Audit Opinion

The auditors issued an unmodified opinion on the standalone Ind AS financial statements for the year ended March 31, 2026, subject to the significance of the matter discussed in the Emphasis of Matter paragraph. The financial statements are stated to give a true and fair view of the company's state of affairs.

Emphasis of Matter: Fair Valuation of Investment Property

Land & Buildings are carried as Investment property as per Ind AS-40 using the cost model. The fair value of the property is stated as Rs. 2,32,537 Lakhs as per a certified valuer's report dated October 22, 2022.

The company has initiated valuation of assets during FY 2026-27 as the registration of ownership titles for the majority of properties from BEML Ltd to BLAL is currently in progress.

Key Audit Matters: Non-Compliance with Companies Act and SEBI LODR

1. Board Composition Deficiencies

  • The company was required to appoint One Women Director as per Sec 149(1) of the Companies Act 2013. Appointments are made based on Orders from the Government of India (Ministry of Defence). The company has requested the necessary order and a response is awaited.
  • As per Sec 149(4) of the Companies Act and SEBI LODR Reg. 17(1), the requirement for 50% of the board to be Independent/Non-Executive Directors (given an executive Chairperson) was not met during FY25-26.

2. Committee Non-Constitution

During FY 2025-26, the company did not constitute the Audit Committee, Nomination and Remuneration Committee, and Stakeholder Relationship Committee as required by SEBI LODR Reg. 18, 19, 20 and Companies Act Sec 177 & 178. Committees were constituted but ceased to exist after one independent director ceased to be a director effective April 17, 2026, as the requirement for two independent directors on the audit committee was not met.

3. SEBI LODR Penalties

  • The company has been non-compliant with SEBI LODR Regulations 17 to 20 and 33.
  • For FY 2023-24: Penalty of Rs. 95.77 lakhs (including GST) for non-compliance with Reg. 17-20 and 33.
  • For FY 2024-25: Penalty of Rs. 95.70 lakhs (including GST) for continued non-compliance with Reg. 17-20.
  • For FY 2025-26: Penalty of Rs. 78.99 lakhs (including GST) for continued non-compliance with Reg. 17-20.
  • Total Cumulative Penalty: Rs. 270.46 lakhs as of March 31, 2026 (including an estimate for Q4 FY26).

It is informed that penalties are expected to continue until three Independent Directors, including one Woman Director, are appointed by the Ministry of Defence. The company has submitted applications to BSE & NSE seeking a waiver of fines (reply awaited) and has written to the Ministry of Defence for necessary appointments. Regulation 102 of SEBI LODR provides for potential penalty relaxation if non-compliance is beyond the entity's control.

Status of Property Transfers and Registration

Land Registration Status

  • Out of 401.356 acres at Mysore identified for demerger, KIADB took back the unused portion of the Township. 302.284 acres have been transferred to BLAL.
  • Registration completed for:
  • Bhopal property: March 21, 2025
  • Delhi property: April 8, 2025
  • Chennai Building - Flats at Supriya Estate: May 21, 2025
  • Goa Flats - Victor Building (3 Flats and 2 shops): December 31, 2025
  • Kochi-Land with building: April 28, 2026
  • Registration for other properties is under progress.

Stamp Duty Exemption Status

The transfer of title from BEML Ltd to BLAL is under progress. Stamp duty charges are exempted as per the amended Indian Stamp Act (Section 8G). All State Governments have granted exemption, though the Govt of Karnataka's Commerce & Industries department advised restricting it to 50% stamp duty and 100% registration fees exemption (per notification dated February 12, 2025). The company is pursuing 100% stamp duty exemption with the Govt of Karnataka.

Rental Income Recognition

Properties were demerged from BEML to BLAL as part of strategic disinvestment. While transferred in the books, title transfer is in process for most assets.

BEML Ltd received in-principle approval (BEML's 394th Board Meeting on March 23, 2023; approved by BLAL's 17th Board Meeting) to utilize BLAL's properties. These properties are maintained by BEML Ltd, which bears day-to-day expenses (repairs, maintenance, security, utilities).

A Memorandum of Understanding (MoU) was signed with BEML Limited on January 20, 2026, effective January 1, 2026, leasing:

  • 302.26 acres in Mysuru and 36 acres in Bengaluru at Rs. 3.93 Crs per annum, payable at Rs. 98.25 lakhs quarterly.
  • An invoice of Rs. 81,25,000 (Rs. 95,87,500 with GST) for Bengaluru property was raised on January 20, 2026.
  • An invoice of Rs. 17,00,000 (Rs. 20,06,000 inclusive GST) for Mysuru property was raised on February 17, 2026.

Rent valuation was carried out by Housing and Urban Development Corporation Ltd (Hudco). BEML will pay property tax on behalf of BLAL and account it as a loan.

Discrepancies Noted in Lease Arrangement

1. The lease is executed via an unregistered MoU, not a formal registered Lease Agreement.

2. There is no clause related to payment of a Rent Deposit, raising concerns on Default Risk. The terms specify quarterly rent payment in advance on or before the 7th day of each quarter.

Pending Litigations

The company has the following pending litigations related to assets transferred from BEML, as confirmed by the Legal Team. The auditors note they do not have a legal opinion to assess the financial impact.

| SI No | Reference Number | Issue | Pending Before |

| 1 | RFA 1117/2013 Ramaiah vs. Bayyamma & Others | Title dispute | High Court of Karnataka |

| 2 | WP.58481/2015 Vijayaraj K.B vs State of Karnataka & Ors | Sought relief from the State Government | High Court of Karnataka |

| 3 | WP. 8279/2018 Jayaram vs State of Karnataka & Ors | Sought relief from the State Government | High Court of Karnataka |

| 4 | MA 28/2006 BEML vs BCC Asst. Revenue Officer | Excess property tax levied by BCC and challenged by BEML | City Civil Court Bengaluru |

| 5 | OS 275/25 | Sought relief from the State Government | City Civil Court - Civil Senior Division Judge Ranchi |

Other Financial Information

  • Borrowings: The company borrowed Rs. 282.70 Lakhs from BEML during the year. Total interest for the year is Rs. 109.30 lakhs. There is no stipulation for repayment, thus no overdue amounts.
  • Cash Flow: The company has incurred cash losses during the financial year.
  • Dividend: The company did not propose, declare, or pay any interim or final dividend during the year.
  • Internal Audit: The company does not have an internal audit system. Business operations commenced from January 1, 2026.
  • Internal Financial Controls: The auditor's report expresses an unmodified opinion on the adequacy and operating effectiveness of the company's internal financial controls over financial reporting as of March 31, 2026.