The Members of Star Housing Finance Limited
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of Star Housing Finance Limited (the “Company”), which comprise the Balance Sheet as at March 31, 2024, and the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid 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 March 31, 2024, and its profit, total comprehensive income, its cash flows and the changes in equity for the year ended on that date.
We conducted our audit of the financial statements in accordance with the Standards on Auditing specified under section 143 (10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor’s Responsibility for the Audit of the 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 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 ICAI’s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.
Key audit matter is the matter that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. The matter was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on the matter. We have determined the matter described below to be the key audit matter to be communicated in our report
1*
KEY AUDIT MATTER
AUDITOR'S RESPONSE
Impairment Of Loans
Principal Audit Procedures Performed
Management estimates impairment provision of the
We examined Board Policy approving methodologies for
Financial assets using Expected Credit loss model for
computation of ECL that address policies, procedures
the loan exposure as per the Board approved policy
and controls for assessing and measuring credit risk
which is in line with Ind AS and the Regulations.
on all lending exposures, commensurate with the size,
Measurement of loan impairment involves application
complexity and risk profile specific to the borrowers.
of significant judgement by the management. The most
We evaluated the design and operating effectiveness of
significant judgements are:
controls across the processes relevant to ECL, including
• Timely identification and classification of the impaired
the judgements and estimates.
loans, including classification of assets to stage 1, 2, or
We tested the completeness of loans and advances
3 using criteria in accordance with Ind AS 109 which
included in the Expected Credit Loss calculations as of
also include considering the impact of RBI's regulatory
March 31, 2024 by reconciling it with the balances as per
circulars,
• The segmentation of financial assets when their ECL is
loan balance register and loan commitment report as on that date.
assessed on a collective basis,
• Determination of probability of defaults (PD) and loss given defaults (LGD) based on the default history of
We tested assets in stage 1, 2 and 3 on sample basis to verify that they were allocated to the appropriate stage.
Tested samples to ascertain the completeness and
loans, subsequent recoveries made and other relevant
accuracy of the input data used for determining the
factors and
PD and LGD rates and agreed the data with underlying books of accounts and records.
• Assessment of qualitative factors having an impact on
For samples of exposure, we tested the
the credit risk.
appropriateness of determining EAD, PD and LGD.
There are disclosures made in financial statements for
For exposure determined to be individually impaired,
ECL especially in relation to judgements and estimates
we tested samples of loans and advances and examined
by the Management in determination of the ECL. Refer
management's estimate of future cash flows, assessed
note 3.6 and note 6.1 to the financial statements.
their reasonableness and checked the resultant provision calculations.
We performed an overall assessment of the ECL provision levels at each stage including management's assessment and provision on account of Company's portfolio, risk profile, credit risk management practices. We 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.
Evaluation of Company’s IT Systems and Controls
Our audit procedures includes:
Our audit procedures have a focus on IT systems and
• Assessing the reliability of electronic data processing,
controls due to the pervasive nature and complexity of
we included specialized IT auditors as part of the audit
the IT environment, the large volume of transactions
team.
processed in numerous locations daily and the reliance
• Obtained an understanding of the IT control
on automated and IT dependent manual controls.
environment, IT policies during the audit period.
Due to the pervasive nature and complexity of the
• Tested the design and operating effectiveness of the IT
IT environment, we have ascertained IT systems and
general controls (logical access, changes management
controls as a key audit matter
and aspects of IT operational controls). This included testing that requests for access to systems were reviewed and authorized.
• Tested the Company's periodic review of access rights. We inspected requests of changes to systems for appropriate approval and authorization.
• Considered the control environment relating to various interfaces, configuration and other application layer controls identified as key to our audit.
• Assessment and identification of key IT applications, and further verifying, testing, and reviewing the design and operating effectiveness of the IT system on the basis of reports /returns and other financial and nonfinancial information generated from the system on a test check basis.
Where we identified the need to perform additional procedures, we placed reliance on manual reconciliations between systems and other information sources.
Q TheCompany'sBoardofDirectorsareresponsiblefortheotherinformation.Theotherinformationcomprisestheinformation included in the Management Discussion and Analysis and Directors' Report (the "Reports”) but does not include financial statements and our auditors' report thereon. The reports are expected to be made available to us after the date of this auditors' report.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
I n connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained during the course of our 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 as required under SA 720 (Revised) 'The Auditor's responsibilities Relating to Other Information'. We have noting to report in this regard.
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 financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Ind AS 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 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 statement 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.
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 financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
o 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 financial 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 the management in the financial statements.
Evaluate the appropriateness and reasonableness of disclosures made by the Board of Directors in terms of the requirements specified under the Listing Regulations.
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.
o Evaluate the overall presentation, structure and content of the Financial Results, including the disclosures, and whether the Financial Results represent the underlying transactions and events in a manner that achieves fair presentation.
o Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in
I. planning the scope of our audit work and in evaluating the results of our work; and
II. to evaluate the effect of any identified misstatements in the financial statements.
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 requirement 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 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.
1. As required by the Companies (Auditors' Report) Order, 2020 (“the Order”) issued by the Central Government in terms of section 143 (11) 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, 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.
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 Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.
d) In our opinion, the aforesaid financial statements comply with the Ind AS specified under Section 133 of the Act.
e) On the basis of the written representations received from the directors as and taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164(2) of the Act.
f) 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 A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting.
g) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us, the remuneration has been paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
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, as amended 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 as at 31 March 2024 on its financial position in its Standalone financial statements - Refer Note 29 of financial statements.
ii. The Company did not have any long-term contracts including derivative contracts as at the year-end for which there were any material foreseeable losses.
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
iv. (a) The Management has represented that, to the best of its knowledge and belief, as disclosed in the notes of
accounts, no funds (which are material either individually or in aggregate) 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, 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. Refer note 45 to the financial statements.
(b) The Management has represented, that, to the best of its knowledge and belief, as disclosed in the notes to accounts, no funds (which are material either individually or in the aggregate) 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, 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. Refer note 45 to the financial statements.
(c) Based on the audit procedures that has been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub- clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material mis-statement.
v. (a) The dividend declared and paid by the Company during the year is in accordance with Section 123 of the Act,
as applicable.
(b) The company has not proposed or declared final dividend for the year.
vi. 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 and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with.
As provision to Rule 3(1) of the Companies (Accounts) Rules 2014 is applicable from April 1, 2023, reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the financial year ended March 31, 2024.
For NYATI MUNDRA & CO.
Chartered Accountants
Firm Registration Number : 008153C
SD/-
CA Ashok Kumar Jain Partner
Membership No. 071210 UDIN: 24071210BKJPYG3522
Place: Udaipur Date: 08-05-2024