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Auditor Report of Bharat Heavy Electricals Ltd.

Mar 31, 2023

Bharat Heavy Electricals LimitedReport on the Audit of the Standalone Financial StatementsOpinion

We have audited the accompanying standalone financial statements of Bharat Heavy Electricals Limited (âthe Companyâ), which comprise the Balance Sheet as at March 31, 2023, 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 significant accounting policies and other explanatory information (hereinafter referred to as âthe Standalone financial statements") in which are incorporated the returns for the year ended on that date for 19 branches audited by us and 10 branches audited by the branch auditors of the company.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Companies Act, 2013 (âthe 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, (âInd AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) specified under section 143 (10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the 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 Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgement 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. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matter

Auditor''s Response

Accuracy of recognition, measurement, presentation and disclosures of revenues and other related balances in respect of âRevenue from contracts with Customers" under Ind AS 115.

The application of this revenue accounting standard involves certain key judgments relating to identification of distinct performance obligations, determination of transaction price of identified performance obligations, the appropriateness of the basis used to measure revenue recognized over a period, and disclosures including presentations of balances in the financial statements.

Estimated efforts is a critical estimate to determine revenue, as it requires consideration of progress of the contract, efforts incurred till date, efforts required to complete the remaining performance obligation.

Refer Note 40 to the standalone financial statements.

Principal Audit Procedures

Our audit approach consisted testing of the design and operating

effectiveness of internal controls and procedures as follows:

â¢ Evaluated the effectiveness of controls over the preparation of information that are designed to ensure the completeness and accuracy.

â¢ Selected a sample of existing continuing contracts and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price.

â¢ Tested the relevant information, accounting systems and change relating to contracts and related information used in recording and disclosing revenue in accordance with Ind AS 115.

â¢ Reviewed a sample of contracts to identify possible delays in achieving milestones, which require change in estimated efforts to complete the remaining performance obligations.

â¢ Performed analytical procedures and test of details for reasonableness and other related material items.

Assessment and recoverability of Trade Receivables and Contract Assets

The Company has trade receivables outstanding (net) of '' 6,543.89 Crore. and contract assets (net) of ''29,740.03 Crore at the end of March 31, 2023.

These balances are related to revenue recognized in line with Ind AS 115 âRevenue from contracts with customers" for ongoing contracts and completed contracts. The assessment of its recoverability is a key audit matters in the audit due to its size, pending balance confirmation of letters sent and high level of management judgment.

Refer Notes 6, 9, 40 to the standalone financial statements.

Principal Audit Procedures

We have assessed the Company''s internal process to recognize the revenue and review mechanism of trade receivables and contract assets. Our audit approach consisted testing of the design and operating effectiveness of internal controls and procedures as follows:

â¢ Evaluated the process of invoicing with Customers.

â¢ Obtained the list of project wise outstanding details and its review mechanism by the management.

â¢ Reviewed the guidelines and policies of the Company on impairment of trade receivables and contract assets.

â¢ Tested the accuracy of aging of trade receivables and contract assets at the year end on sample basis.

â¢ Performed analytical procedures and test of details for reasonableness, recoverability and other related material items.

Key Audit Matter

Auditor''s Response

Assessment of Contingent Liability

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 determined the above area as a Key Audit Matter in view of associated uncertainty relating to the outcome of these matters which requires application of judgment in interpretation of law. Accordingly, our audit was focused on analyzing the facts of subject matter under consideration and judgments/ interpretation of law involved.

(Refer Note 32 to the standalone financial statements)

Principal Audit Procedures

The audit procedures included but were not limited to:

- Obtaining a detailed understanding processes and controls of the Management with respect to claims or disputes

- Performing following procedures on samples selected:

- Understanding the matters by reading the correspondences, communications, minutes of the management meeting

- Making corroborative inquiries with appropriate level of the management personnel including status update, expectation of outcomes with the basis, and the future course of action contemplated by the Company, and perusing legal opinions, if any, obtained by the Management.

- Obtaining direct confirmation from the legal attorneys of the company and considering their opinions /probability assessment of the outcomes.

- Evaluating the evidence supporting the judgement of the management about possible outcomes and the reasonableness of the estimates.

- Evaluating appropriateness of adequate disclosures in accordance with the applicable accounting standards.

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 information included in Management Discussion and Analysis, Board''s Report including Annexures to Board''s Report, Business Responsibility & Sustainability Report, Corporate Governance and Shareholder''s information, but does not include the standalone financial statements and our auditor''s report thereon. These reports are expected to be made available to us after the date of this Auditor''s Report.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

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

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe 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 Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding 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.

going concern basis of accounting unless the Management of Company either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are 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 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:

â¢ 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.

â¢ Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, 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.

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

draw attention in our auditor''s report to the related disclosures in the 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.

â¢ 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 financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

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

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

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

Other Matters

the year ended on that date, as considered in the standalone financial statements. The financial statements/information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

(1) As required by the Companies (Auditor''s Report) Order, 2020 (âthe Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the ''''Annexure Aâ a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

(2) As required by Section 143 (3) of the Act, based on our audit 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 and proper returns adequate for the purpose of our audit have been received from the branches not visited by us;

c. The reports on the accounts of the branch offices of the Company audited under Section 143(8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report;

d. The Balance Sheet, the Statement of Profit and Loss (including other comprehensive income), Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the books of account;

e. In our opinion, the aforesaid financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules 2015 as amended;

f. In terms of Notification no. G.S.R. 463 (E) dt. 0506-2015 issued by Ministry of Corporate Affairs,

the Provision of Section 164(2) of the Companies Act, 2013 in respect of disqualification of directors are not applicable to the Company, being a Government Company.

g. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in âAnnexure Bâ;

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 32 to the 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 contracts including derivative contracts. Refer Note 39 to the financial statements;

iii. There has been no delay in transferring the amount, required to be transferred in accordance with the relevant provisions of the Companies Act, 2013 and the rules made thereunder, to the Investor Education and Protection Fund by the Company.

iv. Based on the representation received from Management, no funds have been advanced / received or loaned or invested by the company with the understanding that the intermediary shall lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company / funding partly received by the company.

v. As stated on Note 31 to the financial statements, 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 dividend proposed is in accordance with section 123 of the Act to the extent it applies to the declaration of dividend.

vi. Provision to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.

(3) 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 are enclosing our report in terms of Section 143(5) of the Act, on the directions and sub directions issued by the Comptroller and Auditor General of India in âAnnexure Câ

Mar 31, 2022

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of Bharat Heavy Electricals Limited (âthe Companyâ), which comprise the Balance Sheet as at March 31, 2022, 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 a summary of the significant accounting policies and other explanatory information (hereinafter referred to as âthe Standalone financial statements") in which are incorporated the returns for the year ended on that date for 19 branches audited by us and 10 branches audited by the branch auditors of the company.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Companies Act, 2013 (âthe 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, (âInd AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2022, the profit and total comprehensive income, changes in equity and its cash flow for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) specified under section 143 (10) of the Companies Act, 2013. Our

responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the 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 Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.

Emphasis of Matter

We draw attention to Notes 39 (b) & Additional disclosure of Note 3.1 (point no. 5) of the financial statements, which describes the impact of Change in accounting estimate on account of Contractual Obligation and Change of useful life of assets respectively. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that in our professional judgement were of most significance in our audit of the 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. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matter

Auditor''s Response

Accuracy of recognition, measurement, presentation and disclosures of revenues and other related balances in respect of âRevenue from contracts with Customers" under Ind AS 115.

Refer Note 40 to the standalone financial statements

Principal Audit Procedures

Our audit approach consisted testing of the design and

operating effectiveness of internal controls and procedures as

follows:

â¢ Evaluated the effectiveness of controls over the preparation of information that are designed to ensure the completeness and accuracy.

â¢ Tested the relevant information, accounting systems and change relating to contracts and related information used in recording and disclosing revenue in accordance with Ind AS 115.

â¢ Reviewed a sample of contracts to identify possible delays in achieving milestones, which require change in estimated efforts to complete the remaining performance obligations.

â¢ Performed analytical procedures and test of details for reasonableness and other related material items.

Assessment and recoverability of Trade Receivables and Contract Assets

The Company has trade receivables outstanding (net) of '' 6228.59 Crore and contract assets (net) of '' 26939.87 Crore at the end of March 31, 2022.

Refer Notes 6, 9, 40 to the standalone financial statements.

Principal Audit Procedures

â¢ Evaluated the process of invoicing, verifications, and reconciliations with customers.

â¢ Obtained the list of project wise outstanding details and its review mechanism by the management.

â¢ Reviewed the guidelines and policies of the Company on impairment of trade receivables and contract assets.

â¢ Tested the accuracy of aging of trade receivables and contract assets at the year-end on sample basis.

â¢ Performed analytical procedures and test of details for reasonableness, recoverability and other related material items.

