NTPC Limited
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 2024, 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 standalone financial statements, including a summary of the material accounting policies and other explanatory information for the year ended on that date (hereinafter referred to as "Standalone Financial Statements").
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act 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 (financial position) of the Company as at 31 March, 2024, 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 Auditors' 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 made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
We draw attention to the following matters in the notes to the Standalone Financial Statements:
(a) Note No 50 with respect to a Hydro Electric Project in the State of Uttarakhand which is under execution by the company. After the reports of land subsidence in Joshimath Town, Additional District Magistrate, Chamoli has issued order on 5 January 2023 to stop all the construction activities till further orders. Aggregate cost incurred on the project up to 31 March 2024 is ' 6,671.30 crore (31 March 2023: ' 6,252.31 crore). The matter is sub-judice in Hon'ble High Court of Uttarakhand.
(b) The Company has been assigning jobs on contract basis, for sundry works in plants/stations/offices to M/s Utility Powertech Ltd. (UPL), a joint venture of the Company, in which the company has 50% shareholding. The rates were fixed on cost plus basis, which were however, not considered by management, as on arm's length basis. The transactions reported for the year are in respect of assignments awarded till the financial year 2022-23 having execution period beyond 31 March 2023. The company has presented for the approval of Audit Committee, transactions undertaken during the current financial year 2023-24 of a value of ' 482.45 Crore, in pursuance to assignment awarded upto financial year 2022-23. The audit committee did not review or approve such transactions, but the same were subsequently approved by Board of Directors in the meeting held on 24 May, 2024. (Refer Note No 59 (f) (i))
(c) Note No. 63 (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.
(d) Note No 65 (B) (v) with respect to execution of Business Transfer Agreement (BTA) dated 17 August 2023 with NTPC Mining Limited, a wholly owned subsidiary of the company, for hiving off its coal mining business at book value. The BTA has only been approved by the Board of Directors of the company and subsidiary company, which shall become effective on completion of the precedent conditions as mentioned in the said BTA, subject to necessary regulatory approvals.
Our opinion is not modified in respect of the aforesaid 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.
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NO Key Audit Matters
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How our audit addressed the Key Audit Matters
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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 approved by the Central Electricity Regulatory Commission (CERC) as modified by the orders of Appellate Authorities. Pending issue of provisional/final tariff order w.e.f. 01 April 2019 capacity charges has been provisionally recognised considering the applicable CERC Tariff Regulations 2019.
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. 40 to the Standalone Financial Statements, read with the Material Accounting Policy No.C.13)
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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.
- Examined the Company's material accounting policies with respect to assessing compliance with Ind AS 115 "Revenue from Contract with Customers".
- Verified the accounting of revenue from sale of energy based on provisional tariff computed as per the principles of CERC Tariff Regulations 2019.
- Assessed the disclosures in accordance with the requirements of Ind AS 115 "Revenue from Contract with Customers".
Based on the above procedures performed, the recognition, measurement and disclosures of revenue from sale of energy are considered to be adequate and reasonable.
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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).
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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 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, 2024 (applicable for the tariff period of 5 years from 1 April 2024 to 31 March 2029) along with the aforementioned assumptions.
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No Key Audit Matters
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How our audit addressed the Key Audit Matters
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(Refer Note No. 62(a) to the Standalone Financial Statements, read with the Material Accounting Policy No. C.1)
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Based on the above procedures performed, we observed that the Company's impairment assessment of the PPE is adequate and reasonable.
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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 attributable to the said MAT credit entitlement has also been recognised which is 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 identified this as a key audit matter because of the importance of this matter to the intended users of the Standalone 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.
(Refer Note No. 22, 29, 55 & 70 to the Standalone Financial Statements, read with the Material Accounting Policy No. C.4 and C.15)
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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.
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 attributable to the said MAT credit, payable to the beneficiaries in subsequent periods.
Based on the above procedures performed, the recognition and measurement of Deferred tax asset relating to MAT credit entitlement and attributable Regulatory Deferral Liability towards beneficiaries, are considered adequate and reasonable.
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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 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.
