We have audited the accompanying standalone financial
statements of Manappuram Finance Limited (the "Company”),
which comprise the Balance Sheet as at March 31, 2024, the
Statement of Profit and Loss including Other Comprehensive
income, Statement of Changes in Equity and Statement of Cash
Flow for the year then ended, and notes to the standalone
financial statements, including material accounting policy
information and other explanatory information (hereinafter
referred to as the "standalone financial statements”).
In 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 Companies
(Indian Accounting Standards) Rules, 2015, as amended (the
"Rules”) and other accounting principles generally accepted
in India, of the state of affairs of the Company as at March 31,
2024, Standalone profit, other comprehensive income, changes
in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone 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 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 obtained by
us is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, 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 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. We have determined the matters described below
to be the key audit matters to be communicated in our report.
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Sr.
No
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Key Audit Matter
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How the Key Audit Matter was addressed in our audit
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1.
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Interest Income on Gold Loans:
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Interest Income on Gold Loan as at March 31, 2024:
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Our audit procedures in respect of this matter included the
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' 44,232.98 millions
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following but not limited to:
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Refer note 27(i) to the standalone financial statements
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• Obtained an understanding of management's process,
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Interest Income on Gold Loan is based on the various gold
loan schemes provided by the Company which is netted off
against the rebates & discounts given for prompt or early
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systems/applications and controls implemented on in
relation to computation & recognition of interest income
on gold loans.
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payments. The calculation of the rebates & discount amounts
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• Evaluated and validated the design, implementation
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netted off against the interest income involve complexities
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and operating effectiveness of key internal financial
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on account of descretion & managment judgement which is
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controls pertaining to the recognition of the various gold
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dependent upon the timing and period of repayment under
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loan schemes and interest income thereon, including
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the different schemes. Penal interest charged on account of
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rebates & discounts.
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delay payments dependent on the nature & period of delay
and hence subject to judgement.
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Ý The entire computation of interest income is automated
and system driven. We have performed the following
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Considering the significance of interest income on gold loans
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audit procedure with respect to around interest income
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and the above factors we have considered Interest Income on
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on gold loans:
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gold loan as Key Audit Matter
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i. Selected samples and verified accuracy of interest
income under various gold loans schemes by
performing recomputation.
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Sr.
No
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Key Audit Matter
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How the Key Audit Matter was addressed in our audit
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ii.
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Selected samples of continuing and new gold loan
schemes and tested the operating effectiveness of the
internal control, relating to interest income computation.
We also carried out a combination of procedures
involving inquiry, and observation and inspection of
evidence in respect of operation of these controls.
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iii.
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Performed analytical procedures and test of details
procedures for testing the accuracy and completeness
of revenue recognized.
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iv.
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Tested the relevant IT general controls around access
and change management relating to interest income
computation and related information used in interest
computation.
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v.
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Obtained the list of modifications made in the interest
scheme master during the year and verified the same
on test check basis.
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vi.
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Assessed the appropriateness, accuracy and adequacy
of related presentation and disclosures in accordance
with the applicable accounting standards.
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2
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Provision for Expected Credit Losses (ECL) on Loans:
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Total Gross Loans as at March 31, 2024: ' 2,93,506. 95 millions
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Our audit procedures in respect of this matter included the
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Impairment Provision as at March 31, 2024: ' 2,122.37 millions
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following, but not limited to:
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Refer note 10 to the standalone financial statements
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•
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Examined policies approved by the Board of Directors
for computation of ECL that addresses procedures
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In accordance with IND AS 109, the Company applies expected
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and controls for assessing and measuring credit risk
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credit losses (ECL) model for measurement and recognition of
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on all lending exposures commensurate with the size,
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impairment loss on the loans assets. Significant judgements
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complexity and risk profile specific to the Company.