Assessment of Contingent Liability	Principal Audit Procedures
There are a number of litigations pending before various forums	The audit procedures included but were not limited to:
against the Company and the management''s judgement is required for estimating the amount to be disclosed as contingent liability. We determined the above area as a Key Audit Matter in view of associated uncertainty relating to the outcome of these matters which requires application of judgment in	â¢ Obtaining a detailed understanding processes and controls of the Management with respect to claims or disputes â¢ Performing following procedures on samples selected: â¢ Understanding the matters by reading the correspondences, communications, minutes of the management meeting
interpretation of law. Accordingly, our audit was focused on analyzing the facts of subject matter under consideration and judgments/ interpretation of law involved.	â¢ Making corroborative inquiries with appropriate level of the management personnel including status update, expectation of outcomes with the basis, and the future course of action contemplated by the Company, and perusing legal opinions, if any, obtained by the
(Refer Note 32 to the standalone financial statements)	Management. â¢ Obtaining direct confirmation from the legal attorneys of the company and considering their opinions /probability assessment of the outcomes.
	â¢ Evaluating the evidence supporting the judgement of the management about possible outcomes and the reasonableness of the estimates.
	â¢ Evaluating appropriateness of adequate disclosures in accordance with the applicable accounting standards.

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

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

If, based on the work we have performed, 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.

Management''s Responsibility for the Standalone Financial Statements

income, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, Management of Company 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 of Company either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

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:

â¢ Identify and assess the risks of material misstatement of the 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.

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

â¢ 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 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.

Other Matters

We did not audit the financial statements/information of 10 (Ten) branches included in the standalone financial statements of the Company whose financial statements/ financial information reflect total assets of '' 33573 Crore as at 31^st March, 2022 and total revenue of '' 11630 Crore for the year ended on that date, as considered in the standalone financial statements. The financial statements/information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

(1) As required by the Companies (Auditor''s Report) Order, 2020 (âthe Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the âAnnexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

(2) As required by Section 143 (3) of the Act, based on our audit 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:

f. In terms of Notification no. G.S.R. 463 (E) dt. 0506-2015 issued by Ministry of Corporate Affairs, the Provision of Section 164(2) of the Companies Act, 2013 in respect of disqualification of directors are not applicable to the Company;

i) The company has disclosed the impact of pending litigations on its financial position in its standalone financial statements. Refer Note 32 to the financial statements;

ii) The company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on longterm contracts including derivative contracts. Refer Note 39 to the financial statements;

iii) There has been no delay in transferring the amount, required to be transferred in accordance with the relevant provisions of the Companies Act, 2013 and the rules made thereunder, to the Investor Education and Protection Fund by the Company.

iv) Based on the representation received from Management, no funds have been advanced / received or loaned or invested by the company with the understanding that the intermediary shall lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company / funding party received by the company.

v) As stated in Note 31 to the financial statements, 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 dividend proposed is in accordance with section 123 of the Act to the extent it applies to the declaration of dividend.

Mar 31, 2021

Bharat Heavy Electricals Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of Bharat Heavy Electricals Limited ("the Company"),

which comprise the Balance Sheet as at March 31, 2021, 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 a summary of the significant accounting policies and other explanatory information (hereinafter referred to as âthe Standalone financial statements") in which are incorporated the returns for the year ended on that date for 19 branches audited by us and 10 branches audited by the branch auditors of the company.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Companies Act, 2013 (âthe 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, (âInd AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2021, the loss and total comprehensive income, changes in equity and its cash flow for the year ended on that date.

Basis for Opinion

Key Audit Matters

Key Audit Matter

Auditor''s Response

Accuracy of recognition, measurement, presentation and disclosures of revenues and other related balances in respect of "Revenue from contracts with Customers" under Ind AS 115.

Refer Note 49 to the standalone financial statements

Principal Audit Procedures

Our audit approach consisted testing of the design and operating

effectiveness of internal controls and procedures as follows:

â¢ Evaluated the effectiveness of controls over the preparation of information that are designed to ensure the completeness and accuracy.

â¢ Tested the relevant information, accounting systems and change relating to contracts and related information used in recording and disclosing revenue in accordance with Ind AS 115.

â¢ Reviewed a sample of contracts to identify possible delays in achieving milestones, which require change in estimated efforts to complete the remaining performance obligations.

â¢ Performed analytical procedures and test of details for reasonableness and other related material items.

Assessment and recoverability of Trade Receivables and Contract Assets

The Company has trade receivables outstanding (net) of 17213.37 crore and contract assets of 124079.25 crore at the end of March 31, 2021

Refer Notes 6,9,11,17,49 to the standalone financial statements.

Principal Audit Procedures

â¢ Evaluated the process of invoicing, verifications, and reconciliations with customers.

â¢ Obtained the list of project wise outstanding details and its review mechanism by the management.

â¢ Reviewed the guidelines and policies of the Company on impairment of trade receivables and contract assets.

â¢ Tested the accuracy of aging of trade receivables and contract assets at the year-end on sample basis.

â¢ Performed analytical procedures and test of details for reasonableness, recoverability and other related material items.

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 information included in Management Discussion and Analysis, Board''s Report including Annexures to Board''s Report, Business Responsibility Report, Corporate Governance and Shareholder''s information, but does not include the standalone financial statements and our auditor''s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

If, based on the work we have performed, 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.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Act") with respect to the preparation of these 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 Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material

misstatement, whether due to fraud or error.

The Board of Directors are responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the 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:

â¢ Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)

(i) of the Companies Act, 2013, 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.

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

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.

Other Matters

We did not audit the financial statements/information of 10 (Ten) branches included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of 733345 crore as at 31st March, 2021 and total revenue of 79454 crore for the year ended on that date, as considered in the standalone financial statements. The financial statements/information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

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

(2) As required by Section 143 (3) of the Act, based on our audit 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. and proper returns adequate for the purpose of our audit have been received from the branches not visited by us.

c. The reports on the accounts of the branch offices of the Company audited under Section 143(8) of the Act by branch

auditors have been sent to us and have been properly dealt with by us in preparing this report

f. In terms of Notification no. G.S.R. 463 (E) dt. 05-06-2015 issued by Ministry of Corporate Affairs, the Provision of Section 164(2) of the Companies Act, 2013 in respect of disqualification of directors are not applicable to 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 41 to the 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 contracts including derivative contracts. Refer Note 48 to the financial statements.

For Raj Har Gopal & Co. For Tiwari & Associates For Mahesh C. Solanki & Co.

Chartered Accountants Chartered Accountants Chartered Accountants

FRN - 002074N FRN - 002870N FRN - 006228C

L4, %''j^''

(CA. Gopal Krishan) (CA. Sandeep Sandill) (CA. Priyanka Jajoo)

Partner Partner Partner

M. No. 081085 M. No. 085747 M. No. 411739

UDIN:21081085AAAAJL3015 UDIN:21085747AAAABA2627 UDIN:21411739AAAADH6304

Place : New Delhi

Mar 31, 2018

Report on the Standalone Ind AS financial statements

We have audited the accompanying Standalone Ind AS financial statements of Bharat Heavy Electricals Limited (âthe Companyâ), which comprise the balance sheet as at March 31, 2018, the Statement of profit and loss (including other comprehensive income), the cash flow statement and the statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory information in which are incorporated the returns for the year ended on that date for 16 branches audited by us and 16 branches audited by the branch auditors of the Company.

Managementâs Responsibility for the Standalone Ind AS financial statements

The Companyâs Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to the preparation of these Standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified 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 Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditorsâ Responsibility

Our responsibility is to express an opinion on these Standalone Ind AS financial statements based on our audit.

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

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

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

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

Opinion

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

(a) In the case of the balance sheet, of the state of affairs (financial position) of the Company as at March 31, 2018;

(b) In the case of the statement of profit and loss, of the profit (financial performance including other comprehensive income) for the year ended on that date; and

(d) In the case of statement of changes in equity, of the change in equity for the year ended on that date.

Other Matters

We did not audit the financial statements/information of 16 (sixteen) branches included in the Standalone Ind AS financial statements of the Company whose financial statements / financial information reflect total assets of Rs. 43,503.33 crore as at 31^st March, 2018 and total revenue of Rs. 19,115.29 crore for the year ended on that date, as considered in the Standalone Ind AS financial statements. The financial statements/information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

(1) As required by the Companies (Auditorsâ Report) Order, 2016 (âthe Orderâ) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act and on the basis of our examination 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 âAnnexure Aâ, a statement on the matters specified in paragraphs 3 and 4 of the said Order, to the extent applicable.

(2) As required by Section 143 (3) of the Act, we report that:

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

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us;

(c) The reports on the accounts of the branch offices of the Company audited under Section 143 (8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report;

(d) The balance sheet, the Statement of profit and loss (including other comprehensive income), the cash flow statement and statement of changes in equity dealt with by this report are in agreement with the books of account;

(e) In our opinion, the aforesaid Standalone Ind AS 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;

(f) In terms of Notification no. G.S.R. 463(E) dt. 05-06 2015 issued by Ministry of Corporate Affairs, the Provision of Section 164(2) of the Companies Act, 2013 in respect of disqualification of directors are not applicable to the Company;

(g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in âAnnexure Bâ;

(h) With respect to the other matters to be included in the Auditorsâ Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. the Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 38 (2) to the financial statements.

ii. the Company has made provision, as required under the applicable laws or Indian Accounting Standards, for material foreseeable losses, if any, on long-term contracts - Refer Note 38 (14) to the financial statements.

iii. there has been no delay in transferring the amount, required to be transferred in accordance with the relevant provisions of the Companies Act, 2013 and the rules made thereunder, to the Investor Education and Protection Fund by the Company.

