax, custom duty and cess which has not been deposited on account of dispute.

(x) The Company does not have any accumulated losses as at 31st March, 2014. The Company has also not incurred cash losses during the year covered by our audit and in the immediate preceding financial year. Accordingly, this clause of the order is not applicable.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank and bond holders as at the Balance Sheet date.

(xii) In our opinion and according to the information and explanations given to us, the Company has maintained records and documents in respect of loan granted by it to various State Electricity Boards, Transmission, DISTRIBUTION and Generation Companies including independent POWER producers on the basis of security including collateral security by way of pledge of share and OTHER securities.

(xiii) In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi or mutual benefit fund or society, therefore, this clause of the order is not applicable to the Company.

(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debenture and OTHER investment, therefore this clause of the order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for LOANS taken by OTHERs from banks or financial institutions during the year. Accordingly, this clause of the order is not applicable to the Company.

(xvi) In our opinion and according to the information and explanations given to us, the term LOANS were applied for the purpose for which they were raised.

(xvii) According to the information and explanations given to us and on the overall examination of the balance sheet of the Company, we report that no funds raised on short term basis have been used for long term investment.

(xviii) According to the information and explanations given to us, during the year the Company has not made any preferential

allotment of shares to companies, firms or OTHER parties needs to be listed in the register maintained u/s 301 of the Companies Act.

(xix) According to the information and explanations given to us, the Company has created security in respect of Institutional Bonds, Tax Free Secured Bonds, and 54EC Capital Gain Tax Exemption Bonds in the form of charge on receivables and Registered Mortgage on the immovable properties of the Company at Maharashtra, Delhi, Tamil Nadu & Gujarat.

(xx) The Company had made public issue of Tax Free Bonds of face value of Rs. 1,000.00 each aggregating to Rs. 2,148.41 Crores in two tranches during the financial year 2012-13 in addition to a private placement issue of the Tax Free Bonds of Rs. 500.00 Crores. The issue proceeds of Rs. 0.63 Crores remaining unutilized as on 31st March, 2013 have since been utilized for the purposes as mentioned in the Offer document.

The Company has made a public issue of Tax Free Bonds of face value of Rs. 1,000 each aggregating to Rs. 4,500 Crores during the financial year 2013-14 in addition to a private placement of the Tax Free Bonds of Rs. 1,500 Crores. The bonds under public issue had been allotted in line with the prescribed guidelines and within the financial year 2013-14. The issue proceeds have been utilised for the purposes as mentioned in the Offer document except for Rs. 5.96 Crores which is kept in designated public issue account pending its utilisation.

(xxi) During the course of our examination of the books of account carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

Referred in paragraph 5 (i) of report of even date, clauses (ii) (b) & (c), (iii) (c) & (d), (v) (b), (viii) (a) (b) (c) (d) of Companies (Auditor''s Report) Order, 2003 are not applicable to the Company.

ERRATA TO INDEPENDENT AUDITORS'' REPORT DATED 26th MAY, 2014

1. In sub-paragraph 2 of Paragraph 3 "Auditor''s RESPONSIBILITY", first line should be read as "An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements."

2. Point (ii)(f) of Paragraph 5- "Report on OTHER Legal and Regulatory Requirements" may be considered as deleted.

3. Point (i)(b) of "Annexure to the Independent Auditor''s Report" should be read as "All the assets have not been physically verifed by the Management during the year, but there is a regular programme of verifcation to cover all assets, which is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verifcation."

4. Point (ix)(c) of "Annexure to the Independent Auditor''s Report" should be read as below:

The disputed Statutory dues aggregating to Rs. 50.92 crores that have not been deposited on account of matters pending before appropriate authorities are detailed below:

Name of Statute Nature of dues Forum where dispute is pending Rs. Crores

Income Tax Act, 1961 Income Tax CIT (Appeals) 17.75

ITAT 13.21

Delhi High Court 3.79

Supreme Court of India 16.17

Total 50.92

5. Last Paragraph to "Annexure to the Independent Auditor''s Report" should be read as "Referred in paragraph 5 (i) of report of even date, clauses (ii) (a), (b) & (c), (iii) (a), (b), (c), (d), (e), (f) & (g), (v) (a) & (b), (viii), (xiii) (a) (b) (c) & (d) and (xiv) of Companies (Auditor''s Report) Order, 2003 are not applicable to the Company."

