To the Members of Manappuram Finance Limited
Report on the Audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying Standalone Financial Statements of Manappuram Finance Limited (the 'Company'), which comprise the Standalone Balance Sheet as at 31 March 2025, and the Standalone Statement of Profit And Loss (including Other Comprehensive Income), Standalone Statement of Changes in Equity and Standalone Statement of Cash Flows for the year ended on that date, and notes to the Standalone Financial Statements, including a summary of material accounting policy information and other explanatory information (hereinafter referred to as the 'Standalone Financial Statements').
2. I n 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 (the '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, ('Ind AS') and other accounting principles generally accepted in India, of the State of Affairs of the Company as at 31 March 2025, and its Profit and Other Comprehensive Income, Changes in Equity and its Cash Flows for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing ('SAs') specified under section 143(10) of the Act. Our responsibilities under those SAs 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 ('ICAI') together with the ethical requirements that are relevant to our audit of the Standalone
Financial Statements under the provisions of the Act, 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.
Emphasis of Matter
4. We draw attention to note no. 74 of the Standalone Financial Statement describing the identification of instances of embezzlement of the Company's funds by an employee of the Company's subsidiary, Manappuram Comptech and Consultants Limited (the 'subsidiary') and the details of investigation carried out by an independent consultant. As represented by the Company's management, the independent consultant has concluded the investigation procedures and has confirmed that the extent of the embezzlement does not exceed '197.77 million as determined during the preliminary findings. The company has accounted for compensation receivable of '197.77 million for losses suffered due to fraudulent activities. This compensation is considered as an exceptional item due to its nature and size compensation and has been recognized in the Profit & Loss Statement as an exceptional item, reflecting its non-recurring nature. Our opinion on the Standalone Financial Statement is not modified in respect of this matter.
Key Audit Matters
5. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements of the current year. 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.
6. We have determined the matters described below to be the key audit matters to be communicated in our report.
Key Audit Matter
How the Key Audit Matter was addressed in our audit
Interest Income on Gold Loans:
Interest Income on Gold Loans for the financial year ended 31
Our
audit procedures in respect of this matter included the
March 2025: INR 51,510.54 millions.
following:
Refer note no. 27 (i) to the standalone financial statements
•
Obtained an understanding of various schemes approved by the management and process, applications and controls
Interest Income on Gold Loan is based on the various gold loan
implemented on in relation to computation & recognition of
schemes provided by the Company which is netted off against
interest income on gold loans and rebated provided to the
the rebates & discounts given for prompt or early re-payments.
customer on prompt and early re-payment
The calculation of the rebates & discount amounts netted off
against the interest income involve complexities on account
Evaluated the IT Architecture, process flow and operating
of discretion & management judgement which is dependent
effectiveness of key internal financial controls pertaining
upon the timing and period of repayment under the different
to the recognition of the various gold loan schemes and
schemes. Considering the significance of interest income on
interest income thereon, including rebates & discounts.
gold loans and the above factors we have considered Interest
Tested the relevant IT General Controls around access and
Income on gold loan as Key Audit Matter
change management relating to interest income computation and related information used in interest computation.
For loans settled during the year, on test check basis, examined the accuracy of interest income and the rebated recognised under various gold loans schemes by performing re-computation.
For loans disbursed during the year and remaining outstanding as at the reporting date, re-computation of interest income was performed for the entire outstanding loans.
Performed analytical procedures and test of details procedures for testing the accuracy and completeness of revenue recognized.
Obtained the list of modifications made in the interest scheme master during the year and verified the same on test check basis.
Reconciliation of balances as per general ledger and subledgers were performed to ascertain the completeness of the transactions recognised. Further reconciliation was performed between sub-ledger and customer transaction history for selected transactions
Assessed the appropriateness, accuracy and adequacy of related presentation and disclosures in accordance with the applicable accounting standards.
Provision for Expected Credit Losses (ECL) on Loans:
Total Gross Loans as at 31 March 2025: INR 3,21,895.39
millions
following, but not limited to:
Impairment Provision as at 31 March 2025: INR 2,872.71
Obtained understanding of the credit risk attached to
each portfolio or business segment of the Company and the derivation of the model used by the Company for
Refer note no. 10 to the Standalone Financial Statements
determination of ECL for each major portfolio.
