Can Fin Homes Limited
Report on Audit of the Financial Statements Opinion:
We have audited the accompanying Ind AS Financial Statements of Can Fin Homes Limited ("the Company") which comprise Balance Sheet as at March 31,2025, the Statement of Profit & Loss (Including Other comprehensive Income), Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, notes to Ind AS financial statements including a summary of material accounting policies and other explanatory information (hereinafter referred to as the 'Ind AS financial statements').
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Ind AS 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 31,2025, its Profits including Other Comprehensive loss, Changes in Equity and its Cash Flows for the year ended on that date.
Basis of Opinion:
We conducted our audit 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 Auditors' Responsibilities 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 together with the ethical requirements that are relevant to our audit of the Ind AS 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.
Key Audit Matters:
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Ind AS financial statements for the period ended March 31, 2025. These matters were addressed in the context of our audit of the Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
|
Sr. No. Key audit matters
|
How our audit addressed the key audit matter
|
|
1. Expected Credit Loss - Impairment of carrying value
|
Our Audit Approach:
|
|
of loans and advances:
|
Our audit approach was a combination of test of internal controls and
|
|
IND AS 109 requires the Company to provide for
|
substantive procedures which included the following:
|
|
impairment of its Loans and Advances using the Expected
|
A. Obtained an understanding for estimating the probability of default
|
|
Credit Losses (“ECL") approach.
|
on loans receivable through Markov chain model by:
|
|
This Approach involves an estimation of probability of
|
Analysis of Loan portfolio
|
|
weighted loss on Financial Instruments over their life,
|
The loan portfolio for the past several months are analysed with the
|
|
considering reasonable and supportable information
|
transition matrix prepared by the management from 30th April 2017
|
|
about past events, current conditions, and forecasts of
|
moving through 6 stages Standard, SMA-0, SMA-1, SMA-2, NPA and
|
|
future economic conditions which could impact the credit
|
> 120 days. based on this, the default probability arrived is verified by
|
|
quality of the Company's loans and advances.
|
multiplying the monthly matrix by the appropriate number of times that
|
|
As at March 31, 2025, the carrying value of loan assets measured at amortized cost, aggregated to '38,21,716.29
|
represent the maturity period of the loan.
|
|
lakhs and ECL provision amounting to '35,758.46 Lakhs
|
Value of Collateral property
The property value for those loans which are over 90 days past due are
|
|
The major elements of estimating ECL are the following:
|
verified whether the current market value is updated or not and further
|
|
a) Application of ECL model requires several data
|
a haircut of 25% is done on the value of property.
|
|
inputs.
|
Loss Given Default
|
|
b) Judgmental models used to estimate ECL which
|
<90 days:
|
|
involves determining Probability of Default (“PD"),
|
Recovery Rate (RR) calculated by dividing value of collateral of each
|
|
Loss Given Default (“LGD"), and Exposures at Default
|
loan, which is arrived by the transition matrix through analysis of loan
|
|
(“EAD"). The PD and the LGD are the key drivers of
|
mentioned above arrived with EAD then LGD is calculated by (1- RR%)
|
|
estimation complexity in the ECL and as a result are
|
and a minimum threshold is checked for 10% as company policy.
|
|
considered the most significant judgmental aspect of
|
>90 days:
|
|
the Company's modelling approach. c) Qualitative and quantitative factors used in staging of
|
Difference between the total loan value > 90 days and value of collateral of each loan is considered as LGD.
|
|
loan assets.
|
Verification of other factors:
|
|
d) Ind AS 109 requires the Company to measure ECL
|
Considering macro-economic factors such as GDP growth rate, Inflation
|
|
on an unbiased forward-looking basis, reflecting
|
and 1 year risk free rate. Probability of LGD is verified.
|
|
a range of future economic conditions. Significant
|
ECI is verified by loan amount * IGD at each stage to arrive at total ECI
|
|
management judgement is applied in determining
|
IRAC Norms:
|
|
the economic scenarios used and the probability
|
The total ECL arrived at the above methodology is then compared with
|
|
weights applied to them.
|
the provision to be recognised as per IRAC norms and observed that
ECL arrived is higher than IRAC Norms
Testing the design and effectiveness of internal controls over the
following:
• Key controls over the completeness and accuracy of the key inputs, data and assumptions into the Ind AS 109 impairment models.
• Key controls over the application of the staging criteria consistent with the definitions applied in accordance with the policy approved by the Board of Directors including the appropriateness of the qualitative factors.
B. Discussed with the management, the approach, interpretation, systems and controls implemented in relation to probability of default and stage-wise bifurcation of product-wise portfolios for timely ascertainment of stress and early warning signals.
C. Read and assessed the disclosures included in the financial statements in respect of expected credit losses with the requirements of Ind AS 107 Financial Instruments: Disclosure (“Ind AS 107") and Ind AS 109.
|
|
2.
|
Information Technology (IT) Systems and Controls:
|
Our Audit Approach:
|
| |
The Company uses ERP system for financial reporting
|
We have obtained an understanding of the Company's IT applications,
|
| |
which interface with other business operation softwares
|
databases and operating systems relevant to financial reporting and
|
| |
that process transactions related to loans, deposits and
|
the control environment. For these elements of the IT infrastructure,
|
| |
borrowings.
|
the areas of our focus included access security (including controls over
|
| |
The Company's key financial accounting and reporting
|
privileged access), program change controls and segregation of duties.
|
| |
processes are highly dependent on the automated
|
In particular, we have tested the design, implementation and operating
|
| |
controls implemented in IT systems.
