1. We have audited the accompanying Standalone Financial Statements of L&T Finance Limited (formerly knownas L&T Finance Holdings Limited) (the "Company"), which comprise the Standalone Balance Sheet as atMarch 31, 2025, and the Standalone Statement of Profit and Loss (including Other Comprehensive Income),and the Standalone Statement of Cash Flows and the Standalone Statement of Changes in Equity for the yearthen ended, and notes to the Standalone Financial Statements, including a summary of material accountingpolicies and other explanatory information (hereinafter referred to as "Standalone Financial Statements ").
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaidfinancial statements give the information required by the Companies Act, 2013 (the "Act") in the mannerso required and give a true and fair view in conformity with the Indian Accounting Standards ("Ind AS")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, of the state of affairs (financialposition) of the Company as at March 31, 2025, and its profit (financial performance including othercomprehensive income), and its cash flows and the changes in equity for the year ended on that date .
Basis for Opinion
3. We conducted our audit of the financial statements in accordance with the Standards on Auditing ("SAs")specified under section 143(10) of the Act. Our responsibilities under those Standards are further described inthe Auditors' Responsibilities for the Audit of the Standalone Financial Statements section of our report. Weare independent of the Company in accordance with the Code of Ethics issued by the Institute of CharteredAccountants of India ("ICAI") together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on theStandalone Financial Statements.
Key Audit Matters
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our auditof the Standalone Financial Statements of the current year. These matters were addressed in the context ofour audit of the Standalone Financial Statements as a whole, and in forming our opinion thereon, and we donot provide a separate opinion on these matters.
Key Audit Matter
How the matter was addressed in our audit
Allowance for Expected Credit Loss on Retail Loan Assets
[Refer to the Accounting Policies Note 1.7 Impairment, Note 1.9 Presentation of allowance for ECL in theBalance Sheet, Note 06 & 47 to the Standalone Financial Statements]
As at March 31, 2025, Retail loan assets aggregatedRs. 91,642.36 crores (net of expected credit lossesof Rs. 3,536.75 crores), constituting 97.73% ofthe Company's loan book. Significant judgement isused in classifying these loan assets and applyingappropriate measurement principles. ECL on suchloans carried at amortised cost is a critical estimateinvolving a greater level of management judgement.
Our audit procedures were focused on assessingthe appropriateness of management's judgementand estimates used in the impairment analysis thatincluded, but were not limited to, the following:
> Reviewed the Board Approved Policy andprocedures & associates design/controls andexpected credit loss memo concerning theassessment of credit and other risks.
As part of our risk assessment, we determined thatthe ECL on such loan assets has a high degree ofestimation uncertainty, with a potential range ofreasonable outcomes for the standalone financialstatements. The significant assumptions that wefocused on in our audit included those with greaterlevels of management judgement and for whichvariations had the most significant impact on ECL.The key areas where we identified greater levels ofmanagement judgement and therefore increasedlevels of audit focus in the Company's estimationof ECLs are: Each borrower is classified into Stage1, 2, 3 based on the objective criteria of Day PastDue (DPD) status as of the reporting date and otherloss indicators, as applicable. Such classificationby borrower is done across all facilities providedto the borrower, i.e. maximum of the DPDs fromamong the different facilities ["Max DPD"] providedto that borrower. Inherently, significant judgmentis involved in the use of models to estimate ECLwhich includes determining Exposures at Default("EAD"), Probabilities of Default ("PD") and LossGiven Default ("LGD"). The PD and the LGDare the key drivers of estimation complexity andas a result are considered the most significantjudgments in the Company's modelling approach.The modelling methodologies used to estimateECL are developed using historical experience. Theimpact of the prevailing macroeconomic conditionshas also resulted in certain limitations in thereliability of these methodologies to forecast theextent and timing of future customer defaults orpotential credit risks and therefore in estimates ofECL. In addition, modelling methodologies do notnecessarily incorporate all factors that are relevantto estimating ECL, such as differentiating the impacton industry sectors and economic conditions. Theselimitations are attempted to be addressed withmanagement overlay, the measurement of which isinherently judgmental and subject to a high level ofestimation uncertainty.
> Obtained an understanding of the modellingtechniques adopted by the Company includingthe key inputs and assumptions.