In accordance with Ind AS 109 'Financial Instruments', the
Examined policies approved by the Board of Directors for
Company applies ECL model for measurement and recognition
of impairment loss on the loan assets. ECL involves an estimation
computation of ECL that addresses procedures and controls
of probability weighted loss on financial instruments over
for assessing and measuring credit risk on all lending
their life, considering reasonable and supportable information
exposures commensurate with the size, complexity and risk
about past events, current conditions, and forecasts of future
profile specific to the Company.
economic conditions which could impact the credit quality of the Company's financial assets (loan portfolio).
Impairment Loss measurement requires use of statistical
Evaluated the Company's accounting policy in respected of
models to estimate the Probabilities of Default (PD), Loss
ECL provisioning in compliance with requirements of Ind AS
Given Default (LGD) and Exposure at Default (EAD). These
109 'Financial Instruments'
models are key driver to measure Impairment loss.
Significant judgements are used in classifying loan assets and
applying appropriate measurement principles. The allowance for ECL involves a significant level of management judgement and estimation uncertainty in the following key areas:
Assessing whether there has been a significant increase in credit risk for exposures since its initial recognition by comparing the risk of default occurring over the expected life of the asset between the date of initial recognition and
Assessed & validated the design and operating effectiveness of controls across the processes relevant to allowance for ECL. These controls, among others, included controls over the appropriateness of data used for measurement, allocation of assets into stages including management's monitoring of stage effectiveness, financial information used for deriving PD and LGD, computation of PD, LGD and consequently the ECL as at the reporting date and posting of related journal entries.
the reporting date, which involves estimation uncertainty
Verified on sample basis, the completeness of loans included
in computing the default risk over life of the assets which
in the Expected Credit Loss calculations as of 31 March 2025
is likely to be more than one year.
and the accuracy of the source data
• Classification of loan assets to stage I, II, or III using
Selected samples & verified appropriateness of classification
criteria in accordance with Ind AS 109 where no
of loan assets in stage I, II and III in accordance with the
significant increase in credit risk has been observed, such assets are classified in 'Stage I', loans that are considered to have significant increase in credit risk are not credit impaired are considered to be in 'Stage II' and those which are in default or for which there is an objective evidence of impairment are considered to be in 'Stage III'. Such classification requires significant management judgements due to the nature of loan assets and
policy approved by the Board of Directors.
Examined the appropriateness of information used in the estimation of the Probability of Default ('PD') and recomputed
the average PD to applied for measurement of ECL as at the reporting date. Further, validated the information of the macro-economic factors used for determining the PD from external sources.
assessment required thereon.
Validating the recoverability analysis performed by the
Determination of EAD, PD and estimation of LGD. The probability of default for the pools are computed based on the historical losses incurred on defaults, adjusted with any forward-looking macro-economic factors
management for cases tagged as non-performing assets as at the reporting date for determining the Loss given Default ('LGD') for the different stages depending on the nature of the portfolio. Performed re-computation of LGD at each pledge level.
which is subject to estimation uncertainty. Similarly, the
Company computes the Loss Given Default based on the
Selected samples of exposure and verified the
recovery rates as estimated by management.
appropriateness of determining Exposure at Default (EAD),
Considering the above, allowance for Expected Credit Loss
PD and LGD.
on Loan Assets requires a high degree of judgement and
Performed an overall assessment of the ECL provision
estimation uncertainty, with a potential range of outcomes
levels at each stage.
which have a significant impact on the financial statements. Accordingly, we have determined Provision for ECL on Loans as Key Audit Matter.
Assessed the adequacy and appropriateness of disclosures in compliance with the Ind AS 107 in relation to ECL especially in relation to judgements used in estimation of ECL provision.