For Raj Har Gopal & Co. For P. K. Chopra & Co.

Chartered Accountants Chartered Accountants

Firm Regn No. 002074N Firm Regn No. 006747N

(Gopal Krishan) (K. S. Ponnuswami)

Partner Partner

M. No. 081085 M. No. 070276

Place : New Delhi Date : 26th May, 2014

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Mar 31, 2013

Report on the Financial Statements

1. We have audited the accompanying financial statements of RURAL ELECTRIFICATION CORPORATION LIMITED, which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit & Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

2. Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatements, whether due to fraud or error.

3. Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on auditing issued by the Institute of Chartered Accountants of India. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4. Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principals generally accepted in India:

(a) In the case of Balance Sheet, of the state of affairs of the company as at March 31, 2013;

(b) In the case of Statement of Profit and Loss , of the profit for the year ended on that date; and

(c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

5. Report on Other Legal and Regulatory Requirements

(i) As required by the Companies (Auditors'' Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the order.

(ii) As required under the provisions of section 227(3) of the Companies Act, 1956, we report that:

a. We have 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 appears from our examination of those books;

c. The Balance Sheet, Statement of Profit & Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, Statement of Profit & Loss and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

e. Vide notification No. 2/5/2001-CL.V dated 22.03.2002 of the Department of Company Affairs, Government of India, Government Companies have been exempted from applicability of the provisions of Section 274(1)(g) of the Companies Act, 1956.

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act,1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

(i) (a) The Corporation has maintained fixed assets records to show full particulars including quantitative details and situation of its fixed assets.

(b) The fixed assets of the corporation were physically verified by the management during the year ended on 31st March, 2013; as certified by the management, no material discrepancies has been found on such physical verification.

(c) In our opinion and according to the explanations given to us, during the year, the Corporation has not disposed off substantial part of fixed assets; therefore going concern is not affected. Hence this clause of the order is not applicable.

(ii) The Corporation being Non Banking Financial Company, does not have any inventory; as such this clause is not applicable.

(iii) (a) According to the information and explanations given to us, the Corporation has not granted any loans secured or unsecured to any Corporation, firm or other parties covered in register maintained under section 301 of Companies Act, 1956. Accordingly clause 4(iii) (a), the clause 4(iii)(b), 4(iii)(c) and 4(iii)(d) of the order are not applicable.

(b) According to the information and explanations given to us, the Corporation has not taken any loans, secured or unsecured, from any Corporation, firm, or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly clause 4(iii)(e), the clause 4(iii)(f) and 4(iii)(g) of the order are not applicable.

(iv) In our opinion and according to information & explanations given to us, internal controls are generally commensurate with the size of the Corporation and the nature of its business. However in certain areas internal control needs further strengthening like utilization of grants/subsidy received under various schemes; monitoring and supervision of loans given to various SEBs/DISCOMS/TRANSCOS/GENCOS including obtaining search reports for charges created against the loans given, physical verification of assets charged to REC as security after Commercial Operations Date; regular updating of Loan module and generation of various reports from loan module in ERP to have better control over loan assets.

(v) According to information and explanations given to us, the Corporation has not entered into any contract with the Companies or Entities covered u/s 301 of the Companies Act, 1956. Accordingly this clause of the order is not applicable.

(vi) According to the information and explanations given to us, the Corporation has not accepted any deposit from public to which the provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Rules framed there under, apply.

(vii) In our opinion the Corporation has an internal audit system generally commensurate with its size and nature of its business.

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records under clause (d) of sub section (1) of section 209 of the Companies Act, 1956, for the products/services of the Corporation. Accordingly, this clause of the order is not applicable to the Corporation.

(ix) (a) The Corporation is generally regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, investor''s education protection fund, employees state insurance, income tax, wealth tax, service tax and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, service tax, wealth tax were in arrears as at 31st March 2013 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of income tax, wealth tax, service tax and cess which has not been deposited on account of dispute.

