To the Members of McNally Bharat Engineering Company Limited Report on the Audit of the Standalone Financial Statements Adverse Opinion

We have audited the accompanying Standalone Financial Statements of McNally Bharat Engineering Company Limited (“the Company”), which comprise the Standalone Balance Sheet as at 31st March, 2024, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows for the year then ended, and notes to the Standalone Financial Statements including a summary of material accounting policies and other explanatory information (hereinafter referred to as “Standalone Financial Statements”).

In our opinion and to the best of our information and according to the explanations given to us because of the significance of the matter described in the Basis for Adverse Opinion section of our report, the aforesaid Standalone Financial Statements do not give the information required by the Companies Act, 2013 (“the Act”) in the manner so required and also does not give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as amended (Ind AS) and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2024, its loss including Other Comprehensive Income, its changes in equity and Statement of cash flows for the year ended on that date.

Basis for Adverse Opinion

a) Current Assets, Current Liabilities and Capital Work - in - Progress

i. We draw attention to Note 44 to the Standalone Financial Statements regarding Trade Receivables, Advance to Suppliers, Trade Payables, Other Financial Assets and Advance from Customer being subject to confirmation and reconciliation from respective parties and consequential reconciliation, outcomes of pending arbitration/ settlements of claims and adjustments arising therefrom, if any. Adjustments/ Impacts with respect to these are currently not ascertainable and as such cannot be commented upon by us.

ii. We draw attention to Note 6(d) to the Standalone Financial Statements, Claims Recoverable (BG Encashed) amounting to Rs. 36,183.70 Lakhs, including Rs. 11,677.58 Lakhs under arbitration whose fair value is Rs. 21,454.57 Lakhs are doubtful. Recoverability/Adjustments/ Impacts with respect to these are currently not ascertainable and as such cannot be commented upon by us.

iii. There is no material movement in Capital Work-in-Progress amounting to Rs. 462.62 Lakhs, since 31st March, 2016. In absence of any audit evidence, we are unable to ascertain the impact or adjustments required and comment on the same.

b) Non-adjustment of the Carrying Value of Loan

In earlier years, the Company had given unsecured loan to Vedica Sanjeevani Projects Private Limited (“VSPL”). VSPL vide their letter dated 15th February, 2022 informed the Company that it was unable to service the debt and requested the Company for a moratorium on the repayment of the loan, including interest for two years i.e., Financial Year 2021-22 and Financial Year 2022-23. Subsequently, the Company has stopped recognizing interest income on the same. In absence of any further communication between the Company and VSPL made available to us, we are unable to comment on the realizability of loan and its interest and consequential adjustment to be made in the books.

This constitutes a material departure from the requirements of Indian Accounting Standard - 109 “Financial Instrument”.

c) Recognition of Deferred Tax Assets

Note 7 to the Standalone Financial Statements mentions that the Company had recognized deferred tax assets of Rs. 51,706.60 lakhs up to 31st March, 2018, which is being carried forward in the books by the Company expecting adequate future taxable profits after infusion of fresh funds in the Company by the successful Resolution Applicant against which such deferred tax assets would be adjusted.

The Company has been continually incurring losses and its net worth has been fully eroded. We are unable to obtain sufficient appropriate audit evidence with respect to the management's assertions and are therefore, unable to comment on the carrying value of the aforesaid net deferred tax assets on 31st March, 2024.

This constitutes a material departure from the requirements of Indian Accounting Standard 12 “Income Taxes”.

Material Uncertainty Related to Going Concern

The Company has reported a net loss in the current year amounting to Rs. 88,326.28 Lakhs (previous year Rs 2,47,120.74 Lakhs) before comprehensive income and is unable to meet its financial commitments/covenants to lenders and various other stakeholders. The ability to continue as a going concern is dependent upon many factors including continued support from the financial creditors, operational creditors, customers and the successful implementation of the resolution plan as approved by the Hon’ble National Company Law Tribunal. These events and conditions indicate a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern.

However, we could not gather sufficient evidence with respect to the management’s assertion and in the absence of required documents/evidence are unable to comment on the preparation of the Statement.

