To the Members of Hindustan Construction Company Limited
Report on the Audit of the Standalone Ind AS Financial
Statements
Qualified Opinion
1. We have audited the accompanying standalone Ind AS financial statements of Hindustan Construction Company Limited and its joint operations (together referred to as 'the Company') (Refer Annexure A for the list of joint operations included in the standalone Ind AS financial statements), which comprise the standalone Balance Sheet as at March 31,2025, the standalone Statement
of Profit and Loss (including Other Comprehensive Income), the standalone Ind AS Statement of Cash Flow and the standalone Statement of Changes in Equity for the year then ended, and notes to the standalone Ind AS financial statements, including material accounting policy information and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of the reports of the other auditors as referred to in paragraph 17 below, except for the possible effects of the matters described in the Basis for Qualified Opinion section of our report, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013 ('the Act') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards ('Ind AS') specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2025, and its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
Basis for Qualified Opinion
3. As stated in:
a) Note 32 to the standalone Ind AS financial statements, the Company's investments in subsidiaries as at March 31, 2025 includes investment in HCC Infrastructure Company Limited ('HICL), its wholly owned subsidiary amounting to '1294.33 crore, stated at cost. The subsidiary's consolidated net worth as at March 31, 2025 is substantially eroded but, the said investment is considered fully recoverable by the management on the basis of factors stated in the aforesaid note including a valuation report obtained from an independent valuer.
However, in the absence of sufficient appropriate audit evidence to support the significant judgements and estimates applied by the management in the aforementioned valuation report, we are unable to comment upon the adjustments, if any, that are required to the carrying value of the aforesaid
investment and consequential impact, if any, on the accompanying standalone Ind AS financial statements.
b) Note 9.5 to the standalone Ind AS financial
statements, the Company has recognised net deferred tax assets amounting to '204.90 crore as at March 31, 2025, which mainly includes deferred tax assets on carried forward unused tax losses and other taxable temporary differences on the basis of expected availability of future taxable profits for utilization of such deferred tax assets. However, in view of the history of losses recorded by the Company, we are unable to obtain sufficient appropriate audit evidence with respect to the projections for future taxable profits prepared by the management and therefore, are unable to comment on any adjustments that may be required to the carrying value of aforesaid net deferred tax assets as at March 31, 2025.
Audit report of the erstwhile Statutory auditor on the standalone audited financial results of the Company for the year ended March 31,2024 dated May 24, 2024 was also qualified in respect of the above matters.
4. We conducted our audit in accordance with the Standards on Auditing 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 ('ICAI') 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 together with the audit evidence obtained by the other auditors, in terms of their reports referred to in paragraph 17 of the Other Matter section below is sufficient and appropriate to provide a basis for our qualified opinion.
Emphasis of Matter
5. We draw attention to Note 33 to the standalone Ind AS financial statements, regarding the position relating to recoverability of unbilled work-in-progress (contract assets), current trade receivables and non-current trade receivables amounting to '308.59 crore, '214.27 crore and '5752 crore, respectively, as at March 31, 2025, which represent receivables in respect of closed/ substantially closed/ suspended projects. The Company is at various stages of negotiation/ discussion with the clients or under arbitration/ litigation in respect of the aforementioned receivables. Considering the contractual tenability, progress of negotiations/ discussions/ arbitration/ litigations and
as legally advised in certain contentious matters, the management is confident of recovery of these receivables. Our opinion is not modified in respect of the above matter.
Key Audit Matters
6. Key audit matters are those matters that, in our professional judgment, and based on the consideration of the reports of the other auditors as referred to paragraph 17 below, 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 with reference to 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.
7 In addition to the matters described in the Basis for Qualified Opinion, we have determined the matters described below to be the key audit matter to be communicated in our report.
Key audit matter
How our audit addressed the key audit matter
Recognition of contract revenue, margin and contract costs (Refer note 22 to the standalone Ind AS financial statements)
The Company's revenue primarily arises from construction
Our audit procedures to address this key audit matter
contracts which, by its nature, is complex given the significant judgements involved in the assessment of
included, but were not limited to the following:
identification and satisfaction of performance obligations.