(x) The Corporation does not have any accumulated losses as at 31st March, 2013. The Corporation has also not incurred cash losses during the financial year covered by our audit and in the immediate preceding financial year. Accordingly, this clause of the order is not applicable.

(xi) In our opinion and according to the information and explanations given to us, the Corporation has not defaulted in repayment of dues to a financial institution, bank or bond holders as at the Balance Sheet date.

(xii) In our opinion and according to the information and explanations given to us, the Corporation has maintained records and documents in respect of loan granted by it to various State Electricity Board, Transmission, Distribution and Generation Companies including independent power producers on the basis of security including collateral security by way of pledge of shares and other securities.

(xiii) In our opinion and according to the information and explanations given to us, the Corporation is not a chit fund or a nidhi or mutual benefit fund or society, therefore, this clause of the order is not applicable to the Corporation.

(xiv) In our opinion and according to the information and explanations given to us, the Corporation is not dealing or trading in shares, securities, debenture and other investment, therefore this clause of the order is not applicable to the Corporation.

(xv) In our opinion and according to the information and explanations given to us, the Corporation has not given any guarantee for loans taken by others from banks or financial institutions during the year. Accordingly this clause of the order is not applicable to the Corporation.

(xvi) In our opinion and according to the information and explanations given to us the term loans were applied for the purpose for which they were raised.

(xvii) According to the information and explanations given to us and on the overall examination of the balance sheet of the Corporation, we report that no funds raised on short term basis have been used for long term investment.

(xviii) According to the information and explanations given to us, during the year the Corporation has not made any preferential allotment of shares to companies, firms or other parties needs to be listed in the register maintained u/s 301 of the Companies Act.

(xix) According to the information and explanations given to us, the corporation has created security in respect of Institutional Bonds, Tax Free Secured Bonds and Capital Gain Bonds in the form of charge on receivables and Registered Mortgage on the immovable properties of the Corporation at Maharashtra, Delhi, Tamilnadu & Gujarat.

(xx) The Corporation has made a public issue of Tax Free Bonds of face value of Rs. 1000/- each aggregating to Rs. 3000.00 crores during the financial year 2011-12. The bonds have been allotted on 27.03.2012 and the issue proceeds had been kept in designated Public Issue accounts. The issue proceeds have been made available to the Company and utilized for the purpose as mentioned in the offer document during the period ended 31st March, 2013. Further, an amount of Rs. 0.63 Crore remaining unutilized as on 31.03.2013 out of the issue proceeds of Tax Free Bonds of Rs. 2148.41 crores for public issue and Rs. 500 crores for private placement made during the year 2012-13. The unutilized proceeds are kept in the designated public account.

(xxi) During the course of our examination of the books of account carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Corporation, noticed or reported during the year, nor have we been informed of such case by the management.

For Bansal & Co. For P.K. Chopra & Co.

Chartered Accountants Chartered Accountants

Firm Regn No. 001113N Firm Regn No. 006747N

(R.C.Pandey) (K.S. Ponnuswami)

Partner Partner

M. No. 070811 M. No. 070276

Place : New Delhi

Date : 28th May, 2013

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Mar 31, 2012

1. We have audited the attached Balance Sheet of RURAL ELECTRIFICATION CORPORATION LIMITED as at 31st March 2012 and also the Statement of Profit & Loss and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors' Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable to the Corporation.

4. Further to our comments in the Annexure referred in paragraph 3 above, we report that:

i) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii) In our opinion, proper books of account as required by law have been kept by the Corporation so far as appears from our examination of such books;

iii) The Balance Sheet, Statement of Profit & Loss and Cash Flow Statement dealt with by this report are in agreement with the books of accounts;

iv) In our opinion, the Balance Sheet, Statement of Profit & Loss and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub- section (3C) of Section 211 of the Companies Act, 1956 to the extent possible.

v) Vide notification No. 2/5/2001-CL.V dated 22.03.2002 of the Department of Corporate Affairs, Government of India, Government Companies have been exempted from applicability of the provisions of Section 274(1)(g) of the Companies Act, 1956.