âAnnexure Aâ to the Independent Auditorsâ Report

(Referred to in Paragraph 1 under the heading âReport on Other Legal and Regulatory Requirementsâ of our report of even date on the Standalone Ind AS financial statements of Bharat Heavy Electricals Limited âthe Companyâ), for the year ended March 31, 2018)

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

(b) According to the information and explanations given to us, physical verification of fixed assets is being conducted in a phased manner by the management under a programme designed to cover all the property, plant and equipment including intangible assets over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and nature of its business and no material discrepancies were noticed on such verification to the extent verification was made during the year.

(c) The details of title deeds of immovable properties not held in the name of the Company are given in note no. 2.1 (a to f) to the Financial Statements.

ii) As explained to us physical verification of inventory has been conducted by the management under Perpetual Inventory Programme at regular intervals during the year except for stock of work in progress and finished goods in few units where these are verified at the year end with reference to the inspection reports and production reports of the Production Planning Department of such units. In regard to stocks lying with contractors/fabricators and other parties, confirmations were received in few cases only. In our opinion the frequency of verification is reasonable.

iii) According to the information given to us, the Company has not granted any loans or advances in the nature of loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties listed in the register maintained under section 189 of the Companies Act, 2013. Therefore, clauses (iii) (a), (iii) (b) and (iii) (c) of Paragraph 3 of the Order are not applicable to the Company.

iv) The Company has complied with the provisions of section 185 and 186 of the Companies Act, 2013 in respect of loans, investments, guarantees and securities.

v) Based on our examination of the Companyâs records and according to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules 2014.

vi) We have broadly reviewed the books of account and records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014 prescribed by the Central Government under section 148(1) of the Companies Act, 2013 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we are not required to and have not carried out any detailed examination of such accounts and records.

vii) (a) According to the information and explanations given to us, in our opinion, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employeesâ State Insurance, Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise, Value Added Tax, Goods and Service Tax, Cess and any other statutory dues as applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise, Value Added Tax, Goods and Service Tax, Cess and any other statutory dues were outstanding as at March 31, 2018 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, the particulars of Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise, Value Added Tax, Goods and Service Tax which have not been deposited on account of dispute are as under:

(Rs. in crore)

Sl. No.	Name of the Statute	Nature of the Dues	Pending Amount	Amount paid under protest	Forum where dispute is pending
1	Central Sales Tax Act, Value Added Tax and Sales Tax Act of various	Sales Tax, VAT	79.66	25.65	Assessing Officer
		Sales Tax, VAT	326.19	50.98	Dy. Commissioner / Jt. Commissioner / Commissioner (Appeals)
	States		401.78	157.73	Appellate Tribunal
			459.54	27.86	High Court
			2.87	2.83	Supreme Court
			419.74	30.52	Various Appellate Authorities

2	Income Tax Act, 1961	Income Tax	0.08	-	Assessing Officer
	Income Tax Act, 1961		0.02	-	Commissioner (Appeals)
			10.56	-	High Court
3	Central Excise Act, 1944	Excise Duty	77.68	7.35	Commissioner (Appeals)
	Central Excise Act, 1944		176.29	3.49	Appellate Tribunal
			57.46	5.69	High Court
	Service Tax under the Finance Act, 1994		34.93	2.80	Various Appellate Authorities
4		Service Tax	335.74	5.71	Appellate Tribunal
			17.15	-	High Court

viii) According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to financial institutions, banks or Government. The Company has not issued any debentures.

ix) According to the records of the Company examined by us and the information and explanations given to us, the Company has not raised any monies by way of initial public offer or further public offer (including debt instruments) and term loans. Hence, the same is not applicable to the Company.

x) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud by the Company or any fraud on the Company by its officers or employees has been noticed or reported during the year.

xi) In terms of Notification no. G.S.R. 463(E) dt. 05-06-2015 issued by the Ministry of Corporate Affairs, the provisions of section 197 of the Companies Act, 2013 relating to managerial remuneration are not applicable to the Company.

xii) Since the Company is not a nidhi Company, provisions of clause no. 3(xii) do not apply to the Company;

xiii) According to the records of the Company examined by us and the information and explanations given to us, the related party transactions are in compliance with section 177 and 188 of the Companies Act, 2013 and have been disclosed in the Financial Statements.

xiv) Based on our examination and the information and explanations given to us, the Company has not made any preferential allotment or private placement of shares or debentures during the year under review. Therefore, provision of clause no. (xiv) is not applicable to the Company.

xv) Based on our examination and the information and explanations given to us, the Company has not entered into any non-cash transactions with directors or persons connected with them.

xvi) Based on our examination and the information and explanations given to us, the Company is not required to be registered under section 45-IA of the Reserve Bank of India. Act, 1934.

For DSP & Associates For Dhawan & Co. For Mahesh C. Solanki & Co.

Chartered Accountants Chartered Accountants Chartered Accountants

FRN - 006791N FRN - 002864N FRN - 006228C

(CA. Sanjay Jain) (CA. Deepak Kapoor) (CA. Ritesh Kumar Jain)

Partner Partner Partner

M. No. 084906 M. No. 072302 M. No. 077026

Place: New Delhi

Date: May 29, 2018

Mar 31, 2017

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind As financial statements of Bharat Heavy Electricals Limited (âthe Companyâ), which comprise the Balance Sheet as at MarcRs.31, 2017, and the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information in which are incorporated the returns for the year ended on that date audited by us for 16 branches and 17 branches audited by the branch auditors of the company.

Managementâs Responsibility for the Standalone Financial Statements

The Companyâs Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards (Ind AS) prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditorâs Responsibility

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

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

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

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

Opinion

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

(a) In the case of the Balance Sheet, of the state of affairs (financial position) of the company as at MarcH 31, 2017;

(b) In the case of the Statement of Profit and Loss, of the profit (financial performance including other comprehensive income) for the year ended on that date; and

(d) In the case of Statement of changes in Equity, of the change in equity for the year ended on that date.

Other Matters

The comparative financial information of the company for the year ended 31st MarcRs.2016 and the transition date opening balance sheet as at 1st April 2015 included in these standalone Ind AS financial statements, are based on the previously issued statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2006 audited by the predecessor auditors/by us and their report for the year ended 31st MarcRs.2016 and 31st MarcRs.2015 dated 27th May 2016 and 26th May 2015 respectively expressed an unmodified opinion on those standalone financial statements, as adjusted for the differences in the accounting principles adopted by the Company on transition to the Ind AS, which have been audited by us.

We did not audit the financial statements/information of 17 (seventeen) branches included in the standalone Ind AS financial statements of the Company whose financial statements / financial information reflect total assets of RS.41,762.31 Crore as at 31^st March, 2017 and total revenue of RS.19,188.82 Crore for the year ended on that date, as considered in the standalone Ind AS financial statements. The financial statements/information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of these matters. Report on Other Legal and Regulatory Requirements

(1) As required by the Companies (Auditorâs Report) Order, 2016 (âthe Orderâ) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the âAnnexure Aâ a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

(2) As required by Section 143 (3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(c) The reports on the accounts of the branch offices of the Company audited under Section 143(8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report.

(d) The Balance Sheet, the Statement of Profit and Loss including other comprehensive income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account and with the returns received from the branches not visited by us.

(e) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(f) Being a Government Company, Section 164(2) of the Companies Act, 2013 regarding âwhether any director is disqualified from being appointed as a directorâ is not applicable to the Company in view of Notification no. G.S.R. 463(E) dtd. 0506-2015.

(h) With respect to the other matters to be included in the Auditorâs 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 Ind AS financial statements - Refer Note 39 (2) to the 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 contracts - Refer Note 39 (17) to the financial statements.

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

iv. The Company has provided requisite disclosures in the financial statements as to holdings as well as dealings in specified Bank Notes during the period from 8th November, 2016 to 30th December 2016. based on audit procedures and relying on the management representation we report that the disclosures are in accordance with books of account maintained by the company and as produced by the management -Refer Note 39 (19) to the Ind AS financial statements.

(3) As required by section 143(5) of the Act, we have considered the directions issued by the Comptroller and Auditor General of India, the action taken thereon and its impact on the accounts and financial statements of the company -Refer Annexure C attached.

Annexure-A

to the Independent Auditorsâ Report

(Referred to in ParagrapRs.1 under the heading âReport on Other Legal and Regulatory Requirementsâ of our report of even date on the accounts of Bharat Heavy Electricals Limited (âthe Companyâ), for the year ended March 31, 2017)

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

(c) The details of title deeds of immovable properties not held in the name of the company are given in note no. 2 (a to f) to the Ind AS Financial Statements.