(Refer Note No. 75(A) to the Standalone Financial Statements, read with the Material Accounting Policy No. C.11)
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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:
- understood and tested the design and operating effectiveness of controls as established by the management for obtaining all relevant information for pending litigation cases;
- discussed with the management regarding any material developments thereto 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;
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No Key Audit Matters
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How our audit addressed the Key Audit Matters
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- examined management's judgements and assessments in respect of whether provisions are required;
- considered the management assessments of those matters that are not disclosed as contingent liability since 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.
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Information other than the Standalone Financial Statements and Auditors' 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, and the information included in the Directors' Report including Annexures, Management Discussion and Analysis, Business Responsibility and Sustainability Report and other company related information (but does not include the Consolidated Financial Statements and Standalone Financial Statements and our auditors' report thereon), which are expected to be made available to us after the date of this auditors' 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.
When we read other information, 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 and presentation 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.
Auditors' 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 auditors' 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 system in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' 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 auditors' 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.
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 auditors' 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
1. The audited standalone financial statements of the Company for the year ended 31 March 2023 included in these standalone financial statements, have been audited by the Predecessor Joint Statutory Auditors whose audit report dated 19 May, 2023 expressed an unmodified opinion on those audited standalone financial statements.
2. We audited the restatement adjustments, as disclosed in Note No. 54 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, 2024, in accordance with the requirement of applicable Ind AS.
Our opinion is not modified in respect of the aforesaid matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order, 2020 ("the Order") issued by the Central Government of India in terms of Section 143(11) of the Act, 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, to the extent applicable.
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 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 Flows 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 the Standalone Financial Statement of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure 3". Our report expresses a opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting.
(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 Auditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:
I. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements. Refer Note No. 75(A) 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 some delay in transferring unclaimed amount of dividend and equity shares related thereto, as required to be transferred, to the Investor Education and Protection Fund by the Company. No amount of unclaimed dividend or unclaimed equity shares are pending to be transferred to the said fund as on 31 March 2024.
IV. (a) The Management has represented that, to the best of its knowledge and belief, as disclosed in the note no.
76(xvi) to the Standalone Financial Statements , 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(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(b) The Management has represented, that, to the best of its knowledge and belief, as disclosed in the note no. 76(xvi) to the Standalone Financial Statements , no funds have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(c) Based on the audit procedures performed that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.
V. As stated in Note 23 (c) to the Standalone Financial Statements:
(a) The final dividend proposed for the previous year, declared and paid by the Company during the year is in accordance with Section 123 of the Act, as applicable.
(b) Interim dividend declared and paid by the Company during the year is in accordance with Section 123 of the Act.
(c) The Board of Directors of the Company has proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The amount of dividend proposed is in accordance with Section 123 of the Act to the extent it applies to declaration of dividend.
VI. Based on our examination, which included test checks, the Company has used accounting software for maintaining its books of account for the financial year ended 31 March, 2024 which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with.
As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from 1 April, 2023, reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the financial year ended 31 March, 2024.
For Vinod Kumar & Associates For Goyal Parul & Co For M. C. Bhandari & Co.
Chartered Accountants Chartered Accountants Chartered Accountants
FRN-002304N FRN-016750N FRN- 303002E
(Mukesh Dadhich) (Parul Goyal) (Amit Biswas)
Partner Partner Partner
M. No.511741 M. No.099172 M. No.052296
UDIN: 24511741BJZYRA9379 UDIN: 24099172BKBKAG2157 UDIN: 24052296BKFZHU6845
For J K S S & Associates For Agasti & Associates For S.N. Kapur & Associates
Chartered Accountants Chartered Accountants Chartered Accountants
FRN-006836C FRN-313043E FRN-001545C
(Ram Babu) (B. Agasti) (S. N. Kapur)
Partner Partner Partner
M. No.016151 M. No.051026 M. No.014335
UDIN: 24016151BKDEWE2047 UDIN: 24051026BKGTSN4620 UDIN: 24014335BJZZMY4719
Place: New Delhi
Dated: 24 May, 2024
Digitally signed by signatories
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