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AUDITOR'S REPORT

NTPC Ltd.

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Market Cap. (₹) 114084.25 Cr. P/BV 1.04 Book Value (₹) 111.21
52 Week High/Low (₹) 146/107 FV/ML 10/1 P/E(X) 9.03
Bookclosure 21/08/2019 EPS (₹) 12.77 Div Yield (%) 5.27
Year End :2019-03 

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the Standalone Financial Statements of NTPC Limited (“the Company”), which comprise the Balance Sheet as at 31 March 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended and notes to the financial statements, including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “Standalone Financial Statements”).

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013 (“the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs (financial position) of the Company as at 31 March, 2019, and its profit (financial performance including other comprehensive income), changes in equity and its cash flows 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 Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules there under, 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 the following matters in the notes to the Standalone Financial Statements:

(a) Note No. 32(a) regarding billing and recognition of sales on provisional basis pending disposal of the Company’s petition before CERC on the measurement of GCV of coal on ‘as received’ basis measured on wagon top at the unloading point, on the adjustment of loss of GCV for the period 2014-19 and other related matters as mentioned in the said note.

(b) Note No. 42 in respect of a Company’s project consisting of three units of 800MW each, where the order of NGT has been stayed by the Hon’ble Supreme Court of India; the matter is sub-judiced and the units have since been declared commercial.

(c) Note No. 57(iii)(b) with respect to appeal filed by the company with the Hon’ble High Court of Delhi in the matter of Arbitral award pronounced against the company and the related provision made/disclosure of contingent liability as mentioned in the said note.

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, description of how our audit addressed the matter is provided in that context. We have determined the matters described below to be the key audit matters to be communicated in our report.

Sr. No.

Key Audit Matter

How our audit addressed the Key Audit Matter

1.

recognition and Measurement of revenue from Sale of Energy

The company records revenue from sale of energy as per the principles enunciated under Ind AS 115, based on tariff rates approved by the Central Electricity Regulatory Commission (CERC) as modified by the orders of Appellate Authorities. However, in cases where tariff rates are yet to be approved, provisional rates are adopted considering the applicable CERC Tariff Regulations.

This is considered as key audit matter due to the nature and extent of estimates made as per the CERC Tariff Regulations, which leads to recognition and measurement of revenue from sale of energy being complex and judgemental.

(Refer Note No. 32 to the Standalone Financial Statements, read with the Significant Accounting Policy No. C.15)

We have obtained an understanding of the CERC Tariff Regulations, orders, circulars, guidelines and the Company’s internal circulars and procedures in respect of recognition and measurement of revenue from sale of energy comprising of capacity and energy charges and adopted the following audit procedures:

- Evaluated and tested the effectiveness of the Company’s design of internal controls relating to recognition and measurement of revenue from sale of energy.

- Verified the accounting of revenue from sale of energy based on tariff rates approved by the CERC as modified by the orders of Appellate Authorities. In case of power stations where the tariff rates are yet to be approved, provisional rates are adopted in accordance with the principles given in the CERC Tariff Regulations.

Based on the above procedure performed, the recognition and measurement of revenue from sale of energy are considered to be adequate and reasonable.

2.

impairment assessment of Property, Plant and Equipment (PPE)

The Company has a material operational asset base (PPE) relating to generation of electricity and is one of the components for determining the tariff as per the CERC Tariff Regulations, which may be vulnerable to impairment.

We considered this as a key audit matter as the carrying value of PPE requires impairment assessment based on the future expected cash flows associated with the power plants (Cash generating units).

(Refer Note No. 56(a) to the Standalone Financial Statements, read with the Accounting Policy No. C.20)

We have obtained an understanding and tested the design and operating effectiveness of controls as established by the Company’s management for impairment assessment of PPE.

We evaluated the Company’s process of impairment assessment involving valuation experts to assist in assessing the appropriateness of the impairment model including the independent assessment of discount rate, economic growth rate, terminal value etc.

We evaluated and checked the calculations of the cash flow forecasts prepared by the Company taking into consideration the CERC (Terms and Conditions of Tariff) Regulations, 2019 (applicable for the tariff period of 5 years from 1 April 2019 to 31 March 2024) along with the aforementioned assumptions.