vi) In our opinion and to the best of our information and according to explanations given to us, the said financial statements read together with notes and accounting policies thereon, give the information required by the Companies Act 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) In the case of the Balance Sheet of the State of Affairs of the Company as at 31th March 2012.

b) In the case of Statement of Profit & Loss, of the Profit of the Company for the year ended on that date; and

c) In the case of the Cash Flow Statement, of the Cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS' REPORT REFERRED TO IN PARAGRAPH (3) OF OUR REPORT OF EVEN DATE ON THE ACCOUNTS OF RURAL ELECTRIFICATION CORPORATION LIMITED FOR THE YEAR ENDED ON 31st MARCH, 2012

(i) (a) The Corporation has maintained fixed assets records to show full particulars including quantitative details and situation of its fixed assets.

(b) The fixed assets of the corporation were physically verified by the management during the year ended on 31st March,2012; as certified by the management, no material discrepancies has been found on such physical verification.

(c) In our opinion and according to the explanations given to us, during the year, the Corporation has not disposed off substantial part of fixed assets therefore going concern is not affected . Hence this clause of the order is not applicable.

(ii) The Corporation being Non Banking Financial Company, does not has any inventory; as such this clause is not applicable.

(iii) (a) According to the information and explanations given to us, the Corporation has not granted any loans secured or unsecured to any Corporation, firm or other parties covered in register maintained under section 301 of Companies Act, 1956. Accordingly clause 4(iii)(a), the clause 4(iii)(b), 4(iii)(c) and 4(iii)(d) of the order are not applicable.

(b) According to the information and explanations given to us, the Corporation has not taken any loans, secured or unsecured, from any Corporation, firm, or other parties covered in the register maintained under section 301 of the Companies Act 1956. Accordingly clause 4(iii)(e), the clause 4(iii)(f) and 4(iii)(g) of the order are not applicable.

(iv) In our opinion and according to information & explanations given to us, internal controls are generally commensurate with the size of the Corporation and the nature of its business. However in certain areas internal control needs further strengthening like utilization of grants/subsidy received under various schemes; monitoring and supervision of loans given to various SEBs/DISCOMS/TRANSCOS/GENCOS including obtaining search reports for charges created against the loans given, regular updating of Loan module and generation of various reports from loan module in ERP to have better control over loan assets. During the course of audit we have not come across any major failure in internal control system.

(v) According to information and explanations given to us, the Corporation has not entered into any contract with the Companies or Entities covered u/s 301 of the Companies Act, 1956. Accordingly this clause of the order is not applicable.

(vi) According to the information and explanations given to us, the Corporation has not accepted any deposit from public to which the provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Rules framed there under, apply.

(vii) In our opinion the Corporation has an internal audit system generally commensurate with its size and nature of its business.

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records under clause (d) of sub section (1) of section 209 of the Companies Act, 1956, for the products/services of the

Corporation. Accordingly, this clause of the order is not applicable to the Corporation.

(ix) (a) The Corporation is generally regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, investor's education protection fund, employees state insurance, income tax, wealth tax, service tax and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, service tax, wealth tax were in arrears as at 31st March 2012 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of income tax, wealth tax, service tax and cess which has not been deposited on account of dispute.

(x) The Corporation does not have any accumulated losses as at 31st March, 2012. The Corporation has also not incurred cash losses during the financial year covered by our audit and in the immediate preceding financial year. Accordingly, this clause of the order is not applicable.

(xi) In our opinion and according to the information and explanations given to us, the Corporation has not defaulted in repayment of dues to a financial institution, bank or bond holders as at the Balance Sheet date.

(xii) In our opinion and according to the information and explanations given to us, the Corporation has maintained records and documents in respect of loan granted by it to various State Electricity Board, Transmission, Distribution and Generation Companies including independent power producers on the basis of security including collateral security by way of pledge of shares and other securities.

(xiii) In our opinion and according to the information and explanations given to us, the Corporation is not a chit fund or a nidhi or mutual benefit fund or society, therefore, this clause of the order is not applicable to the Corporation.