> Assessing the design, implementation andoperating effectiveness of key internal financialcontrols including monitoring process ofoverdue loans (including those which becameoverdue after the reporting date), measurementof provision, stage-wise classification of loans,identification of NPA accounts, assessing thereliability of management information.
> Evaluated the appropriateness of the Company'sdetermination of Significant Increase inCredit Risk ("SICR") in accordance with theapplicable accounting standard and the basis forclassification of various exposures into variousstages.
> Testing key controls relating to selection andimplementation of material macro-economicvariables and the controls over the scenarioselection and application of probability weightsand computation of probability of default andloss given default percentages.
> Reviewed the critical assumptions and inputdata used in the estimation of expected creditloss for specific key credit risk parameters, suchas the movement between stages, Exposure atdefault (EAD), probability of default (PD) or lossgiven default (LGD).
> Involved Information system resource to obtaincomfort over data integrity and process ofreport generation through interface of variousinformation systems.
> Tested controls placed over key inputs, data andassumptions impacting ECL calculations to assessthe completeness, accuracy and relevance ofdata and reasonableness of economic forecasts,weights, and model assumptions applied asdetailed below:
• Verified the completeness and accuracy ofthe Exposure at Default ("EAD") and theclassification thereof into stages consistentwith the definitions applied in accordance withthe policy approved by the Board of Directors.
• Checked the appropriateness of informationused in the estimation of the Probability ofDefault ("PD") and Loss given Default ("LGD")for the different stages depending on thenature of the portfolio reconciled the total
retail considered for ECL assessment with thebooks of accounts to ensure the completeness.
• Performed test of details over modelcalculations testing through re-performance,where possible.
• Tested appropriateness of staging ofborrowers based on DPD and other lossindicators.
• Tested the factual accuracy of informationsuch as period of default and other relatedinformation used in estimating the PD.
• Evaluated the reasonableness of applicableassumptions included in LGD computation.
• Evaluated the methodology used todetermine macroeconomic overlays andadjustments to the output of the ECL model.
> Assessed whether the disclosures on keyjudgements, assumptions and quantitative datawith respect to impairment of loans (includingrestructuring related disclosures) in theStandalone Financial Statements are appropriateand sufficient.
> Verified the manner of preparation ofinformation w.r.t. to provisions and disclosuresin the Standalone Financial Statements.
> Obtained written representations frommanagement and those charged withgovernance on whether they believe significantassumptions used in calculation of expectedcredit losses are reasonable.
Information Technology (“IT”) Systems and Controls
The Company has a complex IT architecture tosupport its day-to-day business operations. Highvolume of transactions are processed and recordedon single or multiple applications. The reliability andsecurity of IT systems plays a key role in the businessoperations of the Company. Since large volumeof transactions are processed daily, IT controls arerequired to ensure that applications process dataas expected and that changes are made in anappropriate manner. Appropriate IT general controlsand application controls are required to ensure thatsuch IT systems are able to process the data, asrequired, completely, accurately and consistently forreliable financial reporting. We have identified 'ITsystems and controls' as a key audit matter because
Our Audit procedures included the following, butnot limited to:
Involved IT specialists as part of the audit for thepurpose of testing the IT general controls andapplication controls (automated and semi automatedcontrols) to determine the accuracy of the informationproduced by the Company's IT systems.
With respect to the "In-scope IT systems" identifiedas relevant to the audit of the financial statementsand financial reporting process of the Company,we have evaluated and tested relevant IT generalcontrols.
On such "In-scope IT systems" we have performedthe following procedures:
of the high-level of automation, significant numberof systems being used by the management and thecomplexity of the IT architecture and its impact onthe financial reporting system.
Obtained an understanding of IT applicationslandscape implemented by the Company, includingan understanding of the process, mapping ofapplications and understanding financial risks posedby people, process and technology.
Tested design and operating effectiveness of keycontrols over user access management (includinguser access provisioning, de-provisioning, useraccess review, password configuration review andprivilege access), change management (includingcompliance of change release in productionenvironment to the defined procedures), programdevelopment (including review of data migrationactivity), computer operations (including testing ofkey controls pertaining to, backup, batch processing,incident management and data centre security. Alsotested entity level controls pertaining to IT policy andprocedure and business continuity plan assessment.
