We have audited the accompanying standalone financialstatements of Manappuram Finance Limited (the "Company”),which comprise the Balance Sheet as at March 31, 2024, theStatement of Profit and Loss including Other Comprehensiveincome, Statement of Changes in Equity and Statement of CashFlow for the year then ended, and notes to the standalonefinancial statements, including material accounting policyinformation and other explanatory information (hereinafterreferred to as the "standalone financial statements”).
In our opinion and to the best of our information and according tothe explanations given to us, the aforesaid standalone financialstatements give the information required by the Companies Act,2013 (the "Act”) in the manner so required and give a true andfair view in conformity with the Indian Accounting Standardsprescribed under section 133 of the Act read with Companies(Indian Accounting Standards) Rules, 2015, as amended (the"Rules”) and other accounting principles generally acceptedin India, of the state of affairs of the Company as at March 31,2024, Standalone profit, other comprehensive income, changesin equity and its cash flows for the year ended on that date.
We conducted our audit of the standalone financial statementsin accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities underthose Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Standalone FinancialStatements' section of our report. We are independent of theCompany in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India ("ICAI”) together withthe ethical requirements that are relevant to our audit of thestandalone financial statements under the provisions of the Actand the Rules thereunder, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and theCode of Ethics. We believe that the audit evidence obtained byus is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professionaljudgment, were of most significance in
our audit of the financial statements for the year ended March 31,2024. These matters were addressed in the context of our auditof the standalone financial statements as a whole, and in formingour opinion thereon, and we do not provide a separate opinion onthese matters. We have determined the matters described belowto be the key audit matters to be communicated in our report.
Sr.
No
Key Audit Matter
How the Key Audit Matter was addressed in our audit
1.
Interest Income on Gold Loans:
Interest Income on Gold Loan as at March 31, 2024:
Our audit procedures in respect of this matter included the
' 44,232.98 millions
following but not limited to:
Refer note 27(i) to the standalone financial statements
• Obtained an understanding of management's process,
Interest Income on Gold Loan is based on the various goldloan schemes provided by the Company which is netted offagainst the rebates & discounts given for prompt or early
systems/applications and controls implemented on inrelation to computation & recognition of interest incomeon gold loans.
payments. The calculation of the rebates & discount amounts
• Evaluated and validated the design, implementation
netted off against the interest income involve complexities
and operating effectiveness of key internal financial
on account of descretion & managment judgement which is
controls pertaining to the recognition of the various gold
dependent upon the timing and period of repayment under
loan schemes and interest income thereon, including
the different schemes. Penal interest charged on account of
rebates & discounts.
delay payments dependent on the nature & period of delayand hence subject to judgement.
Ý The entire computation of interest income is automatedand system driven. We have performed the following
Considering the significance of interest income on gold loans
audit procedure with respect to around interest income
and the above factors we have considered Interest Income on
on gold loans:
gold loan as Key Audit Matter
i. Selected samples and verified accuracy of interestincome under various gold loans schemes byperforming recomputation.
ii.
Selected samples of continuing and new gold loanschemes and tested the operating effectiveness of theinternal control, relating to interest income computation.We also carried out a combination of proceduresinvolving inquiry, and observation and inspection ofevidence in respect of operation of these controls.
iii.
Performed analytical procedures and test of detailsprocedures for testing the accuracy and completenessof revenue recognized.
iv.
Tested the relevant IT general controls around accessand change management relating to interest incomecomputation and related information used in interestcomputation.
v.
Obtained the list of modifications made in the interestscheme master during the year and verified the sameon test check basis.
vi.
Assessed the appropriateness, accuracy and adequacyof related presentation and disclosures in accordancewith the applicable accounting standards.
2
Provision for Expected Credit Losses (ECL) on Loans:
Total Gross Loans as at March 31, 2024: ' 2,93,506. 95 millions
Impairment Provision as at March 31, 2024: ' 2,122.37 millions
following, but not limited to:
Refer note 10 to the standalone financial statements
•
Examined policies approved by the Board of Directorsfor computation of ECL that addresses procedures
In accordance with IND AS 109, the Company applies expected
and controls for assessing and measuring credit risk
credit losses (ECL) model for measurement and recognition of
on all lending exposures commensurate with the size,
impairment loss on the loans assets. Significant judgements
complexity and risk profile specific to the Company.
are used in classifying loan assets and applying appropriatemeasurement principles. The allowance for expected creditlosses ("ECL”) involves a significant level of managementjudgement and estimation uncertainty in the following keyareas:
Evaluated & validated the design and operatingeffectiveness of controls across the processes relevantto allowance for ECL. These controls, among others,included controls over the allocation of assets intostages including management's monitoring of stage
• Assessesing whether there has been a significant
effectiveness, model monitoring including the need
increase in credit risk for exposures since its initial
for post model adjustments, model validation, credit
recognition by comparing the risk of default occurring
monitoring, individual/ collective provisions and
over the expected life of the asset between the date of
production of journal entries and disclosures.
initial recognition and the reporting date, which involvesestimation uncertanity in computing the default risk overlife of the assets which is likely to be more than one year.