(xiv) In our opinion and according to the information and explanations given to us, the Corporation is not dealing or trading in shares, securities, debenture and other investment, therefore this clause of the order is not applicable to the Corporation.

(xv) In our opinion and according to the information and explanations given to us, the Corporation has not given any guarantee for loans taken by others from banks or financial institutions during the year. Accordingly this clause of the order is not applicable to the Corporation.

(xvi) In our opinion and according to the information and explanations given to us the term loans were applied for the purpose for which they were raised.

(xvii) According to the information and explanations given to us and on the overall examination of the balance sheet of the Corporation, we report that no funds raised on short term basis have been used for long term investment.

(xviii)According to the information and explanations given to us, during the year the Corporation has not made any preferential allotment of shares to companies, firms or other parties needs to be listed in the register maintained u/s 301 of the Companies Act.

(xix) According to the information and explanations given to us, the corporation has created security in respect of Institutional Bonds, Tax Free Secured Bonds and Capital Gain Bonds in the form of charge on receivables and Registered Mortgage on the immovable properties of the Corporation at Maharashtra, Delhi & Chennai.

(xx) The Corporation has made a public issue of Tax Free Bonds of face value of Rs. 1000/- each aggregating to Rs. 3000.00 Crores during the financial year 2011-12. The bonds have been allotted on 27.03.2012 and the issue proceeds had been kept in designated Public Issue accounts. The issue proceeds could not be utilized till the Balance Sheet date as the proceeds of the funds raised became available to the corporation only on the listing of the bonds on Bombay Stock Exchange (BSE) on 04.04.2012.

(xxi) During the course of our examination of the books of account carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Corporation, noticed or reported during the year, nor have we been informed of such case by the management.

For P.K. Chopra & Co. For Bansal & Co.

Chartered Accountants Chartered Accountants

Firm Regn No. 006747N Firm Regn No. 001113N

(K.S. Ponnuswami) (R.C. Pandey)

Partner Partner

M. No. 070276 M. No. 070811

Place: New Delhi

Date: 23rd May 2012

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Mar 31, 2011

1. We have audited the attached Balance Sheet of Rural Electrification Corporation Limited as at 31st March 2011 and also the Profit & Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and Significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors' Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable to the Corporation.

4. Further to our comments in the Annexure referred in paragraph 3 above, we report that:

i) We have obtained all the information and explanations which to be best of our knowledge and belief were necessary for the purposes of our audit;

ii) In our opinion, proper books of accounts as required by law have been kept by the company so far as appears from our examination of such books;

iii) The Balance Sheet, Profit & Loss account and cash flow

statement dealt with by this report are in agreement with the books of accounts;

iv) In our opinion, the Balance Sheet, Profit & Loss account and Cash Flow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent possible.

v) Vide notification No. 2/5/2001-CL.V dated 22.03.2002 of the Department of Company Aaffairs, Government of India, Government Companies have been exempted from applicability of the provisions of Section 274(1)(g) of the Companies Act, 1956.

vi) In our opinion and to the best of our information and according to explanations given to us, the said statements of accounts read together with notes and accounting policies thereon, give the information required by the Companies Act 1956, in the manner so required and give a true and affair view in conformity with the accounting principles generally accepted in India:

a) In the case of the Balance Sheet of the State of affairs of the Company as at 31st March 2011.

b) In the case of Profit & Loss Account, of the Profit of the Company for the year ended on that date; and

c) In the case of the Cash Flow Statement, of the Cash flows for the year ended on that date.

Annexure to the Auditors' Report

Referred to in paragraph (3) of our report of even date on the accounts Of rural electrification corporation limited for the year ended on 31st March, 2011

(i) (a) The Corporation has maintained fixed assets records to show full particulars including quantitative details and situation of its fixed assets.

(b) The fixed assets of the corporation were physically verified by the management during the year ended on 31st March,2011;as certified by management, no material discrepancies has been found out on such physical verification.

(c) In our opinion and according to the explanations given to us, during the year, the Corporation has not disposed of substantial part of fixed assets therefore going concern is not affected . Hence this clause of the order is not applicable.