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

iv) The Company has complied with the provisions of the section 185 and 186 of the Companies Act, 2013 in respect of loans, investments, guarantees, and security.

v) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules 2014.

vi) We have broadly reviewed the books of account and records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014 prescribed by the Central Government under section 148(1) of the Companies Act, 2013 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate and complete.

vii) (a) According to the information and explanations given to us, in our opinion, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employeesâ State Insurance, Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise, Value Added Tax, Cess and any other statutory dues as applicable to it .

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise, Value Added Tax, Cess and any other statutory dues were outstanding as at MarcH 31, 2017 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, the particulars of Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise and Value Added Tax which have not been deposited on account of dispute are as under:

Sl. No.	Name of the Statute	Nature of the Dues	Pending Amount	Amount paid under protest	Forum where dispute is pending
1	Central Sales Tax Act, Value Added Tax and Sales Tax Act of various States	Sales Tax, VAT	18.49	6.12	Assessing Officer
			441.18	65.90	Dy. Commissioner / Jt. Commissioner / Commissioner (Appeals)
			416.67	167.81	Appellate Tribunal
			380.5	19.87	High Court
			2.87	2.83	Supreme Court
			603.04	37.5	Various Appellate Authorities
2	Income Tax Act, 1961	Income Tax	0.22	-	Assessing Officer
			0.05	-	Commissioner(Appeals)
			12.46	-	High Court
3	Central Excise Act, 1944	Excise Duty	80.91	7.93	Commissioner (Appeals)
			309.24	10.55	Appellate Tribunal
			29.35	5.14	High Court
			0.55	0.55	Supreme Court
			62.87	-	Various Appellate Authorities
4	Service Tax under the Finance Act, 1994	Service Tax	111.62	3.80	Commissioner (Appeals)
			379.93	3.59	Appellate Tribunal
			16.12	-	High Court

viii) According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to financial institutions, banks or government. The company has not issued any debentures.

ix) Provisions of clause no. (ix) relating to utilization of moneys raised by way of initial public offer or further public offer including debt instruments and term loans is not applicable to the Company as no such moneys raised and outstanding during the year.

xi) Being a Government Company, provision of clause no. (xi) regarding section 197 of the Companies Act, 2013 relating to managerial remuneration is not applicable to the Company in view of Notification no. G.S.R. 463(E) dtd. 05-062015.

xii) Provisions of clause no. (xii) regarding Nidhi Company is not applicable to the Company;

xiv) Provision of clause no. (xiv) regarding preferential allotment or private placement of shares or fully or partly convertible debentures during the year is not applicable to the Company as no such preferential allotment or private placement took place during the year.

xv) The company has not entered into any non-cash transactions with directors or persons connected with him.

xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India. Act, 1934.

For Wahi & Gupta For DSP & Associates For S B A & Company

Chartered Accountants Chartered Accountants Chartered Accountants

FRN-002263N FRN-006791N FRN-004651C

(CA Y.K. Gupta) (CA Sanjay Jain) (CA. Sita Ram Soni)

Partner Partner Partner

M.No.016020 M.No. 084906 M.No. 072381

Place: New Delhi

Date: May 29, 2017

Mar 31, 2016

We have audited the accompanying financial statements of Bharat Heavy Electricals Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2016, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information in which are incorporated the returns for the year ended on that date audited by us for 16 branches and 18 branches audited by the branch auditors of the company.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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

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

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

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

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

Opinion

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

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

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

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

Other Matter

We did not audit the financial statements/information of 18 ( Eighteen) branches included in the standalone financial statements of the Company whose financial statements/financial information reflect total assets of Rs. 37337.65 crores as at 31st March, 2016 and total revenue of Rs. 13006.97 crores for the year ended on that date, as considered in the standalone financial statements. The financial statements/information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

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

(2) As required by Section 143 (3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us;

(c) The reports on the accounts of the branch offices of the Company audited under Section 143 (8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report.

(d) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from the branches not visited by us.

(e) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(f) Being a Government Company, Section 164(2) of the Companies Act, 2013 regarding ''whether any director is disqualified from being appointed as a director'' is not applicable to the Company in view of Notification no. G.S.R. 463(E) dtd. 05-06- 2015

(g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B".

(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 financial statements Â Refer Note 31 (5) to the financial statements.

ii. The Company has made provision, as required under the applicable law and accounting standards, for material foreseeable losses, if any, on long- term contracts Â Refer Note 31 (11) to the financial statements.

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

(3) As required by section 143(5) of the Act, we have considered the directions issued by the Comptroller and Auditor General of India, the action taken thereon and its impact on the accounts and financial statements of the company ÂRefer Annexure C attached.

"Annexure A" to Independent Auditors'' Report

(Referred to in Paragraph 1 under the heading "Report on Other Legal and Regulatory Requirements" of our report of even date on the accounts of Bharat Heavy Electricals Limited ("the Company"), for the year ended March 31, 2016)

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

(b) According to the information and explanations given to us, physical verification of fixed assets is being conducted in a phased manner by the management under a programme designed to cover all the fixed assets over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and nature of its business and no material discrepancies were noticed on such verification to the extent verification was made during the year.

(c) The details of title deeds of immovable properties not held in the name of the company are given in note 31(2)(a) (i to iii) to the Financial Statements.

ii) As explained to us physical verification of inventory has been conducted by the management under Perpetual Inventory Programme at regular intervals during the year except for stock of work in progress and finished goods in few units where these are verified at the year end with reference to the inspection reports and production reports of the Production Planning Department of such units. In regard to stocks lying with contractors/fabricators and other parties, confirmations were received in few cases only. In our opinion the frequency of verification is reasonable.

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

iv) The Company has complied with the provisions of the section 185 and 186 of the Companies Act, 2013 in respect of loans, investments, guarantees, and security.

v) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules 2014.

vi) We have broadly reviewed the books of account and records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014 prescribed by the Central Government under section 148(1) of the Companies Act, 2013 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate and complete.

vii) (a) According to the information and explanations given to us, in our opinion, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees'' State Insurance, Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise, Value Added Tax, Cess and any other statutory dues as applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise, Value Added Tax, Cess and any other statutory dues were outstanding as at March 31, 2016 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, the particulars of Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise and Value Added Tax which have not been deposited on account of dispute are as under:

(Rs. in Crore)

Sl. Name of the Statute Nature of Pending Amount No. the Dues Amount paid under protest

1 Central Sales Tax Act, Value Sales Tax, 30.97 3.81 Added Tax and Sales Tax Act of VAT various States 398.59 58.31

378.08 133.27

43.47 22.33

2.87 2.83

399.34 26.05

2 Income Tax Act, 1961 Income Tax 0.81 -

0.05 -

0.10 -

3 Central Excise Act, 1944 Excise Duty 41.84 4.37

369.86 13.69

55.70 4.96

0.55 0.55

- -

4 Service Tax under the Finance Service Tax 1.56 0.74 Act, 1994

468.51 6.54

15.10 -

0.77 0.06

5 Customs Act,1962 Custom 0.10 - duty

Name of the Statute Forum where dispute is pending

Central Sales Tax Act Assessing Officer

Dy. Commissioner/ Jt. Commissioner/ Commissioner (Appeals)

Appellate Tribunal

High Court

Supreme Court

Various Appellate Authorities

Income Tax Act, 1961 Assessing Officer

Commissioner (Appeals)

High Court

Central Excise Act, 1944 Commissioner (Appeals)

Appellate Tribunal

High Court

Supreme Court

Various Appellate Authorities

Service Tax Under the Finance Act, 1994 Commissioner (Appeals)

Appellate Tribunal

High Court

Various Appellate Authorities

Customs Act, 1962 Assessing Officer

viii) According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to financial institutions, banks, government. The company has not issued any debentures.

ix) Provisions of clause no. (ix) relating to utilization of moneys raised by way of initial public offer or further public offer including debt instruments and term loans is not applicable to the Company as no such moneys raised during the year.

x) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud by the Company or any fraud on the Company by its officers or employees has been noticed or reported during the year.

xi) Being a Government Company, provision of clause no. (xi) regarding section 197 of the Companies Act, 2013 relating to managerial remuneration is not applicable to the Company in view of Notification no. G.S.R. 463(E) dtd. 05-06-2015.

xii) Provisions of clause no. (xii) regarding Nidhi Company is not applicable to the Company;

xiii) According to the records of the Company examined by us and the information and explanations given to us, the related party transactions are in compliance with section 177 and 188 of the Companies Act, 2013 and have been disclosed in the Financial Statements.

xiv) Provision of clause no. (xiv) reg. preferential allotment or private placement of shares or fully or partly convertible debentures during the year is not applicable to the Company as no such preferential allotment or private placement took place during the year.

xv) The company has not entered into any non-cash transactions with directors or persons connected with him.

xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India. Act, 1934.

For Wahi & Gupta For DSP & Associates For SBA & Company

Chartered Accountants Chartered Accountants Chartered Accountants

FRN 002263N FRN 006791N FRN 004651C

(CA Y K Gupta) (CA Sanjay Jain) (CA Vikas Jain)

Partner Partner Partner

M.No.016020 M.No. 084906 M.No. 078245

Place : New Delhi

Date : May 27, 2016

Mar 31, 2015

Report on the Financial Statements

We have audited the accompanying financial statements of Bharat Heavy Electricals Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2015, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information in which are incorporated the returns for the year ended on that date audited by us for 11 branches and 24 branches audited by the branch auditors of the company.