• Obtained an understanding of the Company's revenue recognition processes and evaluated the appropriateness
The Company recognizes contract revenue on the basis of
of the Company's accounting policy for revenue
stage of completion determined based on the proportion of contract costs incurred till balance sheet date, relative to
recognition in accordance with Ind AS 115 - Revenue
the total estimated costs of the contract at completion. The
from contracts with customers;
recognition of contract revenue and the resultant profit/ loss
• Evaluated the design and tested the operating
therefore rely on estimates in relation to forecasted revenue and contract costs. These contract estimates are reviewed by the management on a periodic basis. In doing so, the
effectiveness of key internal financial controls including those related to estimation of forecasted contract
management is required to exercise significant judgement
revenue and contracts costs;
in its assessment of the transaction price which may also include variable consideration pertaining to additional claims raised by the Company. The management is also required
• For a sample of contracts, performed the following procedures:
to exercise judgement to assess the completeness and
- inspected the underlying documents such as
accuracy of forecasted costs to complete.
customer contract/ agreement and variation orders, if any, for the significant contract terms and
Changes in these estimates as contracts progress can result
conditions;
in material adjustments to revenue and margins. Considering
high estimation uncertainty, complexities involved and material impact on the financial statement, this area has been considered a key audit matter in the current year audit.
- evaluated the identification of performance obligations as per the contract;
- obtained an understanding of and evaluated the reasonableness of the assumptions applied in determining the forecasted revenue and cost to complete;
- tested the existence and valuation of variable consideration with respect to the contractual terms and conditions and inspected the related correspondence with customers;
- reviewed the legal and contracting experts' note and/ or legal opinion from independent legal counsel obtained by the management, if any;
- Tested the forecasted cost by obtaining executed purchase orders/ agreements/ relevant documents and evaluated the reasonableness of management judgements/ estimates; and
- For cost incurred to date, tested samples by verifying underlying supporting documents;
- Performing analytical procedures including project profitability analysis for reasonableness of revenue recognized; and
• Evaluated the appropriateness and adequacy of the disclosures related to contract revenue and costs in the standalone Ind AS financial statements in accordance with the applicable accounting standards.
Information other than the Standalone Ind AS financial
statements and Auditor's Report thereon
8. The Company's Board of Directors are responsible for the other information. The other information comprises the information included in the Board Report, Report on Corporate Governance, Business Responsibility & Sustainability Report and Management Discussion and Analysis Report but does not include the standalone Ind AS financial statements and our auditor's report thereon. The Board Report, Report on Corporate Governance, Business Responsibility & Sustainability Report and Management Discussion and Analysis Report are 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 will 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 the Board Report, Report on Corporate Governance, Business Responsibility & Sustainability Report and Management Discussion and Analysis Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Responsibilities of Management and Those Charged with
Governance for the Standalone Ind AS financial statements
9. The accompanying standalone Ind AS financial statements have been approved by the Company's Board of Directors. The Company's Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect
to the preparation and presentation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act and other accounting principles generally accepted in India. 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.
10. In preparing the standalone Ind AS financial statements, the 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 the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
11. The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone
Ind AS financial statements
12. 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 Standards on Auditing 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.
13. As part of an audit in accordance with Standards on Auditing, specified under section 143(10) of the Act 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 control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to standalone Ind AS financial statements in place and the operating effectiveness of such controls;
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
• Conclude on the appropriateness of Board of Directors' 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; and
• Obtain sufficient appropriate audit evidence regarding the standalone Ind AS financial statements of the Company and its joint operations or the business activities within the Company to express an opinion on the standalone Ind AS financial statements. We are responsible for the direction, supervision and performance of the audit of standalone Ind AS financial statements of the Company. For the joint operations included in the standalone Ind AS financial statements, which have been audited by the other auditors, such other auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.
14. 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.
15. 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.
16. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone Ind AS financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other Matter
17 We did not audit the Ind AS financial statements of eight (8) joint operations included in the standalone Ind AS financial statements of the Company whose Ind AS financial statements reflects Company's share of total assets of '146.24 crore as at March 31, 2025, and Company's share of total revenues of '322.10 crore, total net profit after tax of '4.04 crore, and total comprehensive income of '4.04 crore, and cash inflow (net) of '14.64 crore for the year then ended, as considered in the standalone Ind AS financial statements. These Ind AS financial statements have been audited by the other auditors whose reports have been furnished to us by the management, and our opinion on the standalone Ind AS financial statements, in so far as it relates to the amounts and disclosures included in respect of these joint operations, and our report in terms of sub-section (3) of section 143 of the Act in so far as it relates to the aforesaid joint operations, is based solely on the report of such other auditors.
Further, of these joint operations, the financial statements of four (4) joint operations have been prepared in accordance with accounting principles generally accepted in India, including accounting standards issued by the ICAI. The Company's management has converted the financial statements of such joint operations in accordance with Ind AS. Our opinion on the standalone Ind AS financial statements, in so far as it relates to the amounts and disclosures included in respect of such joint operations, is based on the report of other auditors and the conversion adjustments prepared by the management of the Company.
