Indian Railway Catering and Tourism Corporation Limited Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying Standalone Financial Statements of Indian Railway Catering and Tourism Corporation Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2023, 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 Notes to the Standalone Financial Statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as “Standalone Financial Statements”).

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013, as amended, (“the Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards (“Ind AS”) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standard) Rules, 2015, as amended, and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, its profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Basis of 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 Act. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Financial Statements.

Emphasis of Matter

We draw attention to:

1. Note No. 37.2(iv) regarding arbitration award pronounced

in April 2022 amounting to H7,400Lakhs plus simple

interest @ 6% per annum from January 2018 onwards, given in favour of certain licensees which represents principal amount towards claims for supply of welcome drinks not paid to licensees and recovery of differential costs for the supply of regular meals to the passengers on the instructions of Railways whereas the price of combo meal, which is lower than the price of regular meal, was reimbursed to these licensees. The Company has filed objections against the award and the same was listed before Honourable High Court of Delhi. Matter is pending. The Company contends that the main liability in this matter would be of Railways and the Company has the right to recovery from Railways in case ultimately it is made liable to pay.

2. Note No.37.2(v) regarding notice dated 25.02.2022

issued by the National Anti-Profiteering Authority (GST) alleging profiteering amounting to H5,041.44Lakhs for the period July 1, 2017 to May 31, 2020 against the Company under Section 171 of the CGST Act, 2017 for not passing on the benefit of reduction in rate of tax to the consumers by way of commensurate reduction in the MRP of Railneer brand of drinking water manufactured and sold by the Company even though there was reduction in the tax rate on the introduction of GST w.e.f. July 1, 2017. The Company contends that Railneer drinking water falls under controlled price segment as the MRP is fixed by Ministry of Railways, Government of India and the MRP fixed in the year 2012 is still continuing despite substantial increase in prices of raw-materials, power, HR cost, freight etc. Legal opinion obtained by the Company justifies the contention of the Company. Competent Commission of India (“CCI”) is now vested with powers to adjudicate all such cases in which benefit of tax reduction not being passed to consumers by the assesses and the matter is now pending with CCI.

3. Note Nos. 54(b) & 83 regarding 15% share of Railneer Segment profit for the period 2007-08 to 2020-21 amounting to H2,713.32Lakhs paid to Railways which was shown as an Exceptional Item in the Statement of Profit and loss of the Company during the previous year. The Railway Board has demanded 40% share of PPP plants revenue whereas the Company has contended that PPP plants are not run on license basis and accordingly paid 15% share of profits of these plants which is included in above payment. No provision for share of Railways was considered necessary by the Company in view of treatment of above payment of H2,713.32Lakhs as an expense for the previous year which resulted into loss of Railneer segment in the previous year. These matters are subject to confirmation / reconciliation by / with the Railways.

4. Note No. 39 regarding balance confirmation letters from parties & banks. Guidelines issued by the Company for obtaining balance confirmation letters from parties & banks have been followed partially by certain offices. We are informed that no balance confirmation letters are sent to Railways since their books of account are maintained on cash basis. We note that substantial amounts are receivable / payables from / to Railways which also includes number of inoperative debit balances and few credit balances as on March 31, 2023 including legacy debit & credit balances i.e. those pertaining to the period of transfer of catering operations from / to the Railways. Further, response to balance confirmation letters sought from other parties and banks was negligible and the system and procedures of obtaining balance confirmations at periodical intervals has not been reviewed and strengthened to ensure better response from the parties.

5. Note No. 56(b) regarding non-sharing of input tax credit data of GST for certain periods by Developer cum Operators (“DCO”) of four Rail Neer plants resulting in non-recognition of these claims receivables in the books of account of the Company. Amount of such claims are not ascertainable at this stage. Further, these DCOs are also disputing these claims including claims of H751.74Lakhs debited to their accounts.