Emphasis of Matters

a) Approval of Resolution Plan by the Committee of Creditors/ NCLT

Note 40 to the Statement informs that the Hon’ble National Company Law Tribunal (NCLT), Kolkata Bench admitted the Corporate Insolvency Resolution Process (CIRP) against the Company and appointed Mr. Ravi Sethia (IBBI/IPA-001/IP-P01305/2018- 2019/12052) as the Resolution Professional (RP). The RP received Resolution Plans from 4 applicants. Out of the 4, the Resolution Plan of one of the applicants received approval from the Committee of Creditors by the requisite majority and thereafter the RP submitted the application before the Hon’ble NCLT on 3rd August 2023 for its final approval. On the 19th December 2023, Hon’ble NCLT pronounced its order in favor of one of the successful Resolution Applicants i.e. BTL EPC Limited. Pursuant to the approval of the Plan by the Hon’ble NCLT, the Implementation and Monitoring Committee (“IMC”) is duly constituted on 19th December 2023 as per the terms of the plan to oversee the implementation. However, the effect of the order on the financial statements of the Company shall be done only after fulfilling the condition as per the NCLT order and the resolution plan submitted by the Resolution Applicant.

b) Non-Assessment of Pending Litigations

Note 42 to the Standalone Financial Statements refers to the Company’s receipt of regulatory Enquiries/ Notices/ Summons/ Show-Cause/ Demand/ Orders from various government authorities such as departments of Goods and Services Tax, Income Tax, etc. In view of Company’s admission under CIRP, all existing civil / legal proceedings will be kept in abeyance as moratorium is in force under section 14 of the Insolvency and Bankruptcy Code, 2016 till the conclusion of CIRP. Therefore, no impact has been considered in the Standalone Financial Statements as of now.

c) Recognition of Interest Expense

As referred to in Note 43 of the Statement, the Company has recognized interest expense for the year ended 31st March, 2024 on Bank Borrowings, Inter Corporate Deposits, and claim of EIG (Mauritius) Limited under the head 'Finance Costs’ amounting to Rs. 73,333.91 Lakhs as estimated by the management.

d) Recognition of interest on outstanding balances of MSME vendors

The company has not provided us with the appropriate audit evidence relating to the identification of balances of MSME parties on which the interest is recognised.

Our opinion on the Standalone Financial Statements 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. In addition to the matters described in the Basis for Adverse Opinion section and Emphasis of Matters section of our report, we have determined the matters described below to be the key audit matters to be communicated in our Report.

Information Other than the Standalone Financial Statements and Auditor's Report Thereon (‘Other Information')

In view of ongoing Corporate Insolvency Resolution Process (CIRP), the management under Monitoring Committee is responsible for the preparation of the Other Information. The Other Information comprises of the information included in the Management Discussion and Analysis, Board’s Report including Annexures thereto, Corporate Governance and Shareholders Information but does not include the Standalone Financial Statements and our Auditor’s Report thereon.

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

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

After reading the Other Information, 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 Financial Statements

The Hon’ble National Company Law Tribunal (NCLT), Kolkata Bench admitted the Corporate Insolvency Resolution Process (CIRP) against the Company and appointed Mr. Ravi Sethia (IBBI/IPA-001/IP-P01305/2018- 2019/12052) as the Resolution Professional (RP). The RP received Resolution Plans from 4 applicants. Out of the 4, the Resolution Plan of one of the applicants received approval from the Committee of Creditors by the requisite majority and thereafter the RP submitted the application before the Hon’ble NCLT on 3rd August 2023 for its final approval. On the 19th December 2023, Hon’ble NCLT pronounced its order in favor of one of the successful Resolution Applicants i.e. BTL EPC Limited. Pursuant to the approval of the Plan by the Hon’ble NCLT, the Implementation and Monitoring Committee (“IMC”) is duly constituted on 19th December 2023 as per the terms of the plan to oversee the implementation.

However, until the implementation of the Resolution Plan submitted by the Successful Resolution Applicant as per the conditions set out in the NCLT order, the management under the Monitoring Committee is responsible for the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance, including total comprehensive loss, changes in equity, and cash flows of the Company in accordance with the accounting principles generally accepted in India including the Indian Accounting Standards prescribed under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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, the management under the Monitoring Committee 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 the management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. The management under the Monitoring Committee is also responsible for overseeing the Company’s financial reporting process.