Our opinion above on the standalone Ind AS financial statements, and our report on other legal and regulatory requirements below, are not modified in respect of the above matters with respect to our reliance on the work done by and the reports of the other auditors.
Report on Other Legal and Regulatory Requirements
18. As required by section 197(16) of the Act based on our audit, and on the consideration of the reports of the other auditors as referred to in paragraph 17 above, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
19. As required by the Companies (Auditor's Report) Order, 2020 ('the Order') issued by the Central Government of India in terms of section 143(11) of the Act we give in the Annexure B a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
20. Further to our comments in Annexure B, as required by section 143(3) of the Act based on our audit, and on the consideration of the reports of the other auditors as referred to in paragraph 17 above, we report, to the extent applicable, that:
a) We have sought and except for the matters described in the Basis for Qualified Opinion section, obtained all the information and explanations which to the best
of our knowledge and belief were necessary for the purpose of our audit of the accompanying standalone Ind AS financial statements;
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, except for the possible effects of the matters described in the Basis for Qualified Opinion section and except for the matters stated in paragraph 20(i)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 as amended.
c) The standalone Ind AS financial statements dealt with by this report are in agreement with the books of account;
d) Except for the possible effects of the matters described in the Basis for Qualified Opinion section, in our opinion, the aforesaid standalone Ind AS financial statements comply with Ind AS specified under section 133 of the Act;
e) The matters described in paragraph 3 under the Basis for Qualified Opinion section, in our opinion, may have an adverse effect on the functioning of the Company;
f) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2025 from being appointed as a director in terms of section 164(2) of the Act;
g) The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in paragraph 3 of the Basis for Qualified
Opinion section, paragraph 20(b) above on reporting under section 143(3)(b) of the Act and paragraph 20(i)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended);
h) With respect to the adequacy of the internal financial controls with reference to standalone Ind AS financial statements of the Company as on March 31, 2025 and the operating effectiveness of such controls, refer to our separate report in Annexure C wherein we have expressed a modified opinion; and
i) With respect to the other matters to be included in the Auditor's Report in accordance with rule 11 of the Companies (Audit and Auditors) Rules, 2014 (as amended), in our opinion and to the best of our information and according to the explanations given to us and based on the consideration of the reports of the other auditors as referred to in paragraph 17 above:
i. The Company, as detailed in notes 6.1, 31, 32 and 33 to the standalone Ind AS financial statements, has disclosed the impact of pending litigations on its financial position as at March 31, 2025;
ii. The Company, as detailed in notes 19.1 and 19.2 to the standalone Ind AS financial statements, has made provision as at March 31,2025, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on longterm contracts including derivative contracts;
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company during the year ended March 31, 2025 except for the cases mentioned in the note 18.1 to the standalone Ind AS financial statements.
iv. a. The management has represented that,
to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any person or entity, including foreign entities ('the 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 ('the Ultimate Beneficiaries') or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, other than as disclosed in note 44 to the standalone Ind AS financial statements, no funds have been received by the Company
from any person or entity, including foreign entities ('the 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; and
c. Based on such audit procedures performed as considered reasonable and appropriate
in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under subclauses (a) and (b) above contain any material misstatement.
v. The Company has not declared or paid any dividend during the year ended March 31,2025.
vi. Based on our examination which included test checks, the company has used an accounting software for maintaining its books of account for the financial year ended March 31, 2025, which
has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with other than the consequential impact of the exception given below:
Nature of exception noted
Details of exception
Instances of accounting software for maintaining books of account for which the feature of recording audit trail (edit log) facility was not operated throughout the year for all relevant transactions recorded in the software
The audit trail feature was not enabled at the database level for accounting software to log any direct data changes for the period from April 1, 2024 to May 2, 2024, used for maintenance of all records by the Company.
Pursuant to the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014, which came into effect from April 1, 2024, and in accordance with the requirements of Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014, we report that, based on our audit procedures and the information and explanations provided to us, the Company has duly maintained and preserved the audit trail, as per the applicable statutory requirements for record retention except for audit trail for database level where log any direct data changes for the period from April 1, 2024 to May 2, 2024 is not available with the company.
For Mukund M Chitale & Co
Chartered Accountants Firm's Registration No.: 106655W
S. M. Chitale
Partner
Membership No.: 111383 UDIN: 25111383BMKWQO6932
Place: Mumbai Date: May 8, 2025