(ii) The Corporation being Non Banking Financial Company, does not has any inventory; as such this clause is not applicable.

(iii) (a) According to the information and explanations given to us, the Corporation has not granted any loans secured or unsecured to any company, frm or other parties covered in register maintained under section 301 of Companies Act, 1956. Accordingly clauses 4(iii)(a), 4(iii)(b), 4(iii)(c) and 4(iii)(d) of the order are not applicable.

(e) According to the information and explanations given to us, the Corporation has not taken any loans, secured or unsecured, from any company, frm, or other parties covered in the register maintained under section 301 of the Companies Act 1956. Accordingly clause 4(iii)(e), the clause 4(iii)(f) and 4(iii)(g) of the order are not applicable.

(iv) In our opinion and according to information & explanations given to us, internal controls for purchase of fixed assets and for the financial services are generally commensurate with the size of the Corporation and the nature of its business. However in certain areas internal control needs further strengthening like Utilization of grants/subsidies disbursed under various schemes; Monitoring and supervision of loans given to various SEBs/ DISCOMS/TRANSCOS/GENCOS including obtaining search reports for charges created against the loans given, ascertainment of viability of revised project at the time of re-schedulement of loan assets; Generation of various reports from loan module in ERP to have better control over loan assets. During the course of audit we have not come across any major failure in internal control system.

(v) According to information and explanations given to us, the Corporation has not entered into any contract with the Companies or Entities covered u/s 301 of the Companies Act, 1956. Accordingly this clause of the order is not applicable.

(vi) According to the information and explanations given to us, the Corporation has not accepted any deposit from public to which the provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Rules framed there under, apply.

(vii) In our opinion the Corporation has an internal audit system generally commensurate with its size and nature of its business

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records under clause (d) of sub section (1) of section 209 of the Companies Act, 1956, for the products/services of the Corporation. Accordingly, this clause of the order is not applicable to the Corporation.

(ix) (a) The Corporation is generally regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, investor's education protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and any other statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, service tax, wealth tax were in arrears as at 31st March 2011 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of income tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not been deposited on account of dispute.

(x) The Corporation does not have any accumulated losses as at 31st March 2011. The Corporation has also not incurred cash losses during the year covered by our audit and in the immediate preceding financial year. Accordingly, this clause of the order is not applicable.

(xi) In our opinion and according to the information and explanations given to us, the Corporation has not defaulted in repayment of dues to a financial institution, bank or bond holders as at the Balance Sheet date.

(xii) In our opinion and according to the information and explanations given to us, the Corporation has maintained records and documents in respect of loan granted by it to various State Electricity Board, Transmission, Distribution and Generation Companies including independent power producers on the basis of security by way of pledge of shares and other securities.

(xiii) In our opinion and according to the information and explanations given to us, the Corporation is not a chit fund or a nidhi or mutual benefit fund or society, therefore, this clause of the order is not applicable to the corporation

(xiv) In our opinion and according to the information and explanations given to us, the Corporation is not dealing or trading in shares, securities, debenture and other investment, therefore this clause of the order is not applicable to the corporation.

(xv) In our opinion and according to the information and explanations given to us, the Corporation has not given any guarantee for loans taken by others from banks or financial institutions during the year. Accordingly this clause of the order is not applicable to the Corporation.

(xvi) In our opinion and according to the information and explanations given to us the term loans were applied for the purpose for which they were raised.

(xvii) According to the information and explanations given to us and on the overall examination of the balance sheet of the Corporation, we report that funds raised on short term basis have not been used for long term investment.

(xviii) According to the information and explanations given to us, during the year the Corporation has not made any preferential allotment of shares to companies, firms or other parties needs to be listed in the register maintained u/s 301 of the Companies Act.

(xix) According to the information and explanations given to us, the Corporation has created security in respect of Institutional

Loans, Taxable Secured Bonds and Capital Gain Bonds in the form of charge on receivables and Registered Mortgage on the immovable properties of the Corporation at Maharashtra & Delhi.