Management''s Responsibility for the Standalone Financial Statements

The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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

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

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

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

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

Opinion

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

(a) In the case of the Balance Sheet, of the state of affairs of the company as at March 31, 2015;

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

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

Emphasis of Matter

We draw attention to :

Amount outstanding in projects under hold for more than 3 years amounting to Rs. 1845 Crores (Refer note no. 31(26))

Our opinion is not qualified in respect of above matter.

Other Matter

We did not audit the financial statements/information of 24 (Twenty Four ) branches included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of Rs. 46378.71 Crores as at 31st March, 2015 and total revenue of Rs. 24922.28 Crores for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

(1) As required by the Companies (Auditor''s Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure (A) a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

(2) As required by Section 143 (3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us;

(c) The reports on the accounts of the branch offices of the Company audited under Section 143 (8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report.

(d) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from the branches not visited by us.

(e) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(f) On the basis of the written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors appointed during 2014-15 is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164(2) of the Act. Prior to 01-04-2014, in terms of notification no. GSR 829(E) dated 21.10.2013 issued by the Department of Company Affairs, Govt. of India, the provisions of section 274(1) (g) of the Companies Act, 1956 were not applicable to the company.

(g) ith respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 31(5) to the financial statements.

ii. The Company has made provision, as required under the applicable law and accounting standards, for material foreseeable losses, if any, on long-term contracts Â Refer Note 31(11) to the financial statements.

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

(3) As required by section 143(5) of the Act, we have considered the directions issued by the Comptroller and Auditor General of India, the action taken thereon and its impact on the accounts and financial statements of the company (Annexure B)

Annexure (A) to Independent Auditors'' Report

(Referred to in Paragraph 1 under the heading "Report on Other Legal and Regulatory Requirements" of our report of even date on the accounts of Bharat Heavy Electricals Limited ("the Company"),for the year ended March 31, 2015)

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

(b) According to the information and explanations given to us, physical verification of fixed assets is being conducted in a phased manner by the management under a programme designed to cover all the fixed assets over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and nature of its business and no material discrepancies were noticed on such verification to the extent verification was made during the year.

ii) (a) As explained to us physical verification of inventory has been conducted by the management under Perpetual Inventory Programme at regular intervals during the year except for stock of work in progress and finished goods in few units where these are verified at the year end with reference to the inspection reports and production reports of the Production Planning Department of such units. In regard to stocks lying with contractors/fabricators and other parties, confirmations were received in few cases only. In our opinion the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and discrepancies noticed on physical verification of inventories were not material with regard to the size and nature of operations of the Company and have been properly dealt with in the books of account.

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

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the internal control systems.

v) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules 2014.

vi) We have broadly reviewed the books of account and records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014 prescribed by the Central Government under section 148(1) of the Companies Act, 2013 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate and complete.

vii) (a) According to the information and explanations given to us, in our opinion, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees'' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, duty of Customs, duty of Excise, Value Added Tax, Cess and any other statutory dues as applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, duty of Customs, duty of Excise, Cess and any other statutory dues were outstanding as at March 31, 2015 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, the particulars of Income Tax, Sales Tax, Wealth Tax, Service Tax,duty of Customs, duty of Excise, Value Added Tax and Cess which have not been deposited on account of dispute are as under:

(Rs. in Crore)

Sl. Name of the Statute Nature of Pending No. the Dues Amount

1 Central Sales Tax Act, Work Sales Tax, 89.55 Contract Tax Act, Lease Tax, Entry Tax Entry Tax Act and Sales Tax Act & Work 302.03 of various States Contract Tax

378.77

409.35

3.43

360.81

2 Income Tax Act, 1961 Income 1.17 Tax

15.01

0.32

3 Central Excise Act, 1944 Excise 54.12 Duty

359.63

45.89

4 Service Tax under the Finance Service 77.96 Act, 1994 Tax

366.51

14.47

5 Customs Act,1962 Custom 2.93 duty

6 The Building and Other Cess 11.78 Construction Workers Welfare Cess Act, 1996

Name of the Statute Amount Forum where dispute is paid under pending protest

Central Sales Tax Act, Work Contract Tax Act, Lease Tax, Entry Tax Act and Sales Tax Act of various States 25.15 Assessing Officer

35.96 Dy. Commissioner / Jt. Commissioner/ Commissioner (Appeals)

80.28 Appellate Tribunal

107.49 High Court

3.38 Supreme Court

20.25 Various Appellate Authorities

Income Tax Act, 1961 - Assessing Officer

0.70 Commissioner (Appeals)

- High Court

Central Excise Act, 1944 9.47 Commissioner (Appeals)

8.44 Appellate Tribunal

5.50 High Court

Service Tax under the Finance Act, 1994 2.13 Commissioner (Appeals)

2.23 Appellate Tribunal

- High Court

Customs Act, 1962 2.83 Assessing Officer

The Building and Other Construction Workers Welfare Cess Act, 1996 2.50 High Court

(d) The company has transferred the amount required to be transferred to Investor Education and Protection Fund within time in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder.

viii) The Company has no accumulated losses as at March 31, 2015 and has not incurred any cash losses during the financial year covered by our audit and the immediately preceding financial year.

ix) According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

x) In our opinion and according to the information and explanations given to us, the Company has not given guarantees for loans taken by others from banks or financial institutions.

xi) As per information and explanations given to us, the Company has not obtained any term loan during the year.

xii) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For Wahi & Gupta For DSP & Associates

Chartered Accountants Chartered Accountants

FRN 002263N FRN 006791N

Date : May 26, 2015 (CA Anuj Gupta) (CA Sanjay Jain)

Place : New Delhi M.No.076560 M.No.084906

Mar 31, 2014

We have audited the accompanying financial statements of Bharat Heavy Electricals Limited ("the company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with the Accounting Standards notified under the Companies Act, 1956 ("the Act") read with the General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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

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

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

Opinion

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

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

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

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

Report on Other Legal and Regulatory Requirements

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

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

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. in our opinion proper books of account as required by law have been kept by the company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us.

bb. the report on the accounts of branch offices audited under section 228 by a person other than the company''s auditor has been forwarded to us as required by clause (c) of sub-section (3) of section 228 and have been dealt with in preparing our report in the manner considered necessary by us;

c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this report are in agreement with the books of account and with the returns received from branches not visited by us.

d. in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956 read with the Gene- ral Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Ac t, 2013;

e. In terms of Notification No. GSR 829(E) dated 21.10.2003 issued by the Department of Company Affairs, Government of India, the provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicable to the Company.

Annexure to Independent Auditors'' Repor (Referred to in Paragraph 1 under the heading "Report on Other Legal and Regulatory Requirements" of our report of even date on the accounts of Bharat Heavy Electricals Limited for the year ended March 31, 2014)

i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

(b) According to the information and explanations given to us, physical verification of fixed assets is being conducted in a phased manner by the management under a programme designed to cover all the fixed assets over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and nature of its business and no material discrepancies were noticed on such verification to the extent verification was made during the year. In respect of 65 locomotives given to Indian Railways on lease instead of physical verification a certificate confirming physical possession of these locomotives has been obtained from Indian Railways as per the lease agreement.

(c) According to the information and explanations given to us, the company has not disposed off any substantial part of its fixed assets during the year.

ii) (a) As explained to us physical verification of inventory has been conducted by the management under Perpetual Inventory Programme at regular intervals during the year except for stock of work in progress and finished goods in few units where these are verified at the year end with reference to the inspection reports and production reports of the Production Planning Department of such units. In regard to stocks lying with contractors/fabricators and other parties, confirmations were received in a few cases only. In our opinion the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the company has maintained proper records of its inventories and discrepancies noticed on physical verification of inventories were not material with regard to the size and nature of operations of the company and have been properly dealt with in the books of account.

iii) (a) According to the information given to us, the company has not granted any loans, secured or unsecured to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore clauses (iii) (b) to (iii)(d) of Paragraph 4 of the Order are not applicable to the company.

(b) According to the information given to us, the company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore clauses (iii) (f) and (iii) (g) of Paragraph 4 of the Order are not applicable to the company.

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. Further on the basis of our examination of the books and records of the company and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the internal control systems.

v) According to the information and explanations given to us, we are of the opinion that during the year there are no contracts and arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956. Therefore clause (v) (b) of Paragraph 4 of the Order is not applicable to the company.

vi) According to the information and explanations given to us, the company has not accepted any deposits from public during the year within the meaning of sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975.

vii) According to the information and explanations given to us, the company has an internal audit department responsible for carrying out internal audit of various sections at head office, regional offices and units at periodical intervals as per the approved audit plan. In our opinion, the internal audit system of the company is generally commensurate with size and nature of its business.

viii) We have broadly reviewed the books of account and records maintained by the company pursuant to the Companies (Cost Accounting Records) Rules 2011 prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate & complete.

ix) (a) According to the information and explanations given to us, in our opinion, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty, Cess and any other material statutory dues as applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty, Cess and other statutory dues outstanding as at March 31, 2014 for a period of more than six months from the date they become payable except in the case of Libya project, where as per the agreement, the income tax liability has to be discharged by the customer directly to the Libyan Government. The amount outstanding for more than six months is Rs. 37.09 Crore pertaining to financial year 2008-09 & 2 0 0 9 -10.