Tested the design and operating effectiveness ofcertain automated controls that were consideredas key internal controls over the financial reportingsystem.
5. The Company's Board of Directors is responsible for the other information. The other information comprisesthe information included in the Company's annual report but does not include the Standalone FinancialStatements and our auditors' report thereon. The Other Information is expected to be made available to usafter the date of this auditor's report.
6. Our opinion on the Standalone Financial Statements does not cover the other information and we do notexpress any form of assurance conclusion thereon.
7. In connection with our audit of the Standalone Financial Statements, our responsibility is to read the otherinformation identified above when it becomes available and, in doing so, consider whether the otherinformation is materially inconsistent with the Standalone Financial Statements, or our knowledge obtainedin the audit or otherwise appears to be materially misstated. If, based on the work we have performed, weconclude that there is a material misstatement of this other information, we are required to report that fact.
8. When we read the Annual Report, if we conclude that there is a material misstatement therein, we are requiredto communicate the matter to those charged with governance and take appropriate action as applicableunder the relevant laws and regulations.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial
Statements
9. The accompanying Standalone Financial Statements have been approved by the Company's Board of Directors.The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Act, withrespect to the preparation of these Standalone Financial Statements that give a true and fair view of thefinancial position, financial performance including other comprehensive income, cash flows and changes inequity of the Company in accordance with the accounting principles generally accepted in India, includingthe Ind AS specified under section 133 of the Act. This responsibility also includes maintenance of adequateaccounting 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 accountingsoftware for ensuring compliance with applicable laws and regulations including those related to retentionof audit logs; selection and application of appropriate accounting policies; making judgements and estimatesthat are reasonable and prudent; and design, implementation and maintenance of adequate internal financialcontrols, that were operating effectively for ensuring the accuracy and completeness of accounting records,relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fairview and are free from material misstatement, whether due to fraud or error.
10. In preparing the Standalone Financial Statements, the Board of Directors is responsible for assessing theCompany's ability to continue as a going concern, disclosing, as applicable, matters related to going concernand using the going concern basis of accounting unless the Board of Directors either intends to liquidate theCompany or to cease operations, or has no realistic alternative but to do so.
11. Those Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditors' Responsibilities for the Audit of the Standalone Financial Statements:
12. Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when it exists. Misstatementscan arise from fraud or error and are considered material if, individually or in the aggregate, they couldreasonably be expected to influence the economic decisions of users taken on the basis of these StandaloneFinancial Statements.
13. As part of an audit in accordance with SAs, we exercise professional judgment and maintain professionalskepticism throughout the audit. We also:
(i) Identify and assess the risks of material misstatement of the Standalone Financial Statements, whetherdue to fraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than for one resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(ii) Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible forexpressing our opinion on whether the Company has adequate internal financial controls system withreference to Standalone Financial Statements in place and the operating effectiveness of such controls.
(iii) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimatesand related disclosures made by management.
(iv) 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 conditionsthat may cast significant doubt on the Company's ability to continue as a going concern. If we concludethat a material uncertainty exists, we are required to draw attention in our auditor's report to the relateddisclosures in the Standalone Financial Statements or, if such disclosures are inadequate, to modify ouropinion. 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.
(v) Evaluate the overall presentation, structure and content of the Standalone Financial Statements, includingthe disclosures, and whether the Standalone Financial Statements represent the underlying transactionsand events in a manner that achieves fair presentation.
14. We communicate with those charged with governance regarding, among other matters, the planned scopeand timing of the audit and significant audit findings, including any significant deficiencies in internal controlthat we identify during our audit.
15. We also provide those charged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and other mattersthat may reasonably be thought to bear on our independence, and where applicable, related safeguards.
16. From the matters communicated with those charged with governance, we determine those matters that wereof most significance in the audit of the Standalone Financial Statements of the current year and are thereforethe key audit matters. We describe these matters in our auditor's report unless law or regulation precludespublic disclosure about the matter or when, in extremely rare circumstances, we determine that a mattershould not be communicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
17. As required by the Companies (Auditor's Report) Order, 2020 ("the Order"), issued by the Central Governmentof India in terms of sub section (11) of section 143 of the Act, we give in "Annexure A" a statement on thematters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
18. As required by Section 143(3) of the Act, we report that:
(i) We have sought and obtained all the information and explanations which to the best of our knowledgeand belief were necessary for the purposes of our audit.