(xx) The Corporation has not raised monies by public issue during the year. Accordingly this clause for disclosure of end use of money raised is not applicable. As explained to us, the money raised by way of Taxable Secured Bonds and Capital Gain Bonds is not a public issue.

(xxi) During the course of our examination of the books of account carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Corporation, noticed or reported during the year, nor have we been informed of such case by the management.

For Bansal & Co. for K.G Somani & Co. Chartered Accountants Chartered Accountants R.C. Pandey Bhuvnesh maheshwari Partner Partner

M. No.070811 M. No. 088155

Firm Regn No.001113N Firm Regn No.006591N

Place: New Delhi

Date : 24th May, 2011

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Mar 31, 2010

1. We have audited the attached Balance Sheet of RURAL ELECTRIFICATION CORPORATION LIMITED as at 31st March 2010 and also the Profit & Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable to the Company.

4. Further to our comments in the Annexure referred in paragraph 3 above, we report that:

i) We have obtained all the information and explanations which to be best of our knowledge and belief were necessary for the purposes of our audit;

ii) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of such books;

iii) The Balance Sheet, Profit & Loss account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

iv) In our opinion, the Balance Sheet, Profit & Loss account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent applicable.

v) Vide notification No. 2/5/2001-CL.V dated 22.03.2002 of the Department of Company Affairs, Government of India, Government Companies have been exempted from applicability of the provisions of Section 274(1)(g) of the Companies Act, 1956.

vi) In our opinion and to the best of our information and according to explanations given to us, the said financial statements read together with Note No. 21(B) in schedule 17 of Notes on Accounts regarding Deferred Tax Liability that after considering the opinion given by various concerned authorities, and also the practice followed by other similarly placed Institutions of not creating Deferred Tax Liability (DTL) on account of special reserve created and maintained under Section 36(1)(viii) of the Income Tax Act 1961, the Company is of the opinion that there is no requirement for DTL as per AS 22 of ICAI. Accordingly, the Company has not created Deferred Tax Liability (DTL) of Rs. 155.65 Crore on account of special reserve created and maintained under Section 36(1)(viii) of the Income Tax Act, 1961, for the year ended on 31st March, 2010 and has also reversed the DTL of Rs. 964.57 Crore created in earlier years on this account as per Notes on Accounts, note no. 21(B). The reversal of DTL is done by crediting General Reserve by Rs. 638.80 Crore for the financial years upto 2005-06 and through Profit and Loss Appropriation by Rs. 325.77 Crore for the financial year 2006-07 to financial year 2008-09. Had the company followed the same accounting treatment regarding creation of DTL as in earlier years, the profit after tax for the year ended 31.03.2010 would have been Rs. 1845.77 Crore against reported profit of Rs. 2001.42 Crore and Reserve & Surplus would have been Rs. 8,972.66 Crore against reported Reserve & Surplus of Rs. 10,092.88 Crore as on 31.03.2010, together with other notes and accounting policies thereon, give the information required by the Companies Act 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) In the case of the Balance Sheet of the State of Affairs of the Company as at 31st March 2010.

b) In the case of Profit & Loss Account, of the Profit of the Company for the year ended on that date; and

c) In the case of the Cash Flow Statement, of the Cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT

Referred to in Paragraph (3) of Our Report of even date on the Accounts of Rural Electrification Corporation Limited for The Year Ended on 31st March, 2010

(i) (a) The Company has maintained fixed assets records to show full particulars including quantitative details and situation of its fixed assets.

(b) The Company has a phased programme of physical verification of its fixed assets, which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this programme, substantial assets were physically verified by the management during the year. Discrepancies noticed on such verification have been properly dealt with in the books of account.

(c) In our opinion and according to the explanations given to us, during the year, the Company has not disposed off substantial part of fixed assets therefore going concern is not affected . Hence this clause of the order is not applicable.

(ii) The company being Non Banking Financial Company, does not has any inventory.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans secured or unsecured to any company, firm or other parties covered in register maintained under section 301 of Companies Act, 1956. Accordingly clause 4(iii)(a), the clause 4(iii)(b), 4(iii)(c) and 4(iii)(d) of the order are not applicable.