6. Note Nos.10.1 & 63(i) regarding trade receivables as on March 31, 2023 of H851Crores due from Railways as on March 31, 2023 (As on March 31, 2022 H353 Crores). Out of dues from Railways, outstanding for more than six months amounts to H407 Crores which also includes inoperative balances of H88 Crores due for 3 to 5 years classified as good and recoverable as on March 31, 2023 even though no balance confirmation of Railways is available for these dues as on March 31, 2023.

7. Note No. 77 regarding certain applications made by the Company in previous years for advance ruling relating to applicability of Goods and Services Tax in respect of certain income / receipts amounting to H33,595Lakhs received mainly from the Ministry of Railways, Government of India for which the decision of the Authority for Advance Ruling is awaited.

8. Note No.79 regarding non-recognition of revenue for the financial years 2020-21 to 2022-23 from the increase to be made in license fee for trains due to tariff revision made by the Railway Board in financial year 2019-20 as the exercise regarding sale-assessment of post-paid trains, which will determine the % of increase in license fee, is still under progress as on date. Regarding prepaid trains, even though the sale assessment is over but no revenue was also recognised as certain licensees have disputed demand of additional license fee on account of tariff revision. As the revenue to be recognised can't be either ascertained at this stage or is disputed, the same has been postponed.

9. Note No. 85 regarding: (i) differences between certain subsidiary and control ledger balances which are pending for identification, reconciliation and adjustments, if any, as on March 31, 2023, (ii) review and improvement of system of identification and disclosure of trade payables pending, (iii) marking / knocking off payments made to suppliers and receipts from trade receivables with relevant invoices received / raised for disclosing proper ageing of trade payables and trade receivables at the year-end in the Standalone Financial Statements which are pending in certain cases and (iv) identification of MSME suppliers and their classification into Micro, Small and Medium category to ensure proper disclosure of their dues in Standalone Financial Statements as on March 31, 2023 which needs improvement by way of confirmations from such parties and their classification into Micro, Small and Medium category.

10. Note No. 86 regarding Railway Board letter dated February 23, 2023 imposing fine on the Company @ H1 Lakh per day till the services commences in case catering services are not commenced in trains within 3 days from the date of intimation by the Zonal Railways. The Company has made representation to the Railway Board in March 2023 for review of these instructions for which response of the Railway Board is awaited. Amount of fine payable as on March 31, 2023 not ascertained by the management.

11. Note No. 87 regarding inadmissible payments made of ex-gratia / performance related pay to deputationists amounting to H230.13Lakhs since the year 2015-16 to 2020-21 as stated by C&AG in their provisional Para for C&AG's Report (Railways) for the year ended March 31, 2022 sent to Railway Board. Vide letter dated January 24, 2023, the Company has given its response to the Railway Board letter dated January 09, 2023 seeking comments from the Company wherein payments made to deputationists was justified by the Company. Pending receipt of communication from Railway Board in this regard, amounts paid H243.70Lakhs including H13.57Lakhs for the year 2021-22 has not been shown as recoverable in the books.

Our opinion on the Standalone Financial Statement is not modified in respect of above matters.

Key Audit Matter

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 matter described below to be the key audit matter to be communicated in our report.

Assessment of litigation and related disclosure of contingent liabilities

Refer to Note No. 2 (o) to the Standalone Financial Statements - Use of estimates and judgements-Provisions, Contingent liabilities and Contingent assets and Note No. 37.2 to the Standalone Financial Statements for “Contingent Liabilities” and other significant litigations stated therein.

As at March 31, 2023, the Company has exposures towards number of litigations relating to various matters as set out in the aforesaid Note.

Significant management's judgement is required to assess such matters to determine the probability of occurrence of material outflow of economic resources and whether a provision should be made. The judgement is also supported with legal advice in certain material cases as considered appropriate.

As the ultimate outcome of the litigations are uncertain and the position taken by the management are based on the application of their best judgement which may be subject to management bias, related legal advice including those relating to interpretation of laws / regulations, we have identified this as a Key Audit Matter.