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are used in classifying loan assets and applying appropriate
measurement principles. The allowance for expected credit
losses ("ECL”) involves a significant level of management
judgement and estimation uncertainty in the following key
areas:
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•
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Evaluated & validated the design and operating
effectiveness of controls across the processes relevant
to allowance for ECL. These controls, among others,
included controls over the allocation of assets into
stages including management's monitoring of stage
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• Assessesing whether there has been a significant
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effectiveness, model monitoring including the need
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increase in credit risk for exposures since its initial
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for post model adjustments, model validation, credit
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recognition by comparing the risk of default occurring
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monitoring, individual/ collective provisions and
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over the expected life of the asset between the date of
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production of journal entries and disclosures.
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initial recognition and the reporting date, which involves
estimation uncertanity in computing the default risk over
life of the assets which is likely to be more than one year.
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•
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Verified the completeness of loans included in the
Expected Credit Loss calculations as of 31 March 2024.
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• Classification of loan assets to stage 1, 2, or 3 using
criteria in accordance with Ind AS 109 where no
significant increase in credit risk has been observed,
such assets are classified in "Stage 1”, loans that are
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•
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Selected samples & verified appropriateness of
classification of loan assets in stage 1, 2 and 3 in
accordance with the policy approved by the Board of
Directors.
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considered to have significant increase in credit risk
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Selected samples of exposure and verified the
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are not credit impaired are considered to be in "Stage
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appropriateness of determining Exposure at Default
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2” and those which are in default or for which there is
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(EAD), PD and LGD. Further, also checked the
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an objective evidence of impairment are considered to
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appropriateness of information used in the estimation of
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be in "Stage 3”. Such classification requires significant
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the Probability of Default ("PD”) and Loss given Default
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management judgements due to the nature of loan
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("LGD”) for the different stages depending on the nature
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assets and assessment required thereon.
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of the portfolio.
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Sr.
No
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Key Audit Matter
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How the Key Audit Matter was addressed in our audit
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• Determination of Exposures at Default (“EAD”),
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Performed an overall assessment of the ECL provision
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probability of defaults (PD) and estimation of loss given
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levels at each stage.
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defaults (LGD). The probability of default for the pools
are computed based on the historical trends, adjusted
with any forward looking factors which is subject to
estimation ncertainty. Similarly the Company computes
the Loss Given Default based on the recovery rates as
estimated by management.
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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.
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Considering the above, allowance for Expected Credit Loss
on Loan Assets requires a high degree of judgement and
estimation uncertainty, with a potential range of outcomes
which have a significant impact on the financial statements.
Accordingly, we have determined Provision for Expected
Credit Losses (ECL) on Loans as Key Audit Matter.
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3
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Information Technology ("IT") Systems and Controls
The Company has a complex IT system to support its recording
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Our audit procedures with respect to this matter included the
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of customer's operational data, business processes, ensuring
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following, but were not limited to the following:
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complete and accurate processing of financial transactions
and supporting the overall internal control framework.
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Involved IT specialists as part of the audit for the purpose
of testing the IT general controls and application
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In particular, the IT system is used for recording all
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controls (automated and semiautomated controls) to
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disbursements and collections, identification and tagging of
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determine the accuracy of the information produced by
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pledged loans to customers and calculating interest income
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the Company's IT systems;
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and overdue days.
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Obtained a comprehensive understanding of IT
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The Company's accounting and financial reporting processes
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applications landscape implemented at the Company.
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are dependent on automated controls enabled by IT systems
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It was followed by process understanding, mapping of
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which impacts key financial accounting and reporting items
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applications to the same and understanding financial
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such as loans, interest income, impairment on loans amongst
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risks posed by people-process and technology;
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others.
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Tested design and operating effectiveness of key
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The reliability and security of IT systems play a key role in
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controls operating over user access management,
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the business operation. The controls implemented by the
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change management, computer operations (which
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Company in its IT environment determine the integrity,
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includes testing of key controls pertaining to, backup
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accuracy, completeness and validity of data that is processed
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and incident management and data centre security),
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by the applications and is ultimately used for financial
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System interface controls. This included testing that
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reporting.
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requests for access to systems were appropriately
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Accordingly, we have identified 'IT systems and controls'
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logged, reviewed, and authorized.
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as key audit matter because of the high level automation,
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Tested the design and operating effectiveness of
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significant number of systems being used by the management
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certain automated controls, that were considered as
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and the complexity of the IT architecture and its impact on the
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key internal system controls over financial reporting
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financial reporting system.