(b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured, from any company, firm, or other parties covered in the register maintained under section 301 of the Companies Act 1956. Accordingly clause 4(iii)(e), the clause 4(iii)(f) and 4(iii)(g) of the order are not applicable.

(iv) In our opinion and according to information & explanations given to us, internal controls are generally commensurate with the size of the Company and the nature of its business. However in certain areas internal control needs further strengthening like loan accounting, loan pricing being not linked to rating linked policy in certain cases, control records regarding status of loan documents including formulation of legal manual; Receipt, disbursement & utilization of grants/subsidy received under various schemes; monitoring and supervision of loans given to various SEBs/DISCOMS/ TRANSCOS/GENCOS including obtaining search reports for charges created against the loans given.

During the course of audit we have not come across any major failure in internal control system.

(v) According to information and explanations given to us, the Company has not entered into any contract with the Companies or Entities covered u/s 301 of the Companies Act, 1956. Accordingly this clause of the order is not applicable.

(vi) According to the information and explanations given to us, the Company has not accepted any deposit from public to which the provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Rules framed there under, apply.

(vii) Company is having internal audit department responsible for carrying out the internal audit of various departments at head office and at project office at periodical intervals as per the approved audit plan. The internal audit has been carried out for part of the accounting year. In our opinion internal audit needs to be further strengthened with identification of critical areas for risk based audit and frequency of coverage in respect of loan department.

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records under clause (d) of sub section (1) of section 209 of the Companies Act, 1956, for the products/services of the company. Accordingly, this clause of the order is not applicable to the Company.

(ix) (a) The Company is generally regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, investors education protection fund, employees state insurance, income tax, wealth tax, service tax and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, service tax, wealth tax were in arrears as at 31st March 2010 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of income tax, wealth tax, service tax and cess which has not been deposited on account of dispute.

(x) The Company does not have any accumulated losses as at 31st March, 2010. The Company has also not incurred cash losses during the financial year covered by our audit and in the immediate preceding financial year. Accordingly, this clause of the order is not applicable.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank, bond holders as at the Balance Sheet date.

(xii) In our opinion and according to the information and explanations given to us, the Company has maintained records and documents in respect of loan granted by it to various State Electricity Board, Transmission, Distribution and Generation Companies including independent power producers on the basis of security including collateral security by way of pledge of share and other security.

(xiii) In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi or mutual benefit fund or society, therefore, this clause of the order is not applicable to the company.

(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debenture and other investment, therefore this clause of the order is not applicable to the company.

(xv) In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year. Accordingly this clause of the order is not applicable to the Company.

(xvi) In our opinion and according to the information and explanations given to us the term loans were applied for the purpose for which they were raised.

(xvii) According to the information and explanations given to us and on the overall examination of the balance sheet of the company, we report that no funds raised on short term basis have been used for long term investment.

(xviii)According to the information and explanations given to us, during the year the Company has not made any preferential allotment of shares to companies, firms or other parties needs to be listed in the register maintained u/s 301 of the Companies Act.

(xix) According to the information and explanations given to us, during the year covered by our audit report, the company had issued 1,35,295 institutional bonds of Rs. 10 Lacs each and 30,57,776 capital gain bonds of Rs. 10000/-. The Company has created security in respect of Institutional and capital gain tax exemption bonds in the form of charge on current assets (book debts) and legal mortgage on the immovable properties of the Company at Mumbai & Delhi except in case of 43934 institutional bonds of 91 to 93 series for which registration of charge is in process.

(xx) The Company has raised monies by issue of fresh equity share of 12,87,99,000 of Rs. 10 each at a premium of about Rs. 195/- during the year. The management has disclosed the end use of money raised in notes on accounts.

(xxi) During the course of our examination of the books of account carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

For Bansal & Co. For K.G. Somani & Co.

Chartered Accountants Chartered Accountants

Firm Regn. No. 001113N Firm Regn. No. 006591N

( D.S Rawat) (Bhuvnesh Maheshwari)

Partner Partner

M. No.83030 M. No. 88155

Place: New Delhi Date : 19.05.2010