(c) According to the information and explanations given to us, the particulars of Sales Tax, Income Tax, Excise Duty, Service Tax, Custom Duty and Cess which have not been deposited on account of dispute are as under:

Sl. Name of the Statute Nature of the Pending Amount Forum where dispute No. Dues Amount paid is pending under protest

1 Central Sales Tax Act, Work Sales Tax, Entry 101.57 37.67 Assessing Officer Contract Tax Act, Lease Tax, Tax & Work Entry Tax Act and Sales Tax Contract Tax 192.49 17.84 Dy. Commissioner / Act of various States Jt. Commissioner/ Commissioner (Appeals)

247.42 55.07 Appellate Tribunal

444.30 59.66 High Court

3.43 3.38 Supreme Court

377.11 21.75 Various Appellate Authorities

2 Income Tax Act, 1961 Income Tax 0.30 - Assessing Officer

0.32 - High Court

0.28 - Commissioner(Appeals)

3 Central Excise Act, 1944 Excise Duty 52.25 3.29 Commissioner (Appeals)

332.29 10.09 Appellate Tribunal

43.25 4.37 High Court

4 Service Tax under the Finance Service Tax 55.35 - Commissioner Act, 1994 (Appeals)

224.74 0.61 Appellate Tribunal

11.62 - High Court

5 Customs Act,1962 Custom duty 0.21 0.06 Commissioner (Appeals)

2.93 2.83 Various Appellate Authorities

x) The company has no accumulated losses as at March 31, 2014 and has not incurred any cash losses during the financial year covered by our audit and the immediately preceding financial ye a r.

xi) According to the records of the company examined by us and the information and explanations given to us, the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders. However, the company is yet to redeem the bonds (including interest) amounting to Rs. 6.52 Crore issued by the erstwhile subsidiary company (Bharat Heavy Plates & Vessels Limited) merged with the BHEL in the current ye a r.

xii) According to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) In our opinion, the company is not a chit fund or a Nidhi/mutual benefit fund/ society. Therefore, provisions of clause (xiii) of Paragraph 4 of the Order are not applicable to the company.

xiv) In our opinion and according to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause (xiv) of the Paragraph 4 of the Order are not applicable to the company.

xv) In our opinion and according to the information and explanations given to us, the company has not given guarantees for loans taken by others from banks or financial institutions.

xvi) As per information and explanations given to us, the company has not obtained any term loan during the year.

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

xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix) In our opinion, the company has not issued any debentures during the year. Therefore, provisions of clause (xix) of Paragraph 4 of the Order are not applicable to the company.

xx) The company has not raised any money by way of public issue during the year. Therefore, provisions of clause (xx) of Paragraph 4 of the Order are not applicable to the company.

xxi) During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no major fraud on or by the company has been noticed or reported during the year.

For Wahi & Gupta For S. N. Dhawan & Co.

Chartered Accountants Chartered Accountants

FRN 002263N FRN 000050N

(Y.K.Gupta) (S.K. Khattar)

Partner

M.No 016020

Date : May 29, 2014 Partner

Place: New Delhi M. No 084993

Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Bharat Heavy Electricals Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

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

Auditor''s Responsibility

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

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

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

Opinion

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

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

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

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

Report on Other Legal and Regulatory Requirements

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

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

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us.

c. The Branch Auditors Reports have been furnished to us and have been appropriately dealt with while preparing our report.

d. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from branches not visited by us.

e. in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

f. In terms of Notification No. GSR 829(E) dated 21.10.2003 issued by the Department of Company Affairs, Government of India, the provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicable to the Company.

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

Annexure to Independent Auditors'' Report

(Referred to in Paragraph 1 under the heading "Report on Other Legal and Regulatory Requirements" of our report of even date on the accounts of Bharat Heavy Electricals Limited for the year ended March 31, 2013)

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

(b) According to the information and explanations given to us, physical verification of fixed assets is being conducted in a phased manner by the management under a programme designed to cover all the fixed assets over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and nature of its business and no material discrepancies were noticed on such verification to the extent verification was made during the year. In respect of 65 locomotives given to Indian Railways on lease instead of physical verification a certificate confirming physical possession of these locomotives has been obtained from Indian Railways as per the lease agreement.

(c) According to the information and explanations given to us, the Company has not disposed off any substantial part of its fixed assets during the year.

ii) (a) As explained to us physical verification of inventory has been conducted by the management under Perpetual Inventory Programme at regular intervals during the year except for stock of work in progress and finished goods in few units where these are verified at the year end with reference to the inspection reports and production reports of the Production Planning Department of such units. In regard to stocks lying with contractors/fabricators and other parties, confirmations were received in a few cases only. In our opinion the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and discrepancies noticed on physical verification of inventories were not material with regard to the size and nature of operations of the Company and have been properly dealt with in the books of account.

iii) (a) According to the information given to us, the Company has not granted any loans, secured or unsecured to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore clauses (iii) (b) to (iii)(d) of Paragraph 4 of the Order are not applicable to the Company.

(b) According to the information given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore clauses (iii) (f) and (iii) (g) of Paragraph 4 Order are not applicable to the Company.

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. Further on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the internal control systems.

v) According to the information and explanations given to us, we are of the opinion that during the year there are no contracts and arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956. Therefore clause (v) (b) of Paragraph 4 of the Order is not applicable to the Company.

vi) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975.

vii) According to the information and explanations given to us, the Company has an internal audit department responsible for carrying out internal audit of various sections at head office, regional offices and units at periodical intervals as per the approved audit plan. In our opinion, the internal audit system of the Company is generally commensurate with size and nature of its business.

viii) We have broadly reviewed the books of account and records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules 2011 prescribed by the Central Government under section 209(1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate & complete.

ix) (a) According to the information and explanations given to us, in our opinion, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty, Cess and any other material statutory dues as applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty, Cess and other statutory dues outstanding as at March 31, 2013 for a period of more than six months from the date they become payable except in the case of Libya project, where as per the agreement, the income tax liability has to be discharged by the customer directly to the Libyan Government. The amount outstanding for more than six months is Rs. 32.88 Crore pertaining to financial year 2008-09 & 2009-10.

(c) According to the information and explanations given to us, the particulars of Sales Tax, Income Tax, Excise Duty, Service Tax, Custom Duty and Cess which have not been deposited on account of dispute are as under:

Sl. Name of the Statute Nature of the Dues Pending No. Amount (Rs. in Crore)

1 Central Sales Tax Act, Sales Tax, Entry Tax 35.78 Work Contract Tax Act, & Work Contract 249.20 Lease Tax, Entry Tax Tax Act and Sales Tax Act of various States 344.94

125.82

3.43

117.30

2 Income Tax Act, 1961 Income Tax 3.4

26.50

4.15

3 Central Excise Act, 1944 Excise Duty 30.26

1.15

259.13

43.02

-

4 Service Tax under the Service Tax 54.38 Finance Act, 1994 105.33

-

5.70

Name of the Statute Amount paid Forum where dispute is pending under protest (Rs. in Crore)

Central Sales Tax Act Work Contract Tax Act, Lease Tax, Entry Tax Act and Sales Tax Act of various States 10.38 Assessing Officer

21.44 Dy. Commissioner / Jt. Commissioner/ Commissioner Appeals

49.72 Appellate Tribunal

28.25 High Court

3.38 Supreme Court

8.69 Various Appellate Authorities

Income Tax Act, 1961 - High Court

- Appellate Tribunal

- Commissioner(Appeals)

Central Excise Act, 1944 0.06 Assessing Officer

0.48 Commissioner (Appeals)

3.61 Appellate Tribunal

4.37 High Court

- Various Appellate Authorities

Service Tax umder the Finance Act 1994 0.01 Commissioner (Appeals)

- Appellate Tribunal

- Assessing Officer

- High Court

x) The Company has no accumulated losses as at March 31, 2013 and has not incurred any cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) In our opinion, the Company is not a chit fund or a Nidhi /mutual benefit fund/ society. Therefore, provisions of clause (xiii) of Paragraph 4 of the Order are not applicable to the Company.

xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause (xiv) of the Paragraph 4 of the Order are not applicable to the Company.

xv) In our opinion and according to the information and explanations given to us, the Company has not given guarantees for loans taken by others from banks or financial institutions.

xvi) As per information and explanations given to us, the Company has not obtained any term loan during the year.

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

xviii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix) In our opinion, the Company has not issued any debentures during the year. Therefore, provisions of clause (xix) of Paragraph 4 of the Order are not applicable to the Company.

xx) The Company has not raised any money by way of public issue during the year. Therefore, provisions of clause (xx) of Paragraph 4 of the Order are not applicable to the Company.

xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For Gandhi Minocha & co For S. N. Dhawan & Co.