How our audit addressed the key audit matter

Our audit procedures included the following:

• We understood, assessed and tested the design and operating effectiveness of key controls surrounding assessment of litigations relating to the relevant laws and regulations;

• We read and considered latest orders / awards by various courts / authorities on these matters;

• We conducted detailed discussions with in-house legal head, tax consultants and senior management to understand their assessment on the most likely outcome of the material litigations and to understand the basis considered for the provisions made towards these litigations;

• We performed our assessment on a test basis on the underlying calculations supporting the contingent liabilities/other significant litigations disclosed in the Standalone Financial Statements;

• We considered external legal opinions, where relevant, obtained by management;

• We evaluated management's assessments by understanding precedent set in similar cases and assessed the reliability of the management's past estimates / judgements;

• We evaluated management's assessment around those matters that are not disclosed or not considered as

contingent liability, as the probability of material outflow is considered to be remote by the management; and

• We assessed the adequacy of the Company's disclosures.

Based on the above work performed, the assessment of management in respect of litigations and related disclosures relating to contingent liabilities / other significant litigations in the Standalone Financial Statements is considered to be reasonable.

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

The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the 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 Standalone 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 identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Such other information is pending as on the date of our audit report.

Responsibilities of Management for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance including other comprehensive income, and 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 of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies;

making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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

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

Auditor’s Responsibility for the audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 judgement and maintain professional skepticism throughout the audit. We also:

• 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;

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

(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

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

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our 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.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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

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

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

Report on Other Legal and Regulatory Requirements

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

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 except for the following:

(i) Balance confirmation letters were not received by us from most of the parties and banks. Further, balance confirmation letters were not sent by certain offices which is against the guidelines agreed upon with us;

(ii) Information and explanations are being furnished to us with substantial delays by certain offices, and

(iii) Information and explanations sought regarding differences between financial data (including difference of H423Lakhs between trade receivables as on December 31, 2022) of operations department in “Air Ticketing Division” under the Tourism Office at Corporate Office and the books of account maintained by the Company in ERP were not furnished to us.

Impact of our observations stated above on Standalone Financial Statements can't be quantified.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

(c) The Balance Sheet, the Statement of Profit and Loss including other Comprehensive income, the Cash Flow Statement and Statement of Changes in equity dealt with by this report are in agreement with the books of account.

(d) In our opinion, the aforesaid Standalone Financial Statements comply with the Indian Accounting Standards specified under Section 133 of the Act:

(e) In terms of Notification No. 463 (E) dated 5th June, 2015 issued by the Ministry of Corporate affairs, provisions of Section 164(2) of the Act regarding disqualifications of the Directors, are not applicable as it is a Government Company.

(f) With respect to the adequacy of internal financial controls over financial reporting with reference to the Standalone Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure 2. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting.

(g) As required by sub-section (5) of section 143 of the Act, we enclose herewith “Annexure 3”, a Statement on the Directions issued by the Comptroller and Auditor General of India.

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

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

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements. Refer Note No. 37.2 of the Standalone Financial Statements.

ii. The Company has not entered into any longterm contracts including derivative contracts.

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

iv. (a) The Company has represented that, to the

best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to any persons or entities, including foreign entities (“intermediaries”), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether directly or indirectly lend or invest in other persons or entities or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The Company has represented that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities (“intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding party “Ultimate Beneficiaries” or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(c) Based on such audit procedures that we have considered appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations made to us under paragraphs (iv)(a) and (b) contain any material mis-statement.

v. The interim and final dividends paid during the financial year are in compliance with provisions of section 123 of the Act. Further, the Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members of the Company at the ensuing Annual General Meeting. The amount of dividend proposed is in accordance with section 123 of the Act, as applicable.

vi. Proviso 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.

For P.R. Mehra & Co

Chartered Accountants

(Firm's Registration No. 000051N)

Ashok Malhotra

(Partner)

Membership No: 082648

Place: New Delhi

Dated: May 29, 2023

UDIN:23082648BGZELT4140