Verified the completeness of loans included in theExpected Credit Loss calculations as of 31 March 2024.
• Classification of loan assets to stage 1, 2, or 3 usingcriteria in accordance with Ind AS 109 where nosignificant increase in credit risk has been observed,such assets are classified in "Stage 1”, loans that are
Selected samples & verified appropriateness ofclassification of loan assets in stage 1, 2 and 3 inaccordance with the policy approved by the Board ofDirectors.
considered to have significant increase in credit risk
Selected samples of exposure and verified the
are not credit impaired are considered to be in "Stage
appropriateness of determining Exposure at Default
2” and those which are in default or for which there is
(EAD), PD and LGD. Further, also checked the
an objective evidence of impairment are considered to
appropriateness of information used in the estimation of
be in "Stage 3”. Such classification requires significant
the Probability of Default ("PD”) and Loss given Default
management judgements due to the nature of loan
("LGD”) for the different stages depending on the nature
assets and assessment required thereon.
of the portfolio.
• Determination of Exposures at Default (“EAD”),
Performed an overall assessment of the ECL provision
probability of defaults (PD) and estimation of loss given
levels at each stage.
defaults (LGD). The probability of default for the poolsare computed based on the historical trends, adjustedwith any forward looking factors which is subject to
estimation ncertainty. Similarly the Company computesthe Loss Given Default based on the recovery rates asestimated by management.
Assessed the adequacy and appropriateness ofdisclosures in compliance with the Ind AS 107 in relationto ECL especially in relation to judgements used inestimation of ECL provision.
Considering the above, allowance for Expected Credit Losson Loan Assets requires a high degree of judgement andestimation uncertainty, with a potential range of outcomeswhich have a significant impact on the financial statements.Accordingly, we have determined Provision for ExpectedCredit Losses (ECL) on Loans as Key Audit Matter.
3
Information Technology ("IT") Systems and Controls
The Company has a complex IT system to support its recording
Our audit procedures with respect to this matter included the
of customer's operational data, business processes, ensuring
following, but were not limited to the following:
complete and accurate processing of financial transactions
and supporting the overall internal control framework.
Involved IT specialists as part of the audit for the purposeof testing the IT general controls and application
In particular, the IT system is used for recording all
controls (automated and semiautomated controls) to
disbursements and collections, identification and tagging of
determine the accuracy of the information produced by
pledged loans to customers and calculating interest income
the Company's IT systems;
and overdue days.
Obtained a comprehensive understanding of IT
The Company's accounting and financial reporting processes
applications landscape implemented at the Company.
are dependent on automated controls enabled by IT systems
It was followed by process understanding, mapping of
which impacts key financial accounting and reporting items
applications to the same and understanding financial
such as loans, interest income, impairment on loans amongst
risks posed by people-process and technology;
others.
Tested design and operating effectiveness of key
The reliability and security of IT systems play a key role in
controls operating over user access management,
the business operation. The controls implemented by the
change management, computer operations (which
Company in its IT environment determine the integrity,
includes testing of key controls pertaining to, backup
accuracy, completeness and validity of data that is processed
and incident management and data centre security),
by the applications and is ultimately used for financial
System interface controls. This included testing that
reporting.
requests for access to systems were appropriately
Accordingly, we have identified 'IT systems and controls'
logged, reviewed, and authorized.
as key audit matter because of the high level automation,
Tested the design and operating effectiveness of
significant number of systems being used by the management
certain automated controls, that were considered as
and the complexity of the IT architecture and its impact on the
key internal system controls over financial reporting
financial reporting system.
were tested. Using various techniques such as inquiry,review of documentation / record / reports, observation,and re-performance. We also tested few controls usingnegative testing technique;
Tested compensating controls and performed alternate
procedures, where necessary. In addition, understoodwhere relevant, changes made to the IT landscapeduring the audit period.
The Company's Management and Board of Directors areresponsible for the other information. The other informationcomprises the information included in the Annual Report butdoes not include the standalone financial statements and ourauditor's report thereon. The Annual Report is expected to bemade available to us after that date of this auditor's report.