Chartered Accountants Chartered Accountants

FRN 000458N FRN 000050N

Date : May 23, 2013 (Bhupinder Singh) (Suresh Seth)

Place : New Delhi M.No 092867 M.No 010577

Mar 31, 2012

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

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

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

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

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

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of the books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us.

(c) The Branch Auditor's Reports have been furnished to us and have been appropriately dealt with while preparing our report.

(d) The Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account and with the audited returns received from the branches.

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

(f) In terms of Notification No. GSR 829(E) dated 21.10.2003 issued by the Department of Company Affairs, Government of India, the provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicable to the Company.

(g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the Significant Accounting Policies and Notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

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

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

Annexure to the Auditors' Report

(Referred to in paragraph 3 of our report of even date on the accounts of Bharat Heavy Electricals Limited for the year ended 31st March, 2012)

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

(b) According to the information and explanations given to us, physical verification of fixed assets is being conducted in a phased manner by the management under a programme designed to cover all the fixed assets over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and nature of its business and no material discrepancies were noticed on such verification to the extent verification was made during the year. In respect of 65 locomotives given to Indian Railways on lease instead of physical verification a certificate confirming physical possession of these locomotives has been obtained from Indian Railways as per the lease agreement.

(c) According to the information and explanations given to us, the Company has not disposed off any substantial part of its fixed assets during the year.

ii) (a) As explained to us physical verification of inventory has been conducted by the management under Perpetual Inventory Programme at regular intervals during the year except for stock of work in progress and finished goods in few units where these are verified at the year end with reference to the inspection reports and production reports of the Production Planning Department of such units. In regard to stocks lying with contractors/fabricators and other parties, confirmations were received in a few cases only. In our opinion the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and discrepancies noticed on physical verification of inventories with regard to the size and nature of operations of the Company were not material and have been properly dealt with in the books of account.

iii) (a) According to the information given to us, the Company has not granted any loans, secured or unsecured to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore clauses (iii)(b) to (iii)(d) of Paragraph 4 of the Order are not applicable to the Company.

(b) According to the information given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore clauses (iii) (f) and (iii) (g) of Paragraph 4 Order are not applicable to the Company.

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. Further on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the internal control systems.

v) According to the information and explanations given to us, we are of the opinion that during the year there are no contracts and arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956. Therefore clause (v) (b) of Paragraph 4 of the Order is not applicable to the Company.

vi) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975.

vii) According to the information and explanations given to us, the Company has an internal audit department responsible for carrying out internal audit of various sections at head office, regional offices and units at periodical intervals as per the approved audit plan. In our opinion, the internal audit system of the Company is generally commensurate with size and nature of its business.

viii) We have broadly reviewed the books of account and records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules 2011 prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate & complete.

ix (a) According to the information and explanations given to us, in our opinion, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty, Cess and any other material statutory dues as applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty, Cess and other statutory dues outstanding as at 31st March, 2012 for a period of more than six months from the date they become payable except in the case of Libya project, where as per the agreement, the income tax liability has to be discharged by the customer, directly to the Libyan Government. The amount outstanding for more than six months is r 31.94 Crore pertaining to financial year 2008-09 & 2009-10.

(c) According to the information and explanations given to us, the particulars of Sales Tax, Income Tax, Excise Duty, Service Tax, Custom Duty and Cess which have not been deposited on account of dispute are as under:

Sl. Name of the Statute Nature of Pending Amount No. the Dues (Rs in Crore)

1 Central Sales Tax Act, Work Sales Tax, 25.28 Contract Tax Act, Lease Entry Tax 258.23 Tax, Entry Tax Act and & Work Sales Tax Act of various Contract 218.44 States Tax 119.75

3.43

107.57

2 Income Tax Act, 1961 Income Tax 3.18

26.50

15.52

3 Central Excise Act, 1944 Excise Duty 30.20

72.96

174.25

42.88

4 Service Tax under the Service Tax 24.73 Finance Act, 1994 4.53

97.21

5.70

Name of the Statute Amount paid Forum where dispute is pending under protest (Rs. in Crore)

Central Sales Tax Act, work Contract Tax Act, Lease Tax, Entry Tax Act and Sales Tax Act of Various States 5.55 Assessing Officer

11.12 Dy. Commissioner/Jt. Commissioner Commissioner Appeals

29.11 Appellate Tribunal

43.47 High Court

3.38 Supreme Court

5.76 Various Appellate Authorities

Income Tax Act,1961 - High Court

- Appellate Tribunal

- Commissioner (Appeals)

Central Excise Act,1944 0.06 Assessing Officer

0.40 Commissioner (Appeals)

3.06 Appellate Tribunal

4.37 High Court Various Appellate Authorities

Service Tax Under the Finance Act,1994 - Commissioner (Appeals)

- Appellate Tribunal

- Assessing Officer

- High Court

x) The Company has no accumulated losses as at 31st March, 2012 and has not incurred any cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) In our opinion, the Company is not a chit fund or a Nidhi/mutual benefit fund/ society. Therefore, provisions of clause (xiv) of Paragraph 4 of the Order are not applicable to the Company.

xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause (xiv) of the Paragraph 4 of the Order are not applicable to the Company.

xv) In our opinion and according to the information and explanations given to us, the Company has not given guarantees for loans taken by others from banks or financial institutions.

xvi) As per information and explanations given to us, the Company has not obtained any term loan during the year.

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

xviii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix) In our opinion, the Company has not issued any debentures during the year. Therefore, provisions of clause (xix) of Paragraph 4 of the Order are not applicable to the Company.

xx) The Company has not raised any money by way of public issue during the year. Therefore, provisions of clause (xx) of Paragraph 4 of the Order are not applicable to the Company.

xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For Gandhi Minocha & Co. For S.N. Dhawan & Co.

Chartered Accountants Chartered Accountants

FRN 00458N FRN 000050N

(Bhupinder Singh) (Suresh Seth)

M.No. 092867 M.No. 010577

Date: May 23, 2012

Place: New Delhi

Mar 31, 2011

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

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

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

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

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

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of the books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us.

(c) The Branch Auditor's Reports have been furnished to us and have been appropriately dealt with while preparing our report.

(d) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account and with the audited returns received from the branches.

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

(f) In terms of Notification No. GSR 829(E) dated 21.10.2003 issued by the Department of Company Affairs, Government of India, the provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicable to the Company.

(g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the Significant Accounting Policies and Notes to Accounts thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2011;

(ii) In the case of Profit & Loss Account of the profit for the year ended on that date; and

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

Annexure to the Auditors' Report

(Referred to in Para 3 of our repor t of even date on the accounts of Bharat Heavy Electricals Limited for the year ended March 31st, 2011)

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

(b) According to the information and explanations given to us, physical verification of fixed assets is being conducted in a phased manner by the management under a programme designed to cover all the fixed assets over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and nature of its business and no material discrepancies were noticed on such verification to the extent verification was made during the year. In respect of 65 locomotives given to Indian Railways on lease instead of physical verification a certificate confirming physical possession of these locomotives has been obtained from Indian Railways as per the lease agreement.

(c) According to the information and explanations given to us, the Company has not disposed off any substantial part of its fixed assets during the year.

ii) (a) As explained to us physical verification of inventory has been conducted by the management under Perpetual Inventory Programme at regular intervals during the year except for stock of work in progress and finished goods in few units where these are verified at the year end with reference to the inspection reports and production reports of the Production Planning Department of such units. In regard to stocks lying with contractors/fabricators and other parties, confirmations were received in a few cases only. In our opinion the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and discrepancies noticed on physical verification of inventories with regard to the size and nature of operations of the Company were not material and have been properly dealt with in the books of account.

iii) (a) According to the information given to us, the Company has not granted any loans, secured or unsecured to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore clauses (iii)(b) to (iii)(d) of Paragraph 4 of the Order are not applicable to the Company.

(b) According to the information given to us, the Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore clauses (iii) (f) and (iii) (g) of Paragraph 4 Order are not applicable to the Company.

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. Further on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the internal control systems.

v) According to the information and explanations given to us, we are of the opinion that during the year there are no contracts and arrangements that need to be entered in the register maintained under Section 301 of the Companies Act, 1956. Therefore clause (v) (b) of Paragraph 4 of the Order is not applicable to the Company.

vi) According to the information and explanations given to us, the Company has not accepted any deposits from public during the year within the meaning of sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975.

vii) According to the information and explanations given to us, the Company has an internal audit department responsible for carrying out internal audit of various sections at head office, regional offices and units at periodical intervals as per the approved audit plan. In our opinion, the internal audit system of the Company is generally commensurate with size and nature of its business.

viii) We have broadly reviewed the books of account and records maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209 (I) (d) of the Companies Act, 1956 in respect of manufacture of Electric Motors, Seamless Steel Tubes, Electric Generator, Power Transformers, Power driven Pumps, Power Generation through wind mills, control instrumentation and automation equipment and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate & complete.

ix) (a) According to the information and explanation given to us, in our opinion, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty, Cess and any other material statutory dues as applicable to it.

