FUTURE BHEL Auditors Report

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 ? 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 ? 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 ?Refer 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

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