Information Technology ('IT') Systems and Controls:
The IT environment of the Company is complex and involves
Our audit procedures with respect to this matter included the
a large number of independent and interdependent modules
following, but were not limited to the following:
used in the operations of the Company for processing and recording a large volume of transactions. As a result, there is a high degree of reliance and dependency on such IT systems for the financial reporting process of the Company
Involved IT specialists as part of the audit for the purpose of testing the IT general controls and application controls to determine the accuracy of the information produced by the Company's IT systems;
In particular, the IT system is used for recording all
Obtained a comprehensive understanding of IT Environment,
disbursements and collections, identification and tagging of
IT Applications and related infrastructure to assess
pledged loans to customers and calculating interest income
the controls with reference to preparation of financial
and overdue days.
statements.
The Company's accounting and financial reporting processes
Tested design and operating effectiveness of key controls
are dependent on automated controls enabled by IT systems
operating over user access management, change
which impacts key financial accounting and reporting items
management and other IT operations (which includes
such as loans, interest income, impairment on loans amongst
testing of key controls pertaining to, backup and incident
others.
management and data centre security), System interface controls. This included testing that requests for access
The reliability and security of IT systems play a key role
to systems were appropriately logged, reviewed, and
in the business operation. The controls implemented by
authorized;
the Company in its IT environment determine the integrity, accuracy, completeness and validity of data that is processed by the applications and is ultimately used for financial reporting.
Testing the controls laid down by the management over modification of transactions recognised in the accounting modules or insertion or deletion of transactions in the
accounting module. Further tested the controls with respect
Accordingly, we have identified 'IT systems and controls' as key audit matter because of the high-level automation, significant
to insertion or modification of interest rate masters and customer transaction history.
number of modules being used by the management and the
Examined the process and procedures and other
complexity of the IT architecture and its impact on the financial
documentations for complying with the requirements
reporting system.
of the RBI Master Direction on Information Technology
Governance, Risk, Controls and Assurance Practices (DoS. CO.CSITEG/SEC.7/31.01.015/2023-24 dated November 7, 2023)
Other Information
7. The Company's Management and the Board of Directors are responsible for the other information. The other information comprises the information included in the Company's annual report but does not include the Standalone Financial Statements and our auditors' report thereon. The Other Information is expected to be made available to us after the date of this auditor's report.
8. Our opinion on the Standalone Financial Statements does
not cover the other information and we do not express any form of assurance conclusion thereon.
9. I n 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. 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.
10. When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take appropriate action as applicable under the relevant laws and regulations.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
11. The Company's Management and Board of Directors are 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, change in equity and Cash Flows of the Company 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 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 of the assets of the Company and for preventing and detecting frauds and other irregularities; selection of the appropriate accounting software for ensuring compliance with applicable laws and regulations including those related to retention of audit logs; 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.
12. I n preparing the Standalone Financial Statements, the Management of the Company and the Board of Directors are 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 Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
13. The Board of Directors is also responsible for overseeing the Company's financial reporting process.
Auditor's responsibilities for the audit of the Standalone Financial Statements
14. Our objectives are to obtain reasonable assurance about whether the Standalone 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:
14.1 I dentify 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.
14.2. 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) the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to Standalone Financial Statements in place and the operating effectiveness of such controls.
14.3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management and the Board of Directors.
14.4. Conclude on the appropriateness of the Management and Board of Director'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 Standalone 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.
14.5. 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.
15. 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.
16. 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.
17. 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 year 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 Matter
18. The Standalone Financial Statement of the Company for the financial year ended 31 March 2024 were audited by the predecessor joint auditors, M S K A & Associates, Chartered Accountants and S K Patodia & Associates LLP, Chartered Accountants whose audit report dated 24 May 2024 had expressed an unmodified opinion on those Standalone Financial Statement. Our opinion on the Standalone Financial Statement is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
19. 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 A' a statement on the matters
specified in paragraphs 3 and 4 of the Order, to the extent applicable.
20. As required by Section 143(3) of the Act, we report that:
20.1. 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.
20.2. I n our opinion, proper books of accounts as required by
law have been kept by the Company so far as it appears from our examination of those books except for the matters stated in paragraph 21.8 below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014
(as amended).