Our opinion on the standalone financial statements does notcover the other information and we will not express any form ofassurance conclusion thereon.
In connection with our audit of the standalone financial statements,our responsibility is to read the other information identified abovewhen it becomes available and, in doing so, consider whether theother information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit, orotherwise appears to be materially misstated.
When we read the Annual Report, if we conclude that there is amaterial misstatement therein, we are required to communicatethe matter to those charged with governance under SA 720 'TheAuditor's responsibilities Relating to Other Information'.
The Company's Management and Board of Directors areresponsible for the matters stated in section 134(5) of the Actwith respect to the preparation of these standalone financialstatements that give a true and fair view of the financial position,financial performance, changes in equity and cash flows of theCompany in accordance with the accounting principles generallyaccepted in India, including the Indian Accounting Standardsspecified under section 133 of the Act read with the Rulesthereunder. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and forpreventing and detecting frauds and other irregularities; selectionand application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; anddesign, implementation and maintenance of adequate internalfinancial controls, that were operating effectively for ensuring theaccuracy and completeness of the accounting records, relevantto the preparation and presentation of the standalone financialstatement that give a true and fair view and are free from materialmisstatement, whether due to fraud or error.
In preparing the standalone financial statements, theManagement and Board of Directors are responsible forassessing the Company's ability to continue as a going concern,disclosing, as applicable, matters related to going concern andusing the going concern basis of accounting unless the Boardof Directors either intends to liquidate the Company or to ceaseoperations, or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing theCompany's financial reporting process.
Our objectives are to obtain reasonable assurance aboutwhether the standalone financial statements as a whole arefree from material misstatement, whether due to fraud orerror, and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance, but is nota guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonablybe expected to influence the economic decisions of users takenon the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exerciseprofessional judgment and maintain professional skepticismthroughout the audit. We also:
• I dentify and assess the risks of material misstatement ofthe standalone financial statements, whether due to fraudor error, design and perform audit procedures responsiveto those risks, and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting fromfraud is higher than for one resulting from error, as fraudmay involve collusion, forgery, intentional omissions,misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevantto the audit in order to design audit procedures that areappropriate in the circumstances. Under section 143(3)(i) ofthe Act, we are also responsible for expressing our opinionon whether the company has adequate internal financialcontrols with reference to standalone financial statementsin place and the operating effectiveness of such controls.
• Evaluate the appropriateness of material accounting policiesused and the reasonableness of accounting estimates andrelated disclosures made by Management and Board ofDirectors.
• Conclude on the appropriateness of management and Boardof Director's use of the going concern basis of accountingand, based on the audit evidence obtained, whether amaterial uncertainty exists related to events or conditionsthat may cast significant doubt on the Company's ability tocontinue as a going concern. If we conclude that a materialuncertainty exists, we are required to draw attention in ourauditor's report to the related disclosures in the standalonefinancial statements or, if such disclosures are inadequate,to modify our opinion. Our conclusions are based on theaudit evidence obtained up to the date of our auditor'sreport. However, future events or conditions may cause theCompany to cease to continue as a going concern.
• Evaluate the overall presentation, structure and contentof the standalone financial statements, including thedisclosures, and whether the standalone financialstatements represent the underlying transactions andevents in a manner that achieves fair presentation.
We communicate with those charged with governance regarding,among other matters, the planned scope and timing of theaudit and significant audit findings, including any significantdeficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statementthat we have complied with relevant ethical requirementsregarding independence, and to communicate with them allrelationships and other matters that may reasonably be thoughtto bear on our independence, and where applicable, relatedsafeguards.
From the matters communicated with those charged withgovernance, we determine those matters that were of mostsignificance in the audit of the standalone financial statementsfor the year ended March 31, 2024 and are therefore, the keyaudit matters. We describe these matters in our auditor's reportunless law or regulation precludes public disclosure about thematter or when, in extremely rare circumstances, we determinethat a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of suchcommunication.
1. As required by the Companies (Auditor's Report) Order,
2020 (the "Order”), issued by the Central Government ofIndia in terms of sub-section (11) of section 143 of the Act,we give in "Annexure A” a statement on the matters specifiedin 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 andexplanations which to the best of our knowledge andbelief were necessary for the purposes of our audit.
(b) In our opinion, proper books of account as requiredby law have been kept by the Company so far as itappears from our examination of those books exceptfor the matters stated in paragraph 2 (h)(vi) below onreporting under Rule 11(g) of the Companies (Auditand Auditors) Rules, 2014 (as amended).