Based on the above procedures performed, we observed that the Company’s impairment assessment of the PPE is adequate and reasonable.

3.

Deferred Tax Asset relating to MAT Credit Entitlement and corresponding regulatory Deferral Liability

The company has recognised deferred tax asset relating to MAT credit entitlement. Utilisation of MAT credit will result in lower outflow of Income Tax in future years and accordingly Regulatory Deferral Liability corresponding to the said MAT credit entitlement has also been recognised,

We have obtained an understanding for recognition of deferred tax asset relating to MAT credit entitlement and corresponding liability of the same in Regulatory Deferral Account including the management’s judgement.

Payable to the beneficiaries in subsequent periods as per CERC Tariff Regulations. The recoverability of this deferred tax asset relating to MAT credit entitlement is dependent upon the generation of sufficient future taxable profits to utilise such entitlement within the stipulated period prescribed under the Income Tax Act,1961.

We further assessed the related forecasts of future taxable profits and evaluated the reasonableness of the considerations/assumptions underlying the preparation of these forecasts. We have also verified the regulatory deferral account balance corresponding to the said MAT credit payable to the beneficiaries in subsequent periods.

We identified this as a key audit matter because of the importance of this matter to the intended users of the Financial Statements and its materiality; and requirement of judgement in forecasting future taxable profits for recognition of MAT credit entitlement considering the recoverability of such tax credits within allowed time frame as per the provisions of the Income Tax Act,1961.

Based on the above procedures performed, the recognition and measurement of Deferred tax asset relating to MAT credit entitlement and corresponding Regulatory Deferral Liability towards beneficiaries, are considered adequate and reasonable.

(Refer Note No. 18, 25, 48 & 65 to the Standalone Financial Statements, read with the Accounting Policy No. C.4 and C.18)

4.

Contingent Liabilities

There are a number of litigations pending before various forums against the Company and the management’s judgement is required for estimating the amount to be disclosed as contingent liability.

We have obtained an understanding of the Company’s internal instructions and procedures in respect of estimation and disclosure of contingent liabilities and adopted the following audit procedures:

We identified this as a key audit matter because the estimates on which these amounts are based involve a significant degree of management judgement in interpreting the cases and it may be subject to management bias.

- understood and tested the design and operating effectiveness of controls as established by the management for obtaining all relevant information for pending litigation cases;

(Refer Note No. 69 to the Standalone Financial Statements, read with the Accounting Policy No. C.13)

- discussed with the management any material developments and latest status of legal matters;

- read various correspondences and related documents pertaining to litigation cases and relevant external legal opinions obtained by the management and performed substantive procedures on calculations supporting the disclosure of contingent liabilities;

- examined management’s judgements and assessments whether provisions are required;

- considered the management assessments of those matters that are not disclosed as the probability of material outflow is considered to be remote;

- reviewed the adequacy and completeness of disclosures;

Based on the above procedures performed, the estimation and disclosures of contingent liabilities are considered to be adequate and reasonable.

Other Matter

We audited the adjustments, as fully described in Note No. 47(A) to the Standalone Financial Statements, which have been made to the comparative Standalone Financial Statements presented for the years prior to year ended 31 March 2019. In our opinion, such adjustments are appropriate and have been properly applied.

Information Other than the Standalone Financial Statements and Auditor’s Report Thereon

The Company’s Board of Directors is responsible for the preparation of the other information. The other information comprises the Corporate Governance Report (but does not include the Standalone Financial Statements and our auditor’s report thereon), which we obtained prior to the date of this auditor’s report (hereinafter referred to as ‘CG report’), and the information included in the Director’s Report including Annexures, Management Discussion and Analysis, Business Responsibility Report and other company related information (hereinafter referred to as ‘Other reports’). The Other reports are expected to be made available to us after the date of this auditor’s report.

Our opinion on the Standalone Financial Statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information included in the CG report that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the ‘Other reports’, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take appropriate actions, if required.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as amended. 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.

In preparing the Standalone Financial Statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the Audit of the standalone financial statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the company has adequate Internal Financial Controls with reference to Standalone Financial Statements in place and the operating effectiveness of such controls.

- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

- Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Standalone Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

- Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone Financial Statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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 in terms of Section 143(11) 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 explanations given to us, we give in “Annexure 1” a statement on the matters specified in paragraphs 3 and 4 of the said 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 considered appropriate and according to the information and explanations given to us, in the “Annexure 2” on the directions and sub-directions issued by the 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 (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flow 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 Indian Accounting Standards prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as amended.

(e) Being a Government Company pursuant to the Notification No. GSR 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, Government of India, provisions of sub-section (2) of Section 164 of the Act, are not applicable to the Company.

(f) With respect to the adequacy of the Internal Financial Controls with reference to Standalone Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure 3”.

(g) As per Notification No. GSR 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 of the Act is not applicable to the Government Companies. Accordingly, reporting in accordance with requirement of provisions of section 197(16) of the Act is not applicable on the Company.

(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 Financial Statements. Refer Note No. 69 to the Standalone Financial Statements;

II. The Company has made provision, as required under the applicable law or Indian accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

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

ANNEXURE 1 TO THE INDEPENDENT AUDITORS’ REPORT

Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date to the members of NTPC LIMITED on the Standalone Financial Statements for the year ended 31 March 2019

(i) (a) The Company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets (Property, Plant & Equipment).

(b) The Company is having a regular programme of physical verification of all fixed assets (Property, Plant & Equipment) over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) The title deeds of all the immovable properties are held in the name of the Company except as follows:

Description of Asset

No. of cases

Area in acres

Gross block as on 31.03.2019 (Rs. Crore)

Net block as on 31.03.2019 (Rs. Crore)

Remarks (if Any)

Land

The Company is taking appropriate steps for completion of legal formalities

- Freehold

1183

10,124

1,478.01

1,478.01

- Leasehold

669

10,592

1,543.62

1,362.57

Building & Structures

2

-

4.97

3.04

(ii) The inventory has been physically verified by the management at reasonable intervals. No material discrepancies were noticed on such physical verification.

(iii) The Company has not granted any loans, secured or unsecured to any companies, firms, limited liability partnership or other parties covered in the register maintained under Section 189 of the Act.

In view of the above, clause 3 (iii)(a), 3 (iii)(b) and 3 (iii)(c) of the Order are not applicable.

(iv) The Company has complied with the provisions of Section 185 and 186 of the Act, as applicable, in respect of loans advanced to subsidiary companies & joint venture company and investments made in the subsidiary and joint venture companies. The Company has not given any guarantee or provided any security to any party covered under Section 185 and 186 of the Act.

(v) The Company has not accepted deposits from the public. As such, the directives issued by the Reserve Bank of India, the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under are not applicable to the Company. The Company has obtained deposits from the dependents of employees who die or suffer permanent total disability for which the Company has applied to the Ministry of Corporate Affairs, Government of India for continuation of the exemption earlier obtained in respect of applicability of Section 58A of the Companies Act, 1956, which is still awaited (refer Note No. 28 (d) of the Standalone Financial Statements). No order has been passed with respect to Section 73 to 76, by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

(vi) We have broadly reviewed the accounts and records maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act read with Companies (Cost Records & Audit) Rules, 2014 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made detailed examination of the records with a view to determine whether they are accurate and complete.

(vii) (a) Undisputed statutory dues including provident fund, income tax, goods and service tax, service tax, duty of customs, duty of excise, value added tax, cess and other statutory dues (as applicable) have generally been regularly deposited with the appropriate authorities and there are no undisputed statutory dues outstanding as on 31 March 2019 for a period of more than six months from the date they became payable. We have been informed that employees’ state insurance is not applicable to the Company.

(b) According to information and explanations given to us, the gross disputed statutory dues of income tax or sales tax or service tax or duty of customs or duty of excise or value added tax amounts to Rs.10,696.19 crore in aggregate as on 31 March 2019, out of which Rs. 3,055.82 crore has been deposited under protest/adjusted by tax authorities and the balance of Rs. 7,640.37 crore of dues have not been deposited on account of matters pending before appropriate authorities as detailed below:

Sl. No.