20.3. The standalone balance sheet, the standalone statement of profit and loss including Other Comprehensive Income, the Statement of Changes in Equity and the Standalone Cash
Flow Statement dealt with by this Report are in agreement with the books of account.
20.4. In our opinion, the aforesaid Standalone Financial
Statements comply with the Ind AS specified under Section 133 of the Act read with the relevant rules thereunder.
20.5. On the basis of the written representations received from the directors as on 31 March 2025 taken on record by the Board of Directors, none of the directors is disqualified as on
31 March 2025 from being appointed as a director in terms of Section 164(2) of the Act.
20.6. With respect to the maintenance of accounts and other matters connected therewith, reference is made to our remarks in paragraph 20.2 above on reporting under Section 143(3)(b) and paragraph 21.8 below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended).
20.7. With respect to the adequacy of the internal financial controls with reference to Standalone Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate Report in 'Annexure B'.
20.8. I n our opinion and according to the information and
explanations given to us, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act.
21. 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 (as amended),
in our opinion and to the best of our information and according to the explanations given to us:
21.1. The Company has disclosed the impact of pending litigations as at 31 March 2025 on its financial position in its Standalone Financial Statements - Refer Note no. 41 to the Standalone Financial Statements;
21.2. The Company has recognised the expected credit loss on the loans as per the requirements of the Ind AS 109 'Financial Instruments'. (Refer note no. 10 to the standalone financial statements). As represented to us The Company did not have any other long-term contracts including derivative contracts for which there were any material foreseeable losses (Refer Note no. 76 to the Standalone Financial Statements)
21.3. There was an instance of delay in transferring amounts pertaining to Unpaid Dividend (INR 0.86 million), required to be transferred, to the Investor Education and Protection Fund by the Company. (Refer Note no. 77 to Standalone
Financial Statements)
21.4. The Management has represented that to best of their knowledge and belief, as disclosed in Note no. 64B to the Standalone Financial Statements that 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 or in any other person(s) or entity(ies), 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 identified in any manner whatsoever by or on behalf of the Company ('Ultimate Beneficiaries') or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
21.5. The Management has represented that to best of their knowledge and belief, as disclosed in Note no. 64B to the Standalone Financial Statements, that no funds have been received by the Company from any person(s) or entity(ies), including foreign entities ('Funding Parties'), 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.
21.6. Based on such audit procedures, that have been considered reasonable and appropriate in the circumstances, performed by us, nothing has come to our notice that has caused us to
believe that the representation under paragraph '21.4' and '21.5' contain any material misstatement.
21.7. As stated in note no. 25 b to the Standalone Financial Statements, the interim dividend declared and paid by the Company during the financial year and until the date of this
audit report is in accordance with Section 123 of the Act.
21.8 Based on our examination which included test checks, the company has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility. Further, the audit trail facility has been operating throughout the year for all relevant transactions recorded in the software. The master records of certain modules can be accessed by the database administrator wherein trail of changes made by database administrator is not captured. As represented to us, the privilege access and release management operations performed by Data Base Administrator is monitored by Company's database monitoring team on a daily basis.
Further, during the course of our audit, based on our examination
and representation made by the management, we did not come across any instance of audit trail feature being tampered with. The audit trail to monitor changes to the tables, where old value has been stored, are made effective from 30 April 2025.
Additionally, the audit trail has been preserved by the Company as per the statutory requirements for record retention. The audit trail at the database level for one of the modules forming part of the application has been made effective from current financial year and accordingly the aforesaid audit trail or prior periods are not available.
For and on behalf of For and on behalf of
KKC & Associates LLP Chokshi & Chokshi LLP
(formerly known as Khimji Kunverji & Co LLP) Chartered Accountants
Chartered Accountants ICAI Firm Registration Number: 101872W/W100045
ICAI Firm Registration Number: 105146W/W100621
sd/- sd/-
Soorej Kombaht Vineet Saxena
Partner Partner
ICAI Membership No.: 164366 ICAI Membership No.: 100770
UDIN: 25164366BMNUMQ2681 UDIN: 25100770BMIQRN9779
Place: Valapad Place: Mumbai
Date: 09th May, 2025 Date: 09th May, 2025