|
effectiveness of the Company's general IT controls over the key IT
|
| |
If there exist gaps in the IT control environment, then it
|
systems relevant to financial reporting such as audit trail.
|
| |
could result in the financial accounting and reporting
|
In addition to IT controls, the company maintains certain controls
|
| |
records being materially misstated.
|
involving manual intervention, such as the preparation of financial
|
| |
Therefore, due to the complexity of the IT environment,
|
statements, Asset Liability Management (ALM) reports, Demand
|
| |
the assessment of the general IT controls and the
|
Drafts (DDs) for loans issued, which are cleared manually instead
|
| |
application controls specific to the accounting and
|
of electronically and many others. Accordingly, we performed a test
|
| |
preparation of the financial information is considered to
|
check of the effectiveness of these controls and found them to be
|
| |
be a key audit matter.
|
effective for the sample selected.
|
Other Information:
The Company's Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Report of Directors including Annexures to Directors Report, Corporate Governance, Information to Shareholders and Management Discussion and Analysis but does not include the financial statements and our auditors' report thereon, which are expected to be made available to us after the date of this report.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the 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 financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated. When we read the reports which we are expected to be made available to us after the date of this auditor's report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. In case of uncorrected material misstatements, we are required to communicate to other stakeholders as appropriate as well as to take action under the applicable laws and regulations, if any.
Management's Responsibility for Ind AS Financial Statements:
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 Ind AS 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 accounting standards specified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. 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 implementation and maintenance of 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.
Auditors' Responsibilities for the Audit of the Financial Statements:
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 judgement and maintain professional scepticism through the audit. We also:
• 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 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 management.
• 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 ability of the Company 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.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the 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.
Materiality is the magnitude of misstatements in the Financial Statements that, individually or in aggregate, make 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 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 financial statements for the financial year ended 31st March 2025 and are therefore the key audit matters. We describe these matters in our auditors' 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 Matters
We have relied on the Branch Audit Report issued by the Statutory Branch Auditors of 179 branches included in
the Financial Statements of the company whose financial statements / financial information reflect total advances of '1966351 Lakhs as at March 31, 2025 and total revenue of '188356 Lakhs for the year ended on that date, as considered in the Financial Statements. These branches and processing centres cover of 51.45% of advances, 50.64% of deposits, 57.78% non-performing assets and 48.56% revenue. The financial statements / information of these branches has been audited by the Statutory Branch Auditors whose reports have been furnished to us and in our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the reports of such Branch auditors. Further, in conduct of our audit, we have made a note of unaudited returns in respect of the branches and zonal offices, account for Nil advances and 1.70% of total deposits.
Further to this, the financial information mentioned for the year ended 31st March 2024 was audited by the previous auditors and the amounts of the previous periods have been regrouped/reclassified wherever necessary to confirm with the current period's classification.
Our opinion is not modified with respect of above matters.
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 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, 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 reports on the audit of accounts of 219 branches, (179 branches) by statutory branch auditors and (40 branches) by us as appointed by the Company in accordance with the guidelines prescribed by the Board of Directors have been considered by us in terms of Section 143(8) of the Act and have been dealt in the manner considered appropriate, while preparing this report.
d. The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash flows dealt with by this Report are in agreement with the books of account.
e. In our opinion, the aforesaid Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) rules, 2015, as amended from time to time.
f. On the basis of the written representations received from the directors as on March 31, 2025 taken on record by the Board of Directors, none of the directors is disqualified as on that date 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 over financial reporting 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 requirement of Section 197 (16) of the Act, as amended:
In our opinion and according to the information and explanation given to us, the remuneration paid during the current year by the Company is in accordance with the provisions of Section 197 of the Act.
i. 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 its pending litigations in Note 36 of the IND AS financial statements which would impact its financial position.
ii. The Company did not have any long-term contracts as required under the applicable law or accounting standards, and also not entered into any derivative contracts, accordingly no provision is required to be made in respect of material foreseeable losses.
iii. There has been no delay in transferring amounts, required to be transferred, to the
Investor Education and Protection Fund by the Company except for those reported in Note 16.1 of the financial statements.
iv. A. The Management has represented that, to the best of its knowledge and belief, no funds (which are material either individually or in the 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 or entity, including foreign entity ("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.
B. The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity ("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.
C. Based on the audit procedures that have 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 misstatement
v. 1. The final dividend paid by the Company
during the year declared which was proposed in the previous year is in accordance with Section 123 of the Act.
2. The interim dividends declared by the Board of Directors and paid by the Company during the year are in accordance with Section 123 of the Act.
3. As per Note 20.2 and 20.3 of the financial statements, the Board of Directors has proposed a final dividend which is subject to approval by the members of the Company in ensuing annual general meeting. The amount of dividend proposed is in accordance with Section 123 of the Act, as applicable.
vi. Based on our examination and representation received from the Company, which included test checks, the Company has used an accounting software for maintaining its books of accounts which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for the 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 per proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 & reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014, Based on our examination and representation received from the Company, which included test checks, the Company has preserved the audit trail as per the statutory requirements.
For Rao & Emmar For V.K. Ladha & Associates
Chartered Accountants Chartered Accountants
Firm Registration No. 003084S Firm Registration No. 002301C
Sd/- Sd/-
B J Praveen CA Rakesh Kumar
Partner Partner
Membership No. 215713 Membership No. 546723
UDIN: 25215713BMJHGT4277 UDIN: 25546723BMIOFK5616
Place : Bengaluru Date : April 23, 2025
|