(b) According to the information and explanation given to us, no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty, Cess and other statutory dues outstanding as at March 31, 2011 for a period of more than six months from the date they become payable except in one case at Libya, where as per the agreement, the income tax liability has to be discharged by the customer, directly to the Libyan Government. The amount outstanding for more than six months is R 15.55 crore pertaining to financial year 2008-09.

Further, since the Central Government has till date not prescribed the amount of cess payable under Section 441A of the Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the Regional Operations Division in depositing the same.

(c) According to the information and explanation given to us, the particulars of Sales Tax, Income Tax, Excise Duty, Service Tax, Custom Duty and Cess which have not been deposited on account of dispute are as under:

Sl. Name of the Statute Nature of Pending Amount No. the Dues (R in Crore)

1. Central Sales Tax Act, Work Sales Tax, 23.67

Contract Tax Act, Lease Entry Tax 76.25

Tax, Entry Tax Act and & Work

Sales Tax Act of various Contract 235.96

States Tax 74.54

99.43

2 Income Tax Act, 1961 Income Tax 3.02

26.50

3.09

3 Central Excise Act, 1944 Excise Duty 30.20

1.28

163.71

20.81

0.35

4 Service Tax under the Service Tax 1.92

Finance Act, 1994 212.21

Amount paid Forum where dispute is pending under protest (R in Crore)

Central Sales Ta x Act, Work 1.79 Assessing Officer

Contract Tax Act, Lease 11.08 Dy. Commissioner/Jt. Commissioner/

Tax, Entry Tax Act and Commissioner Appeals

Sales Tax Act of various 41.99 Appellate Tribunal

States 31.84 High Court

6.27 Various Appellate Authorities

Income Tax Act, 1961 - High Court

- Appellate Tribunal

0.02 Commissioner (Appeals)

Central Excise Act, 1944 0.06 Assessing Officer

0.40 Commissioner (Appeals)

6.06 Appellate Tribunal

1.95 High Court

- Various Appellate Authorities

Service Tax under the - Commissioner (Appeals)

Finance Act, 1994 0.22 Appellate Tribunal x) The Company has no accumulated losses as at March 31, 2011 and has not incurred any cash losses during the financial year covered by our audit and the immediately preceding financial year.

xi) According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) In our opinion, the Company is not a chit fund or a Nidhi / mutual benefit fund/ society. Therefore, provisions of clause (xiv) of Paragraph 4 of the Order are not applicable to the Company.

xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause (xiv) of the Paragraph 4 of the Order are not applicable to the Company.

xv) In our opinion and according to the information and explanations given to us, the Company has not given guarantees for loans taken by others from banks or financial institutions.

xvi) As per information and explanations given to us, the Company has not obtained any term loan during the year.

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

xviii) According to the information and explanation given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

xix) In our opinion, the Company has not issued any debentures during the year. Therefore, provisions of clause (xix) of Paragraph 4 of the Order are not applicable to the Company.

xx) The Company has not raised any money by way of public issue during the year. Therefore, provisions of clause (xx) of Paragraph 4 of the Order are not applicable to the Company.

xxi) During the course of our examinations of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For Gandhi Minocha & Co. For S.N.Dhawan & Co.

Chartered Accountants Chartered Accountants

FRN 00458N FRN 000050N

(Bhupinder Singh) (Suresh Seth)

M.No. 092867 M.No. 010577

Date: May 23, 2011

Place: New Delhi

Mar 31, 2010

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

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

In accordance with the provisions of section 227 of the Companies Act, 1956, we report that:

I. As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government of India under sub-section (4A) of section 227 of the Companies Act, 1956 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 enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of the books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us.

(c) The Branch Auditors Reports have been furnished to us and have been appropriately dealt with while preparing our report.

(d) The Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account and with the audited returns received from the branches.

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

(f) In terms of Notification No. GSR 829 (E) dated 21.10.2003 issued by the Department of Company Affairs, Government of India, the provisions of Section 274 (1) (g) of the Companies Act, 1956 are not applicable to the Company.

(g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the Accounting Policies and Explanatory Notes in Schedule-19, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2010; and

(ii) In case of Profit & Loss Account of the profit for the year ended on that date; and

(iii) In the case of Cash Flow Statements of the cash flows for the year ended on that date.

Annexure to the Auditors Report (Referred to in Para of our report of even date)

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

(b) We are informed that management has generally carried out the physical verification of a portion of the fixed assets in accordance with their phased programme of physical verification, which is considered reasonable having regard to the size of the Company and nature of its business and no material discrepancies were noticed on such verification to the extent verification was made during the year. In respect of 65 locomotives given to Indian Railways on lease instead of physical verification, a certificate confirming physical possession of these locomotives has been obtained from Indian Railways as per the lease agreement.

(c) The company has not disposed off any substantial part of its fixed assets so as to affect its going concern status.

ii) (a) As explained to us physical verification of inventory has been conducted by the management under Perpetual Inventory Programme at regular intervals during the year except for stock of work in progress and finished goods in few units where these are verified at the year end with reference to the inspection reports and production reports of the Production Planning Department of such units. In regard to stocks lying with contractors/fabricators and other parties, confirmations were received in a few cases only. In our opinion the frequency of verification is reasonable.

(b) In our opinion procedures of physical verification of inventory, followed by the management are generally reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The company has generally maintained proper records of inventory and the discrepancies noticed on physical verification of inventory with regard to the size and nature of operations of the company were not material and have been properly dealt with in the books of account of the Company.

iii) (a) According to the information given to us, the company has not granted any loans, secured or unsecured to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, clauses (iii) (b) to (iii) (d) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the company for the current year.

(b) According to the information given to us, the company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, clauses (iii) (f) and (iii) (g) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the company for the current year.

iv) In our opinion and according to the information and explanation given to us, there exist an adequate internal control systems commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to sale of goods and services. Further on the basis of our examination of the books and records of the company, and according to the information and explanation given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in internal control systems.

v) According to the information and explanation given to us, we are of the opinion that there are no contracts and arrangements referred to in Section 301 of the Act during the year that need to be entered in the register maintained under that Section. Accordingly, clause (v) (b) of paragraph 4 of the Companies (Auditors Report) Order, 2003 is not applicable to the company for the current year.

vi) According to the information and explanation given to us, the company has not accepted any deposits from public during the year within the meaning of sections 58 A and 58 AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules 1975 framed there under.

vii) In our opinion, the Internal Audit System of the Company is generally commensurate with the size and nature of its business.

viii) We have broadly reviewed the books of accounts and records maintained by the company pursuant to the rules prescribed by the Central Government for the maintenance of cost records under section 209 (I) (d) of the Companies Act, 1956 in respect of manufacture of Electric Motors, Seamless Steel Tubes, Electric Generator, Power Transformers, Power-driven Pumps, Power Generation through wind mills, control instrumentation and automation equipment and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. The contents of these accounts and records have not been examined by us.

ix) (a) According to the information and explanation given to us, in our opinion, the company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty, Cess and any other material statutory dues as applicable with appropriate authorities. There were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty, Cess and other statutory dues outstanding as at 31st March, 2010 for a period of more than six months from the date they become payable.

(b) According to the information and explanation given to us, the particulars of Sales Tax, Income Tax, Excise Duty, Service Tax, Custom Duty and Cess which have not been deposited on account of dispute are as under:

Sl. Name of the Statute Nature of Amount Forum where dispute ispending No. the Dues
1. Central Sales Tax Act, Work Sales Tax, 86.63 Dy. Commissioner / Contract Tax Act, Lease Entry Tax Jt. Commissioner / Commissioner Tax, Entry Tax Act and & Work Appeals

Sales Tax Act of various Contract 144.69 Appellate Tribunal States Tax 45.44 High Court

0.04 Supreme Court

2 Income Tax Act, 1961 Income Tax 0.01 Commissioner (Appeals)

26.5 Appellate Tribunal

2.23 High Court

3 Central Excise Act, 1944 Excise Duty 29.50 Commissioner (Appeals)

142.10 AppellateTribunal

18.86 Supreme Court

4 Service Tax under the Service Tax 0.08 Assessing Officer Finance Act, 1994 2.63 Commissioner (Appeals)

102.8 Appellate Tribunal

5 Custom Act, 1962 Custom Duty 0.15 Commissioner (Appeals)

Total 601.66

x) The company has no accumulated losses as at March 31, 2010 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

xi) According to the records of the company examined by us and the information and explanations given to us, the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

xii) The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The provisions of any special statute applicable to Chit fund / Nidhi / Mutual benefit fund/Societies are not applicable to the company.

xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the company.

xv) In our opinion and according to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

xvi) As per information and explanations given to us, the company has not obtained any term loan during the year.

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

xviii) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956 during the year.

xix) In our opinion, the company has not issued any debentures during the year.

xx) The company has not raised any money by public issue during the year.

xxi) During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the company noticed or reported during the year

For Gandhi Minocha & Co. For M.L. Puri & Co.

Chartered Accountants Chartered Accountants

FRN 00458N FRN 02312N

(Bhupinder Singh) (Navin Bansal)

M.No. 092867 M.No. 091922

Date: 26th May, 2010 Place: New Delhi

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