(ii) In our opinion, proper books of account as required by law have been kept by the Company so far as itappears from our examination of those books.
(iii) The Standalone Balance Sheet, the Standalone Statement of Profit and Loss (including Other ComprehensiveIncome), the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report arein agreement with the books of account.
(iv) In our opinion, the aforesaid Standalone Financial Statements comply with the Ind AS specified underSection 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended.
(v) On the basis of written representations received from the directors as on March 31,2025 taken on recordby the board of directors, none of the directors is disqualified as on March 31,2025 from being appointedas a director in terms of Section 164(2) of the Act.
(vi) With respect to the adequacy of the internal financial controls with reference to Standalone FinancialStatements of the Company and the operating effectiveness of such controls, refer to our separate Reportin "Annexure B". Our report expresses an unmodified opinion on the adequacy and operating effectivenessof the Company's internal financial controls with reference to Standalone Financial Statements.
(vii) In our opinion and according to the information and explanations given to us, the remuneration paid bythe Company to its directors during the current year is in accordance with the provisions of Section 197of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197of the Act.
19. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of theCompanies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our informationand according to the explanations given to us:
(i) The Company has disclosed the impact of pending litigations as on March 31, 2025 on its financialposition in its Standalone Financial Statements - Refer Note 37 to the Standalone Financial Statements.
(ii) The Company did not have any long-term contracts including derivative contracts for which there wereany material foreseeable losses.
(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Educationand Protection Fund by the Company.
(iv) The management has represented, to the best of its knowledge and belief, that no funds have beenadvanced or loaned or invested (either from borrowed funds or securities premium or any other sourcesor kind of funds) by the Company to or in any persons or entities, including foreign entities ('theintermediaries'), with the understanding, whether recorded in writing or otherwise, that the intermediaryshall, whether, directly or indirectly lend or invest in other persons or entities identified in any mannerwhatsoever by or on behalf of the Company ('the Ultimate Beneficiaries') or provide any guarantee,security or the like on behalf the Ultimate Beneficiaries.
(v) The management has represented, to the best of its knowledge and belief, that no funds have beenreceived by the Company from any persons or entities, including foreign entities ('the Funding Parties'),with the understanding, whether recorded in writing or otherwise, that the Company shall, whetherdirectly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by oron behalf of the Funding Party ('Ultimate Beneficiaries') or provide any guarantee, security or the like onbehalf of the Ultimate Beneficiaries.
(vi) Based on such audit procedures performed as considered reasonable and appropriate in the circumstances,nothing has come to our attention that causes us to believe that the representations under para 19(iv) and19(v) contain any material misstatement.
(vii) In our opinion and according to the information and explanations given to us, the final dividend proposedin the previous year, declared and paid by the Company during the year is in accordance with section 123of the Act, as applicable.
As stated in Note 19 to the Standalone Financial Statements, the Board of Directors of the Companyhas proposed final dividend for the year which is subject to the approval of the members at the ensuingAnnual General Meeting. The amount of dividend proposed is in accordance with Section 123 of the Act,as applicable.
(viii) Based on our examination, which included test checks, the Company has used accounting softwares formaintaining its books of account, which has a feature of recording audit trail (edit log) facility and thathas operated throughout the year for all relevant transactions recorded in these software.
However, audit trail (edit logs) for direct changes made at the database level, if any, were not enabled. TheCompany has informed us that an alternate tool is being used to monitor such database-level changes,however the log of same is not preserved in accordance with statutory requirements for record retention.
Further, during the course of our audit we did not come across any instance of audit trail feature beingtampered with, where such functionality was enabled and logs were maintained. Additionally, except forthe database-level changes as mentioned above, the audit trail has been preserved by the Company asper the statutory requirements for record retention.
Chartered Accountants Chartered Accountants
ICAI Firm Registration No. 000515S ICAI Firm Registration No. 006711N/N500028
Partner Partner
Membership No. 015590 Membership No. 075363
UDIN: 25015590BMMJNQ1870 UDIN: 25075363BMOIUQ6022
Place: Mumbai Place: Mumbai
Date: April 25, 2025 Date: April 25, 2025