Name of Statute

Nature of the disputed statutory dues

Period to which the amount relates (FY)

Forum where the dispute is pending

Gross disputed amount (Rs. Crore)

Amount deposited under protest/ adjusted by Tax Authorities (Rs.crore)

Amount not deposited (Rs. Crore)

1

Income Tax Act, 1961

Income Tax/ Penalty/ TDS

1978-79

Supreme Court

0.45

0.45

-

2001-02, 2004-05 to 2011-12

Income Tax Appellate Tribunal*

8,371.26

1,661.87

6,709.39

2009-10 to 2014-15

Commissioner of Income Tax (Appeals)

1,685.01

1,379.35

305.66

2013-14 to 2014-15

Asst. Commissioner of Income Tax

0.32

0.12

0.20

2006-07, 2009-10, 2017-18

ITO (TDS)/AO

0.81

0.78

0.03

2003-04

Appeal not yet filed by IT department with High Court (Time limit not lapsed)

395.69

395.69

2

Income Tax Ordinance of Bangladesh, 1984

Income Tax

2012-13 to 2013-14

Commissioner of Taxes (Appeal), Dhaka, Bangladesh

2.63

0.26

2.37

3

Central Sales Tax and VAT Acts of various States

Central Sales Tax/VAT

1997-98, 2000-01

High Court

2.45

-

2.45

1985-86, 2000-01 to 2011-12, 201314 to 2014-15

Appellate Tribunal/ Board of Revenue

31.40

8.28

23.12

2005-06 to 2008-09

Commissioner of Sales Tax **

2.37

1.17

1.20

2000-01, 2002-03, 2004-05, 2006-07 2014-15 to 2015-16

Additional Commissioner of Sales Tax ***

5.07

1.58

3.49

1988-89 to 1997-98, 2011-12 2015-16

Additional Commissioner of Sales Tax (Appeal)

2.13

0.17

1.96

2008-09

Deputy Commissioner of Sales Tax(Appeals)

0.05

-

0.05

2001-02 to 2006-07

Deputy Commissioner of Sales Tax

11.70

0.01

11.69

2000 -01, 2005-06

Joint Commissioner of Sales Tax****

1.04

0.36

0.68

4

Central Excise Act, 1944

Duty of Excise

2009-10, 2011-12 to 2014-15

CESTAT*****

1.45

0.10

1.35

2015-16 to 2016-17

Commissioner (Appeals)

0.24

0.04

0.20

5

Finance Act, 1994

Service Tax

2009-10 to 2012-13

High Court

0.18

-

0.18

2009-10 to 2016-17

CESTAT

172.52

0.35

172.17

2009-10 to 2016-17

Commissioner (Appeals)

3.35

0.64

2.71

2015-16 to 2016-17

Assistant Commissioner (Appeals)

0.33

0.02

0.31

2012-13 to 2016-17

Assistant Commissioner of CEST

0.57

0.25

0.32

2012-13 to 2016-17

Appeal yet to be filed (Time limit not lapsed)

0.01

-

0.01

6

Customs Act, 1962

Duty of Customs

1999-2000, 2006-07 to 2010-11

CESTAT

4.87

-

4.87

2005-06 to 2015-16

Commissioner of Customs (Appeals)

0.29

0.02

0.27

Total

10,696.19

3,055.82

7,640.37

* Includes disputed amount of Rs. 5,427.00 crore in respect of certain matters, where the first appellate authority has decided in favour of the company, although the Assessing Officer has disputed the same with appropriate Appellate Authority.

** Includes Rs. 2.08 crore and Rs. 0.29 crore towards the demand for VAT raised by Sales tax officer, which has been stayed by the Hon’ble High Court and Commissioner of Sales tax respectively.

*** Includes Rs. 5.01 crore towards the demand for VAT and CST raised by Sales tax authority, which has been stayed by Commissioner/Additional Commissioner of Sales Tax.

**** Includes Rs. 1.02 crore towards the demand for CST raised by Sales tax officer, which has been stayed by the Hon’ble High Court.

***** Includes Rs. 0.30 crore towards the demand for service tax raised by Commissioner, Central Excise Customs and Service Tax which has been stayed by CESTAT.