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were tested. Using various techniques such as inquiry,
review of documentation / record / reports, observation,
and re-performance. We also tested few controls using
negative testing technique;
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Tested compensating controls and performed alternate
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procedures, where necessary. In addition, understood
where relevant, changes made to the IT landscape
during the audit period.
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Information Other than the Financial Statements and
Auditor's Report Thereon
The Company's Management and Board of Directors are
responsible for the other information. The other information
comprises the information included in the Annual Report but
does not include the standalone financial statements and our
auditor's report thereon. The Annual Report is expected to be
made available to us after that date of this auditor's report.
Our opinion on the standalone financial statements does not
cover the other information and we will not express any form of
assurance conclusion thereon.
In 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.
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 under SA 720 'The
Auditor's responsibilities Relating to Other Information'.
Responsibilities of Management and Those Charged
with Governance for the Standalone Financial
Statements
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, changes in equity and cash flows of the
Company in accordance with the accounting principles generally
accepted in India, including the Indian Accounting Standards
specified under section 133 of the Act read with the Rules
thereunder. 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
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
statement that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
In preparing the standalone financial statements, the
Management and 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.
The Board of Directors are also responsible for overseeing the
Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone
Financial Statements
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:
• 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.
• 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) of
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.
• Evaluate the appropriateness of material accounting policies
used and the reasonableness of accounting estimates and
related disclosures made by Management and Board of
Directors.
• Conclude on the appropriateness of 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.
• 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.
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 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.
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
for the year ended March 31, 2024 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.
Report on Other Legal and Regulatory Requirements
1. 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 "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, 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 except
for the matters stated in paragraph 2 (h)(vi) below on
reporting under Rule 11(g) of the Companies (Audit
and Auditors) Rules, 2014 (as amended).
(c) The Balance Sheet, the Statement of Profit and Loss
including other comprehensive income, the Statement
of Changes in Equity and the Statement of Cash Flow
dealt with by this Report are in agreement with the
books of account.
(d) In our opinion, the aforesaid standalone financial
statements comply with the Indian Accounting
Standards specified under Section 133 of the Act read
with the Rules thereunder.
(e) The reservation relating to the maintenance of
accounts and other matters connected therewith are
as stated in the paragraph 2(b) above on reporting
under Section 143(3)(b) of the Act and paragraph
2(h)(vi) below on reporting under Rule 11(g) of the
Companies (Audit and Auditors) Rules, 2014.
(f) On the basis of the written representations received
from the directors as on March 31, 2024 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.
(g) 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”.
(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, 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 on its financial position in its
standalone financial statements (Refer Note 41
of the standalone financial statements).
ii. The Company did not have any long-term
contracts including derivative contracts for
which there were any material foreseeable
losses (Refer Note 76 to the standalone financial
statements).
iii. There Company has transferred '4.40 millions
of Unclaimed dividend to the Investor Education
and Protection Fund during the financial
year 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 the
standalone financial statements, 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,
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.
b. The Management has represented, that,
to the best of its knowledge and belief,
as disclosed in the Note 64B(ii) to the
standalone financial statements, 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, 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.
c. Based on the audit procedures performed
that have been considered reasonable
and appropriate in the circumstances,
and according to the information and
explanations provided to us by the
Management in this regard 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) of the Act
as provided under (1) and (2) above, contain
any material mis-statement.
v. The Company has declared and paid dividend
during the year which is in compliance with
section 123 of the Act.
vi. Based on our examination which included test
checks, the Company has used accounting
software for maintaining its books of account
which have features of recording audit trail (edit
log) facility. As observed, in course of our audit,
for one of the software, audit trail is not enabled
at the database level. Except for this instance,
the audit trail facility in the accounting software
has been operating throughout the year for all
relevant transactions recorded in the software
and we did not come across any instance of audit
trail feature being disabled or tampered with
during the course of our audit.
3. As required by The Companies (Amendment) Act, 2017, in
our opinion, according to information, explanations given to
us, the remuneration paid by the Company to its directors
is within the limits laid prescribed under Section 197 read
with 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
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