(c) The Balance Sheet, the Statement of Profit and Lossincluding other comprehensive income, the Statementof Changes in Equity and the Statement of Cash Flowdealt with by this Report are in agreement with thebooks of account.
(d) In our opinion, the aforesaid standalone financialstatements comply with the Indian AccountingStandards specified under Section 133 of the Act readwith the Rules thereunder.
(e) The reservation relating to the maintenance ofaccounts and other matters connected therewith areas stated in the paragraph 2(b) above on reportingunder Section 143(3)(b) of the Act and paragraph2(h)(vi) below on reporting under Rule 11(g) of theCompanies (Audit and Auditors) Rules, 2014.
(f) On the basis of the written representations receivedfrom the directors as on March 31, 2024 taken onrecord by the Board of Directors, none of the directorsare disqualified as on March 31, 2024 from being
appointed as a director in terms of Section 164 (2)of the Act.
(g) With respect to the adequacy of the internal financialcontrols with reference to standalone financialstatements of the Company and the operatingeffectiveness of such controls, refer to our separateReport in "Annexure B”.
(h) With respect to the other matters to be included inthe Auditor's Report in accordance with Rule 11 ofthe Companies (Audit and Auditors) Rules, 2014, inour opinion and to the best of our information andaccording to the explanations given to us:
i. The Company has disclosed the impact ofpending litigations on its financial position in itsstandalone financial statements (Refer Note 41of the standalone financial statements).
ii. The Company did not have any long-termcontracts including derivative contracts forwhich there were any material foreseeablelosses (Refer Note 76 to the standalone financialstatements).
iii. There Company has transferred '4.40 millionsof Unclaimed dividend to the Investor Educationand Protection Fund during the financialyear 2023-24.
iv. a. The Management has represented that,
to the best of its knowledge and belief,as disclosed in the Note 64B (i) to thestandalone financial statements, nofunds have been advanced or loaned orinvested (either from borrowed funds orshare premium or any other sources orkind of funds) by the Company to or in
any other person(s) or entity(ies), includingforeign entities ("Intermediaries”), with theunderstanding, whether recorded in writingor otherwise, that the Intermediary shall,directly or indirectly lend or invest in otherpersons or entities identified in any mannerwhatsoever by or on behalf of the Company("Ultimate Beneficiaries”) or provide anyguarantee, security or the like on behalf ofthe Ultimate Beneficiaries.
b. The Management has represented, that,to the best of its knowledge and belief,as disclosed in the Note 64B(ii) to thestandalone financial statements, no fundshave been received by the Company fromany person(s) or entity(ies), includingforeign entities ("Funding Parties”), withthe understanding, whether recorded inwriting or otherwise, that the Companyshall, directly or indirectly, lend or invest inother persons or entities identified in anymanner whatsoever by or on behalf of theFunding Party ("Ultimate Beneficiaries”) orprovide any guarantee, security or the likeon behalf of the Ultimate Beneficiaries.
c. Based on the audit procedures performedthat have been considered reasonableand appropriate in the circumstances,and according to the information and
explanations provided to us by theManagement in this regard nothing hascome to our notice that has caused us tobelieve that the representations undersub-clause (i) and (ii) of Rule 11(e) of the Actas provided under (1) and (2) above, containany material mis-statement.
v. The Company has declared and paid dividendduring the year which is in compliance withsection 123 of the Act.
vi. Based on our examination which included testchecks, the Company has used accountingsoftware for maintaining its books of accountwhich have features of recording audit trail (editlog) facility. As observed, in course of our audit,for one of the software, audit trail is not enabledat the database level. Except for this instance,the audit trail facility in the accounting softwarehas been operating throughout the year for allrelevant transactions recorded in the softwareand we did not come across any instance of audittrail feature being disabled or tampered withduring the course of our audit.
3. As required by The Companies (Amendment) Act, 2017, inour opinion, according to information, explanations given to
us, the remuneration paid by the Company to its directorsis within the limits laid prescribed under Section 197 readwith Schedule V of the Act and the rules thereunder.
For M S K A & Associates For S K Patodia & Associates LLP
Chartered Accountants Chartered Accountants
ICAI Firm Registration Number: 105047W CAI Firm Registration Number: 112723W/W100962
sd/- sd/-
Tushar Kurani Ankush Goyal
Membership Number: 118580 Membership Number: 146017
UDIN:24118580BKFLZV2019 UDIN:24146017BKESEY7433
Kolkata Valapad
May 24, 2024 May 24, 2024