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to financial institutions, banks or dues to debenture holders. The company has not taken any loan from the Government.

(ix) The Company has not raised any money by way of initial public offer or further public offer (including debt instruments). According to the information and explanations given to us, the money raised by the Company by way of term loans have been applied for the purposes for which they were obtained.

(x) According to the information and explanations given to us and as represented by the Management and based on our examination of the books and records of the Company and in accordance with generally accepted auditing practices in India, no case of frauds by the Company or any fraud on the Company by its officers or employees has been noticed or reported during the year.

xi) As per Notification No. GSR 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 of the Act is not applicable to the Government Companies. Accordingly, provisions of clause 3 (xi) of the Order are not applicable to the Company.

(xii) The provisions of clause 3 (xii) of the Order, for Nidhi Company, are not applicable to the Company.

(xiii) The Company has complied with the provisions of Section 177 and 188 of the Act w.r.t. transactions with the related parties, wherever applicable. Details of the transactions with the related parties have been disclosed in the Standalone Financial Statements as required by the applicable Indian Accounting Standards.

(xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review. Accordingly, provisions of clause 3 (xiv) of the Order are not applicable to the Company.

(xv) The Company has not entered into any non-cash transactions with the directors or persons connected with them as covered under Section 192 of the Act.

(xvi) According to information and explanation given to us, the Company is not required to be registered under section 45-IA of Reserve Bank of India Act, 1934. Accordingly, provision of clause 3(xvi) of the Order is not applicable to the Company.

ANNEXURE 3 TO THE INDEPENDENT AUDITORS’ REPORT

Referred to in paragraph 3 (f) under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date to the members of NTpC Limited on the standalone Financial statements for the year ended 31 March 2019 Report on the Internal financial Controls with reference to standalone financial statements under Clause (i) of sub-section 3 of section 143 of the Act

We have audited the internal financial controls with reference to Standalone Financial Statements of NTPC Limited (“the Company”) as of 31 March 2019 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 with reference to Standalone Financial Statements based on the internal controls 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 Act.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls with reference to Standalone Financial Statements 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 Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by ICAI. 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 with reference to Standalone Financial Statements 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 control system with reference to Standalone Financial Statements and their operating effectiveness. Our audit of internal financial control with reference to Standalone Financial Statements included obtaining an understanding of internal financial control with reference to Standalone Financial Statements, 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 judgement, 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 with reference to Standalone Financial Statements.

Meaning of Internal financial Controls with reference to standalone financial statements

A Company’s internal financial control with reference to Standalone Financial Statements 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 with reference to Standalone Financial Statements 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 authorisations 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 with reference to Standalone Financial Statements

Because of the inherent limitations of internal financial controls with reference to Standalone Financial Statements, 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 with reference to Standalone Financial Statements to future periods are subject to the risk that the internal financial controls with reference to Standalone Financial Statements 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, to the best of our information and according to the explanations given to us, the Company has, in all material respects, an adequate internal financial controls system with reference to Standalone Financial Statements in place and such internal financial controls with respect to Standalone Financial Statements were operating effectively as at 31 March 2019, based on the internal controls over financial reporting criteria established by the Company considering the components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the ICAI.

For T R Chadha & Co LLP For S. N. Dhawan & Co. LLP For Sagar & Associates

Chartered Accountants Chartered Accountants Chartered Accountants

FRN 006711N/N500028 FRN 000050N/N500045 FRN 003510S

(Neena Goel) (S.K. Khattar) (V. Vidyasagar Babu)

Partner Partner Partner

M. No.057986 M. No. 084993 M No. 027357

For Kalani & Co. For P.A. & Associates For S.K. Kapoor & Co. For B M Chatrath & Co LLP

Chartered Accountants Chartered Accountants Chartered Accountants Chartered Accountants

FRN 000722C FRN 313085E FRN 000745C FRN 301011E/E300025

(Vikas Gupta) (S. S. Poddar) (V. B. Singh) (Sanjay Sarkar)

Partner Partner Partner Partner

M. No. 077076 M.No.051113 M.No. 073124 M. No. 064305

Place: New Delhi

Date: 25 May, 2019

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