Auditor's Responsibility 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 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 the management under the Monitoring Committee.

• Conclude on the appropriateness of management under the Monitoring Committee'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.

• 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 the 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, 2020 (“the Order”) issued by the Central Government in terms of section 143(11) of the Act, we give in the “Annexure A” a statement on the matters specified in the 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 except for possible effects of the matters described in the basis for Adverse Opinion section above, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit of the aforesaid financial statements;

b) except for the possible effects of the matter described in the Basis for Adverse Opinion Section above, 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 Standalone Balance Sheet, the Standalone Statement of Profit and Loss including Other Comprehensive Income, the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flows dealt with by this Report are in agreement with the relevant books of account maintained for the purpose of preparation of the financial statement.

d) considering the significance of the matter described in the Basis for Adverse Opinion Section above, in our opinion, the aforesaid Standalone Financial Statements do not comply with the Indian Accounting Standards specified under Section 133 of the Act;

e) on the basis of the written representations received from the directors of the Company, none of the directors is disqualified as on 31st March, 2024 form being appointed as a director in terms of section 164(2) of the Act. However, in view of ongoing CIRP starting from 29th April, 2022, the powers of Board of Directors stand suspended as per section 17 of the Code and such powers are exercised by the Resolution Professional/ Chairman of the Monitoring Committee during the year.

f) with respect to the adequacy of the internal financial controls over financial reporting of the Company with reference to these Standalone Financial Statements and the operating effectiveness of such controls, refer to our separate report in “Annexure B”. Our report expresses Adverse Opinion on the adequacy and operating effectiveness of internal financial control with reference to the financial statement.

g) The adverse remarks on the maintenance of accounts and other matters connected therewith are as stated in the Basis for Adverse Opinion section above.

h) The matters described in the Basis for Adverse Opinion section above, specially that relating to Non Adjustment of the carrying value of loan stated in para (b) of that section, adjustment of balances of Current Assets, current liabilities, and Capital Work - In - Progress as per the basis stated in para (a) about pending confirmations and adjustments and Material uncertainty relating to going concern assumption pending implementation of Resolution Plan, in our opinion, may have adverse effect on the functioning of the company.

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:

i. except for the possible effect of the matter described in the Basis for Adverse Opinion section above, the Company has disclosed the impact of pending litigations on its financial position in the Standalone Financial Statements (Refer Note 30 to the Standalone Financial Statements);

ii. the Company has made provision as required under the applicable law or accounting standards for material foreseeable losses if any on long term contract including derivative contracts; and

iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

iv.

a) The management has represented that, to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person or entity, including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend to or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

b) The management has represented that, to the best of its knowledge and belief, no funds have been received by the company from any person or entity, including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend to 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 our audit procedure that has 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 (a) or (b) contain any material misstatement. However, in respect of the earlier year transactions dealing with loans and advances, securities, guarantees etc. as stated in those years which are forming part of the Basis for Adverse Opinion as given above, we are unable to ascertain and/or comment as required under this para.

v. The Company has not declared or paid any dividend during the financial year.

vi. Based on our examination, which included test checks, the company has used accounting software for maintaining its books of account which has a feature of recording audit trail in the software, except that the audit log is not maintained in case of modification by certain users with specific access and that the audit trail features has not been enabled at the database level to log any direct data changes. During the course of performing our procedures, other than the aforementioned instances where the question of our commenting on the audit trail feature being tampered with did not arise, we did not come across any instances of the audit trail feature being tampered with.

3. With respect to the matter to be included in the Auditor’s Report under Section 197(16) of the Act:

In our opinion and according to the information and explanations given to us, the Company has paid/ provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V of the Act.

For V. Singhi & Associates

Chartered Accountants Firm Registration No. 311017E (Aniruddha Sengupta)

Place: Kolkata Partner

Date: 05th June, 2024 Membership No. 051371

UDIN:24051371BKFAFU5699